M/s. Subham Maheswari Cold Storage (p)Ltd, Guntur V. The ACIT, Guntur

ITA 405/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5173 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A APPALA RAJU
• Keywords: Depreciation
• Section: 80IB; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 405 / VIZ /201 6 (ASST. YEAR : 2009 - 10 ) M/S. SUBHAM MAHESWARI COLD STORAGE PVT. LTD., D.NO. 25 - 16 - 135, MADRAS ROAD, GUNTUR. V S . A CIT, CIRCLE - 1(1), GUNTUR . PAN NO. AAJPS 3724 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI A. APPALA RAJU SR. DR DATE OF HEARING : 25 / 0 7 /201 8 . DATE OF PRONOUNCEMENT : 31 / 0 7 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , GUNTUR , DATED 29 /0 7 /201 6 FOR ASSESSMENT YEAR 2009 - 10 . 2. GROUND NOS. 1 & 4 ARE NOT PRESSED, THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. 3 . THE ONLY GROUNDS RAISED FOR ADJUDICATION BEFORE US ARE AS UNDER: - 2. THE LD. CIT(A) , GUNTUR HAS ERRED IN HOLDING THAT THE REDUCTION OF THE SUBSIDY FROM THE ASSETS FOR CALCULATION OF 2 ITA NO. 405/VIZ/2016 ( M/S. SUBHAM MAHESWARI COLD STORAGE ) DEPRECIATION FROM THE PREVI O US YEARS RELEVANT TO THE ASSESSMENT YEAR 2002 - 03 AND THEREAFTER INSTEAD OF 2005 - 06 . 3. THE LD. CIT(A), GUNTUR FURTHER ERRED IN HOLDING THAT THE REDUCTION OF THE CLAIM OF THE ASSESSEE COMPANY FROM RS. 36,74,891/ - TO RS. 4,82,728/ - UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961 AS PASSED BY THE ASSESSING OFFICER. 4 . GROUND NO.2 RELATING TO THE CLAIM OF DEPRECIATION. IN THIS CASE, THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE COST OF THE ENTIRE ASSET PURCHASED BY THE COMPANY. THE ASSESSEE ALSO RECEIVED SUBSIDY IN THE ASSESSMENT YEAR 2002 - 03. THE ASSESSING OFFICER AFTER REDUCING SUBSIDY RECEIVED BY THE ASSESSEE, DEPRECIATION WAS ALLOWED. ON APPEAL, LD. CIT(A) HAS HELD THAT SUBSIDY AMOUNT WAS AVAILABLE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2002 - 03 ITSELF. THEREFORE, IT SHOULD BE REDUCED FROM THE ACTUAL COST OF THE ASSET IN THAT YEAR AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. AGAINST THE ORDER OF THE LD. CIT(A), THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL FOR ASSESSMENT YEARS 2004 - 05 & 2005 - 06. THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT(A). TH E SAME ORDER OF THE ITAT HAS BEEN FOLLOWED BY THE ASSESSING OFFICER AND THE LD. CIT(A) , F OR THE ASSESSMENT YEAR 2009 - 10 UNDER CONSIDERATION AND THE CLAIM OF DEPRECIATION IS RESTRICTED BY REDUCING THE SUBSIDY AMOUNT FROM 3 ITA NO. 405/VIZ/2016 ( M/S. SUBHAM MAHESWARI COLD STORAGE ) THE ACTUAL COST OF THE MACHINERY . A CCORDINGLY, ALLOWED THE DEPRECIATION CLAIMED. 5 . AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 6 . AT THE OUTSET , LD. DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IN RESPECT OF CLAIM OF DEPRECIATION HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2004 - 05 & 2005 - 06 IN ITA 238 /VIZ/2008 & 347 /VIZ/2009 BY ORDER DATED 20 /10/2010. 7 . ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTED THAT THE PRESENT ISSUE IS DECIDED AGAINST THE ASSESSEE. 8 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 9 . THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES O W N CASE FOR ASSESSMENT YEAR 2004 - 05 & 2005 - 06 (SUPRA) HAS CONSIDERED THE I SS U E AND CONFIRMED THE ORDER OF THE LD. CIT(A) AND APPEAL FILED BY THE ASSESSEE WAS DISMISSED. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 8. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDER OF THE LOWER AUTHORITIES AND THE SANCTION LETTER OF SUBSIDY, WE FIND THAT UNDISPUTEDLY THE SUBSIDY WAS RELEASED BY THE NABARD TO THE STATE BANK OF TRAVANCORE, THE ASSESSEE'S BAN KER, WHO IN TURN SANCTIONED TERM LOAN OF RS. 100 4 ITA NO. 405/VIZ/2016 ( M/S. SUBHAM MAHESWARI COLD STORAGE ) LAKHS I N AUGUST, 2001. FURTHER, THE SUBSIDY AMOUNT OF RS.50 L AKHS WAS KEPT IN SEPARATE ACCOUNT BY THE STATE BANK OF TRAVANCORE BUT THE INTEREST WAS CHARGED BY THE BANK FROM, THE ASSESSEES ON OUTSTANDING BORR OWED FUNDS REDUCED BY THE SUBSIDY AMOUNT OF RS.50 L AKHS. WE HAVE ALSO CAREFULLY EXAMINED THE SANCTION LETTER DATED 12TH FEBRUARY, 2001 ALONG WITH ITS ANNEXURES AND WE FIND THAT AS PER THE TERMS AND CONDITIONS RELATING TO ADJUSTMENT IN BORROWERS ACCOUNT AN D THE INTEREST CHARGEABLE ON SUBSIDY PORTION, WE FIND THAT SUBSIDY RELEASED BY THE NABARD TO THE BANKS ON BEHALF OF THE INDIVIDUAL UNITS THAT ARE SANCTIONED, ASSISTANCE WILL BE KEPT IN SEPARATE ACCOUNT AND ITS ADJUSTMENT WOULD BE ON THE PATTERN OF BACK - EN DED SUBSIDY AND FOR THE PURPOSE OF CHARGING INTEREST ON THE LOAN AMOUNT, SUBSIDY AMOUNT WOULD BE EXCLUDED. A SPECIFIC QUERY WAS RAISED FROM THE LD. COUNSEL FOR THE ASSESSEES IN THE LIGHT OF THE SANC TION LETTER TO SPECIFY WHETHER BANK HAS CHARGED THE INTERE ST ON THE ENTIRE SANCTIONED LOAN OR A LOAN REDUCED BY AN AMOUNT OF SUBSIDY OF RS.50 L AKHS. THE LD. COUNSEL FOR THE ASSESSEE HAS CANDIDLY ADMITTED THAT THOUGH THE INTEREST WAS CHARGED ON A REDUCED LOAN AMOUNT BUT THE SUBSIDY WAS CREDITED TO THE ACCOUNTS OF THE ASSESSEES ON 1ST MARCH, 2005. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THOUGH THE SUBSIDY WAS NOT CREDITED TO THE ACCOUNTS OF THE ASSESSEES IN THE ASSESSMENT YEAR 2002 - 03 BUT IT WAS ADJUSTED AGAINST THE LOAN AMOUNT FOR THE PURPOSE OF CHARGI NG OF INTEREST. THEREFORE, THIS CAPITAL SUBSIDY HAS REDUCED THE ACTUAL COST IN THE HANDS OF THE ASSESSEES AS THE LIABILITY TO PAY THE INTEREST - TO THE BANKER WAS ONLY OF THE BALANCE LOAN AMOUNT (LOAN AMOUNT DISBURSED - SUBSIDY AMOUNT). A CREDIT OF THE SUBSIDY FROM THE SUSPENSE ACCOUNT TO ASSESSEE'S ACCOUNT IS SIMPLY A GENERAL ENTRY AND IT WOULD NOT EFFECT THE NATURE OF ITS USE AND THE YEAR OF BENEFIT IN THE HANDS OF THE ASSESSEES. WE THEREFORE OF THE VIEW THAT CIT(A) HAS RIGHTLY HELD THAT SUBSIDY AMOUNT WAS AV AILABLE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2002 - 03 ITSELF AND THEREFORE IT SHOULD BE REDUCED FROM THE ACTUAL COST OF THE ASSET IN THAT YEAR. FROM A CAREFUL PERUSAL OF THE ORDER OF THE CIT(A), WE ALSO FIND THAT HE HAS EXAMINED THE I SSUE I N DETAIL IN THE LIGHT OF RELEVANT PROVISIONS OF THE ACT AND SINCE WE DO NOT FIND ANY INFIRMITY THEREIN, WE CONFIRM HIS ORDER. A CCORDINGLY, THIS GROUND OF THE ASSESSEE I S STAND DISMISSED. 10 . R ESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL I N ASSESSEES OWN CASE (SUPRA), WE FIND NO INFIRMITY IN 5 ITA NO. 405/VIZ/2016 ( M/S. SUBHAM MAHESWARI COLD STORAGE ) THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 11 . GROUND NO. 3 RELATING TO DEDUCTION UNDER SECTION 80IB. 12 . THE ASSESSEES COMPANY OPERATES COLD STORAGE AND ALSO TRADING IN TURMERIC AND BLACK GRAM . THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(3) IN RESPECT OF PROFITS DERIVED FROM OPERATION OF COLD STORAGE AS WELL AS PROFITS EARNED FROM TRADING OF TURMERIC UNDER SECTION 80IB(3) OF THE ACT. THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE G R O UND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(3) TO RUN COLD STORAGE ONLY , AND NOT ELIGIBLE FOR DEDUCTION ON THE PROFIT EARNED FROM THE TRADING IN TURMERIC AND RE JECTED THE CLAIM OF THE ASSESSEE. 13 . T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY FOLLOWING THE DECISION IN EARLIER YEARS. 14 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFO RE THE TRIBUNAL. 15 . AT THE OUTSET, L D. DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT Y EARS 2004 - 05 & 2005 - 06 IN 6 ITA NO. 405/VIZ/2016 ( M/S. SUBHAM MAHESWARI COLD STORAGE ) ITA 238/VIZ/2008 & 347/VIZ/2009 AND SUBMITTED THAT THIS GR O UND RAISED BY THE ASSESSEE MAY BE DISMISSED. 16 . ON THE OTHER HAND, LD . COUNSEL FOR THE ASSESSEE HAS CONCEDED THAT THE ISSUE HAS ALREADY BEEN DECIDED AGAINST THE ASSESSEE. 17 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 18 . WE FIND THAT THE ISSUE RELATING TO CLAIM OF 80IB(3) DEDUCTION IN RESPECT OF PROFITS EARNED FROM THE TRADING OF TURMERIC HAS BEEN CONSIDERED BY THE TRIBUNAL FOR THE ASSESSMENT YEARS 2004 - 05 & 2005 - 06 AND DECIDED AGAINST THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 17. FROM A PLAIN READING OF SUB - SECTION 1 AND SUB - SECT ION 3 OF SECTION 80IB, ITS ABUNDANTLY CLEAR THAT ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB - SECTION 3 THAT I NCLUDES IN THE TOTAL INCOME OF THE ASSESSEES SHALL BE ELIGIBLE FOR DEDUCTIONS U/S 80 I B OF THE ACT IN ACCORDANCE WITH THE OTH ER PROVISIONS OF SECTION 80 I B. THE ACTIVITY OF OPERATION OF COLD STORAGE PLANTS FIND PLACE IN SUB - SECTION 3. THEREFORE, THE PROFIT AND GAINS DERIVED FROM THE OPERATION OF THE COLD STORAGE PLANT IS ELIGIBLE FOR DEDUCTION U/S 80 I B OF THE ACT. LEGISLATURE HAS USED THE WORD 'DERIVED' AND THE WORD DERIVED' HAS ALREADY BEEN DEFINED BY THE APEX COURT REPEATEDLY THROUGH VARIOUS JUDICIAL PRONOUNCEMENTS AND IT HAS BEEN HELD THAT IT HAS A NARROWER SENSE AND TECHNICALLY INCLUDES THOSE INCOME WHICH IS DIRECTLY RELATED T O THE OPERATION OF THE COLD STORAGE PLANT. THEREFORE, AN INCOME WHICH IS GENERATED BY WAY OF COMPENSATION OR RENT CHARGED FOR STORAGE OF THE GOODS AND OTHERS CAN ONLY BE CALLED TO 7 ITA NO. 405/VIZ/2016 ( M/S. SUBHAM MAHESWARI COLD STORAGE ) HAVE BEEN DERIVED FROM THE COLD STORAGE PLANT. THE TRADING ACTIVITY UNDERTAK EN BY THE ASSESSEE IN TURMERIC CANNOT BE CALLED TO BE THE ACTIVITY WITHIN THE PURVIEW OF OPERATION OF THE COLD STORAGE. TRADING ACTIVITIES ARE PERFORMED OUTSIDE THE COLD STORAGE PLANT. IF THE ASSESSEE HAS USED THE COLD STORAGE PLANT FOR STORING ITS OWN TUR MERIC FOR A CONSIDERABLE PERIOD ONLY THE NOTIONAL INCOME WHICH COULD HAVE BEEN CHARGED FROM THE OUTSIDERS CAN ONLY BE CONSIDERED T O BE THE PROFIT AND GAINS, DERIVED FROM THE OPERATION OF THE COLD STORAGE PLANT FOR THE PURPOSE OF DEDUCTIONS U/S 80IB OF THE ACT. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE C1T(A) AND WE FIND THAT CIT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF REL EVANT PROVISIONS OF SECTION 80IB OF THE ACT AND VARIOUS JUDICIAL PRONOUNCEMENTS. SINCE WE DO NOT FIND ANY INFIRMITY IN HIS ORD ER AND WE CONFIRM THE SAME. ACCORDINGLY, THIS GROUND OF THE ASSESSEE ALSO FAILS. 19 . WE, THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA), FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A ). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 20 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 31 ST DAY OF JULY , 201 8 . SD/ - SD/ - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST JULY , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE M/S. SUBHAM MAHESWARI COLD STORAGE PVT. LTD., D.NO. 25 - 16 - 135, MADRAS ROAD, GUNTUR. 2. THE REVENUE ACIT, CIRCLE - 1(1), GUNTUR. 3. THE PR. CIT , GUNTUR. 4. THE CIT(A) - 1, GUNTUR. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER SR.PRIVATE SECRETARY, ITAT, VISAKHAPATNAM .