NIRU EXPORTS, MUMBAI V. ACIT (OSD-1) C.R.7, MUMBAI

ITA 3254/MUM/2010

• Counselvise Citation: 325419914 RSA 2010
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 37(1); 208; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R.S. SYAL R.S. SYAL R.S. SYAL R.S. SYAL(AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 3254/MUM/2010 ASSESSMENT YEAR- 2007-08 M/S. NIRU EXPORTS, 112/115, THE JEWEL TATA ROAD NO.2, OPERA HOUSE, MUMBAI-400 004 PAN-AAAFH 0235L VS. THE ACIT 10(1), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SATISH MODI RESPONDENT BY: SHRI R.K. GUPTA O R D E R O R D E R O R D E R O R D E R PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 6.01.2010 PASSED BY THE LD. CIT(A)- 40 FO R THE ASSESSMENT YEAR 2007-08. 2. THE FACTS IN BRIEF ARE THAT IN NIRU IMPEX GROUP OF CASES SEARCH AND SEICURE OPERATIONS WERE CARRIED ON 4.10.2006 AT T HE BUSINESS PREMISES OF THE GROUP CONCERNS, RESIDENCE OF THE PARTNE RS AND OTHER CONNECTED PERSONS. 3. THE ASSESSING OFFICER HELD THAT DURING THE YEAR UNDE R CONSIDERATION THERE WAS NO TRANSACTION OF PURCHASE AND SALE. THE ASSESSEE HAS WRITTEN BACK THE PROVISION OF TAX TO THE PRO FIT & LOSS ACCOUNT AND HAS WORKED OUT THE LOSS OF `. 4,97,308/-. THE ASSESSEE HAS CLAIMED DEPRECIATION FOR `. 2,73,125/-. SINCE DU RING THE YEAR UNDER CONSIDERATION THERE WAS NO BUSINESS ACTIVITIES, THE DEPRE CIATION ITA NO. 3254/M/2010 2 CLAIMED ON FACTORY BUILDING AND CAR ETC. ARE NOT AL LOWABLE AS THESE ASSETS HAVE NOT TO PUT TO USE. THEREFORE, THE DEPRECIA TION OF `. 2,73,125/- IS DISALLOWED. 4. IN THE APPEAL BEFORE THE LD. CIT(A) IT WAS ARGUED THAT JUST BECAUSE THERE WAS NO BUSINESS ACTIVITY WOULD NOT MEAN TH AT DEPRECIATION SHOULD NOT BE ALLOWED. IT WAS ALSO AR GUED THAT THE ASSETS WERE PUT TO USE FOR THE PURPOSE OF BUSINESS AND NOT FOR PERSONAL PURPOSES. ASSESSEE FURTHER ARGUED THAT DEPRECIATION SHOUL D BE ALLOWED AS PER THE NORMAL ACCOUNTING AND BUSINESS PRACT ICES AS PER THE PROVISIONS OF SEC. 32 R.W.S. 37(1) OF THE I.T. ACT . 5. THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. LOOKING INTO THE FACT TH AT THERE WERE NO BUSINESS ACTIVITIES DURING THE YEAR. I AGREE WITH DEPRECIATION, THE ASSETS IN QUESTION HAVE TO BE NECESSARI LY PUT TO USE IN TERMS OF VERY CLEAR CUT PROVISIONS OF SEC. 32 O F THE I.T. ACT. IN THE APPELLANTS CASE, ON ACCOUNT OF THERE BEING NO BUSINESS ACTIVITIES DURING THE YEAR, THE ASSETS ON WHICH DEPREC IATION HAS BEEN CLAIMED WERE OBVIOUSLY NOT USED FOR THE PURPOSE OF THE BUSINESS OR PROFESSION AS SPELT OUT IN SUB-SECTION (1) OF SEC. 32. THE APPELLANT HAS ALSO NOT BROUGHT ANYTHING ON RECORD TO INDICATE THAT THE ASSETS HAD BEEN USED FOR THE PURPOSE OF THE APP ELLANTS BUSINESS. IN THIS BACKDROP, THE APPELLANT CLAIMED THAT DEPRECIATION SHOULD BE ALLOWED AS PER THE NORMAL ACC OUNTING AND BUSINESS PRACTICES IS MISPLACED. IN THAT, AS DISCUSSED ABOVE, DEPRECIATION IS TO BE ALLOWED ONLY WHEN THE CONDITIO NS SPECIFIED IN SEC. 32 OF THE IT ACT ARE SATISFIED, WHICH IS NOT T HE CASE WITH THE APPELLANT. IN VIEW OF THESE FACTS AND CIRCUMSTANC ES AND VERY CLEAR PROVISIONS OF LAW, I CONFIRM THE DISALLOWANCE. THE GROUND OF APPEAL IS DISMISSED. 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US . THE LD. COUNSEL FOR THE ASSESSEE SHRI SATISH MODI ARGUED THAT IT IS NOT A CO RRECT FACT THAT THERE WAS NO BUSINESS. THERE WAS MERELY LULL IN BUSINESS AND THE ITA NO. 3254/M/2010 3 BUSINESS WAS NOT CLOSED DOWN. HE RELIED ON THE DECISION OF MUMBAI ITAT I BENCH IN THE CASE OF SWATI SYNTHETICS LTD. 3 8 SOT 208 (MUM) WHEREIN IT HAS BEEN HELD AS FOLLOWS: ON INSTANT APPEAL, THE ASSESSEE CONTENDED, INTER ALIA, THAT AFTER INSERTION OF BLOCK SYSTEM FOR ALLOWING DEPRECIAT ION, THE DEPRECIATION WAS ALLOWABLE ON ENTIRE BLOCK, EVEN THO UGH SOME OF THE ASSETS OF THE BLOCK HAD NOT BEEN USED. 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER ARGUED THAT THE FACTORY BUILDING AND CAR ARE VERY MUCH READY FOR USE HENCE D EPRECIATION COULD BE ALLOWED ON PASSIVE USE OF FACTORY BUILDING AND CAR. 8. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISION OF 247 ITR 36(SC), 231 ITR 738 AND 304 ITR 160. 9. WE HEARD BOTH THE PARTIES. IN THE CASE OF ALLIED ELECTRONICS AND MAGNETICS LTD. VS DCIT (304 ITR 160), IT HAS BEEN HE LD AS FOLLOWS: A BARE READING OF CLAUSE (III) OF SECTION 32(1) OF TH E INCOME-TAX ACT, 1961, SHOWS THAT ONE OF THE CONDITION S FOR ALLOWING THE DEDUCTION THEREUNDER IS THAT THE MACHIN ERY MUST HAVE BEEN USED FOR THE PURPOSES OF THE BUSINESS DURING TH E PREVIOUS YEAR IN WHICH THE MACHINERY IS SOLD, DISCARDED , DEMOLISHED OR DESTROYED. THAT THERE WAS A CONCURRENT FINDING OF THE THREE AUT HORITIES BELOW, I.E., THE ASSESSING OFFICER, COMMISSIONER OF INCOM E-TAX (APPEALS) AND THE INCOME-TAX APPELLATE TRIBUNAL TO T HE EFFECT THAT THE MACHINERY WAS NOT PUT TO USE AT ALL DURING T HE RELEVANT PREVIOUS YEAR. THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 32(1)(III). 10. SIMILARLY, IN THE CASE OF CIT VS. J.K. TRANSPORT 2 31 ITR 798, THE MADHYA PRADESH HIGH COURT HELD AS FOLLOWS: ITA NO. 3254/M/2010 4 REVERSING THE DECISION OF THE TRIBUNAL, THAT THE BASI C CONCEPT UNDERLYING THE ALLOWANCE OF DEPRECIATION IS THAT IT SHOULD RESULT, AS A CONSEQUENCE OF THE MACHINERY BEING ACTUAL LY USED OR EMPLOYED, IN THE EARNING OF INCOME. THEREFORE, SINC E BOTH THE TRUCKS WERE NOT USED IN THE ACCOUNTING YEAR OR PART T HEREOF, THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION ON THE TRUCKS. THE ASSETS ON WHICH DEPRECIATION HAS BEEN CLAIMED WERE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION USED FOR THE PURPOSE OF BUSINESS OR PROFESSION USED FOR THE PURPOSE OF BUSINESS OR PROFESSION USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AS SPELT OUT IN SUB-SEC (1) OF SEC. 32. HENCE, IN OUR OPINION DEPRECIATION CANNOT BE GRANTED FOR THE PLANT AND MACHINERY WHICH HAD NOT BEEN ACTUALLY USED IN THE BUSINESS OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 27 TH APRIL, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3254/M/2010 5 DATE INITIALS 1 DRAFT DICTATED ON: 21. .0 4. 2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 25. 0 4 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______