Chhatariya Firetech Industries, Ahmedabad V. The Jt.CIT, Range-2, Bhavnagar

ITA 3602/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9176 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-09-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Depreciation; Business expenditure; Set aside
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 3602/AHD/2015 ( ASSESSMENT YEAR : 2010-11) CHHATARIYA FIRETECH INDUSTRIES 23-A, SURYODAYA MILL COMPOUND, 1 ST FLOOR, 96, TARDEV ROAD NEXT TO AC MARKET, MUMBAI & ANIL R. SHAH (C.A.) SHREEJI HOUSE, 4 TH FLOOR, B/H. M. J. LIBRARY, ELLIS BRIDGE, AHMEDABAD - 380006 / VS. JT. COMMISSIONER OF INCOME TAX RANGE-2, BHAVNAGAR ./ ./ PAN/GIR NO. : AACFC8648J ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ANIL R. SHAH WITH KINJAL SHAH, A.RS. / RESPONDENT BY : SHRI L. P. JAIN, SR. D.R. DATE OF HEARING 24/09/2019 !'# / DATE OF PRONOUNCEMENT 04/10/2019 / O R D E R ITA NO. 3602/AHD/15 [CHHATARIYA FIRETECH INDUSTRIES] A.Y. 2010-11 - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-6, AHMEDABAD (CIT(A) IN SHORT), DATED 30 .09.2015 ARISING IN THE ASSESSMENT ORDER DATED 25.03.2015 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2010-11. 2. THE GROUND OF APPEAL RAISED BY ASSESSEE READS AS UNDER: 1) THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACT IN CONFIRMING ADDITION OF RS.4,85,834/-ALLEGING IT TO BE EXCESSIV E SHORTAGE. YOUR APPELLANT HAS BEEN MAINTAINING REGULAR AND PRO PER BOOKS OF ACCOUNTS DULY AUDITED AND THE SHORTAGE DECLARED AND CLAIMED IS FAIR AND REASONABLE KEEPING IN MIND THE METHOD OF ACCOUNTING AS WELL AS PAST PRACTICE. DURING COURSE OF ASSESSMENT PROVIDING AND BEFORE C IT(A) WE HAD GIVEN FULL DATA AND EXPLANATION WITH REGARD TO SHORTAGE AND THE ADDITION BY ASSESSING OFFICER BEING ON PRES UMPTION AND GUESS WORK AND ONLY ON ONE SOLE INSTANCES THE E NTIRE ADDITION OF RS.4,85,834/- DESERVES TO BE DELETED. 2) THE CIT(A) HAS ALSO ERRED IN CONFIRMING ADDITION OF RS.2,35,980/- ADDED BY THE ASSESSING OFFICER AS EXC ESSIVE SHORTAGE IN LAB TESTING. YOUR APPELLANT HAS BEEN MA INTAINING REGULAR AND PROPER BOOKS OF ACCOUNTS DULY AUDITED A ND THE SHORTAGE DECLARED AND CLAIMED IS FAIR AND REASONABL E KEEPING IN MIND THE METHOD OF ACCOUNTING AS WELL AS PAST PR ACTICE AND THEREFORE ADDITION OF RS.2.35.980/- BE DELETED. 3) THE CIT(A) HAS ERRED IN CONFIRMING ADDITION OF R S.75,000/- OUT OF RESEARCH & DEVELOPMENT EXPENSES ACCOUNT INCURRED BY THE APPELLANT DURING COURSE OF BUSINESS AND FOR PURPOSE OF BUSINESS. IT IS SUBMITTED THAT YOUR APPELLANT HAVING SUPPORTE D THE CLAIM BY DOCUMENTS, BILLS, VOUCHERS, RECEIPT IN SUPPORT O F PAYMENT OF RS.75,000/- DISALLOWANCE BE DELETED. 4) THE CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF CLAIM OF DEPRECIATION OF RS. 6,04,563/- ON PURCHASE OF NEW W EAVING LOOMS AND SINCE THE SAID LOOMS HAVING BEEN 'PUT TO USE' AND ITA NO. 3602/AHD/15 [CHHATARIYA FIRETECH INDUSTRIES] A.Y. 2010-11 - 3 - DULY INSTALLED YOUR APPELLANT OUGHT TO HAVE BEEN AL LOWED DEPRECIATION AS CLAIMED. 5) THE CIT(A) HAS ALSO ERRED IN CONFIRMING ADDITION OF RS.88,170/- BEING EXPENDITURE INCURRED ON PACKING F ORWARDING AND TRANSPORTATION CHARGES OF LOOMS PURCHASED AND S INCE EXPENDITURE BEING OF A REVENUE NATURE THE SAME OUGH T TO HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE. WITHOUT PREJUDICE AND IN THE ALTERNATIVE, CIT(A) O UGHT TO HAVE ALLOWED DEPRECIATION TO YOUR APPELLANT AS PER LAW. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LE ARNED AR FOR THE ASSESSEE SUBMITTED THAT HIS GRIEVANCE IS LIMITED TO DISALLOWANCE OF DEPRECIATION ON NEW LOOMS AMOUNTING TO RS.6,04,563/ - AND DISALLOWANCE OF TRANSPORT AND LABOUR CHARGES OF NEW LOOMS RS.88,170/- AS CAPITALIZED BY REVENUE ONLY. THE LE ARNED AR THUS SUBMITTED THAT HE DOES NOT SEEK TO PRESS THE GROUND S CONCERNING EXCESSIVE SHORTAGE IN PRODUCTION OF GRAY HOSE RS.4, 85,834/-, EXCESSIVE SHORTAGE IN LAB TESTING RS.2,35,980/- AND RESEARCH & DEVELOPMENT EXPENSES RS.75,000/-. IN VIEW OF THE ASSERTIONS MAD E ON BEHALF OF THE ASSESSEE GROUNDS NOS. 1, 2 & 3 ARE DISMISSED AS NOT PRESSED. 4. WE SHALL NOW ADVERT TO GROUND NO.4 WHICH CONCERN S CLAIM OF DEPRECIATION OF RS.6,04,563/- ON PURCHASE OF NEW WE AVING LOOMS. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THE ISS UE. IT IS CLAIMED ON BEHALF OF THE ASSESSEE THAT NEW WEAVING LOOMS WE RE INSTALLED AND PUT TO USE BEFORE THE END OF THE FINANCIAL YEAR AS POINTED OUT BEFORE THE LOWER AUTHORITIES. CONSEQUENTLY, IT WAS CLAIME D THAT REVENUE AUTHORITIES WERE NOT JUSTIFIED AND DENYING THE DEPR ECIATION ON THE NEW LOOMS INSTALLED. WE FIND THAT IT IS AN ADMITTED PO SITION THAT THE ASSESSEE HAS PURCHASED NEW WEAVING LOOMS AS PER INV OICE DATED 21.12.2009 FROM M/S. ANNPURNA ENGINEERING WORKS. P ACKING, FORWARDING AND TRANSPORTATION CHARGES OF RS.88,170/ - WERE ALSO FOUND TO BE INCURRED ON THESE LOOMS. THE ASSESSEE IS CLA IMED TO HAVE ITA NO. 3602/AHD/15 [CHHATARIYA FIRETECH INDUSTRIES] A.Y. 2010-11 - 4 - RECEIVED THE LOOMS ON 01.02.2010 AS PER ITS ACCOUNT S. THE REVENUE HAS DISPUTED THE CLAIM OF THE ASSESSEE FOR NOT HAVI NG PUT THE LOOMS INTO USE ON THE DATE OWING TO ABSENCE OF SATISFACTO RY EVIDENCE. IN THIS REGARD, WE NOTICE THAT THE CLAIM WAS PRIMARILY DENI ED AS THE ASSESSEE COULD NOT SHOW PURCHASE OF ANY MOTOR THAT IS REQUIR ED FOR PUTTING THE LOOMS IN MOTION. IT IS THE CASE OF THE ASSESSEE TH AT THE NEW LOOMS WERE COMMENCED WITH SPARE MOTORS. ON APPRECIATION OF FACTS IN TOTALITY, WE FIND THE CLAIM OF THE ASSESSEE TOWARDS DEPRECIATION OF NEW LOOMS TO BE MAINTAINABLE. IT IS NOT IN DISPUTE THA T NEW LOOMS WERE PURCHASED DURING THE FINANCIAL YEAR AND WERE DELIVE RED IN THE PREMISES OF THE ASSESSEE COMPANY. THE FACTS AND CIRCUMSTANC ES OF THE CASE SHOWS THAT NEW LOOMS WERE READY FOR ACTUAL USE EVEN IF IT IS MOMENTARILY PRESUMED THAT ACTUAL PRODUCTIONS WERE N OT CARRIED OUT. ON THE CONSPECTUS OF FACTS, WHERE THE ASSET WAS REA DY FOR USE, DEPRECIATION OUGHT TO HAVE BEEN ALLOWED. BE IT AS IT MAY, THE ENTIRE EXERCISE IS REVENUE NEUTRAL WHEN SEEN HOLISTICALLY OVER YEARS AND THEREFORE NO ADVERSE INFERENCE IS REQUIRED TO BE DR AWN. THE ACTION OF THE REVENUE AUTHORITIES IS ACCORDINGLY SET ASIDE AN D THE CLAIM OF THE DEPRECIATION OF RS.6,04,563/- IS ALLOWED. 5. AS REGARDS CLAIM OF RS.88,170/- TOWARDS TRANSPOR T AND LABOUR CHARGES, IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT IT HAS CLAIMED THE AFORESAID EXPENSES AS REVENUE ITEM WHEREAS THE REVENUE HAS CAPITALIZED THE SAME TO THE COST OF THE NEW LOOM AS SAME HAS BEEN INCURRED FOR THE PURPOSES OF TRANSPORTATION OF NEW LOOMS TO THE FACTORY PREMISES. WE DO NOT FIND ERROR IN THE ACTI ON OF THE REVENUE FOR CAPITALIZATION OF TRANSPORT EXPENSES. HAVING R EGARD TO THE FACT THAT TRANSPORT AND LABOUR CHARGES FORM PART OF THE ACTUA L COSTS OF NEW LOOMS, THE ASSESSEE WOULD THUS BE ALLOWED BENEFIT O F DEPRECIATION ON THIS COUNT AS WELL, AS CLAIMED IN THE ALTERNATIVE O N BEHALF OF THE ASSESSEE. THE AO IS ACCORDINGLY DIRECTED TO ALLOW DEPRECIATION ITA NO. 3602/AHD/15 [CHHATARIYA FIRETECH INDUSTRIES] A.Y. 2010-11 - 5 - ALLOWANCE ON TRANSPORT AND LABOUR CHARGES COMPONENT IN ACCORDANCE WITH LAW. THE CLAIM OF THE ASSESSEE IS ACCORDINGLY ALLOWED IN PART. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/10/2019 S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/10/201 9