The Tamilnadu Co-operative Textiles Processing Mills Ltd., Erode V. ITO, Erode

ITA 300/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95834 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN IRS
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Revised return

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , ! , ' #$ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.300/MDS/2015 / ASSESSMENT YEAR : 2010-2011 THE TAMILNADU CO-OPERATIVE TEXTILES PROCEEDING MILLS LTD, NO.428, BHAVANI MAIN ROAD, ERODE 638 004 VS. THE INCOME TAX OFFICER, WARD NO.2(4) ERODE ITA NO.345/MDS/2015 ASSESSMENT YEAR 2010-2011 THE INCOME TAX OFFICER, WARD NO.2(4) ERODE VS. THE TAMILNADU CO-OPERATIVE TEXTILES PROCEEDING MILLS LTD, NO.428, BHAVANI MAIN ROAD, ERODE 638 004 [PAN AAAAT 3147N ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI.G. BASKAR, ADVOCATE /RESPONDENT BY : SHRI. P. RADHAKRISHNAN, IRS, JCIT / DATE OF HEARING : 05-08-2015 / DATE OF PRONOUNCEMENT : 12-08-2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE ASSESSEE AND THE REVENUE ARE IN CROSS APPEALS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-I, COIMBATORE, DATED 07.11.2014 FOR THE ASSESSMENT YEAR 2010-2011. ITA NOS.300 & 345/MDS/2015 :- 2 -: 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ACTION OF THE ASSESSING OFFICER IN DENYING 100% DEPRECIATI ON ON THE POLLUTION CONTROL PLANT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED 100% DEPRECIATION ON 'REVERSE OSMOSIS SYSTEM WITH ULTRA FILTRATION MODULE(RO PLANT)' BEING WATER POLLUTION CONTROL PLA NT, WHEREAS THE ASSESSING OFFICER DISALLOWED THE CLAIM AND ALLOWED ONLY 15% DEPRECATION ELIGIBLE FOR PLANT AND MACHINERY AS THE ULTRA FILTERS AND MEMBRANES CANNOT BE CONSIDERED AS BIO-FILTERS AND F URTHER STATED THAT THE PERCENTAGE OF DEPRECIATION APPLICABLE TO THE AB OVE ASSET IS 15% ONLY AND PROCEEDED TO ALLOW THE DEPRECIATION AT B19 ,61,728/- ON R.O PLANT AND THE BALANCE OF B.1,21,76,849/- WAS DISALL OWED. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT THE ASSESSING OFFICER IN HIS ORDER HAS CONSIDERED T HE SUBMISSIONS MADE BY THE LD. AUTHORISED REPRESENTATIVE FOR ASSES SEE ON ACCOUNT OF THE EXCESS CLAIM OF DEPRECIATION ON RO PLANT AND HA S ELABORATELY DISCUSSED REGARDING THE REVERSE OSMOSIS SYSTEM WITH 'REJECT TREATMENT' FOR THE EXISTING EFFLUENT TREATMENT PLAN T, BY IMPLYING THAT ITA NOS.300 & 345/MDS/2015 :- 3 -: THE RO-PLANT WAS ALREADY EXISTING IN WHICH THE REQU IRED PARTS HAVE BEEN REPLACED. THE ASSESSING OFFICER AFTER VERIFYIN G THE COPY OF BILLS HAS COME TO THE CONCLUSION THAT THE MEMBRANE USED I S UF MEMBRANE AND AS PER RULE 5 OF THE INCOME TAX ACT, 1961, THE ASSETS AS MENTIONED IN THE BILLS MENTIONED BY. THE ASSESSEE I S NOT ELIGIBLE FOR DEPRECIATION AS PER APPENDIX-I. AS PER APPENDIX-I, THE ASSETS OF THE ASSESSEE, RO PLANT DOES NOT FALL UNDER ANY OF THE A SSETS AS MENTIONED IN III(3)(IX) OF APPENDIX-I AS NONE OF THE MACHINER Y APPEARING IN THE LIST ARE ELIGIBLE FOR 100% DEPRECIATION. THE ASSESS ING OFFICER ALSO STATED THAT THE ASSESSEE HAS USED UF MEMBRANES AND FILTERS WHICH CANNOT BE CONSIDERED AS BIO-FILTERS AND WHICH WAS N OT FALLING UNDER III(3)(IX) OF APPENDIX-I. AFTER ELABORATE DISCUSSIO N, THE ASSESSING OFFICER ALLOWED THE DEPRECIATION @ 15% ON THE RO PL ANT AND THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD. AS SEEN FROM THE RECORDS RO PLANT DOES NOT FALL UNDER ANY OF THE ASSETS AS MENTIONED IN III (3)(IX) OF APPENDIX- I AS NONE OF THE MACHINERY APPEARING IN THE LIST ARE ELIGIBLE FOR 10 0% DEPRECATION. BEING SO, THE ASSESSING OFFICER IS JUSTIFIED IN GRA NTING 15% DEPRECIATION ON THE ABOVE IMPUGNED PLANT AND MACHIN ERY. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS REJECTE D. ITA NOS.300 & 345/MDS/2015 :- 4 -: 6. THE NEXT GROUND OF THE ASSESSEE IS THAT THE COMMISS IONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DIRECTED THE ASS ESSING OFFICER TO TREAT THE INCOME RETURNED AS LOSS OF B1,59,07,968/- WHICH WAS WRONGLY TAKEN AS B17,69,391/- AT PAGE NO.19 OF THE ASSESSME NT ORDER. 7. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE LOSS TO BE CONSIDERED AS B1,59,07,968/- AS AGAINST LOSS CONSIDERED BY THE ASSESSING OFFICER IN ITS INCOME RETURNED AT B17 ,69,391/- AT PAGE NO.19 OF THE ASSESSMENT ORDER. 8. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NEITHER THE ORIGINAL RETURN NOR REVISED RETURN SHOWED THE ABOVE LOSS . HOWEVER, THE ASSESSEE FILED REVISED RETURN ON INCOM E, ELECTRONICALLY ON 06.12.2011 AS SEEN FROM THE ASSESSMENT ORDER AND THE ASSESSEE HAS ACCEPTED A TOTAL LOSS OF B1,59,07,968/-. IF TH E ORIGINAL AND REVISED RETURN WERE FILED WITHIN TIME FRAME, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. THIS ISS UE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONS IDERATION. THIS ISSUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ASSESS EE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.300 & 345/MDS/2015 :- 5 -: 9. COMING TO THE APPEAL OF THE REVENUE IN ITA NO.345/MDS/2015, THE GRIEVANCE OF THE REVENUE IS TH AT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING THE APPEAL OF THE ASSESSEE ON THE ISSUE OF SHORTFALL IN CONTRACT RECEIPTS AFTER VERIFYING THE DETAILS IN RESPECT OF SHORTFALL IN CONTRACT REC EIPTS PRODUCED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS, AND NOT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE SAME. 10. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFIC ER ON A PERUSAL OF BOOKS OF ACCOUNTS AND DETAILS AS PER 26A S HAD NOTICED THAT THE ASSESSEE HAS FILED TO ADMIT THE ENTIRE CONTRACT RECEIPTS WITH RESPECT TO THE KERALA STATE HANDLOOM WEAVERS CO-OPE RATIVE SOCIETY LTD AND NATIONAL TEXTILE CORPORATION AND FOUND THE SHORT FALL AT B22,74,898/- AND PROPOSED TO ADD THE SAME AS INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ISSUED A LETTER TO THE ASSESSEE TO FILE THE EXPLANATION FOR THE SAME. THE ASSESSEE IN ITS REPLY STATED AS UNDER :- IT IS STATED IN THE SHOW CAUSE NOTICE THAT THERE IS A SHORTFALL IN THE CONTRACT RECEIPTS ADMITTED IN THE BOOKS OF ACCO UNT, IN THIS REGARD, WE HAVE TO STATE THAT, THE SOCIETY HAS RAIS ED INVOICES FOR THE SAID SOCIETIES(DEBTORS) DURING THE YEAR AND ADM ITTED THE SAME IN THE BOOKS OF ACCOUNT. HOWEVER, THE AMOUNT REFLECTED IN THE FORM NO.26AS ARE AMOUNT RECEIVED DURING THE YEA R WHICH IS INCLUSIVE OF OPENING BALANCE OF PREVIOUS YEAR. WITH OUT CONSIDERING THE FACT THAT THE ASSESSEE HAS ACCOUNTE D THE CONTRACT RECEIPTS ON ACCRUAL BASIS, AND WITHOUT CONSIDERING THE FACT THAT THE DIFFERENCE ARISES IN FORM 26AS DUE TO TDS DEDUC TED BY THE ITA NOS.300 & 345/MDS/2015 :- 6 -: CONTRACTOR AT THE TIME OF PAYMENT INSTEAD OF CREDIT ING THE INVOICES RAISED BY THE ASSESSEE, THE ASSESSING OFFI CER HAD ADDED 22,74,898/- AS INCOME OF THE ASSESSEE WHICH WAS TOT ALLY INCORRECT. THERE WAS NO SUPPRESSION OR CONCEALMENT AS ALLEGED BY THE ASSESSING OFFICER. MOREOVER THE ACCOUNTS AR E AUDITED BY THE GOVERNMENT AUDITORS AND THEY HAD NOT MADE ANY S UCH COMMENTS OF SUPPRESSION OR CONCEALMENT SINCE THEY D O A 100 PERCENT THROUGH AUDIT. THE REPORT OF STATE GOVERNM ENT AGENCY CAN BE ACCEPTED BY THE INCOME TAX DEPARTMENT . HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE AND MAD E ADDITION OF B22,74,898/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 11. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT THE ASSESSING OFFICER HAS BASED HIS ADDITION FOLLOW ING THE DETAILS AS PER 26AS. THE LD. AUTHORISED REPRESENTATIVE FOR AS SESSEE FILED THE COMPLETE DETAILS OF INVOICE RAISED BY THE ASSESSEE AND THE DETAILS OF ABOVE RECEIPTS FROM M/S. KERALA STATE HANDLOOM DEVE LOPMENT CORPORATION LTD. THE DETAILS FILED BY THE ASSESSEE ARE EXAMINED AND IT WAS FOUND THAT THE ASSESSEE HAD ACCOUNTED THE CONTR ACT RECEIPTS ON ACCRUAL BASIS. CONSIDERING THE FACT THAT THE DIFFE RENCE AROSE IN FORM 26AS DUE TO TDS DEDUCTED BY M/S. KERALA STATE HANDL OOM DEVELOPMENT CORPORATION LTD AT THE TIME OF PAYMENT, AFTER VERIFYING THAT THERE WAS NO SUPPRESSION OR CONCEALMENT AS STA TED BY THE ASSESSING OFFICER. THE ACCOUNTS ARE ALSO AUDITED BY THE GOVERNMENT ITA NOS.300 & 345/MDS/2015 :- 7 -: AUDITOR AND THEY HAD NOT MADE ANY COMMENTS REGARDIN G SUPPRESSION OR CONCEALMENT. THEREFORE, THE COMMISSIONER OF INC OME TAX (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSI NG OFFICER. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE CONTENTION OF THE LD. AUTHORISED REPRES ENTATIVE FOR ASSESSEE IS THAT THE ASSESSEE HAD ACCOUNTED ALL THE RELEVANT SALES IN ITS BOOKS OF ACCOUNTS FOR THE ASSESSMENT YEAR UNDER CON SIDERATION AND THERE WAS NO FINDING BY THE ASSESSING OFFICER THAT SALES RELATING TO THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT PROPERL Y ACCOUNTED. HOWEVER, WE FIND THAT THE ASSESSEE HAD NOT PRODUCED BREAKUP OF THE SALES, WHICH ARE RECORDED IN FORM NO.26AS AND HAS N OT RECONCILED THE SAME WITH THE SALES RECORDED BY THE ASSESSEE IN IT S BOOKS OF ACCOUNT IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIEW OF THIS, WE ARE INCLINED TO DIRECT THE ASSESSEE TO FURNISH RECONCIL IATION BETWEEN FORM 26AS AND SALES RECORDED BY THE ASSESSEE FOR THE ASS ESSMENT YEAR UNDER CONSIDERATION AND PIN POINT EXACT DIFFERENCE WHICH ARE NOT RELATING TO THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE FORM NO.26AS SO AS TO EXCLUDE FROM THE SALES IN ASSESSME NT YEAR UNDER CONSIDERATION. WITH THESE OBSERVATIONS, WE ARE REMI TTING BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRES H CONSIDERATION. ITA NOS.300 & 345/MDS/2015 :- 8 -: 13. THE REVENUES APPEAL IN ITA NO.345/MDS/2015 IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.300/MDS/2015 AND REVENUES APPEAL IN ITA NO.345/ MDS/2015 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, 12 TH DAY OF AUGUST, 2015, AT CHENNAI. SD/- SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ) (CHANDRA POOJARI) ' / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:12.08.2015 KV %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 3. ' +',! / CIT(A) 5. )-.' / / DR 2. / RESPONDENT 4. ' + / CIT 6. .0'1 / GF