The ACIT(OSD)-I,Range-4, Ahmedabad V. Mann Pharmaceuticals Ltd., Ahmedabad

ITA 3281/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73100 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 18-02-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 10-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Keywords: Depreciation; Rule of consistency; Valuation report

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BENCH, AHMEDABAD .., ! '# '# '# '# $ %&, ! BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER #./ I.T.A. NO.3281/AHD/2010 ( ( ')( ( ')( ( ')( ( ')( / / / / ASSESSMENT YEAR : 2003-04) THE ACIT (OSD)-I RANGE-4 AHMEDABAD / VS. MANN PHARMACEUTICALS LTD. 106, HARIKRUPA CHAMBERS B/H. NATIONAL CHAMBER ASHRAM ROAD AHMEABAD !* #./+, #./ PAN/GIR NO. : AAACM 9899 E ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) AND CO NO.18/AHD/2011 A.Y. 2003-04 (IN ITA NO.3281/AHD/2010) MANN PHARMACEUTICALS LTD. VS. DCIT AHMEDABAD CIRCLE-4, AHMEDABAD (CROSS OBJECTOR) .. (RESPOND ENT) REVENUE BY : SHRI K.C. MATHEWS, SR.DR ASSESSEE BY : SHRI SUNIL TALATI $'0 1 & / / / / DATE OF HEARING : 18/02/2014 23) 1 & / DATE OF PRONOUNCEMENT : 28/02/2014 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XX, AHMEDABA D (CIT(A) FOR SHORT) DATED 29/09/2010 PERTAINING TO ASSESSME NT YEAR (AY) 2003- ITA NO.3281/AHD/2010 (BY REVENU E) AND CO NO.18/AHD/2011 (BY ASSESSEE) ACIT (OSD) VS. MANN PHARMACEUTICALS LTD. ASST.YEAR 2003-04 - 2 - 04 AND THE ASSESSEE IS IN CROSS-OBJECTION THEREOF. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD.CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS.15,40,000/- BY RESTRICTING THE A SSESSEES CLAIM OF DEPRECIATION @ 40% ON STRUCTURES BEING STAFF QUARTE RS TO 5%. 1.2.IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE SAID STRUCTURES BEING STAFF Q UARTERS WERE NOT TEMPORARILY WOODEN STRUCTURES BUT WERE IN THE NATUR E OF BUILDINGS USED MAINLY FOR RESIDENTIAL PURPOSES AND THEREFORE DEPRECIATION HAD BEEN RIGHTLY ALLOWED BY THE AO @ 5% ON THE SAID STR UCTURES. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I D ELETING THE ADDITION OF RS.49,344/- MADE BY THE AO ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESI. 2.2.IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE EMPLOYEES CONTRIBUTION TO PF IS GOVERNED BY SECTION 36(1)(VA) OF THE ACT AND IS LIABLE TO BE TR EATED AS INCOME OF THE ASSESSEE IF NOT PAID BEFORE THE DUE DATE, AS PE R THE PF ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS- OBJECTION NO.18/AHD/2011 FOR AY 2003-04 (IN ITA NO. 3281/AHD/2010): THE ASSESSEE BEING AGGRIEVED BY THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) PRESENTS THIS C ROSS OBJECTION AGAINST THE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS. 1. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN NOT GR ANTING DEDUCTION OF RS.3,88,559/- BEING EXPENDITURE INCURR ED IN REVENUE IN NATURE BUT CLAIMED AS SPREAD OVER A PERIOD OF 5 YEARS. IT IS SUBMITTED THAT ON THE PRINCIPLE OF CONSISTENCY AS A LLOWED IN THE EARLIER YEAR THE EXPENDITURE CLAIMED AT 1/5 TH OF THE TOTAL EXPENDITURE WORKED OUT TO RS.3,88,559/- BE ALLOWED AS EXPENDITURE ITA NO.3281/AHD/2010 (BY REVENU E) AND CO NO.18/AHD/2011 (BY ASSESSEE) ACIT (OSD) VS. MANN PHARMACEUTICALS LTD. ASST.YEAR 2003-04 - 3 - INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS FOR THE YEAR. 3. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER AND/OR TO AMEND ALL OR ANY OF THE GROUNDS BEFORE THE FINAL HEARING. 3. AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE SHRI SUNIL TALATI SUBMITTED THAT HE DOES NOT WISH TO PRESS CROSS OBJE CTION FILED BY THE ASSESSEE AND, THEREFORE, REQUESTED TO DISMISS THE C ROSS-OBJECTION. THE SR.DR HAS NO OBJECTION. HENCE, WE DISMISS THE CROS S-OBJECTION FILED BY THE ASSESSEE AS NOT PRESSED. 4. WE TAKE UP THE REVENUES APPEAL IN ITA NO.3281/A HD/2010 FOR AY 2003-04. 4.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30/01/2006, THEREBY THE ASSESSING OFFICER(AO) MADE VARIOUS DISALLOWANCE(S) ON DELAYED PAYMENT OF PF & ESIC AMO UNTING TO RS.49,344/-, ON DEFERRED REVENUE EXPENSES AMOUNTING TO RS.3,88,559/- AND ON DEPRECIATION AMOUNTING TO RS.15,40,000/-. T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERI NG THE SUBMISSIONS, PARTLY ALLOWED THE APPEAL, THEREBY THE LD.CIT(A) CO NFIRMED THE DISALLOWANCE OF RS.3,88,559/- AND DELETED THE DISAL LOWANCE(S) ON ACCOUNT OF DEPRECIATION AMOUNTING TO RS.15,40,000/- AND DE LAYED PAYMENT OF PF & ESI AMOUNTING TO RS.49,344/-. ITA NO.3281/AHD/2010 (BY REVENU E) AND CO NO.18/AHD/2011 (BY ASSESSEE) ACIT (OSD) VS. MANN PHARMACEUTICALS LTD. ASST.YEAR 2003-04 - 4 - 3. APROPOS TO GROUND NOS.1 & 1.2, THE SR.DR STRONGL Y SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF ASSESSEE BY THE DECISION OF HONBLE COORDINATE BENCH (ITAT D BENC H AHMEDABAD) IN ASSESSEES OWN CASE BEARING ITA NO.2137/AHD/2010 FO R ASST.YEAR 2005- 06, DATED 11/03/2011. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE HONBLE COORDINATE BENCH IN ASSESS EES OWN CASE IN ITA NO.2137/AHD/2010 FOR ASST.YEAR 2005-06 VIDE OR DER DATED 11/03/2011 HAS DECIDED THIS ISSUE IN FAVOUR OF ASSE SSEE, BY OBSERVING AS UNDER:- 4. 0N HEARING THE RIVAL SUBMISSIONS AND CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE WE HAVE NOTICED THAT IT W AS AN ADMITTED FACTUAL POSITION THAT THE STAFF-QUARTERS FOR LABOUR ERS WERE TEMPORARY IN NATURE BEING WOODEN STRUCTURE, WHICH WAS SUBSEQUENT LY REMOVED FROM THE SITE WHEN THE FACTORY WAS STARTED. IN SUPPORT A VALUATION REPORT OF THE GOVT. APPROVED VALUER CERTIFYING THE NATURE OF THE IMPUGNED ASSET HAS ALSO BEEN FURNISHED. THE REASON ASSIGNED FOR CL AIMING THE SAID RATE OF DEPRECIATION WAS THAT AS PER OLD APPENDIX-A RULE 5 OF PART-A UNDER THE HEAD 'BUILDINGS' VIDE CLAUSE 3(III) AS APPLICAB LE FOR THE ASSESSMENT YEARS 1988-89 TO A.Y. 2002-03 THE RATE PRESCRIBED W AS 40% FOR THE CONSTRUCTION MEASURING 80 SQUARE METERS. SINCE THE QUARTERS WERE BELOW 80 SQ. METERS THEREFORE IT WAS DECIDED TO CLA IM THAT RATE OF DEPRECIATION, WHICH WAS ALLOWED IN THE PAST AS WELL . IN SUPPORT OF THE LEGAL PROPOSITION OF RULE OF CONSISTENCY CASE LAW C ITED WERE CIT VS. SMT. SWAPNA ROY 331 ITR 367 (AFT) & POONAWALA ESTATE STU D FARM 136 TTJ 236 (PUNE). IT WAS ALSO AN ADMITTED LEGAL POSITION THAT AS PER APPENDIX- I DEPRECIATION @ 100% IS PERMISSIBLE IN RESPECT OF TEMPORARY ERECTIONS SUCH AS WOODEN STRUCTURE FOR THE YEAR UNDER CONSIDE RATION. HOWEVER, ITA NO.3281/AHD/2010 (BY REVENU E) AND CO NO.18/AHD/2011 (BY ASSESSEE) ACIT (OSD) VS. MANN PHARMACEUTICALS LTD. ASST.YEAR 2003-04 - 5 - THE LD.CIT(A) HAS ALLOWED ONLY 40% AND THE ASSESSEE IS NOT IN APPEAL. UNDER THESE CIRCUMSTANCES, WE ARE NOT INCLINED TO I NTERFERE WITH THE FINDINGS OF THE LD.CIT(A). THIS GROUND OF THE REVE NUE IS THEREFORE, DISMISSED. 4.1. SINCE THE FACTS ARE IDENTICAL FOR THIS YEAR AL SO AND THE REVENUE HAS NOT PLACED ANY CONTRARY MATERIAL ON RECORD, THEREFO RE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO.2137/AHD/2010(SUPRA), WE DISMISS THE GROUND NOS.1 & 1.2 OF REVENUES APPEAL IN THIS YEAR AS WELL. 5. GROUND NO.2 & 2.2 ARE ALSO INTER-CONNECTED AND A GAINST THE DISALLOWANCE OF RS.49,344/- ON ACCOUNT OF DELAYED P AYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESIC. THE LD.COUNS EL FOR THE ASSESSEE FAIRLY CONCEDED THAT THE ISSUE HAS BEEN DECIDED BY THE HONBLE GUJARAT HIGH COURT AGAINST THE ASSESSEE IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION REPORTED AT (2014) 41 TAXMANN .COM 100 (GUJARAT). THE LD.SR.DR HAS PLACED COPY OF THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT-II VS. GUJARAT STATE ROAD TRANSPORT CORPORATION(SUPRA). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. GUJARAT STATE ROAD TRANSPORT CORPORATION (SUPRA). SINCE THE ISSU E HAS BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT AGAINST THE A SSESSEE, THESE GROUNDS OF REVENUES APPEAL ARE ALLOWED AND THE ORDER OF TH E LD.CIT(A) IS HEREBY SET ASIDE. ITA NO.3281/AHD/2010 (BY REVENU E) AND CO NO.18/AHD/2011 (BY ASSESSEE) ACIT (OSD) VS. MANN PHARMACEUTICALS LTD. ASST.YEAR 2003-04 - 6 - 5. GROUND NOS.3 & 4 ARE GENERAL IN NATURE NEED NO I NDEPENDENT ADJUDICATION. 6. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) ($ %&) ! ! ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28/ 02 /2014 7.., '.../ T.C. NAIR, SR. PS 4 1 .&8 98)& 4 1 .&8 98)& 4 1 .&8 98)& 4 1 .&8 98)&/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. ## & $: / CONCERNED CIT 4. $:() / THE CIT(A)-XX, AHMEDABAD 5. 8'%; .& , , / DR, ITAT, AHMEDABAD 6. ;( <0 / GUARD FILE. 4$ 4$ 4$ 4$ / BY ORDER, /8& .& //TRUE COPY// = == =/ // / #+ #+ #+ #+ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 18.2.14 (DICTATION-PAD 7-PAG ES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26.2.14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFOR E OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.28.2.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.2.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER