Fortuna Engineeering Pvt. Ltd., Nashik V. Joint Commissioner of Income-tax,

ITA 274/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9466 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-01-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 24-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Depreciation; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 274 /P U N/201 6 / ASSESSMENT YEAR : 20 1 1 - 12 FORTUNA ENGINEERING PVT. LTD., PLOT NO. E - 109, MIDC AREA, AMBAD, DISTT. - NASHIK - 422010 PAN : AAACF2767Q ....... / APPELLANT / V/S. JOINT COMMISSIONER OF INCOME TAX, RANGE 1, NASHIK / RESPONDENT ASSESSEE BY : S HRI C.H. NANIWADEKAR REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 11 - 01 - 2018 / DATE OF PRONOUNCEMENT : 12 - 01 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 1 , NASHIK DATED 04 - 12 - 2015 FOR THE ASSESSMENT YEAR 20 11 - 12. 2 ITA NO .274/PUN/2016, A.Y. 2011 - 12 2. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST DISALLOWING DEPRECIATION RS.4,08,414/ - ON MACHINERY . 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN MANUFACTURING OF CONNECTING RODS AND AUTOMOBILE COMPONENTS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PU RCHASED MACHINERY FROM ACE MANUFACTURING SYSTEM LTD. THE ASSESSEE CAPITALIZED THE AFORESAID ASSET (MACHINERY) IN ITS BOOKS AND CLAIMED DEPRECIATION THEREON. THERE WERE DISPUTES ON ACCOUNT OF INFERIOR QUALITY /SPECIFICATION OF MACHINERY SUPPLIED. SINCE, T HE VENDOR OF MACHINERY HAD NOT REMOVED THE DEFECTS DESPITE REPEATED REMINDERS , THE PAYMENT TO SUPPLIER WAS KEPT IN ABEYANCE. THE ASSESSEE CLAIMED DEPRECIATION @ 15% ON THE COST OF MACHINERY I.E. RS.27,22,758/ - . THE ASSESSING OFFICER ISSUED NOTICE TO THE SUPPLIER OF MACHINERY M/S . ACE MANUFACTURING SYSTEM LTD. THE SUPPLIER OF THE MACHINERY ADMITTED THAT THEY HAVE WRITTEN OF F RS.27,22,758/ - TO BE RECOVERED FROM ASSESSEE AS BAD DEBTS. THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM OF DEPRECIATION RS.4,0 8,414/ - ON THE SAID MACHINERY. AGGRIEVED BY THE ASSESSMENT ORDER DATED 2 5 - 02 - 2014, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE FINDINGS OF ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF DEPRECIATION. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 4. SHRI C.H. NANIWADEKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMIT TED AT THE OUTSET THAT THE ISSUE RAISED IN THE APPEAL BY ASSESSEE HAS 3 ITA NO .274/PUN/2016, A.Y. 2011 - 12 BEEN DECIDED AGAINST THE ASSESSEE BY JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. LORD CHLORO ALKALIES LTD. REPORTED AS 32 CCH 109. 5. SHRI MUK ESH JHA REPRESENTING THE DEPARTMENT SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). 6. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS, WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION O N ASSET FOR WHICH NO COST HAS BEEN PAID. THE LD. AR OF THE ASSESSEE HAS FAIRLY ADMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS . LORD CHLORO ALKALIES LTD. (SUPRA). THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL IN THE SAID CASE READ AS UNDER : 3. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD, INCLUDING THE BIFR SCHEME (PB PAGES 1 TO 4), AND ALSO THE `STATEMENT O F EFFECT (PB PG. 5) DRAWN BY THE ASSESSEE IN RESPECT OF CAPITAL AND REVENUE ITEMS, BOTH OF WHICH STAND SUBSTANTIALLY REDUCED BY THE BIFR UNDER THE REHABILITATION SCHEME AS APPROVED BY IT. THE SAID STATEMENT CONTAINS THE IMPUGNED CREDIT/S AT SERIAL NO. 15 UNDER THE ITEMS OF CAPITAL NATURE. COPIES OF THE ACCOUNTS OF THE IMPORTER - SUPPLIERS IS ALSO ANNEXED (PB PGS. 6,7). AS SUCH, WE FIND MERIT IN THE ASSESSEE'S CLAIM THAT THE DUES THERETO, WRITTEN BACK ON THE RECONSTRUCTING SANCTIONED BY BIFR, WOULD BE A CAPIT AL RECEIPT, NOT LIABLE TO BE CONSIDERED AS INCOME U/S. 2(24) OF THE ACT. SO, HOWEVER, THE CREDIT WRITTEN BACK BEING ADMITTEDLY ON ACCOUNT OF IMPORT OF PLANT & MACHINERY, THE COST OF THE RELEVANT ASSETS WOULD BE REQUIRED TO BE RECOMPUTED, BEING NOT INCURRED TO THAT EXTENT (S. 43(1)). WE DECIDE ACCORDINGLY, UPHOLDING THE IMPUGNED ORDER IN PRINCIPLE. 4 ITA NO .274/PUN/2016, A.Y. 2011 - 12 THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISION RENDERED IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. LORD CHLORO ALKALIES LTD. (SUPRA), THE A PPEAL OF ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 12 TH DAY OF JANUARY, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 12 TH JANUARY, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1 , NASHIK 4. THE PR. COMMISSIONER OF INCOME TAX - 1, NASHIK 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE