ASSTT. COMMISSIONER of INCOME TAX.CIRCLE-7, Nagpur V. M/s BALLARPUR INDUSTRIES LTD., GURGAON

ITA 379/NAG/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7580 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 379 / NAG/2014 ASSESSMENT Y EAR: 2008 - 09 THE ACIT, CIRCLE - 7, ROOM NO. 521, 5 TH FLOOR, MECL BUILDING, NAGPUR VS. M/S BALLARPUR IN DUSTRIES LTD., FIRST INDIA PALACE, GURGAO ROAD, HARYANA PAN : AAACB5343E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI GITESH KUMAR (SR.DR) ) ASSESSEE BY : SHRI K.P. DEWANI (AR ) DATE OF HEARING: 08 /05 /201 8 DATE OF PRONOUNCEMENT: 09 / 05 /201 8 O R D E R PER RAM LAL NEGI, JM THIS IS A RECALLED MATTER. THE REVENUES APPEAL ITA NO. 379/NAG/2014 WAS DECIDED BY THIS BENCH OF THE TRIBUNAL VIDE ORDER DATED 04.12.2015 . SUBSEQUENTLY, THE REVENUE FILED MISCELL ANEOUS APPLICATION BEARING MA NO. 22 /NAG/2016 WITH A PRAYER TO DECIDE GROUND NO 3 AND 4 RAISED BY THE REVENUE, WHICH HAD NOT BEEN ADJUDICATED BY THE BENCH WHILE DECIDING THE APPEAL OF THE REVENUE. THE COORDINATE BENCH OF THE TRIBUNAL ALLOWED THE APPLICATIO N AND RECALLED ITS ORDER DATED 04.12.2015 FOR ADJUDICATING THE SAID GROUND S OF THE APPEAL . GROUND NO. 3 AND 4 OF THE APPEAL WHICH REQUIRE ADJUDICATION READ AS UNDER: - 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WA S RIGHT IN ALLOWING DEPRECIATION @ 40% ALLOWED FOR AIRCRAFT - AEROEGINE WITHOUT APPRECIATING THE FACT THAT ASSESSEE NEITHER BEFORE AO NOR BEFORE CIT (A) 2 ITA NO. 379 / NAG /2014 ASSESSMENT YEAR: 2008 - 09 HAS POINTED OUT HOW THE AIRCRAFT PURCHASES BY IT COMES IN THIS CATEGORY? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS RIGHT IN ALLOWING DEPRECIATION @ 40% WITHOUT APPRECIATING THE FACT THAT AIRCRAFT UNDER CONSIDERATION DOES NOT FULFILL THE TWO CRITERIA GIVEN BY DELHI ITAT BENCH IN THE CASE OF CIT VS. SRC AVIATION P VT. LTD. FOR IDENTIFICATION OF AIRPLANE? 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 201, 05,25,454/ - . THE RETURN WAS PROCESSED U/S 143 (1) AND ORDER U/S 143 (3) WAS PASSED. THEREAFTER, NOTICE U/S 148 WAS ISSUED AND IN RESPONSE THEREOF ASSESSEE ASKED THE AO TO TREAT THE ORIGINAL RETURN FILED EARLIER AS THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148. THEREAFTER, NOTICE U/S 143 (2) AND THE ASSESSEE WAS ASKED TO FURNISH DETAILS AND EXPLAINED THE DISCREPANCIES IN THE RETURN AFTER HEARING THE ASSESSEE, THE AO COMPUTED THE TOTAL INCOME OF RS. 2,91,68,51,846/ - INTER ALIA MAKING DISALLOWANCE OF RS. 11,25,00,000/ - I.E. DEPRECIATION ON AIRCRAFT @ 40 %. IN THE FIRST APPEAL, THE LD. CIT (A) ALLOWED THE DEPRECIATION @ 40% ON AIRCRAFT AERO - ENGINE AND DELETED THE ADDITION . AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER BEFORE THE ITAT BY RAISING THE FOLLOWING EFFEC TIVE GROUNDS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS RIGHT IN HOLDING THAT PRESENCE OF EXEMPT INCOME IN NECESSARY FOR DISALLOWANCE OF EXPENDITURE U/S 14A? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW THE LD. CIT (A) WAS RIGHT IN HOLDING THAT INVESTMENTS WERE MADE OUT OF THE NON - INTEREST BEARING FUNDS AND AS NO EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMPT INCOME WITHOUT APPRECIATING THE FACT THAT THE 3 ITA NO. 379 / NAG /2014 ASSESSMENT YEAR: 2008 - 09 ASSESSEE HAS NOT PRO VED NEXUS BETWEEN THE OWNED INTEREST FEE FUNDS AND INVESTMENT? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS RIGHT IN ALLOWING DEPRECIATION @ 40% ALLOWED FOR AIRCRAFT - AEROEGINE WITHOUT APPRECIATING THE FACT THAT ASSESSEE NEITHER BEFORE AO NOR BEFORE CIT (A) HAS POINTED OUT HOW THE AIRCRAFT PURCHASES BY IT COMES IN THIS CATEGORY? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) WAS RIGHT IN ALLOWING DEPRECIATION @ 40% WITHOUT AP PRECIATING THE FACT THAT AIRCRAFT UNDER CONSIDERATION DOES NOT FULFILL THE TWO CRITERIA GIVEN BY DELHI ITAT BENCH IN THE CASE OF CIT VS. SRC AVIATION PVT. LTD. FOR IDENTIFICATION OF AIRPLANE? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT (A) IS RIGHT IN HOLDING THAT THE REOPENING OF CASE IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SEC. 147 OF THE ACT WITHOUT APPRECIATING THE FACT THAT IN VIEW OF CLAUSE (C)(I) UNDER EXPLANATION 2 OF SECTION 147 OF THE I.T. ACT, WHERE THE A SSESSMENT HAS BEEN MADE BUT, INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED THE SAME AMOUNTS TO ESCAPEMENT OF INCOME AND HENCE RE - OPENING OF THE ASSESSMENT WAS VALID. 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) I S RIGHT IN HOLDING THAT HE REOPENING OF CASE IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SEC. 147 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THERE WAS ESCAPEMENT OF INCOME AND REOPENING WAS MADE ON THE BASIS OF NEW FACT WITH CAME TO LIGHT WHILE SCRUTINY OF THE CASE FOR SUBSEQUENT ASSESSMENT YEARS? 3. THE COORDINATE BENCH AFTER HEARING THE PARTIES DISMISSED GROUND NO. 1, 2, 5 AND 6 OF THE REVENUES APPEAL BY UPHOLDING THE FINDINGS OF THE LD. CIT (A) VIDE ORDER DATED 04.12.2015. 4 ITA NO. 379 / NAG /2014 ASSESSMENT YEAR: 2008 - 09 NOW THE GROUNDS TO BE A DJUDICATED BY THIS BENCH ARE NO. 3 AND 4 . SINCE, BOTH THE GROUND PERTAIN TO THE SAME ISSUE WE TAKE BOTH THE GROUNDS TOGETHER. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD. CIT ( A) HAS WRONGLY ALLOWED THE DEPRECIATION @ 40% WITH OUT APPRECIATING THE FACT THAT THE ASSESSEE , NEITHER BEFORE THE AO NOR BEFORE THE CIT (A) , HAS POINTED OUT AS TO HOW THE AIRCRAFT PURCHASED BY IT FALLS IN THIS CATEGORY AND FURTHER THE LD. CIT (A) ALLOWED THE DEPRECIATION IN QUESTION WITHOUT APPRECIATING T HE FACT THAT AIRCRAFT UNDER CONSIDERATION DOES NOT FULFILL THE CRITERIA LAID DOWN BY THE DELHI BENCH OF ITAT IN THE CASE OF CIT VS. SRC AVIATION PVT. LTD. 4. ON THE OTHER HAND, THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF M/S AR AIRWAYS PVT. LTD., ITA NO. 2589/DEL/2012 ORDER DATED 25.04.2013 , T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SRC PVT. LTD. AND THE DECISION OF ITAT BENCH, BANGA LORE IN THE CASE OF RANJIT PURA INFRASTRUCTURE PVT. LTD. (2018) 52 CCH 309 (BENGL) . THE LD. COUNSEL FURTHER SUBMITTED THAT THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KIRLOSKAR OIL ENGINE LTD. IS DISTINGUISHABLE ON FACTS AND IS NOT APPLICABLE TO THE PRESENT CASE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON THE RECORD INCLUDING THE CASES RELIED UPON BY THE AUTHORITIES BELOW AND THE CASES REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE. WE NOTICE TH AT THE LD. CIT (A) RELYING UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KIRLOSKAR OIL ENGINE LTD . 230 ITR 88, DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SRC AVIATION PVT. LTD. IN ITA NO. 487 TO 490/2012 DATED 03.09.201 2, ORDER RENDERED BY ITAT BENCH, DELHI IN THE CASE OF M/S AR AIRWAYS PVT. LTD. ITA NO. 2589/DEL/2012 DATED 26.04.2013 , HAS ALLOWED THE DEPRECIATION IN RESPECT OF AIRCRAFT @ 40%. 5 ITA NO. 379 / NAG /2014 ASSESSMENT YEAR: 2008 - 09 6. WE NOTICE THAT I N THE CASE OF M/S AR AIRWAY PVT. LTD. (SUPRA), THE ONLY I SSUE RAISED BY THE REVENUE WAS THAT WHETHER ON THE FACTS IN THESE CIRCUMSTANCES OF THE CASE. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEPRECIATION ON AIRCRAFTS @ 40% AS AGAINST THE DEPRECIATION ALLOWED @ 15% BY THE AO. THE ITAT DELHI BENCH AFT ER HEARING THE PARTIES DISMISSED THIS GROUND OF APPEAL OF THE REVENUE AND ALLOWED 40% DEPRECIATION AND UPHELD THE FINDINGS OF THE LD. CIT (A) HOLDING THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, DELHI BENCH RENDERE D IN THE CASE OF SRC AVIATION PVT. LTD. WHICH WAS AFFIRMED BY THE HONBLE DELHI HIGH COURT IN FURTHER APPEAL. THE HONBLE HIGH COURT HAS U P HELD THE FINDINGS OF THE DELHI BENCH OF THE TRIBUNAL AFTER GOING THROUGH THE ORDER OF THE ITAT AND FINDINGS REGARDING THE EXPRESSION AIRCRAFT AND AEROPLANE . THE OBSERVATIONS OF THE HONBLE COURT ARE AS UNDER: - 9. THIS COURT IS CONSCIOUS OF THE FACT THAT THE GENERIC TERM AIRCRAFT IS BROADER AND THERE CAN BE NO DOUBT THAT IT ENCOMPASSES THE EXPRESSION AEROPLANE. HOWE VER, THIS COURT IS NOT CALLED UPON TO INTERPRET THE TERM AIRCRAFT IN THE PRESENT APPEAL. THE QUESTION IS WHETHER THE BEECHCRAFT SUPER KING AIR B - 200C PURCHASED BY THE ASSESSEE FELL WITHIN THE DESCRIPTION OF AEROPLANE. LD COUNSEL FOR THE REVENUE SOUGHT TO URGE THAT THE AIRPLAIN - AEROENGIN INCLUDED ONLY AERO ENGINE WHICH CAN BE USED FOR AIRPLANE , COVERED BY THE ENTRY III(3)(I) IN THE HEAD PLANT AND MACHINERY. WE SEE NO WARRANT FOR SUCH A RESTRICTIVE INTERPRETATION. EVEN WITH REGARD TO THE HISTORY OF T HE ENTRY ALL THAT CAN BE INFERRED IS THAT AIRCRAFT IS A BRO ADER DESCRIPTION WHICH INCLUDES ALL MANNER OF CRAFT OR MEANS OF TRANSPORT AIDED BY FLIGHT( SUCH AS BALLOONS,PLANES ETC.) WITHIN THE DEPRECIATION RULES. FOR THE REASONS BEST KNOWN, THE RULE MAKING AUTHORITY CONFINED AND NARROWED DEFI NITION TO AEROPLANE. THIS CONCLUSION IS ALSO SUPPORTED BY THE FACT THAT OTHER ENTRIES IN RULE III(3) OF THE DEPRECIATION TABLE EXTEND TO ENTIRE VEHICLES SUCH AS COMMERCIALLY PLIABLE BUSES, CARS ETC. THEY DO NOT CONFINE THE SCOPE OF D EPRECIATION ONLY TO PARTS OF SUCH VEHICLES. 6 ITA NO. 379 / NAG /2014 ASSESSMENT YEAR: 2008 - 09 10. IN VIEW OF THE ABOVE DISCUSSION, THIS COURT IS SATISFIED THAT THE TRIBUNALS JUDGMENT DOES NOT DISCLOSE ANY ERROR AS REGARDS INTERPRETATION OF ENTRY III(3)(I) OF THE DEPRECIATION RULES. ITS UP HOLDING THE DEPRECIATION ALLOWABLE IN THE PRESENT CASE TO THE TUNE OF 40% CANNOT BE TERMED AS UNJUSTIFIED OR UNWARRANTED. 7 . HENCE , THE ISSUE IS COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. SRC AVIATION PVT. LTD. ( SUPRA) AND DECISION OF THE ITAT BENCH DELHI RENDERED IN THE CASE OF ACIT VS. A.R. AIRWAYS (SUPRA). SINCE , THE LD. CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN ACCORDANCE WITH THE DECISION OF THE HONBLE HIGH COURT AND THE TRIBUNAL AFORESAID , WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME . WE ACCORDINGLY UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS GROUN D NO 3 AND 4 OF THIS APPEAL. WE ACCORDINGLY DIRECT THE AO TO ALLOW THE DEPRECIATION CLAIMED BY THE ASSESSEE @ 40%. T HE COORDINATE BENCH HAS DISMISSED GROUND NO. 1, 2, 5 AND 6 OF THE ASSESSEES APPEAL VIDE ORDER DATED 04.12.2015 AND SINCE WE HAVE DISMISSED GROUND NO 3 & 4 OF THE APPEAL, THE APPEAL FILED BY THE REVENUE PERTAINING TO THE AY 2008 - 09 IS TREATED AS DISMISSED. ORD ER PRONOUNCED IN THE OPEN COURT ON 9 TH MAY , 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 09 / 0 5 /2 01 8 ALINDRA, PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 7 ITA NO. 379 / NAG /2014 ASSESSMENT YEAR: 2008 - 09 5. DR, ITAT, NAGPUR 6. GUARD FILE . BY ORDER, // TRUE COPY// ( SR. PS/PS ) ITAT, NAGPUR