DCIT, UDAIPUR V. M/s. Miraj Projects Ltd., UDAIPUR

ITA 401/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82990 (ITAT-JODHPUR)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Keywords: Capital asset; Depreciation; Condonation of delay
• Section: 32; 154

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 401 /JODH/2014 (A.Y. 200 9 - 1 0 ) DCIT, CENTRAL CIRCLE - 1, UDAIPUR. VS. M/S. MIRAJ PROJECTS PVT. LTD. , 3 RD FLOOR, MIRAJ HOUSE, PANCHWATI, UDAIPUR. (APPELLANT) PAN NO. AADCC 3423 F (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL. DEPARTMENT BY : SHRI JAI SINGH - D.R. DATE OF HEARING : 24 / 0 9 /201 4 . DATE OF PRONOUNCEMENT : 01 / 1 0/201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE D EPARTMENT AGAINST THE ORDER DATED 03 /03/2014 OF L D . CIT(A), UDAIPUR . 2 THE REGISTRY HAS POINTED OUT THAT THE APPEAL BY THE DEPARTMENT IS BARRED BY LIMITATION BY 39 DAYS. AN A PPLICATION HAS BEEN FILED BY THE DEPARTMENT FOR CONDONATION OF DELAY BY STATING THEREIN AS UNDER: - 2 IN THIS CONNECTION , THE ORIGINAL APPELLATE ORDER DATED 03/03/2014 IN THE ABOVE MENTIONED CASE PASSED BY CIT(A) , UDAIPUR HAS BEEN RECEIVED IN THE OFFICE OF THE CIT (CENTRAL), JAIPUR ON 03/04/2014 . HOWEVER, THE NAME OF THE ASSESSEE IN THIS O R DER WAS STATED AS M/S. MIRAJ PRODUCT LTD. INSTEAD OF M/S. MIRAJ PROJECTS LTD. HENCE , THE CIT(A), UDAIPUR HAS RECTIFIED THE SAME BY PASSING THE ORDER U/S. 154 R.W.S. 251 OF THE ACT ON 28/05/2014 WHICH WAS RECEIVED BY THE OFFICE OF CIT (CENTRAL), JAIPUR ON 10/06/2014. THEREFORE, THE TIME LIMIT FOR FILING THE APPEAL BEFORE THE HON'BLE ITAT HAS BEEN COUNTED FROM 10/06/2014 TO 03/04/2014. IT IS THEREFORE, REQUESTED TO CONDONE THE DELAY FOR FILING OF APPEAL BEFORE THE HON'BLE ITAT, JODHPUR. 3. DURING THE COURSE OF HEARING, LEARNED D.R. REITERATED THE CONTENTS OF THE AFORESAID APPLICATION FOR CONDONATION OF DELAY AND REQUESTED TO CONDONE THE DELAY. 4. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE OPPOSED THE APPLICATION AND STATED THAT THE DELAY MAY NOT BE CONDONED. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN OU R OPINION, THERE WAS A REASONABLE CA U SE FOR FILING THE APPEAL BELATED. WE, THEREFORE, CONDONE THE DELAY AND THE APPEAL IS ADMITTED. 6 . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: A . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), UDAIPUR HAS ERRED DIRECTING THE A.O. TO ALLOW THE CLAIM OF DEPRECIATION AND EXPENSES WITHOUT APPRECIATING THE FACT THAT NO BUSINESS ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE DURING THE RELEVANT YEAR AND A SSET WAS NOT USED IN THAT YEAR ALSO. 3 B . THE APPELLANT CRAVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY OF THE GROUND OF APPEAL GIVEN ABOVE. 7 . FACTS RELATING TO THIS CASE, IN BRIEF, ARE THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 07/04/2008 AND THIS WA S THE FIRST YEAR OF ITS BUSINESS. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TAXABLE INCOME AT RS. NIL ON 22/09/2009 . THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION AMOUNTING TO RS. 20,62,787/ - BY OBSERVING THAT NO BUSINESS ACTIVITY WA S CARRIED OUT BY THE ASSESSEE. 8 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE ACQUIRED ASSETS LIKE OFFICE PREMISES AND RESIDENTIAL FLATS AT MUMBAI AND HELD ITS BOARD MEETINGS DURING THE RELEVANT PREVIOUS YEAR. IT WAS FURTHER STATED THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION ON FIXED ASSETS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32 OF THE I.T. ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT IN SHORT) AND FOR THE PURPOSE OF SAID SECTION, THE USE OF THE ASSET DURING THE PREVIOUS YEAR MAY BE ACTIVE USE OR PASSIVE I.E. KEPT FOR USE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 1) CIT VS. INTEGRATED TECHNOLOGIES LTD. (DELHI HC) 2) CIT VS. REFRIGERATION AND ALLIED INDUSTRIES LTD. (2001) 247 ITR 12 (DEL.) 3) CIT VS. PANACEA BIOTECH LTD. (2009) 183 TAXMAN 212. 4) WHITTLE ANDERSON LTD. VS. CIT 79 ITR 613 (BOM.) 5) WESTERN INDIA VEGETABLE PRODUCTS LTD. VS. CIT 26 ITR 151 (BOM.) 4 IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAD CONDUCTED ITS MEETING DURING THE YEAR, THEREFORE, ASSETS LIKE OFFICE PREMISES AND RESIDENTIAL FLATS USED THEREIN W ERE KEPT READY FOR USE, HENCE, CLAIM OF DEPRECIATION ON THAT ASSETS WAS WITHIN THE FOUR CORNERS OF THE LAW . 9 . THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD. A.O. K EEPING IN TO CONSIDERATION THE VARIOUS CASE LAWS OF THE HIGHER APPELLATE AUTHORITIES AND THE HON'BLE COURTS I INCLINE TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE APPELLANT IS ENTITLED TO CLAIM THE DEPRECIATION ON FIXED ASSETS AND EXPENSES CLAI MED IN P & L ACCOUNT IN VIEW OF THE FACT THAT THE APPELLANT COMPANY HAS ACQUIRED AS SETS LIKE OFFICE PREMISES AND A RESIDENTIAL FLATS AT MUMBAI AND HELD ITS BOARD MEETINGS I.E. ASSETS WERE PUT TO USE AND THE ADMINISTRATIVE EXPENSES WERE INCURRED DURING THE RELEVANT PREVIOUS YEAR. ACCORDINGLY, THE LD. A.O. IS DIRECTED TO ALLOW RS. 20,62,787/ - ON ACCOUNT OF DEPRECIATION CLAIMED ON OFFICE AN D RESIDENTIAL BUILDING AND OTHER ASSETS AS PER SECTION 32 OF THE ACT. NOW THE DEPARTMENT IS IN APPEAL. 10 . LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT SINCE THERE WAS NO BUSINESS ACTIVITY CONDUCTED BY THE ASSESSEE, SO THE DEPRECIATION WAS RIGHTLY REJECTED. 11 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER . 5 12. WE HAVE CONSIDERED THE SUBMISSI ONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT IT WAS THE FIRST YEAR OF THE ASSESSEES BUSINESS AND FOR THAT PURPOSE, THE ASSESSEE PURCHASED VARIOUS ASSETS WHICH WERE KEPT READ FOR USE. SO, IT WAS ENTITLED FOR DEPRECIATION ON THE ASSETS. 13 . ON A SIMILAR ISSUE , THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. REFRIGERATION AND ALLIED INDUSTRIES LTD. REPORTED IN (2001) 247 ITR 12 HAS HELD AS UNDER: - THE PRINCIPAL FACTORS RESPONSIBLE FOR REDUCTIO N IN VALUE OF A CAPITAL ASSET A ND FOR DEPRECIATION ARE : (A) ORDINARY WEAR AND TEAR; (B) UNUSUAL DAMAGE; (C) INADEQUACY : (D) OBSOLESCENCE. THESE FACTS INCLUDE NOT ONLY THOSE RELATING TO PHYSICAL DETERIORATION BUT ALSO THOSE RELATING TO THE SUITABILITY OF THE ASSET AS AN ECONOMICALLY PRODUCTIVE UNIT AFTER A PERIOD OF TIME . THE TWO INGREDIENTS FOR DEPRECIATION ALLOWANCE ARE (1) THE DEPRECIABLE ASSET SHOULD BE OWNED BY THE ASSES SEE; (2) IT SHOULD BE USED FOR THE PURPOSE OF THE ASSESSEES BUSINESS OR PROFESSION. THE WORDS USED FOR THE PURPOSE OF BUSINESS ARE CAPABLE OF A LARGER AND NARROWER INTERPRETATION. IF THE EXPRESSION USED IS CONSTRUED STRICTLY IT COULD BE TAKEN AS A CONNOTING OR REQUIRING THE ACTIVE EMPLOYMENT OR THE ACTUAL WORKING OF THE MACHINERY, PLANT OR BUILDING IN THE BUSINESS. ON THE OTHER HAND THE WIDER MEANING WOULD INCLUDE NOT ONLY CASES WHERE THE MACHINERY OR P LANT ARE ACTIVELY EMPLOYED BUT ALSO CASES W H ERE THERE IS PASSIVE USER OF THE SAME IN BUSINESS. AN ASSET COULD BE SAID TO BE IN USE WHEN IT IS KEPT READY FOR USE. 6 1 4 IN THE PRESENT CASE ALSO, THE ASSETS WERE KEPT READY FOR USE, SO THE ASSESSEE WAS ENTITLED FOR DEPRECIATION . IN THAT VIEW OF THE MATER, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 1 5 IN THE RESULT, APPEAL OF THE DEPARTMENT I S DISMISSED. ( ORDER PRONOUNCED IN THE COURT ON 01 ST OCTOBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01 ST OCTOBER, 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .