VOLANT TEXTILE MILLS LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 3356/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3581 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 24-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKASH K AGARWAL
• Keywords: Depreciation
• Section: 143(3); 142(1); 115JB; 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI BEFORE SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSA IN, JM ./ I.T.A. NO. 3356/MUM/2013 ( / ASSESSMENT YEAR: 2006-07) VOLANT TEXTILE MILLS LTD GROUND FLOOR, SHREE NIWAS HOUSE H. SOMANI MARG, FORT, MUMBAI-400 001. / VS. ACIT-2(3), MUMBAI ROOM NO.619, AAYAKAR BHAVAN M.K. ROAD, MUMBAI-400 020. ./ ./PAN/GIR NO. AAACV 2463P ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI VIKASH K AGARWAL / DATE OF HEARING : 24/02/2016 !'# / DATE OF PRONOUNCEMENT : 02/03/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)- 6, DATED 21.0 3.2013 FOR A.Y. 2006-07 ON THE FOLLOWING GROUNDS OF APPEAL. 1. THE ASSESSEE COMPANY M/S VOLANT TEXTILES MILLS LTD WAS 100% EOU COMPANY. DURING THE PREVIOUS YEAR, THE COMPANY PLAN T WAS TO CONVERT FROM 2 ITA NO. 3356/MUM/2013 (A.Y. 2006-07) VOLANT TEXTILE VS. ACIT 100% EOU UNIT TO LOCAL UNIT AND FOR THAT PURPOSE TH E PLANT WAS CLOSED ONE. SECONDLY, TO COMPLETE ALL MAJOR REPAIRING AND OVERA LL OILING THE PLANT WAS CLOSED ONE. THIS IS A BRIEF OF THE CASE, OF COURSE DURING THE PERIOD THERE WAS A SALE OF MINIMUM QUANTITY BUT IT WAS THERE. PASSIV E USE OF THE PLANT WAS THERE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 29.11.2006 DECLARING TOTAL INCOME OF RS. NIL. THE R ETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE I.T. ACT. LATER ON THE CASE WAS S ELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICE U/S 142(1) AND SEEKING REP LY, THE AO PASSED A ORDER OF ASSESSMENT U/S 143(3) OF THE I.T. ACT,1961 DETERMIN ING TOTAL INCOME AT NIL AFTER SETTING OF BROUGHT FORWARD LOSSES OF RS.60,59,677/- . AN EFFECT TO CIT(A)S ORDER WAS GIVEN ON 08.07.2010 DETERMINING TOTAL INCOME A T NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSSES OF RS.56,29,818/-. LATER ON PROCEEDING U/S 148 OF THE I.T. ACT,1961 WAS INITIATED VIDE NOTICE U/S 148 OF THE A CT. ULTIMATELY ORDER OF ASSESSMENT U/S 143(3) R.W.S.147 OF THE I.T. ACT,196 1 ON 29.11.2011. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED THE APPEAL BEFORE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF THE AS SESSEE HAD DISMISSED THE APPEAL VIDE ITS ORDER DATED 21.03.13. 3 ITA NO. 3356/MUM/2013 (A.Y. 2006-07) VOLANT TEXTILE VS. ACIT 3.1 AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE F ILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. 4. AT THE VERY OUTSET, IT IS NOTICED THAT EVEN IN S PITE OF SEVERAL NOTICES, NONE HAS APPEARED ON BEHALF OF ASSESSEE AND ON THE PERUSAL O F ORDER SHEET WE HAVE NOTICED THAT NOBODY WAS APPEARING ON BEHALF OF ASSESSEE FOR THE LAST SEVERAL DATES. ALTHOUGH THE NOTICES WERE ALSO SERVED UPON THE ASSE SSEE FOR APPEARING BEFORE US, BUT EVEN THEN THE ASSESSEE HAS NOT PREFERRED TO APP EAR AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED TODAY. ON THE OTHER HAND LD. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECI DED TO PROCEED WITH THE HEARING OF THE CASE EX-PARTE. 6. WE HAVE CONSIDERED THE ORDERS OF AO AS WELL AS L D. CIT(A). THE AO AFTER VERIFYING THE DETAILS AND AFTER DISCUSSION HAS DECI DED THE ISSUE OF DISALLOWANCE OF DEPRECIATION OF RS.33,35,208/- AND ALSO WORKED OUT BOOK PROFIT U/S 115JB AND ON APPEAL: IT IS SEEN FROM THE ANNUAL ACCOUNTS THAT THERE WAS NO PRODUCTION DURING THE PREVIOUS YEAR. HOWEVER, DEPRECIATION ON PLANT AND MACHINERY AMOUNTING TO RS.33,35,208/- WAS ALLOWED. AS THE PLANT AND MACHINERY WERE NOT USED IN THE PREVIOUS YEAR, THE A SSESSEE WAS NOT 4 ITA NO. 3356/MUM/2013 (A.Y. 2006-07) VOLANT TEXTILE VS. ACIT ENTITLED TO DEPRECIATION THEREON. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME AS TO WHY THE DEPRECIATION SHOULD NOT BE W ITHDRAWN. THE ASSESSE SUBMITTED ITS SUBMISSION AND ARGUED THA T ITS PLANT WAS LOCATED IN 100% EOU AREA. THE ASSESEE WANTED TO SHI FT THE PLANT FROM EOU AREA TO THE LOCAL AREA. AS A RESULT OF THIS, TH E PLANT WAS STOPPED FOR THE TIME BEING. THE ASSESSEE, THEREFORE, ARGUED THAT THERE WAS TEMPORARY SHUTDOWN OF THE PLANT AND THERE WAS NEVER DIS CONTINUATION OF THE BUSINESS ACTIVITIES. THE ASSESSEE FURTHER AR GUED THAT USED APPEARING IN SECTION 32 SHOULD NOT BE RESTRICTED TO ACTUAL USE BUT HAS WIDER MEANING TO INCLUDE PASSIVE USER. THEREF ORE, DEPRECATION SHOULD BE ALLOWED IN FULL. 7. LD. CIT(A) AFTER HAVING CONSIDERED THE ORDERS OF THE AO AND THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND ON MERITS HAS DEA LT WITH GROUNDS WHICH ARE AS UNDER: 1. GROUND 1 IS REGARDING DISALLOWANCE OF DEPRECIA TION OF RS.33,35,208/-. 2. THE AO HAS DISCUSSED THIS ISSUE OF DISALLOWANCE OF DEPRECIATION FORM PARA 4.1 O 4.6 PAGES 1&2 OF THE ASSESSMENT ORD ER. THE AO DISALLOWED DEPRECIATION OBSERVING AS UNDER: (I) THERE WAS NO PRODUCTION DURING THE PREVIOUS YE AR. (II) THE PLANT & MACHINERY WERE NOT USED IN THE P REVIOUS YEAR. (III) THE APPELLANTS ARGUMENT THAT IT WANTED TO S HIFTED THE PLANT FROM EOU AREA TO LOCAL AREA THEREFORE, THERE WAS TEMPORARY SHUT DOWN AND THE PLANT WAS POSSIBLY USED IS NOT ACCEPTABLE AS THE PLANT WAS NOT USED EVEN IN THE VE RY NEXT YEAR AND THE PLANT DID NOT STARTS ITS OPERATION IN A Y 2 007-08 ALSO AND THE SALE OF RS. 1.24 LAKHS IN A Y 2006-07 WAS N OT ON ACCOUNT OF ACTUAL MANUFACTURING. 3. THE APPELLANT REITERATED THE STAND TAKEN BEFORE THE AO. 4. I HAVE GONE THROUGH THE ORDER OF THE AD AND SUBM ISSION OF THE APPELLANT WAS NO PRODUCTION ACTIVITY DURING THE YEA R AND IT IS OBVIOUS THAT THE PLANT WAS DURING THE PREVIOUS YEAR, THEREF ORE, THE CONDITIONS OF SECTION 32 OF THE ACT, THAT THE PLANT MUST BE U SED FOR THE PURPOSE OF 5 ITA NO. 3356/MUM/2013 (A.Y. 2006-07) VOLANT TEXTILE VS. ACIT THE BUSINESS, HAS NOT BEEN FULFILLED. AS THERE WAS NO PRODUCTION ACTIVITY AND THE PLANT WAS NOT USED, THERE WAS NO O R 'WEAR AND TEAR' OF THE PLANT AND THERE IS NO CONCEPT OF PASSIVE USE OR OF ALLOWING NOTIONAL DEPRECIATION, DEPRECIATION IS NOT ALLOWABL E AS DEPRECIATION IS ALSO EXPENDITURE IS ALLOWABLE ONLY IF THE EXPEND ITURE IS ACTUALLY INCURRED. THE AOS ACTION IS THEREFORE FOUND TO BE VALID, THEREFORE, CONFIRMED. 5. GROUND 2 IS GENERAL. 6. THE APPEAL IS DISMISSED. 7.1. AFTER ANALYZING THE AFORE MENTIONED ORDER WE F OUND THAT THE CIT(A) HAS DEALT WITH THE ALL THE ISSUES AND HAS PASSED JUDICI OUS ORDER AND NO CIRCUMSTANCES HAVE BEEN BROUGHT BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS RECORDED BY THE CIT(A). THEREFORE, WE SEE NO REASON TO DEVIA TE OR INTERFERE INTO THE FINDINGS RECORDED BY THE CIT(A) AND HENCE, WE REJECT THE GRO UNDS RAISED BY THE ASSESSEE AND UPHOLD THE ORDER OF THE CIT(A) 8. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2016 SD/- SD/- (JASON P. BOAZ) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :02.03.2016 PS. ASHWINI 6 ITA NO. 3356/MUM/2013 (A.Y. 2006-07) VOLANT TEXTILE VS. ACIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI