The Dy. CIT., Circle-4, Ahmedabad V. Infinium Motors Pvt.Ltd., Ahmedabad

ITA 3009/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7899 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 13-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Capital asset; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 3009/AHD/2014 (ASSESSMENT YEAR: 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4, 1 ST FLOOR, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD A PPELLANT VS. INFINIUM MOTORS PVT. LTD., NR. YMCA CLUB, S. G. HIGHWAY, JIVRAJ PARK, AHMEDABAD 380 051 RESPONDENT PAN: AAACI4684B /BY REVENUE : SHRI V. K. SINGH, SR. D.R /BY ASSESSEE : NONE /DATE OF HEARING : 20.12.2017 /DATE OF PRONOUNCEMENT : 29.12.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2008-09 A RISES AGAINST THE CIT(A)-VIII, AHMEDABADS ORDER DATED 25.08.2014 IN CASE NO. CIT(A)- VIII/DCIT/CIR.4/15/13-14, REVERSING ASSESSING OFFIC ERS ACTION MAKING ADDITION ITA NO. 3009/AHD/14 [DCIT VS. INFINIUM MOTORS PVT. LTD.] A.Y. 2008-09 - 2 - OF RS.1,07,19,753/- IN RESPECT OF UNUTILIZED CENVAT CREDIT, IN PROCEEDINGS U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. WE NOTICE AT THE OUTSET THAT THE CIT(A)S FINDIN GS UNDER CHALLENGE ELABORATELY DISCUSS THE RELEVANT FACTS, ABOVE SOLE ISSUE IN QUESTION AS WELL AS ASSESSING OFFICERS REASONING IN RELATION TO THE IM PUGNED UNUTILIZED CENVAT CREDIT AS UNDER: 2.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE AN ADDITION OF THE UNUTILISED CENVAT CREDIT SHOWN IN THE BALANCE SHEET OF THE APPELLANT. IT WAS HELD BY THE AO THAT IT CANNOT BE TREATED AS ADVANCE GIVEN TO THE GOVERNMENT ON ACCOUNT OF EXCISE PAYABLE. THE APPELLANT ON THE OTH ER HAND HAS EXPLAINED THAT THE CENVAT BALANCE WAS NOT A SUBSIDY OR INCENTIVE. THE BALANCE WAS ON ACCOUNT OF EXCISE DUTY CHARGED BY THE CAR MANUFACTURER IN THE SALE INVOICE. THE APPELLANT HAS PURCHASED CERTAIN MOTOR CARS FOR CARRYING OUT B USINESS OF CAB OPERATOR AND THE VALUE OF VEHICLES HAS BEEN REDUCED BY THE APPEL LANT BY THE EXCISE DUTY PAID ON PURCHASE AND HAS BEEN TRANSFERRED TO A SEPARATE ACCOUNT. THE APPELLANT WAS ENTITLED, AS PER THE CENVAT CREDIT RULES, TO UTILIZ E MAXIMUM OF 50% OF EXCISE DUTY. THE APPELLANT DURING THE YEAR HAD TRANSFERRED 50% OF THAT TO THE EXCISE DUTY ACCOUNT AND SAME HAS BEEN UTILISED AGAINST THE SERVICE TAX PAYABLE BY THE APPELLANT ON ACCOUNT OF LETTING OUT CARS. THE APPEL LANT HAS THEREFORE, EXPLAINED THAT THE UNUTILIZED CREDIT BALANCE IN THE CENVAT AC COUNT WAS FULLY EXPLAINED. ON A CAREFUL CONSIDERATION OF THE ENTIRE FACTS OF T HE CASE, IT IS NOTED THAT APPELLANT IS RUNNING THE BUSINESS OF LETTING OUT CA RS FOR HIRE AND IT IS PAYING SERVICE TAX ON SUCH CHARGES. IT IS CLAIMING THE BEN EFIT OF UNUTILIZED CENVAT CREDIT AS PER THE EXCISE RULES FOR CLAIMING THE CEN VAT CREDIT. THE CENVAT BALANCE WHICH IS LYING UNUTILIZED IN THE ACCOUNT IS THERE ON ACCOUNT OF THE CAPITAL ASSETS PURCHASED BY IT FOR THE PURPOSE OF BUSINESS. THE APPELLANT HAS CLEARLY DEMONSTRATED THAT THE UTILIZATION OF CREDIT IS AS P ER THE RULES. THE APPELLANT HAS NEITHER CLAIMED UNUTILIZED CENVAT CREDIT AS EXPENDI TURE NOT DEBITED TO PROFIT AND LOSS ACCOUNT. IT IS FURTHER OBSERVED THAT THE C APITALISED VALUE OF CARS USED FOR THE PURPOSE OF LETTING OUT HAS ALSO BEEN REDUCED BY THE CENVAT CREDIT TRANSFERRED BY IT TO A SEPARATE ACCOUNT AND ACCORDI NGLY NO DEPRECIATION ON THE CENVAT PORTION HAS BEEN CLAIMED BY THE APPELLANT. T HE OBSERVATIONS OF THE AO THAT THE CREDIT OF MODVAT / CENVAT IS AN INCENTIVE IS NOT JUSTIFIED. THE APPELLANT CANNOT CLAIM THE REFUND ON THIS ACCOUNT I F DUE TO SOME CIRCUMSTANCES THE BUSINESS HAS TO BE CLOSED. THE VIEW HAS BEEN UP HELD BY HON'BLE SUPREME COURT IN THE CASE OF INDO NIPPON CHEMICALS LTD. [26 1 ITR 275]. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT MODVAT CREDIT WAS AN IRREVERSIBLE CREDIT ITA NO. 3009/AHD/14 [DCIT VS. INFINIUM MOTORS PVT. LTD.] A.Y. 2008-09 - 3 - AVAILABLE TO MANUFACTURERS AND WOULD NOT AMOUNT TO INCOME WHICH WAS LIABLE TO BE TAXED UNDER THE ACT. THEREFORE, THE MODVAT / CEN VAT CREDIT BALANCE AVAILABLE WITH THE ASSESSEE IS NEITHER INCOME NOR A NY INCENTIVE OR SUBSIDY WHICH CAN BE CONSIDERED AS INCOME OF THE APPELLANT. THE O BSERVATION OF THE AO REGARDING INCLUSION OF UNUTILISED CENVAT CREDIT IN THE CLOSING STOCK WOULD BE APPLICABLE IN CASE OF A PERSON ENGAGED IN MANUFACTU RING AND/OR PURCHASE AND SALE OF GOODS. THESE FACTS ARE NOT APPLICABLE IN TH E CASE OF THE APPELLANT AS THE APPELLANT IS NOT IN THE BUSINESS OF MANUFACTURING A ND SALE OF GOODS. IT IS IN THE BUSINESS OF RUNNING THE CARS ON HIRE AND THEREFORE, THERE IS NO QUESTION OF MAINTAINING CLOSING STOCK. THE APPELLANT HAS ALSO E XPLAINED CLEARLY THAT IT HAS NOT INCLUDED THE EXCISE DUTY COMPONENT IN VALUATION OF THE DEPRECIABLE ASSETS. ACCORDINGLY, THE JUDGEMENTS IN THE CASE OF CHOWRING HEE SALES BUREAU PVT. LTD. 87 ITR 542 AND SINCLAIR MURRAY & CO. PVT. LTD. 97 I TR 615 ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT AND ARE ACCORDINGLY RESPE CTFULLY DISTINGUISHED. IN VIEW OF ABOVE DISCUSSION, I AM OF THE CONSIDERED OPINION THAT NO ADDITION ON THIS ACCOUNT CAN BE MADE TO THE INCOME OF THE APPELLANT. THE ADDITION MADE IS ACCORDINGLY DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING TH E ABOVE CENVAT CREDIT ADDITION IN QUESTION. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENT. THERE IS NO DISPUTE THAT THE ASSESSEE HAD PAID THE IMPUGNED EXCISE DUTY ON MOTOR CARS PURCHASED FOR ITS HIRING BUSINESS. IT REDUCED THE RELEVANT EXCIS E DUTY ON THE SAID PURCHASES FROM THE TOTAL COST OF THE MOTOR CARS. THIS FOLLOWED IT S DEPRECIATION CLAIM ON THE CONSEQUENTIAL REDUCED COST THEREOF. THE ASSESSEE T HEREAFTER TREATED THE ABOVE EXCISE DUTY AMOUNT AS AN ADVANCE IN ITS BALANCE SHE ETS ASSET SIDE. THE REVENUE IS FAIR ENOUGH IN NOT DISPUTING THE FACT THAT IT IS ALREADY ENTITLED TO CLAIM 50% OF THE ABOVE EXCISE DUTY AS CENVAT CREDIT. THE ASSESS EE HAS ADMITTEDLY SET OFF ITS SERVICE TAX PAYABLE TO THE EXTENT OF 50% OF THE ABO VE EXCISE DUTY. IT THEREAFTER HAS CARRIED FORWARD THE REMAINING AMOUNT IN THE NEX T YEAR. WE TAKE INTO ACCOUNT ALL THESE FACTS TO OPINE THAT THERE IS NO INCOME EL EMENT EMBEDDED THEREIN SINCE THE ASSESSEE IS NOT ENTITLED TO GET THE SAME REFUNDED F ROM THE GOVERNMENT SINCE THE SAME HAS TO BE UTILIZED ONLY AGAINST THE SERVICE TA X PAYABLE. WE THEREFORE EXPRESS OUR AGREEMENT WITH LEARNED CIT(A)S CONCLUSION THAT THE ABOVE EXCISE DUTY CANNOT BE ADDED IN CLOSING STOCK VALUE SINCE THE ASSESSEE RUNS ITS CARS ON HIRE. WE ITA NO. 3009/AHD/14 [DCIT VS. INFINIUM MOTORS PVT. LTD.] A.Y. 2008-09 - 4 - ACCORDINGLY FIND NO REASON TO ACCEPT REVENUES SOLE SUBSTANTIVE GRIEVANCE. THE CIT(A)S FINDING UNDER CHALLENGE STAND CONFIRMED. 4. THIS REVENUES APPEAL IS ACCORDINGLY DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF DECEMBER, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 29/12/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0