The DCIT, Circle-1(2), Baroda V. M/s. L.K. India Pvt.Ltd., Baroda

ITA 2714/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85796 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: M K SWADIA
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER THE DCIT, CIR. 1(2), BARODA (APPELLANT) VS M/S. L.K. INDIA PVT. LTD, 328/23, RASULABAD ROAD, VILLAGE, JAROD, TAL. WAGHODIA, BARODA GUJARAT-391510 PAN: AAACL3236C (RESPONDENT) REVENUE BY: SHRI ROOP CHAND, SR. D.R. ASSESSEE BY: SHRI M.K. SWADIA, A.R. DATE OF HEARING : 04-03-2015 DATE OF PRONOUNCEMENT : 13-03- 2015 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-I, BARODA DATED 04-08-2011 FOR A.Y. 2006-07. ITA NO. 2714/AHD/2011 ASSESSMENT YEAR 2006-07 I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. THE ASSSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALES OF ELECTRICAL AND ELECTR ONICS ITEMS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 31-12-2006 SHOWING TOTAL INCOME AT RS. NIL. THE CASE WAS SELE CTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) VI DE ORDER DATED 23-12- 2009 AND THE TOTAL INCOME BEFORE SET OFF OF CARRY F ORWARD LOSSES WAS DETERMINED AT RS. 92,19,134/-. AGGRIEVED BY THE OR DER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE ORDE R DATED 04-08-20011 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY T HE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS FILED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CTT(APPEALS) ERRED IN DELETING THE ADDITION OF R S 78,91,350/- BY ALLOWING DEPRECIATION ON MOULDS @ 30% AS AGAINST 15 % ALLOWABLE ON THE DIES AND MOULDS USED FOR MANUFACTURING ELECT RIC AND ELECTRONIC GOODS BY TREATING THE MANUFACTURING FACI LITY OF THE ASSESSEE AS RUBBER AND PLASTIC GOODS FACTORY IN TER MS OF APPENDIX-I TO RULE 5 OF THE INCOME-TAX RULES, 1962, IGNORING T HE FACT THAT, IN COMMON COMMERCIAL PRACTICE, FACTORIES PRODUCING ELE CTRIC AND ELECTRONIC GOODS ARE NOT KNOWN AS A RUBBER AND PLAS TIC GOODS FACTORIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION OF R S 2,62,184/- MADE U/S.36(I)(VA) R.W.S. 2(24)(X) ON ACCOUNT OF DISALLO WANCE OF EMPLOYEE'S CONTRIBUTION TO PROVIDENT FUND NOT PAID WITHIN THE DUE DATE (INCLUDING THE GRACE PERIOD) IGNORING THE FACT THAT AS PER PROVISIONS OF SECTION 2(24)(X) OF THE ACT THE EMPLO YEES' CONTRIBUTION IS FIRST TREATED AS INCOME, AND THEN IS ALLOWED AS EXPENSE IF IT IS PAID WITHIN THE TIME PROVIDED UNDER PROVIDENT FUND ACT. EMPLOYEES' CONTRIBUTION BEING OF THE NATURE OF TRUST MONEY, IS TO BE ALLOWED ONLY IF PAID BEFORE THE DUE DATE AS PROVIDED IN THE PROV IDENT FUND. THAT I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 3 BEING THE POSITION, THE EMPLOYEE'S CONTRIBUTION IF NOT PAID WITHIN THE DUE DATE MENTIONED UNDER PROVIDENT FUND ACT IS NOT ALLOWABLE U/S.36(1)(VA) OF THE ACT. GROUND NO. 1 IS WITH RESPECT TO DELETION ON DEPRECI ATION ON MOULDS AT 30%. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD CLAIMED DEPRECIATION ON DIES AND MOULD S AT 30% ON THE GROUND THAT IT WAS INVOLVED IN THE MANUFACTURING OF PLASTIC GOODS AND WAS THEREFORE ELIGIBLE FOR HIGHER DEPRECIATION, AO ON T HE OTHER HAND WAS OF THE VIEW THAT THE FINAL PRODUCTS OF THE COMPANY ARE ELE CTRICAL PRODUCTS AND PART OF WHICH COMPRISES OF PLASTIC AND OTHER PART BEING ELECTRICAL CIRCUITS MADE UP OF COPPER AND ALUMINUM. HE WAS OF THE VIEW THAT THE BENEFIT OF 30% DEPRECIATION IS AVAILABLE ONLY TO THOSE INDUSTRIES WHICH ARE MANUFACTURING EXCLUSIVE PLASTIC PRODUCTS. HE ALSO NOTICED THAT O N IDENTICAL FACTS FOR A.Y. 2004-05 AND 2005-06, THE AO HAD RESTRICTED THE CLAI M OF DEPRECIATION ON DIES AND MOULDS TO THE RATE OF DEPRECIATION APPLICA BLE TO PLANT AND MACHINERY. HE ACCORDINGLY, RELYING ON THE ASSESSME NT ORDER FOR A.Y. 2004-05 AND 2005-06 RESTRICTED THE DEPRECIATION ON DIES AND MOULDS AT 15% INSTEAD OF 30% AS CLAIMED BY THE ASSESSEE AND A CCORDINGLY DISALLOWED THE EXCESS DEPRECIATION WORKED OUT BY HI M AT RS. 78,91,350/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) BY FOLLOWING THE DECISION OF HO NBLE ITAT IN ASSESSEES OWN CASE, ALLOWED THE APPEAL OF THE ASSESSEE BY HOL DING AS UNDER:- 2. FIRST GROUND OF APPEAL IS REGARDING DISALLOWANC E OF DEPRECIATION OF RS. 78,91,350/- ON DIES AND MOULDS. AS RIGHTLY POINTED OUT BY THE APPELLANT, THIS GROUND OF APPEAL IS COVERED BY HONBLE ITATS DECISION IN APPELLANTS FAVOUR IN A. Y. 2001-02. THE ITAT, AHMEDABAD THROUGH ORDER DATED 04-10-2007, UPH ELD CIT(A)S DECISION THAT MOULDS IN QUESTION WERE USED FOR MANU FACTURE OF I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 4 PLASTIC GOODS AND WERE ELIGIBLE FOR HIGHER DEPRECIA TION. ITAT RELIED UPON DECISION OF ITAT, BANGALORE IN THE CASE OF BPL REFRIGERATION LTD., 272 ITAT 47 (BANGALORE) (80) AND KINETIC HOND A MOTORS LTD,. 72 TTJ 72 (PUNE). FOLLOWING THE DECISION OF JURISD ICTIONAL ITAT IN APPELLANTS CASE, DEPRECIATION ON DYES AND MOULDS C LAIMED AT THE RATE OF 30% IS DIRECTED TO BE ALLOWED AND DISALLOWA NCE OF RS. 78,91,350/- IS CANCELLED. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. DR RELIED ON THE ORDER OF AO. ON THE OTHER HAND, LD. AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD . CIT(A) AND FURTHER SUBMITTED THAT ON IDENTICAL FACTS THE ASSSESSE HAS BEEN ALLOWED DEPRECIATION AT 30% IN A.Y. 2001-02 TO 2004-05. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORDER. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ALLOWABIL ITY OF HIGHER DEPRECIATION DIES AND MOULDS. WE FIND THAT LD. CIT(A) HAD DECID ED THE ISSUE IN FAVOUR OF ASSESSEE BY RELYING ON THE HONBLE TRIBUNALS DE CISION IN ASSESSEES OWN CASE FOR A.Y. 2001-02. WE FURTHER FIND THAT TH E CO-ORDINATE BENCH OF TRIBUNAL IN A.Y. 2001-02 IN ITA NO. 488/AHD/2007 OR DER DATED 4 TH OCTOBER, 2007 HAD DECIDED THE ISSUE BY HOLDING AS UNDER:- 8. BEFORE ME, THE APPELLANT HAS REITERATED WHAT HA D BEEN SUBMITTED BEFORE THE AO. IN ADDITION, IT HAS BEEN STATED THAT THE PRINCIPLE RAW MATERIAL FOR MANUFACTURING THESE GOODS IN THE FORM OF PLASTIC GRANULES. THE PLASTIC GRANULES ARE LOADED INTO EJE CTION MOULDING MACHINES. THESE MACHINES ARE GENERAL PURPOSE PLASTI C PROCESSING MACHINES. THE GRANULES ARE CONVERTED INTO LIQUID FO RM AND THEN THE SAME ARE GIVEN A DEFINITE SHAPE THROUGH DIFFERENT K INDS OF EJECTION MOULDS, DYES AND TOOLS. THESE PLASTIC COMPONENTS AR E ASSEMBLED TOGETHER TO MAKE SWITCHES AND SOCKETS. WE THEREFORE , SUBMIT THAT I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 5 THE BASIC RAW MATERIALS FOR MANUFACTURING GOODS ARE PLASTIC AND THE FINAL PRODUCT IS ALSO MADE OF PLASTIC '. THE APPEL LANT HAS RELIED UPON THE DECISION OF ITAT BANGALORE IN THE CASE OF BPL R EFRIGERATION LTD VS. ACIT, 272 ITR 47 (BANGALORE) (AT) ART KINETIC H ONDA MOTOR LTD., VS. JT. CIT 72 TTJ 72 (PUNS ITAT). 9. 1 HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE CASE LAW. THE MAIN OBJECTION OF THE AO IS THAT THE END P RODUCT MANUFACTURED BY THE APPELLANT ARE NOT PLASTIC PRODU CT AND PLASTIC IS MERELY A COMPONENT OF THE ELECTRICAL AND ELECTRONIC ITEMS MANUFACTURED BY THE COMPANY. IT IS OBSERVED THAT T HE BASIS OF CLASSIFICATION ADOPTED BY THE AO IS AGAINST REASON. HON 'BLE ITAT BANGALORE HAVE HELD IN THE CASE OF BPL SANYO UTILIT IES AND APPLIANCE LIMITED WHICH OBSERVATIONS HAVE BEEN QUOT ED IN THE CASE OF BPL REFRIGERATION LTD. (SUPRA) THAT 'ONCE THE MO ULDS ARE USED FOR MANUFACTURE OF RUBBER AND PLASTICS GOODS PARTS THOU GH IN A COMPONENT FACTORY MANUFACTURING WASHING MACHINE, VA CCUM CLEANERS ETC., THE ASSESSEE IS ELIGIBLE FOR DEDUCTI ON AT HIGHER RATE OF DEPRECIATION I.E. 40%. FOLLOWING THE SAID ORDER, I T IS HELD THAT THE APPELLANT IS ENTITLED TO DEPRECIATION I.E. 40% FOR THE MOULDS. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTED THE DEP RECIATION ON MOULDS ACCORDINGLY.' 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATE RIAL AVAILABLE ON RECORD. IN THE GIVEN FACTS AND CIRCUMSTANCES, MA DRAS HIGH COURT'S JUDGMENT IN THE CASE OF CIT VS. FALCON WIRE S P. LTD., (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CA SE, IN OUR VIEW, TRIBUNAL JUDGMENT IN THE CASE OF BPL REFRIGERATION LTD. AND KINETIC HONDA MOTOR LTD. (SUPRA) ARE APPLICABLE TO THE ASSE SSEE'S CASE, RESPECTFULLY FOLLOWING THEM, WE UPHOLD ORDER OF THE CIT(A) ALLOWING HIGHER DEPRECIATION AT THE RATE OF 40% ON MOULDS. 8. WE ALSO FIND THAT IN A.Y. 2003-04 AND 2007-08 SI MILAR ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN FAV OUR OF THE ASSESSEE BY RELYING ON THE DECISION OF TRIBUNAL IN ASSESSEES O WN CASE FOR A.Y. 2001- 02. BEFORE US, REVENUE HAS NOT BROUGHT ANY CONTRAR Y BINDING DECISION IN ITS SUPPORT NOR COULD CONTROVERT THE FINDINGS OF CI T(A). IN VIEW OF THESE I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 6 FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. SECOND GROUND IS WITH RESPECT TO DELETION OF ADDITI ON ON ACCOUNT OF DELAYED PAYMENT ON EMPLOYEES CONTRIBUTION TO PROVI DENT FUND. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT EMPLOYEES CONTRIBUTION TO PROVIDENT FUND FOR THE M ONTH OF AUGUST AND OCTOBER, 2005 WAS PAID AFTER THE PRESCRIBED DUE DAT ES. AO WAS OF THE VIEW THAT THE CASE OF DELAY IN DEPOSITING THE EMPLO YEES CONTRIBUTION IN P.F. ACCOUNT BEYOND THE DUE DATES ARE COVERED BY S. 36(1)(VA) R.W.S. 2(24)(X) AND ARE THEREFORE NOT ALLOWABLE. HE ACCORD INGLY MADE AN ADDITION OF RS. 2,62,184/-. AGGRIEVED BY THE ORDER OF AO, A SSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO DELETED THE ADDITION BY HO LDING AS UNDER: 3.1 IN APPEAL, IT WAS SUBMITTED THAT THE EMPLOYEES CONTRIBUTION TO P.F. FOR THE MONTH OF AUGUST, 2005 WAS MADE ON 23.0 9.2005 AS AGAINST DUE DATE ON 20.09.2005 (INCLUDING THE GRACE PERIOD) AND FOR THE MONTH OF OCTOBER, 2005 PAID ON 24.11.2005 AS AG AINST DUE DATE ON 20.11.2005 (INCLUDING GRACE PERIOD). APPELLANT RELIED UPON DECISIONS AS UNDER IN ITS SUPPORT:- - CIT V SABARI ENTERPRISE (2008) 298 ITR 141 (KAR) -CIT V M N CHARI (2009) 310 ITR 445 (KAR) -KUBER HINGS (P) LTD ITO (2009) 120 TTJ 284 (DELHI) -FLUID AIR (INDIA) LTD V DCIT (1997) 63 ITD 182 (MU M) -MADRAS RADIATORS AND PRESSINGS LTD V DCIT (1996) 5 9 ITD 515 (MAD)/(1996) 56 TTJ (MAD) 662 3.2. I HAVE CONSIDERED THE MATTER. SINCE EMPLOYEES CONTRIBUTIONS TO PF WERE PAID BEFORE DUE DATE OF FILING OF RETURN , DISALLOWANCE OF RS. 2,62,184/- IS CANCELLED. RELIANCE IS PLACED ON HONBLE ITAT, AHMEDABADS DECISION IN ITA NO. 2608/AHD/2008 IN TH E CASE OF GUJARAT CONTAINERS LTD IN THIS REGARD. 10. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NO W IN APPEAL BEFORE US. I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 7 11. BEFORE US, LD. DR SUBMITTED THAT THAT THE ISSUE OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND HAS NO W BEEN DECIDED IN FAVOUR OF THE REVENUE BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (2014) 366 ITR 170. HE THUS SUPPORTED THE ORDER OF AO. LD. AR ON THE OTHER HAN D SUBMITTED THAT ASSESSEE HAS DEPOSITED THE CONTRIBUTION BEFORE FILI NG OF RETURN OF INCOME AND THEREFORE IT WAS ALLOWABLE. HE THUS SUPPORTED THE ORDER OF CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE AMOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND FOR A UGUST AND OCTOBER, 2005 HAS BEEN DEPOSITED BEYOND THE DUE DATES PRESCR IBED UNDER THE RELEVANT ACT. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION IN ITA NO 637/AHD/20I3 H AS CONCLUDED THAT WHERE SUM RECEIVED BY ASSESSEE FROM ANY OF HIS EMPL OYEES AS CONTRIBUTION TO PROVIDENT FUND AND/OR ESI FUND WAS NOT CREDITED BY ASSESSEE TO EMPLOYEES ACCOUNT IN RELEVANT FUND OR FUNDS ON OR BEFORE DUE DATE AS PER EXPLANATION TO S. 36(1)(VA), THE ASSESS EE SHALL NOT BE ENTITLED TO DEDUCTION THEREOF. 13. IN VIEW OF THE UNDISPUTED FACT THAT THE EMPLOY EES SHARE OF CONTRIBUTION OF PROVIDENT FUND WAS PAID AFTER THE PRESCRIBED DUE DATE, AND FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION (SUPRA), WE ARE OF THE VIEW T HAT THE AO WAS JUSTIFIED IN DISALLOWING THE BELATED PAYMENTS AND THUS THIS G ROUND OF REVENUE IS ALLOWED. I.T.A NO. 2714/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. M/S. L.K. INDIA PVT LTD 8 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 13/03/2015 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,