The ITO, Ward-4(1), Ahmedabad V. Electro Ferro Alloys Pvt.Ltd., Ahmedabad

ITA 2773/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50893 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Depreciation; Principle of natural justice

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , . .! ' , #$ # % BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ./ I.T.A. NO.2773/AHD/2009 WITH CO NO.259/AHD/2009 ( ' ' ' ' / / / / ASSESSMENT YEAR : 2006-07) THE INCOME TAX OFFICER WARD-4(1) AHMEDABAD / VS. ELECTRO FERRO ALLOYS LTD. 208, ADITYA BUILDING NR.MITHAKHALI SIX ROAD ELLISBRIDGE, AHMEDABAD-6 ( #$ ./!) ./ PAN/GIR NO. :AAACE 6380 L ( (* / // / APPELLANT ) .. ( +,(*/ RESPONDENT ) REVENUE BY : SHRI ALOK JOHRI CIT-D.R. ASSESSEE BY : SHRI S.N.SOPARKAR, SR.ADV. WITH SHRI JAIMIN GANDHI - . /$/ // / DATE OF HEARING : 06/09/2011 01' . /$ / DATE OF PRONOUNCEMENT : 31.10.2011 #2/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : AN APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE HAVE EMERGED FROM THE ORDER OF THE CIT(APPEALS)-VII I, AHMEDABAD DATED 15.06.2009. A) GROUNDS RAISED BY THE REVENUE ARE HEREBY DECIDED AS FOLLOWS :- 2. GROUND NO.1 READS AS UNDER:- ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DEPRECIATION OF RS.61,450/- ON MOTOR CAR PURCHASED IN THE NAME OF THE DIRECTOR OF THE COMPANY. 2.1. ON IDENTICAL FACTS, FOR A.Y. 2005-06 IN ITA NO .2339/AHD/2008 RESPECTED COORDINATE BENCH B AHMEDABAD VIDE AN OR DER DATED 25/03/2011 (A CONSOLIDATED ORDER BEARING ITA NOS.45 23 TO 4527/AHD/2007 FOR A.YS. 2000-01 TO 2004-05) VID E PARAGRAPH NOS.22.1 & 22.2, IT WAS HELD AS UNDER:- 22.1 THE FIRST ISSUE OF THIS APPEAL RELATES TO DI SALLOWANCE OF DEPRECIATION ON MOTOR CAR PURCHASED IN THE NAME OF DIRECTOR OF THE COMPANY. TATA INDICA MOTOR CAR WAS PURCHASED DURING THE YEAR AT RS.4,55,192/- IN THE NAME OF SHRI ADARSH J HAVERI, DIRECTOR OF THE ASSESSEE COMPANY WHICH CLAIMED DEPRECIATION THEREON. AS LEGAL OWNERSHIP DID NOT VEST IN THE COMPANY THE AO DISALLOWED THE CLAIM. THE LD.CIT(A) ALLOWED THE CLAIM FOLLOWI NG THE DECISION IN THE CASE OF MYSORE MINERALS LTD. 239 ITR 775 WIT H THE FOLLOWING OBSERVATIONS:- 5.2. ON CONSIDERATION OF THE FACTS OF THE APPELLAN TS CASE IT IS NOTICED THAT THE MOTOR CAR WAS PURCHASED THOUGH IN THE NAME OF THE APPELLANTS DIRECTOR, IT WAS PURCHASED OUT OF THE FUNDS OF THE APPELLANT COMPANY AND IT IS ALSO NOT I N DISPUTE THAT THE MOTOR CAR WAS PURCHASED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. THUS THE MOTOR CAR BEIN G BUSINESS ASSET OF THE APPELLANT AND PURCHASED FOR T HE PURPOSE OF BUSINESS AND USED AS SUCH BY THE APPELLA NT, IN VIEW OF THE DECISION IN THE CASE OF MYSORE MINERALS 239 ITR 775 REFERRED TO ABOVE AND OTHER DECISIONS CITED BY THE LD.AR, I HOLD THAT THE DISALLOWANCE MADE BY THE AO ON THIS GROUND IS NOT JUSTIFIED AND HENCE THE SAME IS DIRECTED TO BE DELETED. 22.2 IN THE PRESENT CASE IT IS NOT DISPUTED THAT IN VESTMENT WAS MADE BY THE ASSESSEE IN PURCHASE OF THE MOTOR CAR. IT IS SHOWN AS ASSET IN THE BALANCE SHEET OF THE COMPANY. IF EXPE NDITURE FOR ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 3 - RUNNING THE VEHICLE WAS INCURRED BY THE ASSESSEE, T HE ASSESSEE IS DE FACTO OWNER OF THE VEHICLE. IT IS NOT DISPUTED THAT IT WAS USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. H ON. RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MOHD. BUX SHOKAT ALI (NO.2) (2002) 256 ITR 357 (RAJ) HELD THAT WHERE VEHICLE WA S PURCHASED BY THE FIRM USED BY IT FOR THE PURPOSE OF ITS BUSIN ESS BUT IT WAS REGISTERED IN THE NAME OF ONE OF THE PARTNERS THEN THE FIRM WOULD BE ENTITLED TO DEPRECIATION ON VEHICLE. HON.DELHI HIGH COURT IN THE CASE OF CIT VS. BASTI SUGAR MILLS CO. LTD. (200 2) 257 ITR 88 (DEL) HELD THAT WHERE VEHICLE WAS OWNED AND USED BY THE A BUT NO REGISTRATION WAS DONE IN ITS NAME STILL THEN ASSESS EE WOULD BE ENTITLED FOR DEPRECIATION ON SUCH VEHICLE. THEREFO RE, ASSESSEE HAS RIGHT TO CLAIM DEPRECIATION THEREON. THIS GROUND O F REVENUE IS ACCORDINGLY REJECTED. 2.2. SINCE ON IDENTICAL FACTS, A VIEW HAS ALREA DY BEEN TAKEN BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, THEREFORE, RESP ECTFULLY FOLLOWING THE SAME THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 3. GROUND NO.2 READS AS UNDER:- 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB OF RS.6,48,41,835/- . 3.1. THIS ISSUE HAS ALSO BEEN DEALT WITH IN DET AIL BY THE AFORE-CITED DECISION OF THE TRIBUNAL DATED 25/03/2011 AND IT WA S CONCLUDED THAT THE ASSESSEE IS ENTITLED FOR THE CLAIM OF DEDUCTION U/S .80IB OF THE I.T. ACT VIDE PARAGRAPH NO.19; REPRODUCED BELOW:- ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 4 - 19. THUS APPLYING THE ABOVE PRINCIPLES TO THE FAC TS OF PRESENT CASE WE EASILY COME TO THE CONCLUSION THAT WHAT THE ASSESSEE IS DOING AT SILVASA IS MANUFACTURING. FOR ARRIVING AT THIS CONCLUSION WE NEED NOT GO INTO THE DISPUTED ISSUE AS TO WHETHE R THE ASSESSEE IS HAVING ANY LABORATORY OR TESTING FACILITY AT SILVAS A OR WHETHER RAW MATERIAL AS SUCH WAS DIRECTLY IMPORTED TO SILVASA O R WAS DIRECTLY TAKEN TO AHMEDABAD. IN BRIEF, THE PROCESS OF CRUSH ING, GRINDING AND SIEVING FMA SLABS INTO LUMPS, CHIPS AND POWDER CREATES THREE END PRODUCTS WHICH HAVE DIFFERENT PHYSICAL SHAPES; DIFFERENT CHEMICAL COMPOSITION OF IRON, MOLYBDENUM AND SILICO N AND HAVE DIFFERENT CHEMICAL PROPERTIES SUCH AS DIFFERENT MEL TING POINTS AND ARE USED BY DIFFERENT INDUSTRIES. THEIR USE IS NOT INTER-CHANGEBLE, IN THE PLACE OF LUMPS, CHIPS OR POWER OR SLABS AS S UCH CANNOT BE USED. THESE END PRODUCTS ARE KNOW BY DIFFERENT NAM ES IN COMMERCIAL WORLD AND THEREFORE, THE PROCESS EMPLOYE D BY THE ASSESSEE WOULD AMOUNT TO MANUFACTURE AND, THEREFORE , THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S.80IB. WE ACCORDINGLY CONFIRM THE ORDER OF THE LEARNED CIT(A) ON THIS POI NT. 4. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE HEREBY HOLD THAT FOR THE YEAR UNDER CONSIDERATION, AS WELL, THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S.80IB OF THE I.T.ACT. THIS GROUND OF THE REVENUE IS THEREFORE DISMISSED. B) ASSESSEES CROSS OBJECTION NO.259/AHD/2009 (OU T OF ITA NO.2773/AHD/2009) 5. VIDE CROSS OBJECTION, GROUND NO.1 RAISED BY THE RESPONDENT- ASSESSEE AS FOLLOWS:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E RESPONDENTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOL DING THE ASSESSING OFFICERS ACTION OF TREATING THE FOLLOWIN G ITEMS AS NOT BEING ELIGIBLE TO DEDUCTION U/S.80-IB: ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 5 - RS. I) EXCISE INCOME 5,65,454 II) INTEREST FROM VARIOUS PARTIES 4,79,667 III) INSURANCE CLAIM RECEIVED FOR SHORTAGE MATERIAL 26,499 IV) MISC.INCOME RECEIVED FROM SALE OF NON-EXCISABLE WASTE MATERIAL 34,026 HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT AS E XPLAINED IN THE STATEMENT OF FACTS ACCOMPANYING THE RESPONDENTS AP PEAL BEFORE HIM AS ALSO IN THE WRITTEN SUBMISSIONS BEFORE HIM, EACH ONE OF THE ABOVE ITEMS WAS ELIGIBLE TO DEDUCTION U/S.80-IB AND , THEREFORE, HE OUGHT TO HAVE ORDERED FOR GRANTING THAT DEDUCTION T O THE RESPONDENT. 5.1. THE FIRST ITEM OF ADJUSTMENT IS EXCISE INCOME AND IN THIS REGARD VIDE PARAGRAPH NO.21.2, VIDE THE ORDER CITED SUPRA, IT WAS DECIDED AS UNDER:- 21.2. WE HAVE HEARD THE PARTIES. THE ISSUE IS NOW COVERED BY THE DECISION OF HON.DELHI HIGH COURT IN THE CASE OF DHE VCHAND PREMCHAND (2009) 317 ITR 353 (DEL) WHEREIN IT IS HE LD THAT REFUND OF EXCISE DUTY WAS PIVOTED ON THE MANUFACTUR ING ACTIVITY CARRIED ON BY THE ASSESSEE. THE ASSESSEE AT THE TI ME OF PAYMENT OF EXCISE DUTY, DEBITED IT IN THE PROFIT AND LOSS ACCO UNT AND UPON THE RECEIPT OF THE REFUND CREDITED THE PROFIT AND LOSS ACCOUNT. THE NET EFFECT WOULD BE NIL AND, THEREFORE, THERE IS NO REASON TO EXCLUDE THE EXCISE DUTY IN ARRIVING AT PROFIT DERIVED FOR T HE PURPOSES OF DEDUCTION UNDER SECTION 80IB. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 6. FOLLOWING THE ABOVE VIEW, AO IS DIRECTED TO RE-C OMPUTE THE ELIGIBLE DEDUCTION U/S.80IB. ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 6 - 6.1. THE NEXT ITEM OF ADJUSTMENT IS INTEREST ON VARIOUS PARTIES AND IN THIS REGARD LD.AR HAS CONTESTED THAT IN RESPECT OF TRADE DEBTORS THE A.O. SHOULD HAVE ALLOWED THE CLAIM AS HELD BY THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. VS. DCI T 283 ITR 402 (GUJ.). LD.AR HAS REFERRED THAT THE INTEREST RECEIVED FROM VARIOUS PARTIES AMOUNTING TO RS.4,79,667/- PERTAINED TO LATE PAYMENT AND THE CREDIT FACILITY AVAILED BY THOSE PARTIES. IN THIS REGARD, WE HEREBY DIRECT THE ASSESSEE TO ESTABLISH THE ABOVE FACT BEF ORE THE AO AND IF FOUND CORRECT, THEN FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT(SUPRA) THE ELIGIBLE DEDUCTION U/S.80IB SHOULD BE RE-COMPUTED ACCORDINGLY AS PER LAW. 6.2. IN RESPECT OF THE THIRD ITEM ABOUT INSURANCE CLAIM RECEIVED FOR SHORTAGE OF MATERIAL, A VIEW HAS ALREADY BEEN TAKEN BY THE COORDINATE BENCH (SUPRA) VIDE PARAGRAPH NO.21.4 IN ASSESSEES FAVOUR AS FOLLOWS:- 21.4. THE THIRD ITEM IS ABOUT INSURANCE RECEIPT F OR DAMAGES ON GOODS. THE ISSUE IS DIRECTLY COVERED BY THE DEC ISION OF HON.DELHI HIGH COURT IN CIT VS. SPORTKIND INDIA LTD . (2010) 324 ITR 283 (DEL) WHEREIN IT IS HELD THAT IF ASSESSEE R ECEIVES INSURANCE ON DAMAGES THERE IS DEFINITELY A NEXUS WITH THE BUS INESS. THE COMPENSATION AMOUNT RECEIVED BY THE ASSESSEE COMPAN Y FROM INSURANCE COMPANY HAS TO BE TAKEN INTO ACCOUNT IN D ETERMINING THE PROFITS AND GAINS OF INDUSTRIAL UNDERTAKING. ACCOR DINGLY THIS PART OF THE CLAIM OF ASSESSEE IS ALLOWED. 6.3. IN RESPECT OF FOURTH ITEM PERTAINING TO MISCELLANEOUS INCOME RECEIVED FROM SALE OF NON-EXCISABLE WASTE MATERIAL, WE HAVE NOTED THAT THE REQUISITE DETAILS WERE NOT EXAMINED BY THE AO A ND MERELY STATED THAT ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 7 - THE SAID INCOME WAS TO BE EXCLUDED FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.80IB, RESULTANTLY, THE IMPUGNED ADJUS TMENT WAS MADE. HOWEVER, LD.AR HAS STATED THAT THE ISSUE IS COVERED BY THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS . HARJIVANDAS JUTHABHAI ZAVERI 258 ITR 785(GUJ.) AND OF DCIT VS. CORE HEALTH CARE LTD. 308 ITR 263(GUJ). FACTS IN THIS REGARD ARE R EQUIRED TO BE EXAMINED, HENCE, IN THE INTEREST OF NATURAL JUSTICE WE RESTOR E THIS PART OF THIS GROUND BACK TO THE AO TO ADJUDICATED IN THE LIGHT OF THE A FORESAID TWO PRECEDENTS. IN THE RESULT, FIRST CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 7. GROUND NO.2 PERTAINS TO LEVY OF INTEREST U/S.234 B AND U/S.234C AND GROUND NO.3 OF THE CROSS OBJECTION IS IN RESPEC T OF INITIATION OF PENALTY U/S.271(1)(C), HOWEVER, THESE GROUNDS ARE E ITHER CONSEQUENTIAL OR PREMATURE IN NATURE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED 31/ 10 /2011 ORDER PRONOUNCED IN THE COURT SD/- SD/- (AM) (JM) AKG MKS 31.10.11 3/.. , . ../ T.C. NAIR, SR. PS ITA NO.2773/AHD/2009(BY REVENUE) AND CO NO.259/AHD/2009 (BY ASSESSEE) ITO VS. ELECTRO FERRO ALLOYS LTD. ASST.YEAR - 2006-07 - 8 - #2 . +4 5#4' #2 . +4 5#4' #2 . +4 5#4' #2 . +4 5#4'/ COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-VIII, AHMEDABAD 5. 49: + , , / DR, ITAT, AHMEDABAD 6. :; <- / GUARD FILE. #2 #2 #2 #2 / BY ORDER, ,4 + //TRUE COPY// = == =/ // / ! ! ! ! ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..17.10.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.10.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 31.10.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.10.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER