M/S NAGPUR FOUNDRIES LTD., Nagpur V. ASSTT.COMMISSIONER OF INCOME TAX CENTRAL CIR. 1(3), Nagpur

ITA 456/NAG/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4525 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Business income; Depreciation
• Section: 32; 132

Judgement Text

ITA NO. 456/NAG/2014 1 , INCOME TAX APPELLATE TRIBUNAL,NAGPUR BENCH . . , BEFORE S/SH. D T GARASIYA,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ ITA/456/NGP/2014 , / ASSESSMENT YEAR:2006 - 07 M/S NAGPUR FOUNDRIES LIMITED, 101, EAST HIGH COURT ROAD, RAMDASPETH, NAGPUR . VS. ASSTT. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1(3), NAGPUR. ( / APPELLANT ) ( / RESPONDENT ) ASSESSEE BY: NONE. REVENUE BY: SHRI A.R. NINAWE. / DATE OF HEARING: 29.08.2016 / DATE OF PRONOUNCEMENT: 29.08.2016 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 16/07/2014,OF THE CIT (A) III, NAGPUR, THE ASSESSEE HAD FILED THE PRESENT APPEAL.ASSESSEE - COMPANY,IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CEMENT AND IRON. AN ACTION UNDER SECTION 132 (1) OF THE ACT WAS CAR RIED OUT IN MEHTA GROUP OF CASES DURING THE COURSE OF WHICH CERTAIN DOCUMENTS WERE SEIZED THAT PERTAINED TO THE ASSESSEE. ACCORDINGLY, A NOTICE UNDER SECTION 153C OF THE ACT WAS PASSED ON 30/12/2008. WHILE FINALISING THE ASSESSMENT ORDER, THE ASSESSING OFF ICER (AO) HELD THAT THE ASSESSEE WAS NOT CARRYING OUT ANY MANUFACTURING ACTIVITIES. THEREFORE, HE DISALLOWED THE DEPRECIATION AMOUNTING TO RS. 11,00, 613/ ON MACHINERY,TOOLS AND DYES(MTD). BESIDES, HE ALSO OBSERVED THAT ASSESSEE HAD WRONGLY DIRECTED RS. 1 .56 CORRODES, BEING THE CAPITAL GAIN ON THE SALE OF ASSETS FROM WHICH HE FOUND TO HAVE WRONGLY DIRECTED AT MR TIM AND OTHER EXPENSES OF ITA NO. 456/NAG/2014 2 RS. 1.62 CORRODES. HE ACCORDINGLY ADDED BACK RS. 1, 56, 96, 510/ TO THE TOTAL INCOME OF THE ASSESSEE. 2. AGGRIEVED BY T HE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, IT WAS ARGUED THAT THE MANUFACTURING UNIT WAS SITUATED IN THE MIDC AREA HINGNA ROAD NAGPUR, THAT IT HAD TEASED OUT PLOT OF LAND FACTORY SHED, PLANT AND MACHINERY, TOOLS, PATTERN OF COSTING AT THE FACTORY, THAT THOSE ASSETS WERE ACQUIRED OUT OF THE LOAN ASSISTANCE FROM THE NATIONALISED BANKS, THAT IT HAD ALSO ENJOYED WORKING CAPITAL FINANCE FROM OTHER BANKS, THAT IT HAD CARRIED OUT PRODUCTION ACTIVITY TILL ASSESSMENT YEAR 2004 05, THAT ALL THE ASSETS PLANT AND MACHINERY WERE FULLY USED IN CARRYING OUT PRODUCTION ACTIVITY, THAT THE SALES TAX ASSESSMENT FOR THE YEAR WERE ALSO FILED, THAT IN THE ASSESSMENT ORDER OF THE SALES TAX IT WAS MENTIONED THAT THE ASSESSEE WAS CARRYING OUT MANUFACTURING OF COSTING, THAT IT HAD PAID SALES TAX ON THE MANUFACTURED ITEMS, THAT ALL THE FIXED ASSETS WERE ACTUALLY PUT TO USE IN THE YEAR UNDER CONSIDERATION, THAT DUE TO SOME NEVER DOUBLE SITUATION AND MARKET CONDITIONS IT DID NOT CARRY OUT PRODUCTION ACTIVITIES LATER ON, THAT THOUGH THE PRODUCTION WAS NOT CARRIED OUT DURING THE YEAR BUT ALL THE ASSETS SITUATED AT THE FACTORY PREMISES WERE READY FOR USE, THAT IT HAD UNDERTAKEN EFFECTIVE MAINTENANCE AND SECURITY TO MAINTAIN T HE PLANT AND MACHINERY IN PROPER CONDITION, THAT IT HAD CARRIED OUT TRADING BUSINESS DURING THE YEAR UNDER APPEAL, THAT SOME OF THE SETS WERE DIRECTLY OR INDIRECTLY WERE USED, THAT THE OUTSTANDING BALANCES OF DEBTORS AND CREDITORS OF THE EARLIER YEARS WERE ALSO REFLECTED IN THE BALANCE SHEET PROVING THAT ASSESSEE HAD CARRIED OUT MANUFACTURING ACTIVITIES, THAT IT HAD STARTED PRODUCTION ACTIVITIES DURING THE FINANCIAL YEAR 2006 07, THAT THE ASSESSEE HAD RIGHTFULLY CLAIM THE DEPRECIATION UNDER SECTION 32 OF THE ACT, THAT ALL THE NECESSARY CONDITIONS TO CLAIM SUCH DEPRECIATION WERE FULFILLED. THE ASSESSEE RELIED UPON THE CASES OF SHAHBAD CO - OPERATIVE SUGAR MILLS LTD. (201 TAXMANN 66) AND BLEND WELL BOTTLES PRIVATE LTD. (323 ITR 18). WITH REGARD TO DISALLOWANCE OF WRITING OFF OF MTD, THE ASSESSEE REFERRED TO THE CASES OF PADMAVATHI SRINIVASA COTTON GINNING MILLS AND PROCESSING FACTORY (125 TTJ 411) AND NIRMAL PLASTIC INDUSTRIES AND ARGUED THAT LOSS ARISING ON ACCOUNT OF SALE OF DEPRECIABLE ASSETS HAD TO BE TREAT ED AS PART OF BUSINESS LOSS, THAT SAME SHOULD BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME, THAT THE TOOLS, DYES AND PATTERNS WERE ALWAYS CONSIDERED BUSINESS ASSETS AND WERE ALSO USED FOR THE PURPOSE OF BUSINESS. ITA NO. 456/NAG/2014 3 3. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE DETAILS AVAILABLE ON THE RECORD, THE FAA HELD THAT THE FIXED ASSETS OF THE ASSESSEE WERE IN READY TO USE CONDITIONS, THAT IT WAS ENTITLED FOR CLAIM OF DEPRECIATION. ACCORDINGLY HE DIRECTED THE AO TO ALLOW THE CLAIM OF RS. 11,00,613/ - , BEING THE DEPRECIATION ON PLANT AND MACHINERY, TOOLS AND DYES. AS REGARDS THE SECOND ISSUE I.E. SET OFF OF THE EXPENSES AGAINST THE CAPITAL GAIN ON THE SALE OF ASSETS, THE FAA OBSERVED THAT THE ASSESSEE HAD DEBITED RS. 1.56 CORRODES IN ITS P&L ACCOUNT A ND HAD CLAIMED THE SAME AS EXPENDITURE, THAT IT HAD FAILED TO ADD BACK THE AMOUNT IN QUESTION, THAT WHEN AND ASSET WAS LYING IN PARTICULAR BLOCK WAS PURCHASE SOLD DURING THE YEAR THE SAME WAS TO BE ADDED OR SUBTRACTED FROM THE BLOCK, THAT THE AFFECT WOULD AUTOMATICALLY BE TAKEN CARE OF WHILE COMPUTING THE ALLOWABLE DEPRECIATION, THAT THUS NO SEPARATE ASSET WISE COMPETITION WAS REQUIRED TO BE MADE, THAT THE ASSESSEE HAD ADMITTED RS. 1.65 CORRODES AS LOST TO P&L ACCOUNT ON ACCOUNT OF SALE OF ASSET WHICH WAS N OT AN ALLOWABLE EXPENDITURE AS PER THE PROVISIONS OF THE ACT, THAT THE AMOUNT OUGHT TO HAVE BEEN DISALLOWED BY ASSESSEE ITSELF WHILE PREPARING THE STATEMENT OF INCOME, THAT THE AO WAS CORRECT IN DISALLOWING THE SAME, THAT THE CASES RELIED UPON BY THE ASSES SEE WERE NOT RELEVANT AS THE FACTS WERE ENTIRELY DIFFERENT AND THE CONTEXT WAS DISTINGUISH - ABLE. FINALLY, THE FAA CONFIRMED THE ADDITION MADE BY THE AO. 4. AS STATED EARLIER, NONE APPEARED ON BEHALF OF THE ASSESSEE, THOUGH THE HEARING NOTICE WAS SERVED UPON THE ASSESSEE. THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE FAA. IN THE CIRCUMSTANCES, WE ARE ADJUDICATING THE APPEAL CONSIDERING THE AVAILABLE MATERIAL. WE FIND THAT THE FAA HAS OBSERVED THAT ASSESSEE HAD FAILED TO PASS NECESSARY ENT RIES IN THE P&L ACCOUNT WITH REGARD TO THE BLOCK OF ASSETS. NOTHING HAS BEEN BROUGHT ON RECORD TO CONTROVERT THE FINDING OF FACT GIVEN BY HIM. THEREFORE, CONFIRMING HIS ORDER, WE DECIDE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. . ITA NO. 456/NAG/2014 4 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH , AUGUST, 2016. , 2016 SD/ - SD/ - ( . . / D T GARASIYA ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER NAGPUR ; DATED :29 . 0 8 . 2016. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR NAGPUR BENCH, ITAT, / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT,NAGPUR.