ACIT, Circle - 2, Margao V. M/s Waterways Shipyard Pvt. Ltd,

ITA 335/PAN/2013

• Counselvise Citation: 33524114 RSA 2013
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BARTHAKUR
• Assessee Lawyers: PRADEEP KULKARNI
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 335 /PNJ/2013 (ASSESSMENT YEAR - 2005 - 06 ) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2, MARGAO, GOA. (APPELLANT) VS. M/S. WATER WAYS SHIPYARD PVT. LTD. DEMPO ODYSSEY CO - OP. HSG. SOCIETY, NON - MON, VASCO - DA - GAMA, GOA. PAN: AAACW4758J (RESPONDENT) AP PELLANT BY : SHRI B. BARTHAKUR, DR RESPONDEN T BY : SHRI PRADEEP KULKARNI, CA . DATE OF HEARING : 28/1/2014 DATE OF PRONOUNCEMENT : 28/1 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - P ANAJI DATED 16.09.2013 FOR THE ASSESSMENT Y EAR 2005 - 06. 2. THE FOLLOWING GROUNDS RAISED BY THE DEPARTMENT IN THIS APPEAL. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) HAS ERRED ALLOWING THE DEPRECIATION OF RS. 91,39,486/ - ON A SHIP M.V. MAANAV STAR EVEN WHEN THE SHIP WAS NOT PUT TO USE FOR THE PURP OSE OF BUSINESS OF THE ASSESSEE COMPANY DURING THE RESPECTIVE YEAR. 3. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7,62,500/ - ON ACCOUNT OF LEASE RENT OF LUXURY CRUISER AS THE RENT RECEIVABLE FOR THE WHOLE OF THE MONTH HAD ACCRUED TO THE ASSE SSEE AND THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 2.1 . THE ASSESSEE IS A DOMESTIC COMPANY AND FILED THE RETURN OF INCOME ON 16.11.205 DECLARING TOTAL INCOME OF RS. 24,17,280/ - . THE SAID RETURN WAS 2 . ITA NO.335/PNJ/2013 (A.Y.2005 - 06) ACIT VS. M/S. WATER WAYS SHIPYARD PVT. LTD. PROCESSED U/S. 143(1). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 30.11.2007 DETERMINING THE TOTAL INCOME AT RS. 39, 20,120/ - . THE ASSESSEE HAS FILED DEPRECIATION SCHEDULE OF THE FIXED ASSETS FOR THE FINANCIAL YEAR 2004 - 05 RELEVANT TO THE ASSES SMENT YEAR 2005 - 06. THE ASSESSEE HAS ACQUIRED A SHIP M.V. MAANAV STAR AT RS. 3,66,82,240/ - AND CLAIMED DEPRECIATION OF RS. 91,39,468/ - ON THE SAME SHIP AT THE RATE OF 25% PER ANNUM. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SHIP M.V. MAANAV STAR WAS N OT PUT TO USE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2005 - 06 THEREFORE, SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE, WHY THE DEPRECIATION SHOULD NOT BE GRANTED. THE ASSESSEE CONTENDED THAT THE SHIP WAS USED IN FINANCIAL YEAR 2005 - 06. THE SHI P MAANAV STAR HAS EARNED INCOME BY WAY OF FREIGHT/CHARTER HIRE RECEIPTS WHICH IS RS. 1,99,94,978.62/ - AND THE SAME WAS REFLECTED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD INCOME. THE ASSESSEE HAS PRODUCED THE COPY OF PROFIT AND LOSS ACCOUNT AND CLAIM ED THAT DEPRECIATION IS TO BE ALLOWED. THE ASSESSEE, FURTHER CONTENDED THAT AS PER THE AMENDED SECTION 32, DEPRECIATION IS TO BE ALLOWED - IN THE CASE OF ANY BLOCK OF ASSE T . AS PER AMENDED SECTION INDIVIDUAL ASSETS HAVE LOST THEIR IDENTITY AND CONCEPT OF BLOCK OF ASSETS HAS BEEN INTRODUCED. THE ASSESSEE HAS CLAIMED THE DEPRECIATION AS PER SECTION 32. AFTER HEARING THE ASSESSEE THE AO WAS OF THE VIEW THE VESSEL WAS DELIVERED TO THE NEW OWNERS ON 24 TH AUGUST, 2004 AT THE RYE WHARF U.K. ON 11 TH SEPTEMBER 2004 THE VESSEL DEPARTED FROM RYE WHARF TO RYE ANCHORAGE AND T HE MAIN ENGINE WAS STOPPED DUE TO BAD WEATHER AND AS A RESULT THE VESSEL WAS GROUNDED O N 11.09.2004 AND THE VESSEL ARRIVED AT MORMUGAO ON 28 TH MARCH, 2005. THEREFORE, AS PER THIS DO CUMENT ASSESSEE HAS NOT USED THE VEHICLE IN THE RELEVANT ASSESSMENT YEAR. THEREFORE, AO HAS DISALLOWED THE DEPRECIATION OF RS.91,39,468/ - . 3 . ITA NO.335/PNJ/2013 (A.Y.2005 - 06) ACIT VS. M/S. WATER WAYS SHIPYARD PVT. LTD. 3 . THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 3.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF APPELLANT. THE APPELLANT HAS SUBMITTED ENOUGH DOCUMENTARY EVIDENCE TO PROVE THAT THE VESSEL M.V. MANNAV STAR WAS ACTUALLY PUT TO USE DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, THE A.O IS DIRECTED TO ALLOW THE DEPRECIATION OF RS. 91,39,468/ - AND DELETE THE ADDITION MADE ON THIS ACCOUNT. THE AP PEAL ON THIS GROUND IS ALLOWED. 3.1 . THE LEARNED DR SUBMITTED THAT SHIP MAANAV S TAR WAS PURCHASED AND DELIVERED TO THE NEW OWNER S ON 24 TH AUGUST, 2004. ON 11 TH SEPTEMBER 2004 THE VESSEL WAS DEPARTED AND MAIN ENGINE WAS STOPPED DUE TO BAD WEATHER, THEREFORE, VESSEL WAS GROUNDED ON 11.09.2004 AND THE VESSEL ARRIVED AT MORMUGAON ON 28 TH MARCH, 2005 AND IT WAS DRY DOCKED TILL APRIL 08, 2005 WHICH AO VERIFIED FROM TH E LOG BOOK OF THE VESSEL THEREFORE, WHEN THE VESSEL WAS NOT PUT TO USE THERE IS NO REASON TO GRANT OF DEPRECIATION. 3.4 . THE LEARNED DR RELIED UPON THE ORDER OF THE CIT(A). 3.5 . THE LEARNED AR ALSO RELIED UPON THE WRITTEN SUBMISSION WHICH WAS FILED BEFORE THE CIT(A). 3.6 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND FROM THE RECORD THAT THE SHIP M.V. MAANAV STAR WAS PURCHASED AND WAS DELIVERED TO THE NEW OWNER ON 24 TH AUGUS T, 20 04 A ND THE VESSEL DEPARTED FROM RUE WHARF TO RYE ANCHORAGE AND THE VESSEL WAS GROUNDED ON PORT OF U.K. ON 11.09.2004. ON 27 TH SEPTEMBER 2004 THE SAID VESSEL WAS REFLOATED AND IT WAS REPAIRED AND AFTER COMPLETING THE REPAIRING, THE VESSEL STARTED AGAIN FOR MORMUGAO . THE VESSEL WAS USED FROM 24 TH OCTOBER 2004 TILL 30 TH MARCH, 2005 AND ASSESSEE HAS RECEIVED THE FREIGHT AND HIRE CHARGES. THE ASSESSEE HAS EMPLOYED THE VESSEL TO CARRY STEEL FROM IZMIR, TURKEY TO MORONI, COMOROS ISLANDS (INDIAN OCEAN). THE ASSESSEE HAS EARNED THE INCOME AFTER RETURNING FROM MORONI . T HE VESSEL CAME TO MUMBAI 4 . ITA NO.335/PNJ/2013 (A.Y.2005 - 06) ACIT VS. M/S. WATER WAYS SHIPYARD PVT. LTD. AND WAS LOADED CARGO AT MUMABI AND SAILED TO PORT MINA RAS H ID , DUBAI . T HEREAFTER , VESSEL HAD GONE TO VARIOUS PLACES THUS, THE VESSEL H AS EARNED THE TOTAL FREIGHT CHARGES OF RS. 19 , 994 , 978/ - WHICH IS REFLECTED IN THE PROFIT AND LOSS ACCOUNT. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS USED THIS VESSEL FOR CARRIED OUT THE BUSINESS. IN VIEW OF THIS , WE ARE OF THE VIEW THAT CIT(A ) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. IN THE RESULT, THE APPEAL IS DISMISSED ON THIS GROUND N O. 1. 4. GROUND NO. 2. ON PERUSAL OF THE PROFIT & LOSS ACCOUNT IT WAS NOTICED THAT ASSESSEE HAS RECEIVED LEASE RENT OF RS. 1,61,18,200/ - FROM LUXURY CRUISER LEASED TO M/S. ADVANI HOTELS & RESORTS(I) LTD. THE ASSESSING OFFICER HAS VERIFIED THE RECORD AND FROM THE RECORD IT IS FOUND THAT AS PER AGREEMENT BETWEEN ASSESSEE AND M/S. ADVANI HOTELS & RESORTS (I ) LTD. THE LUXURY CRUIS E/VESSEL WAS GIVEN ON LEASE TO M/S. ADVANI HOTELS & RESORTS(I) LTD. AND AS PER THE SAME AGREEMENT THE ASSESSEE HAS RECEIVED LEASE RENT FOR THE PERIOD APRIL 2004 TO 15 TH APRIL 2005. THE TOTAL AMOUNT RECEIVED IS RS. 1,68,80,700/ - WHEREAS THE ASSESSEE HAS SHO WN THE TOTAL LEASE RENT IN ITS BOOKS OF ACCOUNT OF ONLY RS. 1,61,18,200/ - . T HEREFORE, AO WAS OF THE VIEW THAT ASSESSEE WAS RECEIVED MORE RENT AND HE HAS SHOWN THE ADVANCE RENT AT RS.7,62,500/ - IN LIABILITY SIDE OF THE BALANCE SHEET. THEREFORE, SHOW CAUSE NOTICE WAS GIVEN AND AFTER HEARING THE ASSESSEE IT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5 . THE MATTER WAS CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE CONTENTS OF THE WRITTEN SUBMISSION OF THE APPELLANT. IN THIS CASE, THE LEASE RENT WAS PAYABLE ON MONTHLY BASIS. THE CONFUSION HAS ARISEN FOR THE MONTH OF MARCH - APRIL, AS THE LEASE RENT WAS PAYABLE 16 TH MARCH TO 15 TH APRIL. THE ASSESSEE HAS ACCOUNTED FOR 50% OF THE TOT AL LEASE RENT FOR THE ASST. YEAR IN QUESTION, WHEREAS, THE A.O. HAS TAKEN THE LEASE RENT FOR ENTIRE MONTH, I.E., FROM 16 TH MARCH TO 15 TH APRIL. SINCE THE FINANCIAL AND ACCOUNTING YEAR ENDS ON 31 ST MARCH, IN MY OPINION, THE APPELLANT WAS CORRECT IN TAKING 5 0% OF THE LEASE RENT, I.E. UPTO 31 ST MARCH, AS INCOME FOR THE YEAR UNDER 5 . ITA NO.335/PNJ/2013 (A.Y.2005 - 06) ACIT VS. M/S. WATER WAYS SHIPYARD PVT. LTD. CONSIDERATION. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.7,62,500/ - AND THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 5.1 . THE LEARNED DR RELIED UPO N THE ORDER OF AO AND LEARNED DR SUBMITTED THAT THOUGH THE ASSESSEE HAS RECEIVED THE LEASE RENT AT RS. 1,68,80,700/ - HE HAS ONLY ACCOUNTED IN THE BOOKS AT RS. 1,61,18,200/ - AND ASSESSEE HAS NO JUSTIFICATION FOR SHOWING THE LESS AMOUNT. T HE LEASE RENT ACCRUE D TO THE ASSESSEE IS INCOME OF THE ASSESSEE AND AO HAS RIGHTLY ADDED TO THE INCOME. 5.2 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS GIVEN THE LEASE RENT WHICH W AS RECEIVED BY HIM. S.N. LEASE RENT FOR THE PERIOD OF AMOUNT REMARKS 1. APRIL - 2004 13,30,000 AS PER THE OLD AGREEMENT DATED 04.12.1999 2. MAY - 2004 13,30,000 -- DO -- 3. JUNE - 2004 13,30,000 -- DO -- 4. JULY - 2004 13,30,000 -- DO -- 5. AUGUST - 2004 13,30,000 -- DO -- 6. SEPTEMBER - 2004 13,30,000 -- DO -- 7. OCTOBER - 2004 13,30,000 -- DO -- 8. NOVEMBER - 2004 13,30,000 -- DO -- 9. 1 ST DEC - 2004 TO 3 RD DEC - 2004 1,40,700 -- DO -- 10. 16 TH DEC - 2004 TO 15 TH JAN - 2004 15,25,000 AS PER THE NEW AGREEMENT DATED 16.12.2004 11. 16 TH JAN - 2005 TO15TH FEB - 2005 15,25,000 -- DO -- 12. 16 TH FEB - 2005 TO 15 TH MAR - 2005 15,25,000 -- DO -- 13. 16 TH MAR - 2005 TO 15 TH APRIL - 2005 15,25,000 -- DO -- TOTAL 1,68,80,700/ - WE FIND THAT IT IS THE CONTENTION OF THE ASSESSEE THAT FROM M ARCH APRIL . T HE ASSESSEE HAS ACCOUNTED THE RENT ONLY AT 50% OF THE TOTAL LEASE RENT. WE FIND THAT ASSESSEE HAS RECEIVED THE LEASE RENT FROM MARCH - APRIL. THE ASSESSEE HA S RECEIVED LEASE RENT FROM M/S. ADVANI HOTELS & RESORTS (I) LTD. FOR PERIOD OF 16 TH MARCH 2005 TO 15 T H APRIL 2005. THE ASSESSEE HAS RECEIVED THIS AMOUNT BUT 6 . ITA NO.335/PNJ/2013 (A.Y.2005 - 06) ACIT VS. M/S. WATER WAYS SHIPYARD PVT. LTD. AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM AND THE ASSESSMENT YEAR ENDING ON MARCH. THEREFORE, ASSESSEE HAS SHOWN THE LEASE RENT AT RS.7,62,500/ - FOR A.Y. 2006 - 07 AND REMAINING RENT WAS SHOWN IN THE SUBSEQUENT YEAR. THEREFORE, C IT(A) VERIFYING THIS ACCOU NTS HE HAS DELETED THE ADDITION. T HEREFORE, OUR INTERFERENCE IS NOT REQUIRED. IN THE RESULT DEPARTMENTS APPEAL IS DISMISSED ON THIS GROUND. 6 . IN THE RESULT, REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.1. 2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 6.2 . 2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER SR. PRIVATE SECRETARY, ITAT, PANAJI, GOA