Charotar Gas Sahakari Mandali Ltd., Anand V. The Dy.CIT.,Anand Circle, Anand

ITA 2916/AHD/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9736 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR 2007-08: PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR: 2007-08 CHAROTAR GAS SAHAKARI MANDALI LTD., ......... ...........APPELLANT NEW ADDRESS : GAS HOUSE, 11, GIDC JANTA CROSSING, NR. CNG STATION, ANAND SOJITRA ROAD, VITTHAL UDYOGNAGAR, ANAND-388 121 PAN AAATC 1831 F VS. DY. COMMISSIONER OF INCOME-TAX, . .R ESPONDENT ANAND CIRCLE, ANAND APPEARANCES BY: ARTI N. SHAH - FOR THE APPELLANT J. P. JANGID -F OR THE RESPONDENT DATE OF CONCLUDING THE HEARING: JULY 7, 2015 DATE OF PRONOUNCING THE ORDER: JULY 10, 2015 O R D E R PER PRAMOD KUMAR, AM : BY WAY OF THIS APPEAL, THE ASSESSEE APPELLA NT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 10 TH AUGUST, 2010, PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE IN COME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2007-08. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE :- I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR 2007-08: PAGE 2 OF 6 1. THE LD. COMMISSIONER OF INCOME-TAX (A PPEALS)VI, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY C ONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.26,97,661/- ON BAL VLA-BAKROL PIPELINE. 3. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONCERNED, THE RELEVANT MATERIAL FACTS OF THE CASE ARE AS FOLLOWS. THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF PURCHASE OF NATURAL GAS AND SUPPLYING I T TO DOMESTIC AND INDUSTRIAL CONSUMERS AT THEIR DOORSTEP. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHI LE THE ASSESSEE HAS CLAIMED DEPRECIATION ON ITS MAIN PIPELINE, I.E. BA VLA BAKROL PIPELINE, THE SAID PIPELINE WAS NOT ACTUALLY USED FOR THE PURPOSE OF DISTRIBUTION OF GAS. WHEN ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHO W CAUSE AS TO WHY DEPRECIATION ON THIS PIPELINE NOT BE DISALLOWED, IT WAS EXPLAINED BY THE ASSESSEE THAT THIS PIPELINE WAS NOT USED DUE TO OPE RATIONAL REASONS, I.E. LOW GAS PRESSURE AND USE OF ALTERNATE MODE, THE SAID PI PELINE WAS VERY MUCH AVAILABLE FOR BUSINESS PURPOSE. ON THESE FACTS, THE ASSESSING OFFICER OBTAINED DIRECTIONS OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX UNDER SECTION 144A OF THE ACT. THESE DIRECTIONS WERE AS F OLLOWS :- THE ASSESSEE HAS SUBMITTED THAT THE DEPRECIATION ON PLNT AND MACHINERY ON PIPELINE FROM BAVLA TO BAKROL OF WORTH RS.1,79,85,075/- @ 15% AMOUNTING TO RS.26,97,661/- HAS BEEN CLAIMED. T HE INSTALLATION WORK OF THE SAID PIPELINE HAVING LENGTH OF 65 KM. W AS COMPLETED AND PUT TO USE FROM 24/6/2001. DURING THE YEAR, THE ASSESSE E DID NOT ACQUIRE GAS THROUGH THE SAID INSTALLATION FROM BAVLA DUE TO TEMPORARY NON- FUNCTIONING ON ACCOUNT OF LOW PRESSURE OF GAS. THE GAS WILL BE ACQUIRED UPON AVAILABILITY OF SUFFICIENT PRESSURE FROM BAVLA AND THE SAID PIPELINE IS FULLY ALIVE AND MAINTAINED. THE ASSESSEE HAS FUR THER RELIED ON THE DECISION OF KARNATAKA HIGH COURT IN CASE OF CVIT VS . SHRI CHAMUNDERSWARI SUGAR LTD. (2009) 223 CTR (KAR) 423. 7. THE FACTS IN THE CASE OF THE ASSESSEE AND THE JU DGMENT OF KARNATAKA HIGH COURT RELIED UPON BY THE ASSESSEE, W AS EXAMINED AND IT IS FOUND THAT THE SAID DECISION IS DISTINGUISHABLE ON FACTS. IN THE CASE OF CHAMUNDESHWARI SUGAR LIMITED THE PLANT AND MACHINER Y INSTALLED COULD NOT EFFECTIVELY FUNCTION AS THE MACHINERY WAS FOUND DEFECTIVE DURING TRIAL RUN. IN THE INSTANT CASE THE FACTS ARE DIFFERENT. T HE SAID PIPELINE WAS PUT TO USE IN THE EARLIER YEARS. HOWEVER, IN THE YEAR U NDER CONSIDERATION IT WAS NOT USED AT ALL. IN ORDER TO ASCERTAIN AS TO WH ETHER THE SAID PIPELINE WAS USED IN THE SUBSEQUENT YEARS THE QUESTION WAS A SKED TO THE I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR 2007-08: PAGE 3 OF 6 AUTHORISED REPRESENTATIVE DURING THE COURSE OF HEAR ING WHO EXPLAINED THAT THE SAID PIPELINE HAS NOT BEEN USED AFTER DISC ONTINUING THE SAME IN THE YEAR 2006-07. 8. THEREFORE, THIS IS A CASE WHERE THE PLANT AND MACHINERY WAS NOT USED AT ALL FOR THE PURPOSE OF BUSINESS. THERE ARE DECISIONS WHERE IT HAS BEEN HELD THAT IF THE PLANT AND MACHINERY WAS NOT A CTUALLY USED THE DEPRECIATION SHOULD NOT BE ALLOWED. SOME OF SUCH DE CISIONS ARE AS UNDER :- (I) UNDER SECTION 32 OF INCOME-TAX ACT DEPRECIATION IS PERMISSIBLE IN THE CASE OF MACHINERY, PLANT OR FURNITURE OWNED BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION, WHEN THE LEGISLATURE HAS USED THE WORD SED FULL MEANING MUST BE GIVEN TO IT, THE MACHINERY HAS TO BE ACTUALLY USED IN TER MS OF STATUTE. THE MACHINERY WAS KEPT READY FOR USE. HOWEVER, THER E WAS NO EVIDENCE OF ACTUAL USE. IT WAS HELD THAT THE ASSESS EE WAS NOT ENTITLED FOR DEPRECIATION [DCIT VS. YELLAMMA DASAPP A HOSPITAL 290 ITR 353 (KAR)] (II) ASSET WAS READY FOR USE BUT NOT ACTUALLY USED. DEPRECIATION CANNOT BE CLAIMED. THE WORD USED IN S.32 DENOTE S THAT THE ASSET HAS BEEN ACTUALLY USED AND NOT THAT IT IS MER ELY READY FOR USE. [DINESHKUMAR GULABCHAND AGRAWAL V. CIT 267 ITR 768 (BOM)] SLP: THE SUPREME COURT HAS DISMISSED THE SPECIAL L EAVE PETITION FILED BY THE ASSESSEE AGAINST THIS JUDGMENT (2204) 266 ITR (ST) 106. (III) NO DEPRECIATION IS ALLOWABLE IF THE ASSETS A RE NOT USED AT ALL FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE IN THE RELEVANT PREVIOUS YEARS [CIT V. ORIENTAL COAL CO. LTD. 206 I TR 683 (CAL)] 4. ACCORDINGLY, DEPRECIATION OF RS.26,97,761/- WAS DISALLOWED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE CIT(A) BUT WITHOUT ANY SUCCESS. REJECTING THE GRIEVANCE OF THE ASSESSEE, CIT(A) OBSERVED AS FOLLOWS :- 2.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE AND APPELLANTS SUBMISSIONS. EVEN AFTER THE INTRODUCTIO N OF BLOCK OF ASSETS CONCEPT, AS PER SECTION 32, DEPRECIATION IS ADMISSI BLE IN RESPECT OF ANY ASSET FALLING IN THE BLOCK OF ASSETS, ONLY IF T HE ASSET CONCERNED IS USED FOR THE PURPOSE OF BUSINESS. THIS CONTENTI ON OF THE APPELLANT IS THEREFORE, NOT TENABLE. THE BAVLA BAKROL GAS PIPELI NE WAS NOT PUT TO USE DURING THE PREVIOUS YEAR AND ANY TIME THEREAFTE R. HIGH COURT OF I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR 2007-08: PAGE 4 OF 6 KARNATAKA IN THE CASE OF YELLAMMA DASAPPA HOSPITAL (2007) 290 ITR 353 (KARNATAKA) AND HIGH COURT OF BOMBAY IN THE CAS E OF DINESHKUMAR GULABCHAND AGARWAL (2004) 267 ITR 768 H AVE HELD THAT FOR THE PURPOSE OF DEPRECIATION MACHINERY HAS TO BE ACTUALLY USED IN TERMS OF STATUTE AND MACHINERIES KEPT READY FOR USE ARE NOT ELIGIBLE FOR DEPRECIATION. DEPRECIATION ON BAVLA BAKROL PIPELINE IS THEREFORE, NOT ADMISSIBLE. EVEN OTHER-WISE, THERE IS NOTHING ON RE CORD TO INDICATE THAT THE PIPELINE WAS EVEN KEPT READY FOR USE OR IT WAS A CASE OF TEMPORARY NON FUNCTIONING. THE DECISION IN THE CASE OF SHRI CHAMUNDESHWARI SUGAR LTD. RELIED UPON BY THE APPELL ANT IS DISTINGUISHABLE WHERE THE MACHINERY BECAME DEFECTIV E DURING THE TRIAL RUN ITSELF AND WAS TEMPORARILY OUT OF USE. DISALLOW ANCE OF DEPRECIATION OF RS.26,97,661/- ON BAVLA BAKROL PIPELINE IS UPHEL D. 5. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN T HE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THIS IS NOT IN DISPUTE THAT THE BAV LA-BAKROL GAS PIPELINE WAS USED IN EARLIER YEARS, AND THAT THE REASONS FOR ITS NOT BEING PUT INTO ACTUAL USE WAS DUE TO LOW GAS PRESSURE AND OTHER OP ERATIONAL FACTORS. THE GAS PIPELINE DID EXIST AND WAS AVAILABLE. AS REGARD S LEARNED CIT(A)S RELIANCE ON HONBLE BOMBAY HIGH COURTS JUDGMENT IN THE CASE OF DINESHKUMAR GULAB CHANDRA AGARWAL VS. CIT [(2004) 267 ITR 768 (BOM)] AND ON HONBLE KARNATAKA HIGH COURTS JUDGMENT IN THE CASE OF DCIT VS. YELLAMMA DASAPPA HOSPITAL [(2007) 290 ITR 353 (KAR), SUFFICE TO SAY THAT THE INTERPRETATION SO GIVEN BY HONBLE NON-JURISDICTIONAL HIGH COURT IS D IAMETRICALLY OPPOSED TO THE LAW LAID DOWN BY HONBLE DELHI HIGH COURT IN THE CA SE OF [(1980) 123 ITR 404 (DEL)] CAPITAL BUS SERVICE (P) LTD. VS. CIT WHEREIN IT IS HELD THAT EVEN WHEN MACHINERY IS KEPT READY FOR USE IN THE BUSINESS BUT COULD NOT BE USED FOR THE REASONS BEYOND ASSESSEES CONTROL, DEPRECIATION IS NONETHELESS IS ADMISSIBLE. WE ARE NOT AWARE OF ANY DIRECT DECISION ON THE ISSUE BY HONBLE JURISDICTIONAL HIGH COURT. ACCORDINGLY, ADOPTING ON E OF THE POSSIBLE VIEWS IN FAVOUR OF THE ASSESSEE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR 2007-08: PAGE 5 OF 6 THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALL OWANCE. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 8. GROUND NO.1 IS THUS ALLOWED. 9. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE :- 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS)VI, BARODA HAS ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIR MING THE DISALLOWANCE OF RS.1,11,96,029/- U/S 43B(E). 10. AS REGARDS THIS DISALLOWANCE, IT WAS MADE BY THE ASSESSING OFFICER ON THE SHORT GROUND THAT THE INTEREST WAS DEBITED, THO UGH NOT ACTUALLY PAID, AND THE INTEREST WAS PAYABLE TO AN INSTITUTION WHICH WA S A SCHEDULED BANK AT THE POINT OF TIME WHEN LOAN WAS RECEIVED THOUGH ADMITTE DLY IT WAS NOT A SCHEDULED BANK AT PRESENT. THE ASSESSING OFFICER WA S OF THE VIEW THAT IT IS NOT NECESSARY THAT THE RECIPIENT OF INTEREST SHOULD ALSO BE A SCHEDULED BANK AT THE POINT OF TIME WHEN INTEREST IS CLAIMED AS DE DUCTION, AND THAT ITS BEING A SCHEDULED BANK AT THE POINT OF TIME WHEN LOAN WAS GIVEN, WOULD SUFFICE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BU T WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APP EAL BEFORE US. 11. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN T HE LIGHT OF THE APPLICABLE LEGAL POSITION. 12. WE FIND THAT IT IS NOT EVEN IN DISPUTE THAT THE LENDER IS NOT A SCHEDULED BANK ANY LONGER. THE INTEREST ON SUCH A L OAN CANNOT, THEREFORE, BE TREATED AS INTEREST ON LOAN FROM A SCHEDULED BANK. IN THIS VIEW OF THE MATTER AND THE LIGHT OF THE LIMITED SCOPE OF DISALLOWANCE UNDER SECTION 43B(E), WE DIRECT THE ASSESSING OFFICER TO DELETE THIS DISALLO WANCE OF RS.1,11,96,029/- AS WELL. I.T.A. NO.: 2916/AHD/2010 ASSESSMENT YEAR 2007-08: PAGE 6 OF 6 13. GROUND NO.2 IS THUS ALLOWED. 14. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCE D IN THE OPEN COURT TODAY ON 10 TH DAY OF JULY, 2015. SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (AC COUNTANT MEMBER) AHMEDABAD, THE 10 TH DAY OF JULY, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD