DCIT, Chandigarh V. M/s Bnal Prefabs (P) Ltd., Chandigarh

ITA 387/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80964 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-10-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 387/CHD/2014 ASSESSMENT YEAR : 2010-11 THE D.C.I.T., VS. M/S BNAL PREFABS (P) LTD., CIRCLE 1(1), SR 19, SECTOR 7, CHANDIGARH. CHANDIGARH. PAN: AAACB7859D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S.NAGAR, DR RESPONDENT BY : SHRI VINEET KRISHAN DATE OF HEARING : 29.10.2014 DATE OF PRONOUNCEMENT : 31.10.2014 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), CHANDIGARH DATED 31.1.2014 FOR ASSESSMENT YEAR 2010 -11, CHALLENGING THE ORDER OF LEARNED CIT (APPEALS) IN DELETING THE ADDITION OF RS.10,40,608/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF DISALLOWANCE OF LOSS IN BADDI UNIT-II SI NCE THE ASSESSEE WAS NOT ELIGIBLE FOR DEPRECIATION ON PLANT AND MACHINERY. 2. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESS EE COMPANY CARRIED ON THE BUSINESS OF MANUFACTURING OF PRE- FABRICATED STRUCTURE AND PANELS, HAD TAKEN LAND, BU ILDING AND PLANT AND MACHINERY ON LEASE FROM M/S APEX PREFAB B UILDING 2 SYSTEMS (HEREINAFTER REFERRED TO AS M/S APEX). AS PER THE ASSESSEE, THE COMMERCIAL PRODUCTION IN THE NEW UNIT -II HAD COMMENCED ON 4.3.2010. SUBSEQUENTLY THE ASSESSEE HAD PURCHASED THE SAME PLANT AND MACHINERY WHICH WERE T AKEN ON LEASE FROM M/S APEX FOR RS.1,09,67,443/-. THE ASS ESSEE HAD CLAIMED DEPRECIATION ON THESE PLANT AND MACHINERY. THE ASSESSING OFFICER OBSERVED IN RESPECT OF THE CLAIM OF THIS DEPRECIATION THAT THE IMPUGNED PLANT AND MACHINERY WERE PURCHASED VIDE BILLS DATED 25, 26 AND 27.3.2010, BU T THE AUDITOR HAD SHOWN THE DATE OF PURCHASE AS 15.3.2010 AND THE BILLS WERE SHOWING MANIPULATION OF DATES. AS PER THE ASSESSMENT ORDER, THE PRODUCTION HAD NOT STARTED IN UNIT-II SINCE THE SALE SHOWN IN THIS UNIT WAS OF RS.44,200/ - ONLY AND NO EVIDENCE OF PRODUCTION FROM THIS UNIT HAD BEEN P RODUCED. THE ASSESSING OFFICER, THEREFORE, ASKED THE EXPLANA TION OF THE ASSESSEE FOR DISALLOWING OF THE DEPRECIATION. THE ASSESSEE SUBMITTED THAT THE SALE WAS MADE AFTER PRODUCTION COMMENCED. THE ASSESSING OFFICER DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE AND DISALLOWED THE LOSS CLAIMED OF RS.10,40,608/-. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT (APPEALS) THAT PLANT AND MACHINERY WERE TAKEN O N LEASE FROM M/S APEX IN FEBRUARY, 2010 AND UNIT-II HAD COM MENCED PRODUCTION ON 4.3.2010 ITSELF. THESE PLANT AND MA CHINERY WERE LATER ON PURCHASED. AS PER THE LETTER ISSUED BY THE DEPUTY DIRECTOR INDUSTRIES, BADDI, THE COMMERCIAL P RODUCTION OF THE NEW UNIT HAD STARTED ON 4.3.2010. THE ASSE SSEE HAD MADE PURCHASES OF RS.4,82,388/-, SALES OF RS.4,06,0 00/- AND HAD INCURRED MANUFACTURING EXPENSES OF RS.73,776/- AND 3 ADMINISTRATIVE EXPENSES OF RS.2,50,000/-. THE ASS ESSMENT ORDER OF M/S APEX UNDER SECTION 143(3) OF THE INCOM E TAX ACT WAS ALSO FILED, WHICH CONVEYED THAT PLANT AND MACHI NERY HAD BEEN SOLD AND THE SAME WAS ALSO SUBJECTED TO SALES- TAX. IT WAS EXPLAINED THAT THERE WAS TYPOGRAPHICAL ERROR WH ICH IS REMOVED. 3. THE LEARNED CIT (APPEALS) ON CONSIDERATION OF TH E FACTS AND MATERIAL ON RECORD DELETED THE ADDITION. HIS FINDINGS IN THE IMPUGNED ORDER IN PARAS 3.3 TO 3.3.3 ARE REPROD UCED AS UNDER :- 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. C OUNSEL. THE IMPUGNED PLANT & MACHINERY WAS TAKEN ON LEASE BY TH E APPELLANT FROM M/S APEX AND THE SAME MACHINERY WAS PURCHASED SUBSE QUENTLY. THE ASSESSING OFFICER HAS POINTED OUT THAT THE DATES OF PURCHASE MENTIONED BY THE AUDITORS IN THE AUDIT REPORT IS DI FFERENT FROM THE DATE MENTIONED IN THE BILLS AND THERE WERE OVERWRIT ING ON THE BILLS. THE AUDITORS HAVE NOW CERTIFIED THAT THERE WAS A TY POGRAPHICAL ERROR IN THE AUDIT REPORT IN MENTIONING THE DATES AND THE Y HAVE CERTIFIED THE CORRECT DATES NOW. MOREOVER, THE IMPUGNED SALE HAS BEEN DULY REFLECTED BY M/S APEX IN THE VAT RETURNS AND THE FACT OF SELL ING THE MACHINERY WAS ALSO SCRUTINIZED BY INCOME TAX OFFICER, WARD-1, PAN CHKULA. THUS THERE IS NO DOUBT THAT THE MACHINERY HAD ACTUALLY BEEN SO LD. 3.3.1 THE NEXT QUESTION IS WHETHER THE UNIT HAD S TARTED PRODUCTION. THE APPELLANT HAD CLAIMED MANUFACTURING EXPENSES IN THE PROFIT & LOSS ACCOUNT AND HAD DECLARED SALES AND PURCHASES OF MOR E THAN RS. 4 LAKHS AND SO IT CANNOT BE SAID THAT NO MANUFACTURING WAS DONE IN UNIT-II. IN FACT, THE MANUFACTURING HAD ALREADY STARTED IN THIS UNIT, SINCE THE MACHINERY WAS TAKEN ON LEASE EARLIER BEFORE THE DAT E OF PURCHASE AND THE DEPUTY DIRECTOR INDUSTRIES, BADDI HAD CERTIFIED THAT COMMERCIAL PRODUCTION OF THE UNIT OF MANUFACTURING OF PUF PANE L HAD COMMENCED ON 04.03.2010. THEREFORE, IT IS EVIDENT THAT THE MANUF ACTURING HAD COMMENCED IN UNIT-II. 4 3.3.2 THE ASSESSING OFFICER HAS PLACED RELIANCE ON SOME JUDGEMENTS,WHICH ARE DISCUSSED BELOW: (A) M/S ORIENTAL COAL CO. LTD (CAL) (206 ITR 682) IN THIS CASE, THE PLANT & MACHINERY WAS NOT PUT TO USE DUE TO LOCK OUT. THIS CASE IS ENTIRELY DISTINGUISHABLE FRO M THE FACTS OF THE INSTANT CASE. (B) M/S JINOJI RAO SUGAR MILLS LTD (MP) (71 ITR 319) IN THIS JUDGEMENT, IT WAS HELD BY HONBLE MP HIGH C OURT THAT MACHINERY KEPT READY FOR USE WAS NOT SUFFICIENT FOR CLAIMING DEPRECIATION. THIS JUDGEMENT, IN ANY CASE, IS NOT A PPLICABLE TO THE FACTS OF THE APPELLANT, SINCE THE MACHINERY HAD BEE N PUT TO USE DURING THE YEAR AS HELD BY ME IN PARA 3.3.1 ABOVE. MOREOVER, THE JURISDICTIONAL HIGH COURT, IN THE CASE OF M/S SHAHA BAD CO- OPERATIVE SUGAR MILLS LTD (SUPRA), HAS HELD THAT AN ASSESSEE IS ENTITLED TO DEPRECIATION EVEN IF MACHINERY WAS KEPT IN THE STATE OF READINESS FOR PRODUCTION. I HAVE GONE THROUGH THE OTHER JUDGEMENTS RELIED UPO N BY THE ASSESSING OFFICER AND FIND THAT RATIO OF NONE OF TH ESE JUDGEMENTS IS APPLICABLE TO THE FACTS OF THE INSTANT CASE. 3.3.3 IN VIEW OF THE ABOVE, IT IS HELD THAT THE APPELLANT WAS ELIGIBLE TO CLAIM THE IMPUGNED DEPRECIATION AND THE ASSESSI NG OFFICER WAS NOT RIGHT DEPRECIATION AND THE ASSESSING OFFICER WAS NOT RIG HT IN DISALLOWING THE DEPRECIATION CLAIMED ON THIS PLANT & MACHINERY AND LOSS CLAIMED BY THE APPELLANT IN THIS UNIT. THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER IS ACCORDINGLY DELETED. GROUNDS OF APPEAL NOS. 2 & 3 ARE ALLOWED. 4. ON CONSIDERATION OF THE RIVAL CONTENTIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE LEARNED D.R. FOR THE REVENUE CONTENDED THAT THERE WAS MANIPULATION I N THE BILLS OF THE PURCHASES BECAUSE THERE WAS OVERWRITIN G. THE LEARNED COUNSEL FOR THE ASSESSEE PRODUCED THE ORIGI NAL BILLS AND ORIGINAL LEASE DEED FOR INSPECTION BY US. THO UGH THERE 5 IS A CUTTING IN THE DATES OF BILLS FROM APRIL TO MA RCH BUT IT IS A FACT THAT THE PLANT AND MACHINERY WERE TAKEN ON LEA SE BY THE ASSESSEE FROM M/S APEX VIDE RENT DEED DATED 8.2.201 0, WHICH IS DULY REGISTERED. THE DEPUTY DIRECTOR INDUSTRIE S ISSUED A LETTER DATED 9.3.2010 WHICH ACKNOWLEDGES THE PRODUC TION STARTED BY THE ASSESSEE ON 4.3.2010. THE ORIGINAL RENT DEED IS ALSO PRODUCED. THESE FACTS WOULD CLEARLY SHOW THAT THE PLANT AND MACHINERY WERE IN THE POSSESSION OF THE A SSESSEE AS PER THE RENT DEED AND THAT THE COMMERCIAL PRODUCTIO N WAS STARTED ON 4.3.2010. THOUGH THERE IS SOME CUTTING IN THE BILLS OF PURCHASES AND THE SALE OF MACHINERY BUT IT WOULD NOT DISALLOW THE CLAIM OF THE ASSESSEE GRANT OF DEPRECIATION/LOSSES. CONSIDERING THE FACTS AND CIR CUMSTANCES IN TOTALITY, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE, THE SAME IS ACCORDINGLY, DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST OCTOBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6