ITO 9(2)(2), MUMBAI V. KING PRAWNS LTD, MUMBAI

ITA 3497/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71761 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: V B DALAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 3497/MUM/2012 (ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER - 9(2)(2) M/S. KING PRAWNS PVT. LTD. ROOM NO. 225, 2ND FLOOR 229/230, ARUN CHAMBERS AAYAKAR BHAVAN, M.K. ROAD VS. TARDEO ROAD, MUMBAI CENTRAL MUMBAI 400020 MUMBAI 400034 PAN - AAACK2067J APPELLANT RESPONDENT APPELLANT BY: SHRI M.L. PERUMAL RESPONDENT BY: SHRI V.B. DALAL DATE OF HEARING: 04.12.2013 DATE OF PRONOUNCEMENT: 04.12.2013 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 06.03.2012 PASSED BY THE CIT(A)-20, MUMBAI AND IT P ERTAINS TO A.Y. 2009-10. 2. CLAIM OF DEPRECIATION ON PONDS DISALLOWED BY THE AO BUT ALLOWED BY THE CIT(A) IS THE SUBJECT MATTER OF DISPUTE BEFORE US. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE O F SALT. IT CLAIMED DEPRECIATION ON PONDS AND HATCHERIES CONSTRUCTED AT THE SITE WHICH WAS ORIGINALLY USED FOR PRAWN FARMING. THE CASE OF THE AO WAS THAT THE INVESTMENT IN CONSTRUCTION OF THE PONDS IS LYING IN THE HANDS OF THE ASSESSEE AS CAPITAL INVESTMENT AND IT DID NOT PUT TO USE THESE ASSETS D URING THE YEAR UNDER CONSIDERATION FOR EARNING INCOME AND HENCE DEPRECIA TION CANNOT BE CLAIMED ON SUCH ASSETS. ON THE OTHER HAND, THE ASSESSEE CLA IMED BEFORE THE FIRST APPELLATE AUTHORITY THAT THE COMPANY WAS ALSO ENGAG ED IN PRAWN FARMING SINCE 1985 AND THE PONDS (TANKS) AND HATCHERIES ARE REQUIRED FOR CARRYING ON THE MAIN BUSINESS ACTIVITY OF PRAWN FARMING. THEY F ORM PART OF BLOCK OF ASSETS ITA NO. 3497/MUM/2012 M/S. KING PRAWAN PVT. LTD. 2 UNDER THE HEAD BUILDING AND DEPRECIATION HAS BEEN ALLOWED FROM YEAR TO YEAR ON SUCH BLOCK. IN WAS ONLY ON ACCOUNT OF THE RESTRI CTIONS IMPOSED BY THE HON'BLE SUPREME COURT THAT IT COULD NOT CARRY ON TH E BUSINESS OF PRAWN FARMING IN THIS YEAR THOUGH SUCH ACTIVITY WAS ADMIT TEDLY CARRIED ON IN THE EARLIER YEARS AND DEPRECIATION WAS ALLOWED IN EARLI ER YEARS. IT WAS ALSO BROUGHT TO THE NOTICE OF THE CIT(A) THAT AS PER THE HON'BLE SUPREME COURTS DIRECTIONS THE ASSESSEE COMPANY DULY APPLIED FOR RE GISTRATION WITH COASTAL AQUACULTURE AUTHORITY UNDER COSTAL AQUACULTURE ACT, 2005 AND IN FACT DEPRECIATION WAS ALSO ALLOWED ON THE BLOCK OF ASSET S. REFERENCE WAS ALSO MADE TO THE CIRCULAR OF CBDT (CIRCULAR NO. 469) TO SUBMI T THAT INDIVIDUAL ASSETS LOSE THEIR IDENTITY UPON INTRODUCTION OF THE CONCEP T OF BLOCK OF ASSETS, FOR THE PURPOSE OF CALCULATION OF DEPRECIATION. RELIANCE WA S PLACED UPON SEVERAL DECISIONS OF VARIOUS HIGH COURTS TO CONTEND THAT ON CE DEPRECIATION WAS ALLOWED IN THE EARLIER YEARS IT CANNOT NOW BE DISAL LOWED MERELY BECAUSE THE ASSESSEE COULD NOT CARRY ON THE BUSINESS IN THIS YE AR. 4. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE A SSESSEE BY OBSERVING IN PARAS 3.3.1 AND 3.3.2 AS UNDER: - 3.3.1 IT IS A FACT THAT IN THE CURRENT YEAR THE A PPELLANT COULD NOT CARRIED OUT PRAWN FARMING DUE TO RESTRICTIONS IMPOSED BY TH E APEX COURT. IN COMPLIANCE TO APEX COURTS DIRECTIONS, IT HAS DULY REGISTERED WITH THE CONCERNED REGULATORY AUTHORITY UNDER THE COASTAL AQ UACULTURE ACT. 3.3.2 IT IS ALSO A FACT THAT PONDS (TANKS) FORM BLO CK OF ASSETS UNDER THE HEAD BUILDING AND, THEREFORE, THE JUDGEMENTS OF HON 'BLE COURTS (CITED SUPRA), THEY CANNOT BE SEPARATED OR SEGREGATED WITH IN THE BLOCK FOR THE PURPOSE OF GRANTING DEPRECIATION. THE CIRCULAR NO. 469 DATED 23.09.1986 ALSO HOLDS THAT WITH THIS AMENDMENT INDI VIDUAL ASSETS HAVE LOST THEIR IDENTITY AS CONCEPT OF BLOCK INTROD UCED WHICH IS RELEVANT FOR CALCULATING DEPRECIATION. TAKING INTO ACCOUNT A LL THESE FACTS & CIRCUMSTANCES THE ACTION OF THE ASSESSING OFFICER I N DISALLOWING DEPRECIATION IS REVERSED AND THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. DURING T HE COURSE OF HEARING BEFORE THE TRIBUNAL THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CARRIED ON AQUACULTURE ACTIVITIES IN EARLIER YEARS AND SUBSEQUENT TO COMPLYING WITH THE DIRECTIONS OF THE HON'BLE SUPREME COURT IT STARTED CARRYING ON ITS ACTIVITIES AND, THUS, MEREL Y BECAUSE IN THIS YEAR THERE IS NO ACTIVITY, A PARTICULAR ASSET CANNOT BE SEGREG ATED FROM THE BLOCK OF ITA NO. 3497/MUM/2012 M/S. KING PRAWAN PVT. LTD. 3 ASSETS FOR THE PURPOSE OF DENIAL OF DEPRECIATION. I N THIS REGARD THE LEARNED COUNSEL RELIED UPON THE ORDER OF THE ITAT D BENCH , MUMBAI IN THE CASE OF G.R. SHIPPING LTD (ITA NO. 822/MUM/2005 DATED 17 TH JULY, 2008). 6. THE LEARNED D.R., ON THE OTHER HAND, SUBMITTED THAT DEPRECIATION IS ALLOWED ONLY IN THE CASE OF THE ASSETS WHICH ARE US ED FOR THE PURPOSE OF BUSINESS WHEREAS IN THE YEAR UNDER CONSIDERATION TH E ASSESSEE HAS NOT PUT TO USE THE PONDS AND HENCE THE ASSESSEE COMPANY IS NOT ENTITLED FOR DEPRECIATION. 7. AS COULD BE NOTICED FROM THE GROUNDS OF APPEAL, THE PLEA OF THE ASSESSEE IS THAT THE ASSETS WERE NOT PUT TO USE IN THE FINANCIAL YEAR UNDER CONSIDERATION; IT IS NOT CLEAR AS TO WHETHER THE AS SETS WERE PUT TO USE IN THE SUBSEQUENT YEARS. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. UNDER THE NEW CONCEPT OF BLOCK OF ASSETS TH E CLAIM FOR DEPRECIATION CAN BE MADE SUBJECT TO THE CONDITION THAT THE ASSET IS READY FOR USE. IN THE INSTANT CASE THE PONDS WERE NOT ONLY READY FOR USE BUT THEY WERE PUT TO USE IN THE PRECEDING YEARS. IT WAS ONLY DUE TO THE CIRC UMSTANCES BEYOND THE CONTROL OF THE ASSESSEE COMPANY THAT THE IMPUGNED A SSETS COULD NOT BE PUT TO USE IN THIS YEAR BUT THEY WERE READY FOR USE. THE I SSUE OF BLOCK OF ASSETS WAS CONSIDERED BY THE ITAT D BENCH, MUMBAI WHEREIN IT WAS HELD THAT ONCE IF DEPRECIATION IS ALLOWED ON ASSETS WHICH FORM PART O F BLOCK OF ASSETS, MERELY BECAUSE IT WAS NOT PUT TO USE IN ONE YEAR, DEPRECIA TION CANNOT BE DISALLOWED IN THE YEAR OF NON-USE. HAVING REGARD TO THE CIRCUM STANCES OF THE CASE AND IN THE LIGHT OF THE DECISIONS CITED SUPRA WE ARE OF TH E VIEW THAT THE ORDER PASSED BY THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. W E, THEREFORE, UPHOLD THE ORDER PASSED BY THE CIT(A) AND DISMISS THE APPEAL F ILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2013. SD/- SD/- (SANJAY ARORA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 4 TH DECEMBER, 2013 ITA NO. 3497/MUM/2012 M/S. KING PRAWAN PVT. LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20, MUMBAI 4. THE CIT 9, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.