M.I. ALLOYS, MUMBAI V. ITO 18(3)(3), MUMBAI

ITA 3091/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88624 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Assessee Lawyers: MRUGAKSHI K JOSHI
• Keywords: Depreciation; Business expenditure; Capital receipt; Revenue expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 3091/MUM/2013 ( / ASSESSMENT YEAR: 2007-08) M. I. ALLOYS 552, KRISHNA KUNJ, 4A/3B, 1 ST FLOOR, 7/8 TH KHAR PALI ROAD, KHAR (W), MUMBAI-400 052 VS. ITO-18(3)(3), MUMBAI ! ' ./PAN/GIR NO. AAHFM 9016 F ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : MS. MRUGAKSHI K. JOSHI $%!#&' / RESPONDENT BY : SHRI PAVAN KUMAR BEERLA ( )*&+, / DATE OF HEARING : 03.02.2015 -./&+, / DATE OF PRONOUNCEMENT : 18.03.2015 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI (CIT(A) FOR SHORT) DATED 01.01.2013, DISMISSING THE ASSESSEES APPEAL CONTESTING THE ORDER DATED 04 .06.2010 PASSED U/S. 154 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) MODIFY ING ITS ASSESSMENT U/S.143(3) FOR THE ASSESSMENT YEAR (A.Y.) 2007-08 VIDE ORDER DATED 01. 12.2009. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR THE YEAR ON 20.10.2007, CLAIMING DEPRECIATION AT RS.28, 12,122/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, HOWEVER, IT CAME TO LIGHT T HAT IT HAD RECEIVED INSURANCE CLAIM FOR 2 ITA NO. 3091/MUM/2013 (A.Y. 2007-08) M. I. ALLOYS VS. ITO RS.12,55,330/- FROM ORIENTAL BANK OF COMMERCE LTD., WHICH INCLUDED RS.10,91,808/- ON ACCOUNT OF THE INSURANCE CLAIM AGAINST LOSS ON DAMA GE TO MACHINERY AT ITS FACTORY AT SILVASA, AND WHICH STOOD CREDITED TO ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR. THE SAME BEING MONEYS PAYABLE, AS DEFINED UNDER EXPLANATION BELOW SUB-SECTION (4) OF SECTION 41 OF THE ACT, SO THAT IT WAS IN TERMS OF SECTION 4 3(6)(C) REQUIRED TO BE DEDUCTED IN COMPUTING THE WRITTEN DOWN VALUE (WDV) OF THE RELEV ANT BLOCK OF ASSETS, THE ASSESSEE, ADMITTING ITS MISTAKE IN NOT SO DOING, REVISED ITS CLAIM OF DEPRECIATION TO RS.26,48,352/- BY REDUCING THE SAID AMOUNT WHILE COMPUTING THE AMO UNT ON WHICH THE DEPRECIATION ON THE RELEVANT YEAR BLOCK OF ASSETS WAS CHARGEABLE FO R THE RELEVANT YEAR. THE ASSESSMENT STOOD MADE ON 01.12.2009 BY ALLOWING DEPRECIATION A T THE REVISED CLAIM OF RS.26.48 LACS. THE ASSESSEE SUBSEQUENTLY, I.E., ON 22.01.2010, MOV ED AN APPLICATION U/S.154, STATING THAT THE CREDIT TO THE PROFIT AND LOSS ACCOUNT INCLUDED INTER ALIA THE INSURANCE CLAIM FOR RS.10,91,808/-, I.E., IN RESPECT OF THE DAMAGE TO I TS MACHINERY, AND WHICH WAS, THUS, ONLY A CAPITAL RECEIPT, REQUIRED TO BE ADJUSTED IN COMPU TING DEPRECIATION ALLOWANCE ON THE RELEVANT BLOCK OF ASSETS, AND WHICH HAD IN FACT BEE N COMPUTED AND ALLOWED ACCORDINGLY. THE ASSESSED INCOME HAVING, HOWEVER, BEEN COMPUTED WITHOUT ADJUSTMENT QUA THE SAID AMOUNT CREDITED TO ITS PROFIT AND LOSS ACCOUNT, THE SAME WAS PRAYED FOR BEING REDUCED. THE SAME WAS NOT ACCEPTED ON THE GROUND THAT THE RE VISION TO ITS CLAIM FOR DEPRECIATION WAS MADE BY THE ASSESSEE ONLY UPON AN ENQUIRY IN RE SPECT OF THE SAID CREDIT DURING THE COURSE OF THE SAID ASSESSMENT PROCEEDINGS. THE SAME FOUND CONFIRMATION WITH THE LD. CIT(A) IN APPEAL, WHO FOUND THE MATTER AS OUTSIDE T HE SCOPE OF THE RECTIFICATION PROCEEDINGS UNDER THE ACT. ANY MISTAKE WHICH COULD ONLY BE FOUND OUT OR DISCOVERED ON THE BASIS OF ARGUMENTS, AND NOT OTHERWISE OBVIOUS F ROM THE RECORD, CANNOT BE SAID TO BE AN ERROR OR MISTAKE APPARENT FROM THE RECORD. THE A PPELLANT WAS TRYING TO MAKE A CLAIM BY AN ELABORATE PROCESS OF REASONING, BASED ON THE INTERPRETATION OF THE RELEVANT PROVISION OF THE ACT UNDER THE GARB OF A MISTAKE, APPARENT FR OM THE RECORD, AND WHICH COULD NOT BE. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3 ITA NO. 3091/MUM/2013 (A.Y. 2007-08) M. I. ALLOYS VS. ITO 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE REVISION TO THE DEPRECIATION BY THE ASSESSEE DU RING THE COURSE OF THE ASSESSMENT PROCEEDINGS, AND WHICH STOOD ACCEPTED IN ASSESSMENT U/S.143(3), WAS ONLY FOR THE REASON THAT THE IMPUGNED CREDIT OF RS.10,91,808 /- WAS AN INSURANCE CLAIM QUA MACHINERY, RECEIVED TOWARD THE LOSS SUFFERED ON DAM AGE ON ACCOUNT OF FIRE, SO THAT THE SAME WAS ONLY MONEYS PAYABLE, AS DEFINED U/S.43(6 ) VIDE EXPLANATION 4 THERETO AND, ACCORDINGLY, DEDUCTIBLE IN COMPUTING THE WDV OF THE RELEVANT BLOCK OF ASSETS, WITH REFERENCE TO WHICH DEPRECIATION IS EXIGIBLE. WE ARE , THUS, UNABLE TO COMPREHEND THE REVENUES STANCE IN NOT, CONSEQUENTLY, ALLOWING THE ASSESSEE DEDUCTION FOR THE SAID AMOUNT, CREDITED TO ITS PROFIT AND LOSS ACCOUNT, IN COMPUTING ITS TOTAL INCOME FOR THE YEAR. HOW COULD AN AMOUNT BE AT THE SAME TIME A REVENUE A S WELL AS CAPITAL RECEIPT ? THE VERY FACT OF ITS REDUCTION IN COMPUTING THE WDV ESTABLI SHES ITS CHARACTER AS A CAPITAL RECEIPT, SO THAT IT COULD NOT BE BROUGHT TO TAX AS INCOME, W HICH THE REVENUE PATENTLY HAS IN-AS- MUCH AS THE COMPUTATION OF THE TOTAL INCOME IN THE ASSESSMENT ORDER PROCEEDS BY ADOPTING THE FIGURE OF NET PROFIT AS PER THE PROFIT AND LOSS ACCOUNT BEARING THE SAID CREDIT (PB PG.3). THERE IS, HOWEVER, ONE RESERVATION. THE ASSESSEE HA S NOWHERE SPECIFIED THE MANNER IN WHICH IT HAS ACCOUNTED FOR THE IMPUGNED L OSS (THE COMPENSATION BY WAY OF INSURANCE CLAIM FOR WHICH IS UNDER REFERENCE) TO MA CHINERY, I.E., UPON INCURRING THE NECESSARY EXPENDITURE ON ITS RESTORATION AND/OR ACQ UISITION OF FRESH MACHINERY (OR ITS PARTS), IN ITS ACCOUNTS AND, ACCORDINGLY, CLAIMED T HE SAME. IF THE SAID EXPENDITURE HAS ALSO BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT AND CLA IMED AS REVENUE EXPENDITURE, THE ASSESSEES CLAIM IS EQUALLY UNTENABLE. TWO WRONGS, HOWEVER, DO NOT MAKE A RIGHT, AND THAT WOULD NOT VALIDATE THE REVENUES ACTION. THERE IS, AT THE SAME TIME, NO ESTOPPEL AGAINST LAW. ONE COULD ARGUE THAT THIS IS NOBODYS CASE, I.E., NEITHER OF THE REVENUE NOR OF THE ASSESSEE. THE ARGUMENT IS MISCONSTRUED. BESIDES THERE BEING, AS AFORE-SAID, NO ESTOPPEL AGAIN LAW, IT IS TRITE THAT IT IS THE CORR ECT LEGAL POSITION THAT IS RELEVANT, AND NOT THE VIEW THAT THE PARTIES MAY TAKE OF THEIR RIGHTS IN T HE MATTER [REFER: CIT V. C. PARAKH & CO. 4 ITA NO. 3091/MUM/2013 (A.Y. 2007-08) M. I. ALLOYS VS. ITO (INDIA) LTD . [1956] 29 ITR 661 (SC); KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC)]. AS SUCH, WHILE GRANTING THE ASSESSEES CLAIM FOR RE DUCTION OF THE COMPENSATION CREDIT IN COMPUTING THE WDV OF THE RELEVANT BLOCK O F ASSETS, WE ALSO DIRECT THAT THE SAID LOSS, WHICH IS AGAIN A MATTER OF RECORD, BE ALSO DE NIED, WHERE CLAIMED AS A REVENUE EXPENDITURE, AND CONSIDERED AS A PART OF THE COST O F IMPROVEMENT, ENHANCING THE WDV OF THE RELEVANT BLOCK OF ASSETS. THE ASSESSEES CLAIM FOR THE SAID LOSS AS BUSINESS EXPENDITURE, IN SUCH A CASE, WOULD STAND DISALLOWED . WE ARE CONSCIOUS THAT THE SAID EXPENDITURE, OR PART THEREOF, MAY HAVE BEEN INCURRE D IN AN EARLIER YEAR. THIS IS SO AS INSURANCE CLAIMS ARE GENERALLY MADE AND RECEIVED WI TH A TIME LAG. THE LAW, AND ON WHICH THERE IS NO AMBIGUITY OR DEBATE, MUST NEVERTHELESS TAKE ITS COURSE, AND ONLY A CORRECT TREATMENT OF THE SAID LOSS WOULD SATISFY THE MANDAT E OF LAW, WITHOUT PREJUDICING EITHER SIDE. AS REGARDS THE POWER OR THE COMPETENCE OF THI S TRIBUNAL TO SO DIRECT, THE CASE LAW ON WHICH IS LEGION, WE MAY, FOR READY REFERENCE, ADVER T TO THE DECISIONS OF THE APEX COURT IN THE CASE OF HUKUMCHAND MILLS LTD. VS. CIT [1967] 63 ITR 232 (SC); CIT VS. S. NELLIAPPAN [1967] 66 ITR 722 (SC); CIT VS. ASSAM TRAVELS SHIPPING SERVICE [1993] 199 ITR 1 (SC); AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351 (BOM) (FB), TO CITE SOME. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORE-SAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 18, 201 5 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 1* MUMBAI; 2 DATED : 18.03.2015 )3 ROSHANI , SR. PS 5 ITA NO. 3091/MUM/2013 (A.Y. 2007-08) M. I. ALLOYS VS. ITO ! ' #$%& ' &$ COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 4+ 5 6 / THE CIT(A) 4. ( 4+ / CIT - CONCERNED 5. 7)89$3+3:; ,:;/ ( 1* / DR, ITAT, MUMBAI 6. 9<=* GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ( 1* / ITAT, MUMBAI