TIPCO INDUSTRIES LTD, MUMBAI V. DCIT 9(3), MUMBAI

ITA 4514/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3054 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHUDR
• Assessee Lawyers: KALPESH TURALKARAR
• Keywords: Depreciation
• Section: 32

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/685/MUM/2012, /ASSESSMENT YEAR: 2008-09, ./ITA/3768/MUM/2012, /ASSESSMENT YEAR:2009-10 ./ITA/4514/MUM/2013, /ASSESSMENT YEAR: 2010-11 M/S. TIPCO INDUSTRIES LTD. RANI SATI MARG, MALAD (E) MUMBAI-400 097. PAN:AAACT 1678 E VS. DCIT-9(3) AAYAKAR BHAVAN MUMBAI. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI R.K. SAHU-DR ASSESSEE BY: MS. AARTI SATHE & SHRI KALPESH TURALKAR-(AR) / DATE OF HEARING: 29.07.2016 / DATE OF PRONOUNCEMENT: 21.09.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER OF THE CIT(A)-20,MUMBAI,THE A SSESSEE HAS FILED THE APPEALS FOR THE ABOVE-MENTIONED THREE ASSESSMENT YE ARS(AY.S.). AS THE ISSUES INVOLVED IN ALL THESE APPEALS ARE COMMON,SO FOR THE SAKE OF CONVENIENCE WE ARE PASSING A SINGLE ORDER.THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF THERMO PLASTIC COMPOUND, PHONETIC MATERIAL AND COMPOUNDS. DETAILS OF DATES OF FILING OF RETURNS, RETURNED INC OMES,ETC.CAN BE SUMMARISED AS UNDER: A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) DT. OF CIT(A) ORDER 2008-09 30.09.2008 (-)4.86 CRORES 30.11.2010 (-)33. 84 LAKHS 15.11.2011 2009-10 29.09.2009 (-)3.04 CRORES 30.09.2011 (-)3.0 2 CRORES 06.03.2012 2010-11 30.09.2012 (-)1.88 CRORES 25.09.2012 (-)1.8 6 CRORES 30.04.2013 2. ITA/685/MUM/2012,A.Y.2008-09: EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE OF DEPRECIATION OF RS.17.17 LAKHS ON MACHINERY,HAVING WRITTEN DOWN VALUE (WDV) OF RS.1.14 CRORES, WHICH WAS DAMAGED DUE TO FLOODS AND ON WHICH CLAIM WAS NOT APPROVED BY THE INSURANCE COMPANY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME WHEREIN IT AD DED BACK AN AMOUNT OF RS. 685, 3768/M/12;4514/13-TIPCO 2 4.53 CRORES,BEING LOSS ARISING OUT OF EXCEPTIONAL ITEM.THE AO OBSERVED THAT THE ASSESSEE HAD INCREASED THE CLAIM OF DEPRECIATION, U /S. 32 OF THE ACT,FROM RS.69.49 LAKHS TO RS.86.67 LAKHS THAT THE INCREASE WAS ATTRIBUTABLE TO ADDITION ON ACCOUNT OF REJECTION OF INSURANCE CLAIM OF RS.1, 14,49,389/- PERTAINING TO FIXED ASSETS. HE HELD THAT THE ADDITION TO FIXED AS SET MADE BY THE ASSESSEE WAS NOT ON ACCOUNT OF FLOODS OR ON ACCOUNT OF PURCHASE OF ASSETS OR ANY OTHER ASSET BEING PUT TO USE, THAT THE BASIC CONDITION OF CLAIM ING THE DEPRECIATION U/S. 32 REMAINED UNSATISFIED. THE ASSESSEE HAD CLAIMED DEPR ECIATION @ 15% OF RS.1.14 CRORES I.E. RS.17,17,403/- IN THE REVISED COMPUTATI ON OF INCOME. THE AO DID NOT ALLOW THE CLAIM AND ACCORDINGLY MADE THE ADDITION. 3. AGGREIVED BY THE ORDER OF THE AO, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, IT WAS ARGUED THAT DUE TO HEAVY FLOOD IN SILVASSA ON 3.8.2004 FLOOD WATER ENTERED F ACTORY AT SILVASSA RESULTING INTO SEVERE DAMAGE TO PLANT AND MACHINERY(P&M), THA T INSURANCE CLAIM WAS FILED AND THE ASSESSEE HAD DEBITED THE AMOUNT RECEI VABLE UNDER THE HEAD INSURANCE CLAIM RECEIVABLE IN ITS BOOKS, THAT IN TH E BOOKS OF ACCOUNT A SEPARATE INSURANCE CLAIM RECEIVABLE ACCOUNT WAS CREATED F OR THE DAMAGE/LOSS OF FIXED ASSETS,THAT IT REDUCED BLOCK OF ASSETS OF P&M FOR A SUM OF RS.1.14 CRORES BEING WDV UNDER THE ACT, THAT IT DID NOT CLAIM DEPRECIATI ON FOR AY.S 2005-06 TO 2008-09,THAT DURING THE YEAR UNDER CONSIDERATION TH E INSURANCE CLAIM WAS REJECTED, THAT WDV WAS REINSTATED TO THE BLOCK OF ASSETS OF THE COMPANY AND ACCORDINGLY DEPRECIATION WAS CLAIMED, THAT THE P&M WAS NOT SOLD/DISCARDED/ DEMOLISHED/DESTROYED, THAT IT CONTINUED TO BE IN EX ISTENCE, THAT AS PER THE LAW PASSIVE USER OF P&M WAS ENTITLED TO CLAIM DEPRECIAT ION,THAT AFTER INTRODUCTION OF CONCEPT OF BLOCK OF ASSETS IT WAS NOT PERMISSIBLE F OR THE AO TO SEE AS TO WHETHER A PARTICULAR/SPECIFIC ASSET WAS PUT TO USE OR NOT, THAT COLLECTIVE USE OF BLOCK OF ASSETS WAS TO BE EXAMINED, THAT DEPRECIATION WAS TO BE ALLOWED FOR ENTIRE BLOCK, THAT INSPITE OF HEAVY FLOOD THE MACHINERY WAS IN WO RKING CONDITION. 685, 3768/M/12;4514/13-TIPCO 3 AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE AO IT WAS HELD BY THE FAA THAT THE ASSESSEE DID NOT CLAIM ANY DEPRECIATIO N ON THE DAMAGED MACHINERY FOR THE REASON THAT INSURANCE CLAIM WAS L ODGED, THAT ONLY AFTER REJECTION OF CLAIM BY THE INSURANCE COMPANY THE ASS ESSEE REINSTATED THE WDV TO THE BLOCK OF ASSETS, THAT THERE WAS NO USER OF T HE ASSET FOR THE AY.S 2005-06 TO 2008-09, THAT ASSETS WERE DAMAGED. REFERRING TO THE PROVISIONS OF SEC. 34(1)(II) OF THE ACT HE HELD THAT THE ASSESSEE WAS NOT ENTIT LED TO DEPRECIATION ON ASSETS WHICH DID NOT EXIST. HE REFERRED TO THE CASE OF EID PARRY (226ITR836) AND HELD THAT FACTS OF THE SAID CASE WERE APPLICABLE TO THE FACTS OF THE CASE UNDER CONSI - DERATION.FINALLY,HE UPHELD THE ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) STATED THAT THE FAA WRONGLY HELD THAT PLANT AND MAC HINERY (P&M) DID NOT EXIST, THAT P&M WAS DAMAGED BECAUSE OF FLOOD WATER, THAT ASSESSEE WAS MANUFACTURING GOODS AT SILVASSA, THAT INSURANCE HAD REJECTED THE CLAIM MADE BY THE ASSESSEE DURING THE YEAR UNDER APPEAL, THAT ONL Y AFTER RECEIVING THE REJECTION LETTER FROM THE INSURANCE COMPANY IT HAD REINSTATED ITS CLAIM. SHE REFERRED TO PAGE NO.9, 10 OF THE PB AND RELIED UPON THE CASES O F G.N. AGRAWAL (217 ITR 250); RISHIROOP POLYMERS(P)LTD. (102 ITD 128). THE DR SUPPORTED THE ORDER OF THE FAA AND REFERRED TO THE CASES OF ORIENTAL COAL CO. LTD. (120CTR202) AND JIWAJI RAO SUGAR CO.LTD. (71ITR3219). IN THE REJOIN DER THE AR STATED THAT BOTH THE CASES RELIED UPON BY THE DR, DO NOT DEAL WITH T HE CONCEPT OF BLOCK OF ASSETS. ON A QUERY BY THE BENCH,THE ASSESSEE FURNISHED COP Y OF THE GOODS MANUFACTUR - ED AT THE SILVASSA FACTORY DURING THE YEAR UNDER CO NSIDERATION AND IN THE EARLIER AND SUBSEQUENT YEARS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE FLOOD WAT ERS DAMAGED THE P&M OF THE SILVASSA FACTORY OF THE ASSESSEE,THAT IT FILED A CL AIM BEFORE THE INSURANCE 685, 3768/M/12;4514/13-TIPCO 4 COMPANY, THAT THE INSURANCE AUTHORITY REJECTED THE CLAIM DURING THE YEAR UNDER CONSIDERATION,THAT IT FILED A REVISED STATEMENT OF INCOME BEFORE AO CLAIMING DEPRECIATION ON ASSETS, THAT AS PER THE BOOKS OF AC COUNT THE WDV OF P&M AS ON 1.4.04 WAS RS.1.14 CRORES, THAT IT HAD CLAIMED DEPR ECIATION @15% ON THE BLOCK OF ASSETS,THAT THE FAA REJECTED THE CLAIM MADE BY A O BY INVOKING THE PROVISIONS OF SECTION 34(1) OF THE ACT. AS STATED E ARLIER, THE ASSESSEE HAD FILED BEFORE US THE DETAILS OF MANUFACTUR -ING ACTIVITIES CARRIED OUT AT THE SILVASSA UNIT.A SEPARATE MANUFACTURING ACCOUNT OF THE SILVAS SA UNIT CLEARLY ESTABLISHES THAT IT WAS CARRYING OUT ITS MANUFACTURING ACTIVIT IES AT SILVASSA AFTER THE FLOODS. THERE IS A DISTINCTION BETWEEN NON EXISTENCE OF P&M AND DAMAGED P&M.THERE IS NOTHING ON RECORD TO DISPROVE THE FACT THAT MANU FACTURING ACTIVITIES WERE CARRIED OUT AT SILVASSA.THEREFORE, FAA WAS NOT JUST IFIED IN HOLDING THAT P&M DID NOT EXIST. THE FACT IS THAT P&M EXISTED AND IT WAS BEING USED BY THE ASSESSEE FOR MANUFACTURING ACTIVITIES.SECONDLY,AFTER THE INT RODUCTION OF CONCEPT OF BLOCK ASSETS INDIVIDUAL ASSETS ARE NOT TO BE CONSIDERED F OR ALLOWING/DISALLOWING DEPRECIATION.THE ASSESSEE HAD NOT CLAIMED DEPRECIAT ION AS ITS CLAIM WAS PENDING BEFORE THE INSURANCE AUTHORITIES. WE FIND THAT THE CASES RELIED UPON BY THE DR ARE OF NO HELP BECAUSE THE FACTS OF BOTH THE CASES ARE DISTINGUISHABLE, BESIDES THEY DO NOT DEAL WITH CONCEPT OF BLOCK OF ASSETS. THEREFORE, REVERSING THE ORDER OF THE FAA,WE HOLD T HAT THE ASSESSEE WAS ENTITLED FOR DEPRECIATION FOR THE MACHINERY @ 15% (17.17 LAK HS).EFFECTIVE GROUND OF APPEAL OF THE ASSESSEE IS DECIDED IN FAVOUR OF THE ASSESSEE. ITA.S/3768-4514/MUM/2012 & 2013,AY.S:2009-10 AND 20 10-11 6. THE FACTS AND CIRCUMSTANCES OF BOTH YEARS ARE IDENT ICAL TO FACTS OF EARLIER YEAR EXCEPT THE AMOUNT INVOLVED UNDER THE HEAD DEPRECIAT ION.SO,FOLLOWING OUR ORDER FOR THE AY.2008-09, WE ALLOW THE EFFECTIVE GROUND R AISED BY THE ASSESSEE FOR BOTH THE YEARS. 685, 3768/M/12;4514/13-TIPCO 5 AS A RESULT, ALL THE APPEALS FILED BY THE ASSESSEE FOR ALL THE THREE AY.S ARE ALLOWED. . ORDER PRONOUNCED IN THE OP EN COURT ON 21 ST SEPTEMBER, 2016. 21 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER MUMBAI; DATED : 21.09.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.