The ACIT, Range-1, Ahmedabad V. M/s. Anoli Hoildings Pvt.Ltd., Ahmedabad

ITA 3175/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68016 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 30-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA SR D R
• Assessee Lawyers: V R CHOKSI
• Keywords: Depreciation; Opportunity of being heard; Retrospective amendment
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD , , , , BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND .., SHRI T.R. MEENA, ACCOUNTANT MEMBER !.. , ' # $ # $ # $ # $ ITA NO. 3175/AHD/2010 ASSESSMENT YEAR :2005-06 DCIT(OSD), RANGE-1, AHMEDABAD V/S . ANOLI HOLDINGS PVT. LTD. 101, MADHUBAN BUILDING, OPP. HOTEL WEST END, MADALPUR UNDERBRIDGE, AHMEDABAD PAN NO. A A BCA25 83L (APPELLANT) .. (RESPONDENT) %& ' ( BY APPELLANT SHRI O. P. BHATEJA, SR. D.R. )%& ' ( /BY RESPONDENT SHRI V. R. CHOKSI, A.R. *+, ' -' /DATE OF HEARING 09.10.2013 ./0 ' -' /DATE OF PRONOUNCEMENT 13.12.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF REVENUE WHICH HA S EMANATED FROM THE ORDER OF CIT(A)-VI, AHMEDABAD, DATED 13.09.2010 FOR ASSESSMENT YEAR 2005-06. THE EFFECTIVE GROUNDS OF REVENUES APPEAL ARE AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN ALLO WING THE CLAIM OF ASSESSEE U/S.80IB AMOUNTING TO RS.6,95,585/-. ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 2 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN ALLOW ING THE ASSESSEES CLAIM OF RS.2,97,038/- ON ACCOUNT OF DEP RECIATION ON ELECTRICAL FITTINGS. 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.2,86,448/- U/S.40A(IA) ON ACCOUNT OF LATE PAYMENT OF TDS. 2. THE FIRST GROUND IS AGAINST ALLOWING THE CLAIM O F ASSESSEE U/S.80IB AMOUNTING TO RS.6,95,585/-. THE ASSESSEE HAS CLAIM ED DEDUCTION U/S.80IB AT RS.6,95,585/- FOR CLAIMING OF DEDUCTION AND AUDIT R EPORT WAS NOT FILED ALONGWITH RETURN. THE A.O. GAVE REASONABLE OPPORTU NITY OF BEING HEARD ON THIS ISSUE WHICH WAS AVAILED BY THE ASSESSEE BUT TH E A.O. HELD THAT TO THE FACT THAT THE ASSESSEE HAD NOT SUBMITTED THE REQUIRED CE RTIFICATE FROM THE CHARTERED ACCOUNTANT ALONGWITH RETURN OF INCOME WHI CH IS MANDATORY, THE ASSESSE IS NOT ENTITLED TO THE DEDUCTION U/S.80IB. RELIANCE IS PLACED ON THE APPEAL ADMITTED IN APEX COURT ON THE ISSUE AGAINST THE ORDER OF THE HONBLE HIGH COURT OF M.P. IN CASE OF CIT VS. PANAMA CHEMICALS WORKS 250 ITR 661. IN VIEW OF THE ABOVE FINDING, THE A.O. HAD NOT ALLO WED DEDUCTION U/S. 80IB OF RS.6,95,585/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE ASSESSEES AP PEAL BY OBSERVING AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANTS SUBMISSION. APPELLANT DID NOT FILE AUD IT REPORT UNDER SECTION 80IB ALONG WITH THE RETURN OF INCOME. SUCH AUDIT REPORT WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDIN G. APART ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 3 FROM THIS, ASSESSING OFFICER DID NOT FIND ANY MISTA KE OR DEFECT IN THE CLAIM OF APPELLANT UNDER SECTION 80IB. APPELLANT R ELIED UPON THE DECISION OF GUJARAT HIGH COURT IN WHICH IT IS HELD THAT AUDIT REPORT FILED DURING THE ASSESSMENT PROCEEDINGS IS SUFFICIE NT COMPLIANCE OF SECTION 80I(7). SINCE THE DECISION OF JURISDICTION AL HIGH COURT IS NOT YET REVERSED BY SUPREME COURT, THE SAME IS BINDING ON THE APPELLATE AUTHORITIES. APPELLANT FULFILS ALL OTHER CONDITIONS REQUIRED FOR CLAIM UNDER SECTION 80IB. THE REJECTION OF CLA IM WAS ONLY ON NON-SUBMISSION OF AUDIT REPORT ALONGWITH RETURN OF INCOME AND AS SUCH APPELLANT IS ELIGIBLE FOR THIS CLAIM. RESPECT FULLY FOLLOWING THE DECISION OF GUJARAT HIGH COURT REPORTED IN 201 ITR 325 AO IS DIRECTED TO ALLOW CLAIM OF DEDUCTION UNDER SECTION 80IB. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. RELI ED UPON THE ORDER OF THE A.O. AND ARGUED THAT STATUTORY REQUIREMENT HAD NOT BEEN FULFILLED BY THE APPELLANT. THEREFORE, HE WAS RIGHTLY DECIDED AND D ISALLOWED THE CLAIM U/S.80IB AT RS.6,95,585/-. AT THE OUTSET, LD. A.R. ARGUED THAT AUDIT REPORT WAS FURNISHED BEFORE THE A.O. AT THE TIME OF ASSESSMENT AND HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. GUJARAT OIL AND ALLIED INDUSTRIES, 201 ITR 325, HAS HELD THAT IF THE ASSESSEE FILED THE AUDIT REPORT BE FORE THE A.O. AT THE TIME OF ASSESSMENT, HE SHOULD ALLOW THE CLAIM OF 80IB. LD. A.R. FURTHER ARGUED THAT VARIOUS HIGH COURTS ALSO HELD THIS VIEW THAT DEDUCT ION CANNOT BE DISALLOWED MERELY ON THE GROUND THAT AUDIT REPORT WAS NOT FILE D ALONGWITH RETURN OF INCOME. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS FACT THAT THE ASSESSEE DID NOT FURNI SH AUDIT REPORT ALOGNWITH RETURN ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 4 BUT PRODUCED BEFORE THE A.O. AT THE TIME OF ASSESSM ENT AS HONBLE GUJARAT HIGH COURT HAS HELD THAT IT IS A SUFFICIENT COMPLIA NCE OF THE SECTION IF THE ASSESSEE FURNISHED THE AUDIT REPORT BEFORE THE A.O. AT THE TIME OF ASSESSMENT. THUS, CLAIM OF 80IB CANNOT BE DENIED. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE REVENUES A PPEAL ON THIS GROUND. 6. THE SECOND GROUND OF APPEAL IS AGAINST NOT ALLOW ING DEPRECIATION ON ELECTRICAL FITTINGS AT RS.2,97,038/-. THE A.O. OBS ERVED THAT DEPRECIATION ON ELECTRIC FITTINGS IS ADMISSIBLE @ 15% FOR THE YEAR UNDER CONSIDERATION. BUT ASSESSEE HAS CLAIMED DEPRECIATION @ 25%. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS AVAILED BY THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, HE ALLOWED THE DEPRECIATION @ 15% AND EXCESS DEPRECIATION OF RS.2,97,038/- WAS ADDED BACK. 7. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) WHO HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANTS SUBMISSION. APPELLANT IS ENGAGED IN TH E BUSINESS OF RUNNING A MULTIPLEX THEATRE. THE ELECTRICAL FITTING S INCLUDE ELECTRIFICATION AND EQUIPMENTS CONNECTED TO PROJECT OR AND OTHER FILM EXHIBITION SYSTEMS. APPELLANT THEREFORE CLAIMED TH AT THESE ARE IN THE NATURE OF PLANT WHICH IS ESSENTIAL FOR CARRYING ON THE BUSINESS ACTIVITY. THE 15% RATE OF DEPRECIATION IS ON ELECT RICAL FITTINGS IN THE NATURE OF WIRING, SWITCHES, SOCKETS, FANS ETC. THE SE ITEMS ARE ONLY INCIDENTAL AND SUPPLEMENTARY TO THE BUSINESS. HOWE VER IN THE APPELLANTS CASE, THE EQUIPMENTS AND FITTINGS ARE A MOUNTING TO RS.59,48,760. ELECTRICAL WIRING, SOCKETS AND SWITC HES CANNOT BE OF ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 5 THIS MUCH VALUE UNLESS VALUABLE EQUIPMENTS ARE PART OF IT AND THEREFORE THESE ITEMS WILL NOT BE SUBJECT TO 15% DE PRECIATION APPLICABLE TO ELECTRICAL FITTINGS. APPELLANT RELIED UPON VARIOUS DECISIONS IN WHICH BU ILDINGS, FURNITURE AND FITTINGS WERE TREATED AS PLANT CONSID ERING THE PECULIAR NATURE OF ASSESSEE'S BUSINESS. RAJASTHAN HIGH COURT IN THE CASE OF CIT VERSUS RG ISPAT LTD 272 ITR 383 HELD THAT WHERE A PARTICULAR STRUCTURE IS MERELY HELPFUL FOR CARRYING ON THE ACT IVITIES OF THE ASSESSEE IT MAY NOT BE A PLANT BUT IF IT IS AN INTE GRAL PART OF PLANT AND MACHINERY OR A PORTION OF THAT BUILDING IS AN INTEG RAL PART OF PLANT AND MACHINERY THEN THAT SHOULD BE CONSIDERED AS PLANT I N VIEW OF SUPREME COURT DECISION IN THE CASE OF CIT VERSUS KA RNATAKA POWER CORPORATION. EVEN ITAT AHMEDABAD IN THE CASE OF MAR WAR HOTELS LTD HELD THAT HOTEL ELECTRICAL FITTINGS ARE ELIGIBL E TO DEPRECIATION AS PLANT AND MACHINERY. CONSIDERING THIS, IN APPELLAN T'S CASE ELECTRICAL FITTINGS ARE ESSENTIAL PART OF FILM EXHIBITION AND NOT ANCILLARY TO ITS BUSINESS. RESPECTFULLY FOLLOWING THE DECISIONS RELI ED UPON BY THE APPELLANT AND ALSO OF JURISDICTIONAL ITAT, IT IS HE LD THAT ELECTRICAL INSTALLATION AND EQUIPMENTS IN THE CASE OF APPELLAN T ARE ELIGIBLE FOR DEPRECIATION AT THE RATE APPLICABLE FOR PLANT AND M ACHINERY. THE ADDITION MADE BY ASSESSING OFFICER IS THEREFORE DEL ETED. 8. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. RELI ED UPON THE ORDER OF THE A.O. AND ARGUED THAT AS PER RULE, ON ELECTRIC ITEM DEPRECIATION IS ALLOWABLE @ 15%. THEREFORE, HE REQUESTED TO CONFIRM THE ORDER OF THE A.O. AT THE OUTSET, LD. A.R. ARGUED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING A MULTIPLEX THEATRE. THE COST OF ELECTRIC FITTINGS A ND EQUIPMENTS AMOUNTING TO RS.59,48,760/-. THE ELECTRIC FITTINGS ARE ENGAGED FOR RUNNING THE PROJECTOR AND ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 6 FILM EXHIBITION SYSTEMS. THUS, THE ELECTRIC FITTIN GS AND EQUIPMENTS ARE APPARENTLY IN THE NATURE OF APPARATUS OR PLANT WHIC H IS ESSENTIAL FOR CARRYING ON THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE. THE VARIOUS HIGH COURTS HAVE HELD THAT DEPRECIATION ON ITEMS AS PER RULE ARE LES S BUT ARE USED OR FITTED WITH THE MAIN PLANT AND MACHINERY AND ARE INTEGRAL PART OF THE VERY PLANT AND MACHINERY FOR CARRYING ON THE BUSINESS ACTIVITY, TH E HIGHER DEPRECIATION CAN BE ALLOWED. HE RELIED UPON THE DECISION OF HONBLE SU PREME COURT IN CASE OF CIT VS. KARNATAKA POWER CORPORATION, 243 ITR 81, WHEREIN HONBLE SUPREME COURT APPLIED THE FUNCTIONAL TEST IN THIS CASE ON B UILDING WHICH IS SPECIALLY DESIGNED AND EQUIPPED TO FUNCTION AS A NURSING HOME CONSTITUTED A PLANT FOR THE PURPOSE OF DEPRECIATION. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED THAT ELECTRICAL ITEMS ARE FITTED WITH PROJECTOR AND OTHER FILM EXHIBITION SYSTEMS. WITHOUT ELECTRICAL ITEMS, THE PROJECTOR AS WELL AS EXHIBITION SYSTEMS CANNOT BE RUN. THEREFORE, IT IS A PART AND PARCEL OF THE PLANT AND MACHINERY. THUS, THE ASSESSEE IS ENTITLE D TO HIGHER RATE @ 25%. WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE REVENUES APPEAL ON THIS GROUND. 10. THIRD GROUND OF APPEAL IS AGAINST DELETING THE ADDITION OF RS.2,86,448/- U/S. 40(A)(IA) ON ACCOUNT OF LATE PAYMENT OF TDS. THE A.O. FOUND THAT AS PER AUDIT REPORT TDS OF RS.1,05,079/- HAD BEEN PAID ON 30.05.2005 AS AGAINST DUE DATE OF 07.12.2004. THE ASSESSEE WAS ALLOWED T O EXPLAIN REASONS FOR NOT ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 7 PAYING TAX TIME WHICH WAS AVAILED BY THE ASSESSEE. THE ASSESSEE CAPITALIZED THE VARIOUS EXPENSES BUT CLAIMED DEPREC IATION AT RS.2,86,448/- IN THE P&L ACCOUNT. THUS, HE MADE ADDITION OF RS.2,86 ,448/- IN THE INCOME OF THE ASSESSEE U/S.40(A)(IA). 11. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT( A) WHO HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER: 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER DISALLOWE D DEPRECIATION ON CAPITALISED EXPENSES ON THE GROUND THAT TDS WAS NOT PAID IN TIME. APPELLANT SUBMITTED THAT THE ENTIRE TDS WAS PAID ON MAY 30, 2005 WHICH IS MUCH BEFORE THE DUE DATE OF FILING RETURN. AS PER RETROSPECTIVE AMENDMENT BY FINANCE ACT 2008 THE EXP ENSE IS ALLOWABLE IF TDS FOR THE MONTH OF MARCH IS PAID BEF ORE DUE DATE OF FILING RETURN. TDS IN THIS CASE IS PRIOR TO MARCH 2005 AND THEREFORE AMENDED PROVISIONS WILL NOT APPLY TO THE APPELLANT. APPELLANT'S ARGUMENT THAT DEPRECIATION CANNOT BE DI SALLOWED UNDER SECTION 40 (A) (IA) OF IT ACT SINCE IT TALKS OF EXPENDITURE BY WAY OF INTEREST, COMMISSION, BROKERAGES, FEES FOR PROFE SSIONAL SERVICES. THERE IS NO PROVISION WHICH PROHIBITS APPELLANT FRO M CAPITALIZING THE ASSETS WHERE TDS WAS NOT PAID. SINCE SECTION 43 (1) DECIDES ACTUAL COST AND SECTION 43 (6) DECIDES WRITTEN DOWN VALUE, ALLOWANCE OF DEPRECIATION IS NOT COVERED UNDER SECTION 40 (A) (I A). DEPRECIATION IS TO BE ALLOWED ON THE WDV WHICH IS DEFINED IN SECTIO N 43 (6). IN VIEW OF THIS, THE PAYMENT OF TDS IN RESPECT OF CAPITALIS ED ITEM OF EXPENSE IS NOT RELEVANT AS FAR AS ISSUE OF CAPITALISATION I S CONCERNED SINCE THE EXPENSE IS CAPITAL AND PART OF WDV OF BLOCK OF ASSETS, DEPRECIATION ON THE SAME CANNOT BE DENIED ON ACCOUN T OF NON- ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 8 PAYMENT OF TDS. THE REQUIREMENT OF DEPRECIATION IS -OWNERSHIP AND USAGE OF ASSET FOR BUSINESS PURPOSE. THERE IS NO DI SPUTE ON THESE TWO REQUIREMENTS THEREFORE DEPRECIATION CANNOT BE D ISALLOWED BY THE ASSESSING OFFICER. IN VIEW OF THIS THE ADDITION MAD E BY THE AO IS DELETED. 12. THE REVENUE IS BEFORE US. LD. SR. D.R. VEHEMEN TLY RELIED UPON THE ORDER OF THE A.O. AND PRAYED TO CONFIRM THE ORDER O F THE A.O. AT THE OUTSET, LD. A.R. ARGUED THAT PROVISION OF SECTION 40(A)(IA) HAS BEEN AMENDED BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 01 .04.2005. AS PER THIS SECTION 40(A)(IA) ONLY DISALLOWANCE BY WAY OF INTER EST, COMMISSION, BROKERAGE, FEES FOR PROFESSIONAL SERVICE OR FEES FO R TECHNICAL SERVICES CAN BE MADE, IF TDS HAS BEEN DEDUCTED. THE ASSESSEE DID N OT CLAIM ANY EXPENDITURE UNDER THESE HEADS. THE ASSESSEE HAS CA PITALIZED FOR PAYMENTS ON WHICH IT REQUIRED TO BE DEDUCTED TDS, DURING THE PRE-COMMENCEMENT PERIOD. THEREFORE, PROVISION OF SECTION 40(A)(IA) IS NOT APPLICABLE. ALTERNATIVELY, IT HAS BEEN ARGUED THAT THE TDS HAS BEEN DEDUCTED WHICH HAS BEEN PAID ON 30.05.2005 BEFORE THE DUE DATE OF FILI NG OF RETURN. THEREFORE, IT IS ALLOWABLE EXPENDITURE. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. STRICTLY, DEPRECIATION CANNOT BE DISALLOW ED WHERE TDS ON PAYMENT OF CAPITAL ITEM MADE BUT NOT PAID IN TIME. IN THIS SECTION, ITEMS OF TDS HAVE BEEN IDENTIFIED BY THE LEGISLATURE AND DEPREC IATION IS NOT COVERED U/S. ITA NO. 3175/AHD/10 A.Y. 05-06 PAGE 9 40(A)(IA) AND ALSO THE ASSESSEE PAID TDS ON 30.05.2 005 BEFORE DUE DATE OF RETURN FILED. THUS, WE CONFIRM THE ORDER OF THE CI T(A) AND DISMISS THE APPEAL OF THE REVENUE. 14. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 13.12.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA 1 1 1 1 ' '' ' )-2 )-2 )-2 )-2 320- 320- 320- 320- / COPY OF ORDER FORWARDED TO:- 1. %& / APPELLANT 2. )%& / RESPONDENT 3. - *7 / CONCERNED CIT 4. *7- / CIT (A) 5. 2; )-+ , , / DR, ITAT, AHMEDABAD 6. = >? / GUARD FILE. BY ORDER/ 1 , @/ B , $