M/s. Rite Steel Industries Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2701/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4237 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 19-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAME IRSJCIT
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, CHENNAI , ! ' . #$ , %&' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER ./ WTA NO.37/MDS/2016 % *+ ,* / ASSESSMENT YEARS : 2004-05 . M/S. RITE STEEL INDUSTRIES PVT LIMITED, (FORMERLY NAMED AS METPRO INDUSTRIES PVT. LTD) NO.45, CHAMIERS ROAD, R.A. PURAM, CHENNAI 600 028. VS. THE ASSISTANT COMMISSIONER OF WEALTH TAX, COMPANY CIRCLE IV(2) CHENNAI. ./ ITA NO.2701/MDS/2016 % *+ ,* / ASSESSMENT YEARS : 2005-2006. M/S. RITE STEEL INDUSTRIES PVT LIMITED, (FORMERLY NAMED AS METPRO INDUSTRIES PVT. LTD) NO.45, CHAMIERS ROAD, R.A. PURAM, CHENNAI 600 028. [ PAN AAACM 5369F ] ( -. / APPELLANT) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(2) CHENNAI. ( /0-. /RESPONDENT) -. 1 2 /APPELLANT BY : SHRI., T. BANUSEKAR, C.A. /0-.12 /RESPONDENT BY : SHRI. K. RAME, IRS,JCIT. 13 /DATE OF HEARING : 07.06.2017 45,+13 /DATE OF PRONOUNCEMENT : 19.06.2017 2 WTA 37/MDS/2016 & ITA NO. 2701/MDS/2016 /O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI DATED 31.05.2016 AND 30.05.2016 RESPECTIVELY FOR THE ASSESSMENT YEAR S 2004-05 AND 2005- 2006 PASSED U/S. 16(3) R.W.S. 17 OF WEALTH TAX ACT AND 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REF ERRED TO AS THE ACT). 2. FIRST, WE TAKE UP ITA NO.2701/MDS/2016, ASSESSMEN T YEAR 2005-2006 FOR ADJUDICATION. THE FACTS OF THE CASE ARE THAT ASSESSEE CLAIMED DEPRECIATION AT F11,99,098/- ON MACHINERY. LD. ASSESSING OFFICER DISALLOWED THE SAME ON THE REASON THAT ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY IN THE ASSESSMENT YEAR UNDER CONS IDERATION. THERE WAS NO CONSUMPTION OF RAW MATERIALS OR OPERATING EXPENS ES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. ONLY DEPRECIATION WAS CL AIMED WHICH WAS SET OFF AGAINST THE INCOME FROM OTHER SOURCES. AGGRIEVE D, ASSESSEE FILED AN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEA LS). 3. LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT DEPRECIATION U/S. 32 OF THE ACT CANNOT BE ALLOWED TO THE ASSESSEE ON THE REASON THAT ASSESSEE NOT CARRYING ON ANY BUSINESS A CTIVITY IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND ASSESSEE DI D NOT PUT TO USE THE 3 WTA 37/MDS/2016 & ITA NO. 2701/MDS/2016 MACHINERY. ASSESSEE HAD TAKEN A PLEA BEFORE THE L D. COMMISSIONER OF INCOME TAX (APPEALS) IS THAT DUE TO LULL IN BUSINES S, NO ACTIVITY WAS CARRIED OUT IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION. HOWEVER IN THE NEXT ASSESSMENT YEAR BUSINESS ACTIVITIES WAS CARRIE D ON BY THE ASSESSEE. IT WAS ONLY A TEMPORARY CLOSURE OF BUSINESS AND B USINESS WAS NOT COMPLETELY CLOSED. LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND DISA LLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IN THE ASSESSMENT YEAR 2004-05, DEPRECIATION HAS BEEN GRA NTED TO THE ASSESSEE AND SIMILARLY FOR THE ASSESSMENT YEAR 200 6-2007 ALSO DEPRECIATION WAS GRANTED. ACCORDING TO THE LD. AU THORISED REPRESENTATIVE ASSESSEE HAS NOT CARRIED ON THE BUS INESS DUE TO LULL IN BUSINESS. IT CANNOT BE SAID THAT THE ASSESSEE HAS PERMANENTLY CLOSED THE BUSINESS. 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 4 WTA 37/MDS/2016 & ITA NO. 2701/MDS/2016 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIA L ON RECORD. IN OUR OPINION, ASSESSEE HAD NOT CLOSED THE BUSINESS PERMANENTLY. ASSESSEE HAD STARTED ITS BUSINESS IN THE NEXT ASSESSMENT YEAR 2006-07 FOR WHICH ASSESSEE HAD FILED COPY OF PROFIT AND LOSS ACCOUNT, BALANCE SHEET. DEPRECIATION WAS FULLY GR ANTED TO THE ASSESSEE IN THE ASSESSMENT YEAR 2006-07. DUE TO ADVERSE MARK ET CONDITION, THE ASSESSEE TEMPORARILY SUSPENDED ITS BUSINESS ACTIVIT Y IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE IS MAINTAIN ING PLANT AND MACHINERY, SO AS TO RESUME BUSINESS AS SOON AS MA RKET CONDITIONS IMPROVES. BEING SO, IT CANNOT BE SAID THAT ASSESS EE HAD CLOSED ITS BUSINESS. ACCORDINGLY, BY PLACING RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF L.VE. VAIRAVAN CHETTIAR VS. CIT, 72 ITR 0114 , WE ARE INCLINED TO ALLOW DEPRECIATION CLAIMED B Y THE ASSESSEE SINCE THE BUSINESS WAS TEMPORARY CLOSED I N THE ASSESSMENT YEAR 2005-06 DUE TO LULL IN BUSINESS AND IT WAS RES TARTED IN THE NEXT ASSESSMENT YEAR. THE GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IS ALLOWED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. COMING TO WTA NO.37/2016, ASSESSMENT YEAR 2004-05, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (A) THE COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN PASSING ORDER DATED 31.5.2016 REJECTING THE APPE AL FILED BY THE APPELLANT ON AN ERRONEOUS CONSIDERATI ON OF LAW AND FACTS. THE APPEAL IS LIABLE TO BE ALLOWED I N FULL. (B) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED 5 WTA 37/MDS/2016 & ITA NO. 2701/MDS/2016 IN HOLDING THAT THE APPELLANT IS LIABLE TO THE LEVY OF WEALTH TAX AND OUGHT TO HAVE NOTICED THAT THE LAND AND BUILDING OF THE APPELLANT COMPANY WAS AN ACTIVE BUSINESS ASSET NOT LIABLE TO THE LEVY OF WEALTH TAX . (C) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING ERRONEOUSLY THAT THERE WAS NO PRODUCTION OR BUSINESS ACTIVITY SINCE ASSESSMENT YEAR 2004-05. HE OUGHT TO HAVE NOTED THAT THE APPELLANT HAD ONLY A B RIEF LULL IN BUSINESS ACTIVITY AND IN FACT HAS BEEN IN B USINESS BOTH PRIOR TO 2002-03 AND FROM FEBRUARY, 2006. THE AFORESAID FACTS WERE DULY ESTABLISHED BEFORE THE LO WER AUTHORITIES AND OUGHT TO HAVE BEEN TAKEN INTO CONSIDERATION. (D) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RELYING ON JUDGMENTS THAT HAVE NO RELEVANCE IN T HE FACTS OF THE PRESENT CASE AND THAT ARE WHOLLY DISTINGUISHABLE. ON THE OTHER HAND, THE JUDGMENTS C ITED BY THE APPELLANT SUPPORT ITS CASE AND OUGHT TO HAVE BEEN ACCEPTED. (E) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT CONTRADICTORY STANDS HAVE BEEN TAKE N BY THE APPELLANT IN INCOME TAX AND WEALTH TAX PROCEEDINGS. THIS IS FACTUALLY ERRONEOUS AND THE SUBMISSIONS MADE BOTH IN THE INCOME TAX AND WEALTH TAX PROCEEDINGS SUPPORT THE APPELLANTS' STAND. (F) ANY OTHER GROUND THAT MAY BE RAISED AT TIME OF PERSONAL HEARING. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. WE ARE OF THE OPINION THAT IMPUGNED ASSET WHICH IS SUBJECT TO WEALTH TAX IS BUSINESS ASSET WHICH CANNOT BE CONSID ERED AS ASSET U/S.2(EA) OF THE WEALTH TAX ACT 1957. THE FACTORY LAND AND BUILDING WHICH BELONGS TO THE BUSINESS ASSETS OF THE ASSESSE E DUE TO LULL IN BUSINESS, ASSESSEE HAD NOT CARRIED ON THE MANUFACT URING ACTIVITY. HOWEVER, IN IMMEDIATE NEXT ASSESSMENT YEAR ASSESSEE HAS RESUMED THE BUSINESS ACTIVITY WHICH IS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT AND 6 WTA 37/MDS/2016 & ITA NO. 2701/MDS/2016 BALANCE SHEET FILED BY THE ASSESSEE BEFORE US. BEI NG SO, IT CANNOT BE CONSIDERED AS ASSETS LIABLE FOR WEALTH TAX. SIMIL AR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF ACWT VS. M/S. RASLEE GRANTIES PVT. LTD IN WTA NO.03/MDS/2013 DATED 30.4.2015 FOR THE ASSESSME NT YEAR 2008- 2009 WHEREIN IT WAS HELD AS UNDER:- 6 .WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. T HE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE PIECE OF LAND USED BY THE ASSESSEE IS FOR THE PURPOSE OF BUSINESS OR N OT. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND EXPO RT OF GRANITE MONUMENTS. THE LAND OWNED BY THE ASSESSEE COMPANY WAS USED FOR PURPOSE OF STOCKING GRANITE MONUMENTS. THE ASSESSEE HAS CONTINUED ITS BUSINESS ACTIVITIES UPTO 31.03.2008 AND THEREAFTER, THERE W AS A TEMPORARY LULL IN THE BUSINESS. THE ASSESSEE STARTE D SELLING THE PROPERTY, WHICH WAS USED FOR THE PURPOSE OF ITS BUSINESS, IN THE ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-1 1. THEREFORE, THE ASSESSING OFFICER CAME TO A CONCLUSI ON THAT THE LAND WHICH WAS USED BY THE ASSESSEE IS NOT FOR THE BUSINESS PURPOSE BECAUSE THE ASSESSEE HAS STOPPED ITS BUSINE SS IN THE ASSESSMENT YEAR 2008-09 ITSELF. IT IS A FACT TH AT THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GRANITE MONUMENTS AND USED THE LAND FOR THE PURPOSE OF BUSINESS. SIMPLY BECAUSE THERE WAS A TEMPORARY LULL , IT CANNOT BE SAID THAT THE ASSESSEE IS NOT CARRYING BUSINESS AND THE LAND WHICH IS USED FOR KEEPING THE GRANITE MONUMENT S. UNDER SIMILAR CIRCUMSTANCES, IN THE CASE OF DCIT(OSD) V. HSIL LTD. (2014) 61 SOT 1 (KOLKATA), THE TRIBUNAL HAS OBSERVE D THAT THE MERE FACT THAT A PART OF LAND, WHICH WAS HELD AS FACTORY, SOLD BY THE ASSESSEE AS A PIECE OF LAND WOULD NOT C HANGE THE CHARACTER OF ASSET IN THE HANDS OF THE ASSESSEE. A VACANT PIECE OF LAND, EVEN IF IT CAN BE SOLD AS LAND AS SUCH, CONTINUES TO BE A BUSINESS ASSET AS LONG AS VACANT LAND AN INTEGRAL PART OF FACTORY ETC. IN THE PRESENT CASE, THE VACANT LAND WAS USED BY THE ASSESSEE FOR THE PURPOSE OF IT S BUSINESS AND SIMPLY BECAUSE THERE WAS A TEMPORARY LULL IN TH E BUSINESS, IT CANNOT BE SAID THAT THE PIECE OF LAND IS NOT USED FOR THE BUSINESS PURPOSE. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF T HE TRIBUNAL IN THE CASE OF DCIT(OSD) V. HSIL LTD. (SUPRA), WE F IND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE GROUND RAISED BY THE REVENUE IS DISMISSED . 7 WTA 37/MDS/2016 & ITA NO. 2701/MDS/2016 ACCORDINGLY, THE ISSUE RAISED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR AND AGAINST THE REVENUE. THE APPEAL OF THE ASSESSE E IS ALLOWED. 9. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE AR E ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 19TH DAY OF JUNE, 2 017, AT CHENNAI. SD/- SD/- ( ! ' . #$ ) DUVVURU R.L. REDDY) % /JUDICIAL MEMBER ( ) (CHANDRA POOJARI) /ACCOUNTANT MEMBER /CHENNAI, I /DATED, THE 19TH JUNE, 2017. KV J 1 /%3KL ML,3 / COPY TO: 1 . -. / APPELLANT 3. N3 () / CIT(A) 5. LOP /%3% / DR 2. /0-. / RESPONDENT 4. N3 / CIT 6. P$* Q / GF