HATHWAY CABLE AND DATACOM LTD, MUMBAI V. ASST CIT CEN CIR 34, MUMBAI

ITA 2824/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2519 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

HATHWAY CABLE AND DATACOM LIMITED (FORMERLY KNOWN AS HATHWAY CABLE & DATACOM PVT LTD.) ITA NO. 2824 /MUM/20 1 4 1 H IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI A K GARODIA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 2824 /MUM/20 1 4 ( ASSESSMENT YEAR: 200 7 - 0 8 ) HATHWAY CABL E AND DATACOM LIMITED (FORMERLY KNOWN AS HATHWAY CABLE & DATACOM PVT LTD.) RAHEJAS, 1 ST FLOOR, CORNERS OF MAIN AVENUE & V.P. ROAD, SANTA CRUZ(W), MUMBAI - 400 054 .: PAN: A AACC 6814 B VS ASST. COMMISSIONER OF INCOME TAX CIR - 34, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NITESH JOSHI RESPONDENT BY : SHRI K MOHANDAS /DATE OF HEARING : 01 - 1 2 - 201 5 / DATE OF PRONOUNCEMENT : 01 - 1 2 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE AFORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 21.01.2014 , PASSED BY CIT(A PPEALS ) - 20, MUMBAI , FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSM ENT YEAR 2007 - 08. IN VARIOUS GROUNDS OF APPEAL, THE ASSESSEE HAS MAINLY CHALLENGED THE ADDITIONAL DISALLOWANCE OF DEPRECIATION OF RS. 3,00,385/ - WHICH HAS BEEN ENHANCED BY CIT(A) A S AGAINST THE DISALLOWANCE OF RS. 53,395/ - MADE BY THE AO. 2. BRIEF FACTS Q UA THE ISSUE INVOLVED ARE THAT, THE ASSESSEE IS IN THE BUSINESS OF CABLE NETWORK SERVICES AND INTERNET SERVICE PROVIDER. THE AO, FROM THE PERUSAL OF THE DETAILS OF ADDITIONS MADE IN PLANT AND MACHINERY NOTED THAT THE ASSESSEE HAS ADDED AN AMOUNT OF RS. 23, 55,968/ - TO THE BLOCK OF ASSETS WHICH WAS HATHWAY CABLE AND DATACOM LIMITED (FORMERLY KNOWN AS HATHWAY CABLE & DATACOM PVT LTD.) ITA NO. 2824 /MUM/20 1 4 2 STATED TO BE ADJUSTMENT ON ACCOUNT OF LOWER AMOUNT OF INSURANCE CLAIM RECEIVED. IT WAS STATED BY THE ASSESSEE THAT IT HAD MADE A CLAIM OF RS. 23.55 LAKHS ON ACCOUNT OF ASSETS DESTROYED / LOST BY THEFT DURING THE EARLIER YEARS AND BY SAME AMOUNT IT WAS REDUCED FROM THE WDV OF THE ASSETS IN THE PRECEDING YEARS. DURING THE PREVIOUS YEAR , SINCE NO CLAIM WAS SETTLED, THEREFORE, CONSEQUENTIAL DIFFERENCE HAS BEEN ADDED IN THIS YEAR. THE AO HELD THAT THE SAID ADJUSTMENT S HOULD HAVE BEEN MADE IN THE PRECEDING YEAR ITSELF AND ON THAT DEPRECIATION SHOULD HAVE BEEN CLAIMED. SINCE THE ASSESSEE HAS MADE THE RELEVANT ADJUSTMENT IN THIS YEAR, THEREFORE, THERE IS AN ENHANCED CLAIM OF DEPRECIATION ON THE SAID ASSETS. THE AO WORKED O UT THE DIFFERENCE IN THE FOLLOWING MANNER : - ADDITION IN AY 2007 - 08 RS.23,55,968 LESS: DEPRECIATION ALLOWABLE IN THAT YEAR RS.3,53,395 OPENING BLOCK FOR AY 2007 - 08 RS. 20,02,573 DEPRECIATION ALLOWABLE IN THIS YEAR @ 15% RS. 3,00,385 ACCORDINGLY, TH E DEPRECIATION ALLOWABLE WOULD HAVE BEEN RS. 3,00,385/ - AS AGAINST RS. 3,53,395/ - CLAIMED BY THE ASSESSEE. IN THIS REGARD, IT IS RELEVANT TO CITE EXPLANATION 5 TO SECTION 32 WHEREIN IT HAS BEEN STATED THAT THE ELIGIBLE DEPRECIATION HAS TO BE ALLOWED IN EAC H YEAR IRRESPECTIVE OF WHETHER THE CLAIM IS MADE OR NOT. IN VIEW OF THE SAME, THE DIFFERENCE OF RS. 53,395/ - IS ADDED IN THE COMPUTATION OF INCOME. 3. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE AO HAS WRONGLY DISALLOWED THE DEPRECIATION TO THE EX TENT OF RS. 53,395/ - , BECAUSE IF INSURANCE CLAIM WAS NOT SETTLED, NORMAL DEPRECIATION SHOULD HAVE BEEN ALLOWED TO THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ASSETS UNDER REFERENCE WAS DESTROYED ON WHICH ASSESSEE RAISED THE INSURANCE CLAIM AT RS. 23,55 ,968/ - , HOWEVER THE SAME WAS NOT SETTLED BY THE INSURANCE COMPANY. THUS, THE ASSESSEE REINSTATED THE W D V TO THAT EXTENT AND CLAIMED THE DEPRECIATION. HOWEVER, THE LD. CIT(A) HELD THAT THE ASSESSEE HAS WRONGLY CLAIMED THE DEPRECIATION OF RS. 3,00,385/ - ON S UCH ASSETS AND AO HAS HATHWAY CABLE AND DATACOM LIMITED (FORMERLY KNOWN AS HATHWAY CABLE & DATACOM PVT LTD.) ITA NO. 2824 /MUM/20 1 4 3 WR ONGLY RESTRICTED THE DISALLOWANCE OF DEPRECIATION TO RS. 53,395/ - . THE REASON FOR SUCH A ENHANCEMENT BY THE LD. CIT(A) WAS THAT IF THE ASSETS WERE DESTROYED OR LOST IN THE EARLIER YEAR S THEN SUCH AN ASSET WERE NOT PUT TO USE FOR THE BUSINESS PURPOSE, HENCE, THE ENTIRE CLAIM OF DEPRECIATION OF SUCH USED PLANT AND MACHINERY HAS TO BE DISALLOWED. ACCORDINGLY, HE DISALLOWED THE ENTIRE CLAIM OF DEPRECIATION OF RS. 3,00,385/ - ON THE WDV OF RS. 20,02,573/ - . 4. BEFORE US, THE LD. COUNSEL, SHRI NITESH JOSHI , SUBMITTED THAT IN THE CONCEPT OF BLOCK OF ASSETS , THE FIRST APPELLATE AUTHORITY CANNOT SAY THAT SUCH AN ASSET HAS NOT BEEN PUT TO USE. IN FACT, WHEN INSURANCE CLAIM WAS NOT SETTLED AND THE ASSESSEE HAS REINSTATED THE WDV , THE ASSESSEE WAS E LI GI BLE TO GET THE ENTIRE DEPRECIATION. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE GR SHIPPING LTD. DCIT 822/MUM/2005 WHICH HAS BEEN AFFIRMED BY THE HONBLE BOMBAY HIGH COURT ORDER DATED 28 TH JULY , 2009 IN INCOME - TAX APPEAL 598 OF 2009. 5. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 6. AFTER CONSIDERING THE RIVAL SUBMISSION S AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE ASSETS IN QUES TION WERE FORMING PART OF BLOCK OF ASSETS WHICH WERE USED EARLIER FOR THE PURPOSE OF BUSINESS. THE SAID ASSET WERE DESTROYED / LOST IN THEFT IN THE ASSESSMENT YEAR 2006 - 07 AND NO INSURANCE CLAIM H AS BEEN RECEIVED TO THE ASSESSEE . TO THE EXTENT OF T HE AMO UNT OF CLAIM MADE TO THE INSURANCE COMPANY WAS REDUCED FROM THE BLOCK OF ASSETS IN THE EARLIER YEARS AND ACCORDINGLY, ASSESSEE HAS CLAIMED DEPRECIATION ON THE REDUCED WRITTEN DOWN VALUE. SINCE THE ASSESSEE COULD NOT RECEIVE THE INSURANCE CLAIM, THE AMOUNT OF INSURANCE CLAIM OF RS. 23,55,968/ - WAS ADDED BACK HATHWAY CABLE AND DATACOM LIMITED (FORMERLY KNOWN AS HATHWAY CABLE & DATACOM PVT LTD.) ITA NO. 2824 /MUM/20 1 4 4 AND ACCORDINGLY , DEPRECIATION WAS CLAIMED ON THIS AMOUNT . THE LD. CIT(A) HAS ENHANCED THE DISALLOWANCE OF DEPRECIATION ON THE GROUND THAT THE SAID ASSET HAS NOT BEEN PUT TO USE FOR THE BUSINESS PURPOSE. SUCH A REASONING GIVEN BY THE LD. CIT(A) FOR THE ENHANCEMENT CANNOT BE SUSTAINED, BECAUSE NOW IT IS QUITE A SETTLED PROPOSITION THAT IF THE ASSETS HA VE ALREADY ENTERED INTO THE BLOCK OF ASSETS AND IS FORMING PART OF THE GROSS BLOCK OF ASSETS, THEN DEPR ECATION HAS TO BE ALLOWED EVEN IF THE SAID ASSETS HAS NOT BEEN USED IN THE RELEVANT YEAR. THIS PROPOSITION NOW STAND S SETTLED BY THE CATENA OF DECISIONS INCLUDING THAT OF A JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS G.R. SHIPPING LTD., WHICH IS BASED ON THE DECISION OF EARLIER BOMBAY HIGH COURT DECISION S . OTHERWISE ALSO, IF THE ASSESSEES CLAIM FOR INSURANCE H AS NOT BEEN SETTLED AND AMOUNT HAS BEEN ADDED BACK , THEN THE DEPRECIATION HAS TO BE ALLOWED ON SUCH AN AMOUNT . A CCORDINGLY, WE DIRECT THE AO TO G RANT DEPRECATION ON RS. 23.56 LAKHS IN THE PREVIOUS YEAR RELEVANT TO AY 2006 - 07 , THAT IS, WHEN IT WAS ADDED BACK TO THE BLOCK OF ASSETS AND SECONDLY , REWORK THE DEPRECATION FOR THE ASSESSMENT YEAR UNDER APPEAL A CCORDI N G L Y . THUS, THE GR OUN D S RAISED BY THE A SSESSEE ARE TREATED AS ALLOWED IN THE MANNER INDICATED ABOVE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DEC EMBER , 2015. SD/ - SD/ - ( A K GARODIA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 1 ST DEC EMBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 20 , MUMBAI. 4 ) THE CIT 9 , MUMBAI. 5 ) H , , / HATHWAY CABLE AND DATACOM LIMITED (FORMERLY KNOWN AS HATHWAY CABLE & DATACOM PVT LTD.) ITA NO. 2824 /MUM/20 1 4 5 THE D.R. H BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDE R / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS