M/s. Well Tuff Safety Glass, Daman V. The Income tax Officer, Vapi Ward-4, Daman

ITA 3166/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5818 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 23-07-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Depreciation; Set aside
• Section: 80IB; 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' [BEFORE S/SHRI BHAVNESH SAINI,JM & A N PAHUJA,AM] ITA NO.3166/AHD/2007 (ASSESSMENT YEAR:-2004-05) M/S WELL TUFF SAFETY GLASS, PLOT NO.83/2, DAMAN INDUSTRIAL ESTATE, KADAIYA, DAMAN-396210 [PAN:AAAFW3088J] V/S ASSISTANT COMMISSIONER OF INCOME-TAX, VAPI CIRCLE, VAPI [APPELLANT] [RESPONDENT] ASSESSEE BY :- SMT. URVASHI SHODHAN, AR REVENUE BY:- SHRI K M MAHESH, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 16-03-2007 OF THE LD. CIT(APPEALS), VALSAD, RAISES THE FOLLOWING GROUNDS: 1 THE ORDER OF THE LEARNED CIT(A) VALSAD, IN CONFIR MING THE ACTION OF THE AO IN CALCULATING THE ALLOWANCE OF DEPRECIATION ON WRITTEN DOWN VALUE AS CALCULATED BY PRESUMING THAT THE CLAIM OF DEPREC IATION HAD BEEN ALLOWED FOR PREVIOUS YEAR RELEVANT TO AY 2001-02, W HERE AS THE CLAIM OF DEPRECIATION FOR PREVIOUS YEAR RELEVANT TO AY 2001- 02 HAD NOT BEEN MADE BY YOUR APPELLANT NOR HAD BEEN THRUST UPON BY THE AO, IS CONTRARY TO LAW AND THE FACTS OF THE CASE. 2 THE ORDER OF THE LEARNED CIT(A) VALSAD, IN CONF IRMING THE DISALLOWANCE TO THE EXTENT OF 1/6 TH OF THE EXPENSES UNDER THE HEAD TELEPHONE AND VEHICLE EXPENSES AND DEPRECIATION THE REON, AMOUNTING IN TOTAL TO RS.26,756/-. 3 YOUR APPELLANT CRAVES THE LEAVE TO ADD ALTER, AME ND MODIFY DELETE, APPEND, ANY OF THE GROUND/S OF APPEAL. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.26,39,600/- FILED ON 31-08-2004 BY TH E ASSESSEE-FIRM, ENGAGED IN MANUFACTURING TOUGHENED GLASSES, AFTER BEING PROCESSED ON 31.8.2004 U/S 143(1) OF THE INCOME-TAX ACT,1961 [HEREINAFTER REFERRED TO AS THE ACT], WAS SELECT ED FOR SCRUTINY WITH ITA NO.3166/AHD/2007 AY 2004-05 M/S WELL TUFF SAFETY GLASS 2 THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 13.1.2 005.DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER[AO IN SHORT] NOTICED THAT THE ASSESSEE CLAIMED DEPRECIAT ION OF RS.6,96,484/- FOR THE YEAR UNDER CONSIDERATION. IT WAS FOUND THAT THE ASSESSEE HAD NOT CLAIMED ANY DEPRECIATION ON ITS AS SETS IN THE AY 1999-2000 & 2000-01. SINCE THE UNDERTAKING OF THE A SSESSEE WAS SITUATED IN UNION TERRITORY OF DAMAN, A BACKWARD AR EA SPECIFIED IN SCHEDULE VIII OF THE ACT AND THE ASSESSEE CLAIMED D EDUCTION U/S 80IB OF THE ACT, CONSIDERING THE WDV OF ASSETS RIGH T FROM THE BEGINNING AFTER ALLOWING NOTIONAL DEPRECIATION IN T HE AY 2001-02, THE AO WORKED OUT THE DEPRECIATION ALLOWABLE DURING THE YEAR AS UNDER: A. Y. OPENING W. D. V. ADDITION DURING THE YEAR [NET] DEPRECIATIO N FOR THE YEAR CLOSING WDV 2001-02 3302152 713458 527625 3177985 2002-03 3177985 (-)76180 454481 2647324 2003-04 2647324 1174506 512364 3309466 2004-05 3309466 12250 458274 2863442 ACCORDINGLY, THE AO ALLOWED DEPRECIATION OF RS.4,58 ,274/- AS AGAINST RS.6,96,484/- CLAIMED BY THE ASSESSEE, RESULTING IN DISALLOWANCE OF RS.2,38,210/-[RS.6,96,484-4,58,274]. CONSEQUENTLY, THE AO RECOMPUTED THE DEDUCTION U/S.80IB OF THE ACT, RELY ING INTER ALIA, ON THE DECISION IN THE CASE OF CAMBAY ELECTRIC SUPPLY CO, V/S. C.I.T. (1978) 113 ITR 84(SC),MC.DOWELL & CO. LTD. V/S. COM MERCIAL TAX OFFICER, 154 ITR 148(SC), AND INDIAN RAYON CORPORATION LTD. , V/S C.I.T. (2003) 261 ITR 98(BOM.) AS ALSO DECISION DATED 9.11.2005 OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF VAHID PAPER C ONVERTERS VS. ITO,98 ITD 165(AHMEDABAD). ITA NO.3166/AHD/2007 AY 2004-05 M/S WELL TUFF SAFETY GLASS 3 3. ON APPEAL, THE LEARNED CIT(A) WHILE DISTINGUISH ING THE DECISION IN C.I.T. V/S. MAHENDRA MILLS LTD. 243 ITR 56(SC) AND FOLLOWING THE VIEW TAKEN IN CAMBAY .ELECTRIC SUPPLY INDUSTRIAL CO.(SUPRA), IND IAN RAYON CORPORATION LTD. V/S CIT 261 ITR 98 (BOM,), MANDHANA EXPORTS PVT. LTD. V /S ACIT 82 ITD 306 & VAHID PAPER CONVERTERS(SUPRA), UPHELD THE FINDINGS OF THE AO. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US A GAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E WHILE RELYING UPON THE DECISION DATED 12-04-2010 OF THE ITAT AHMEDABAD BEN CH IN THE CASE OF M/S KHEMANI DISTILLERIES P. LTD. IN ITA NO. 2149/AHD/2007 FOR THE AY 2004-05 AND DECISION DATED 26.3.2010 IN THE CASE OF M/S SIDDHARTH CORPORATION IN ITA NO. 866/AHD./2007 AND IN THE CASE OF M/S GAUTAM ENTERPRISES IN ITA NO.867/AHD/2007 FOR T HE AY 2003-04, CONTENDED THAT THE AO CAN NOT WORK OUT WDV OF THE A SSETS IN THE YEAR UNDER CONSIDERATION AFTER ALLOWING NOTIONAL DE PRECIATION FOR THE AY 2001-02.THE LEARNED DR, ON THE OTHER HAND, WHILE RELYING UPON DECISION DATED 1.9.2008 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DABUR INDIA LTD. VS. CIT IN ITA NO.579/2007 SUPP ORTED THE FINDINGS OF THE LD. CIT(A). 5 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH T HE FACTS OF THE CASE. THE ONLY ISSUE BEFORE US RELATES TO DE PRECIATION OF RS.5,27,625/- RELATING TO THE AY 2001-02, WHICH WAS NEITHER CLAIM ED IN THE RETURN NOR ALLOWED BY THE AO IN HIS ORDER FOR SAID ASSESSMENT YEAR BU T CONSIDERED WHILE WORKING OUT WDV OF THE ASSETS FOR THE PURPOSE OF DEPRECIAT ION FOR THE YEAR UNDER CONSIDERATION. THOUGH NEITHER THE LD. AR NOR THE LD. DR INFORMED T HE STATUS OF ASSESSMENTS FOR THE AYS. 2001-02 TO 2003-04, WE FIN D THAT THE TRIBUNAL VIDE ORDER DATED 12-04-2010 OF THE ITAT AHMEDABAD BENCH IN THE CASE OF M/S KHEMANI DISTILLERIES P. LTD. IN ITA NO.2149/ AHD/2007 FOR THE AY 2004-05 RELIED ON A DECISION DATED 28.11.2008 IN ITA NO. 1885/AHD./2005 FOR THE AY 2002-03 IN THE CASE OF TH E SAID ASSESSEE, ITA NO.3166/AHD/2007 AY 2004-05 M/S WELL TUFF SAFETY GLASS 4 WHEREIN AFTER REFERRING TO THE DEFINITION OF WRITTEN DOWN VALUE IN SECTION 43(6) OF THE ACT, IT WAS HELD AS UNDER:- 10. A PERUSAL OF THE ABOVE PROVISIONS SHOWS THAT T HE WDV IN RESPECT OF DEPRECIATION IS TO BE CALCULATED IS THE ACTUAL COST OF THE ASSET TO THE ASSESSEE AS REDUCED BY THE AMOUNT OF THE DEPRECIATI ON ACTUALLY ALLOWED TO THE ASSESSEE. NOW IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT IN THE EARLIER YEARS NO DEPRECIATION WAS ALLOWED TO THE ASSESSEE I N RESPECT OF THE FIXED ASSETS IN QUESTION. THE REVENUE COULD NOT BRING ON RECORD ANY MATERIAL BEFORE US TO SHOW THAT THOUGH THE DEPRECIATION WAS NOT CLAIMED BY THE ASSESSEE BUT IN FACT SUCH DEPRECIATION WAS ALLOWED BY THE DEPARTMENT AS DEDUCTION TO THE ASSESSEE IN THE ASSESSMENT MADE IN RESPECT OF THE INCOME OF THE ASSESSEE. IN OUR CONSIDERED OPINION, IT IS NOT OPEN TO THE REVENUE TO DEDUCT ANY AMOUNT FROM THE COST OF THE A SSET TO DETERMINE THE WDV ON THE GROUND THAT SUCH AMOUNT SHOULD HAVE BEEN CLAIMED BY THE ASSESSEE AS DEPRECIATION IN EARLIER YEAR. IN OUR CO NSIDERED VIEW, WDV CAN BE ASCERTAINED ONLY BY REDUCING THE ACTUAL DEPRECIA TION ALLOWED TO THE ASSESSEE IN AN ASSESSMENT AND NOT THE AMOUNT WHICH OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE. IT IS THE ACTUAL DEPRECIAT ION ALLOWED TO THE ASSESSEE WHICH ONLY CAN BE REDUCED FOR ASCERTAINING THE WDV AND NOT THE AMOUNT WHICH IS NOTIONALLY ALLOWED TO THE ASSESSEE. THUS, IN THE ABSENCE OF ANY MATERIAL DROUGHT BEFORE US TO SHOW THAT ANY REMEDIAL MEASURE WAS TAKEN BY THE REVENUE IN THE EARLIER ASSESSMENT YEAR S TO ACTUALLY ALLOW THE DEPRECIATION TO THE ASSESSEE IN THE YEAR IN WHICH T HE ASSESSEE HAS HIMSELF NOT CLAIMED SUCH DEPRECIATION, IN OUR CONSIDERED VI EW, THE NOTIONAL AMOUNT CANNOT BE REDUCED TO ASCERTAIN THE WDV AS PER THE P ROVISIONS OF SECTION 43(6) OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDE RS OF THE LOWER AUTHORITIES AND ALLOW THE DEPRECIATION OF PS.3,25,69,030/- AS C LAIMED BY THE ASSESSEE AS AGAINST THE DEPRECIATION OF RS.2,53,98,048/- ALL OWED TO THE ASSESSEE. THUS, THIS GROUND OF APPEAL IS ALLOWED. 5.1 THE AFORESAID DECISION DATED 28.11.2008 WAS SUB SEQUENTLY FOLLOWED BY ANOTHER BENCH IN THE CASE OF M/S SIDDHA RTH CORPORATION IN ITA NO.866/AHD/2007 AND IN THE CASE OF M/S GAUTA M ENTERPRISES IN ITA NO.867/AHD/2007. 5.2 WE FIND THAT DECISION IN THE CASE OF DABUR I NDIA LTD.(SUPA) RELIED UPON BY THE LD. DR IS NOT DIRECTLY ON THIS I SSUE AND THEREFORE, RELIANCE ON THE SAID DECISION IS TOTALLY MISPLACED. ITA NO.3166/AHD/2007 AY 2004-05 M/S WELL TUFF SAFETY GLASS 5 6 IN THE LIGHT OF THE VIEW TAKEN IN THE AFORESAID D ECISIONS BY THE CO-ORDINATE BENCHES, WE ARE OF THE OPINION THAT WDV OF VARIOUS ASSETS CAN BE ASCERTAINED ONLY BY REDUCING THE ACTUAL DEPR ECIATION ALLOWED TO THE ASSESSEE IN AN ASSESSMENT AND NOT THE AMOUNT WHICH OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE . IN VIEW THEREOF, THE AO WAS NOT JUSTIFIED IN REDUCING THE NOTIONAL AMOUNT OF DEPRECIATION OF RS. 5,27,625/- FOR THE AY 2001- 02 IN ORDER TO ASCERTAIN THE WDV OF THE ASSETS FOR THE YEAR UNDER CONSIDERATION IN TERMS OF PROVISIONS OF SECTION 43(6) OF THE ACT . THEREFORE, WE HAVE NO OPTION BUT TO ALLOW GROUND NO.1 OF THE APPEAL. 7 GROUND NO.2 RELATES TO DISALLOWANCE OF 1/6 TH TELEPHONE AND VEHICLE EXPENSES INCLUDING DEPRECIATION. THE AO NOT ICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE DEBITED RS.76,375/- [58313+18062] ON ACCOUNT OF VEHICLE / P ETROL EXPENSES BESIDES DEPRECIATION OF RS. 28474/- ON MOTOR CAR AN D RS. 55,688/- ON ACCOUNT OF TELEPHONE/MOBILE EXPENSES. SINCE THE VEHICLES AND TELEPHONES WERE USED BY THE PARTNERS OF THE FIRM AN D THEIR FAMILY MEMBERS, THE AO WAS OF THE OPINION THAT THEIR PERSO NAL USE CANNOT BE RULED OUT. TO A QUERY BY THE AO, THE ASSESSEE ST ATED THAT VEHICLES/TELEPHONES WERE USED FOR BUSINESS PURPOSE ONLY WHILE NO LOG BOOK FOR CARS AND RECORDS FOR CALLS MADE ON TEL EPHONES, WAS BEING MAINTAINED. . ACCORDINGLY, THE AO DISALLOWED 1/6TH OF THE EXPENSES ON VEHICLES AND DEPRECIATION ON CAR AS ALS O IN RESPECT OF TELEPHONE EXPENSES, RESULTING IN DISALLOWANCE OF R S.17,475/-FOR PERSONAL USE OF CARS AND RS.9,281/- FOR PHONES/MOBI LES. 8 ON APPEAL, THE LEARNED CIT(A) UPHELD THE DISALLOW ANCE IN THE FOLLOWING TERMS: 6.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. SINCE THE APPELLANT HAS NOT MAINTAINED LOG-BOOK AND REGISTER FOR PERSON AL USER OF CAR AND ITA NO.3166/AHD/2007 AY 2004-05 M/S WELL TUFF SAFETY GLASS 6 TELEPHONE RESPECTIVELY, THE AO IS JUSTIFIED IN MAKI NG DISALLOWANCE OF 1/6 TH OF SUCH EXPENSES. THE ADDITION MADE BY THE AO IS SU STAINED. THE APPELLANTS GROUND NO.3 IS DISMISSED. 9. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE LD . AR MERELY REITERATED THEIR SUBMISSIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 10 AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HAS NOT REFERRED US TO ANY MATERIAL WARRANTING INTERFERENCE WITH THE FINDINGS OF THE LD. CIT(A). SINCE PERSONA L USE OF CAR AND TELEPHONE BY THE ASSESSEE AND HIS FAMILY MEMBERS OR STAFF H AS NOT BEEN DENIED NOR IT WAS CLAIMED THAT THE ASSESSEE OR HIS FAMILY HAD ANY I NDEPENDENT VEHICLES OR TELEPHONES FOR PERSONAL USE, IN OUR OPINION DISALL OWANCE OF 1/6 TH OF THE EXPENSES ON TELEPHONES/MOBILES, RUNNING AND MAINTEN ANCE OF VEHICLES INCLUDING DEPRECIATION THEREON, IN THE LIGHT OF PROVISIONS OF SEC. 38(2) OF THE ACT, IS REASONABLE . THEREFORE, GROUND NO. 2 IS REJECTED. 11. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TE RMS OF THE RESIDUARY GROUND NO.3, ACCORDINGLY, THIS GROUND IS DISMISSED. 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-6-2010 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 30-6-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S WELL TUFF SAFETY GLASS, PLOT NO.83/2, DAMAN INDUSTRIAL ESTATE, KADAIYA, DAMAN-396210 2. THE ACIT, VAPI CIRCLE, VAPI 3. CIT CONCERNED ITA NO.3166/AHD/2007 AY 2004-05 M/S WELL TUFF SAFETY GLASS 7 4. CIT(A)-VALSAD 5. THE DR, C BENCH ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD