ITO, New Delhi V. M/s Tropicana Beverage Company, New Delhi

ITA 4631/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3787 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 16-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTI
• Assessee Lawyers: LALIT MEHTA
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 4631 (DEL)2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, M/S. TROPI CANA BEVERAGES COMPANY WARD 16(4), NEW DELHI. V. (NOW MERGED WIT H M/S. PEPSICO INDIA HOLDINGS PRIVATE LIMITED),FLAT NO.54, WORLD TRADE CENTRE,BARAKHAMBA ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. SRUJANI MOHANTI, SR. DR RESPONDENT BY: S/SHRI VISHAL KALRA & LALIT MEHTA, CA ORDER PER A.D. JAIN, J.M. THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2006-07 CONTENDING THAT THE LEARNED CIT(A) HAS ERRED IN DEL ETING DISALLOWANCE OF DEPRECIATION AMOUNTING TO ` 15,83,047/-, WHEN THE ASSETS WERE NOT PUT TO USE FOR THE BUSINESS OF THE ASSESSEE COMPANY. 2. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E PRIVATE LIMITED COMPANY DERIVED INCOME FROM THE TRADING OF PACKED F RUIT JUICES UNDER THE BRAND NAME TROPICANA. IT PURCHASED PACKED FRUITS FROM M/S. DYNAMIX DAIRY PRODUCTS LTD., PUNE. IT CLAIMED DEPRECIATIO N OF ` 15,83,047/- ON PLANT AND MACHINERY STATED TO HAVE BEEN USED FOR BUSINESS PURPOSES. THE AO ITA 4631(DEL)2010 2 DISALLOWED THIS CLAIM, OBSERVING THAT THE ASSESSEE HAD NOT DERIVED INCOME FROM THE TRADING OF PACKED FRUIT JUICES AND HAD NEV ER INDULGED IN ANY SORT OF MANUFACTURING ACTIVITIES DURING THE YEAR; THAT THE MACHINERY HAD BEEN INSTALLED AT E-94, MIDC, BARAMATI (PUNE); THAT THE SAID PREMISES BELONGED TO M/S. DYNAMIX DAIRY PRODUCT LTD., WHICH WAS SUPPLIER OF PACKED JUICES TO THE ASSESSEE COMPANY; THAT THE PLANT AND MACHINERY WAS ACTUALLY BEING USED BY M/S. DYNAMIX DAIRY PRODUCT LTD. AND THE SAME WAS NOT USED BY THE ASSESSEE; THAT ON QUERY, THE ASSESSEE HAD FAILED TO PROVE THAT IT HAD ACTUALLY PUT THE MACHINERY TO BUSINESS USE AS DEFINED U/S 3 2 OF THE INCOME TAX ACT; THAT ACTUALLY, THE ENTIRE MACHINERY HAD NEVER BEEN USED DURING THE RELEVANT PREVIOUS YEAR BY THE ASSESSEE; THAT THE ASSESSEE HA D FAILED TO PRODUCE ANY EVIDENCE IN RESPECT OF ITS CLAIM OF DEPRECIATION ON PLANT AND MACHINERY; THAT AS SUCH, THE DEPRECIATION CLAIMED WAS NOT ALLOWABLE TO THE ASSESSEE; AND THAT THE DEPRECIATION ON PLANT AND MACHINERY HAD ALSO BE EN DISALLOWED IN THE EARLIER YEARS, ON SIMILAR GROUNDS. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE. 4. THE LD. DR HAS CONTENDED THAT WHILE WRONGLY DELE TING THE DISALLOWANCE CORRECTLY MADE, THE LD. CIT(A) HAS FAI LED TO CONSIDER THE FACT ITA 4631(DEL)2010 3 THAT THE ASSETS, I.E., THE MACHINERY WAS NEVER PUT TO USE BY THE ASSESSEE FOR ITS BUSINESS PREMISES. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS STRONGLY RELIED ON THE IMPUGNED ORDER. BESIDES, HE HAS PLA CED ON RECORD, A COPY OF THE TRIBUNAL ORDER DATED 18.2.10, PASSED BY THE TRI BUNAL, IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05, IN ITA NOS. 4 82(DEL)2009 AND ITA NO. 810(DEL)09, REPORTED AT 2010 TIOL 292 ITA T DEL. 6. THE LD. CIT(A), IT IS SEEN, HAS DELETED THE DISA LLOWANCE BY FOLLOWING THE AFORESAID TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05. THEREIN, THE TRIBUNAL HAS OBSERVED, WHIL E DECIDING THE ASSESSEE TO BE ENTITLED TO THE CLAIM OF DEPRECIATION, AS CLAIME D HEREIN, INTER ALIA, THAT THE ASSESSEE WAS IN THE BUSINESS OF TRADING IN PACKED F RUIT JUICES; THAT AS PER THE ASSESSEES PRODUCT SUPPLY AGREEMENT WITH DYNAMIX F ROM 18.2.99 DYNAMIX WAS TO MANUFACTURE FRUIT JUICES AS PER THE REQUIREM ENT OF THE ASSESSEE AND JUICES WERE TO BE PACKED IN ACCORDANCE WITH THE SPE CIFIED PACKING INSTRUCTIONS; THAT PACKING MATERIAL AND DESIGN HAD TO BE APPROVED BY THE ASSESSEE; THAT THE MANUFACTURE AND PACKING WERE TO BE AS PER THE SPECIFICATIONS AND QUALITY STANDARDS DECIDED BY THE ASSESSEE; THAT THE TRADE MARK BELONGED FULLY TO THE ASSESSEE; THAT EVEN THE RAW MATERIAL AND OTHER INPUTS REQUIRED FOR THE MANUFACTURE OF FRUIT JUICES , WERE TO BE SOURCED FROM ITA 4631(DEL)2010 4 THE SOURCES AS SPECIFIED BY THE ASSESSEE, AS PER TH E ASSESSEES SPECIFICATIONS; THAT IN THESE FACTS, DYNAMIX WAS MANUFACTURING FRUI T JUICES FOR AND ON BEHALF OF THE ASSESSEE AND IT HAD NO SAY IN THE METHOD OF MANUFACTURE, PRODUCT MIXED, SOURCING OF QUALITY OF RAW MATERIAL, METHOD OF PACKING, DESIGN OF PACKING, ETC.; THAT IT WAS NOT THAT DYNAMIX MANUFAC TURED FRUIT JUICE AND THE ASSESSEE WAS A DEALER THEREOF; THAT THE EQUIPMENT S UPPLY AGREEMENT BETWEEN THE ASSESSEE AND DYNAMIX EVINCED THAT DYNAM IX MANUFACTURED THE FRUIT JUICES AS PER THE REQUIREMENT OF THE ASSESSEE ; THAT AS AGREED TO BETWEEN THE ASSESSEE AND DYNAMIX IN THE PRODUCT SUPPLY AGRE EMENT, DYNAMIX REQUIRED THE ASSESSEE TO PROVIDE THE EQUIPMENT; THA T DYNAMIX WANTED TO PLACE THE RESPONSIBILITY ON THE ASSESSEE SO THAT TH E ASSESSEE DID NOT TERMINATE THE AGREEMENT WITH DYNAMIX AFTER DYNAMIX HAD INVEST ED A SUBSTANTIAL AMOUNT OF MONEY IN THE MACHINERY, WHICH WOULD REMAI N A LIABILITY IN THE HANDS OF DYNAMIX, IF THE ASSESSEE WERE TO BACK OUT OF THE AGREEMENT; THAT THE ASSESSEE HAD PROVIDED THE MACHINERY TO DYNAMIX, AS PER THE REQUEST OF THE DYNAMIX, FOR THE PURPOSE OF MANUFACTURING THE P RODUCTS UNDER THE PRODUCT SUPPLY AGREEMENT; THAT IT WAS CLEARLY UNDER STOOD BY BOTH THE ASSESSEE AND DYNAMIX, THAT THE MACHINERY WOULD BELO NG TO THE ASSESSEE AND NOT TO DYNAMIX AND DYNAMIX HAD NO CHARGE OR CLAIM O VER THE MACHINERY; THAT EVEN THE SERVICING, MAINTENANCE AND SUPPLY OF SPARE PARTS OF THE ITA 4631(DEL)2010 5 MACHINERY WAS TO BE DONE IN THE PRESENCE OF THE REP RESENTATIVE OF THE ASSESSEE EVEN THOUGH THE COST FOR THE SAME WAS TO B E BORNE BY DYNAMIX; THAT THE ASSESSEE AND DYNAMIX HAD ALSO ARRIVED AT A CLEA R UNDERSTANDING THAT DYNAMIX COULD NOT USE THE MACHINERY PROVIDED BY THE ASSESSEE FOR THE PURPOSE OTHER THAN THAT OF MANUFACTURING THE PRODUC TS AS AGREED UPON BETWEEN THEM IN THE PRODUCT SUPPLY AGREEMENT; THAT THUS, THE MACHINERY HAD BEEN PROVIDED BY THE ASSESSEE TO DYNAMIX FOR TH E PURPOSE OF MANUFACTURING THE PRODUCT OF THE ASSESSEE; THAT IN THE LIQUIDATORS OF PURSA LIMITED V. CIT, 25 ITR 265(SC), THE HONBLE SUPREME COURT HAD HELD THAT THE WORDS USED FOR THE PURPOSES OF THE B USINESS IN SECTION 10(2)(IV) OF THE INDIAN INCOME TAX ACT, 1922, WHICH EXPRESSION IS THE SAME AS THAT EMPLOYED IN SECTION 32 OF THE I.T. ACT, 196 1, UNDER WHICH THE ASSESSEE HAS MADE THE CLAIM OF DEPRECIATION IN THE PRESENT CASE, MEANT THAT THE MACHINERY AND PLANT IS USED FOR THE PURPOSE OF ENABLING THE OWNER TO CARRY ON THE BUSINESS AND EARN PROFITS IN THE BUSIN ESS; AND THAT THEREFORE, THE ASSESSEE WAS ENTITLED FOR CLAIMING DEPRECIATION. 7. THE AFORESAID TRIBUNAL ORDER HAS NOT BEEN SHOWN TO HAVE BEEN SET ASIDE, QUASHED OR EVEN STAYED ON APPEAL. NO DECISI ON TO THE CONTRARY HAS ALSO BEEN PLACED BEFORE US. THE FACTS FOR THE YEA R UNDER CONSIDERATION HAVE ITA 4631(DEL)2010 6 ALSO NOT BEEN SHOWN TO BE ANY DIFFERENT FROM THOSE BEFORE THE TRIBUNAL FOR ASSESSMENT YEAR 2004-05(SUPRA). 8. NOW, WHEN IT IS ESTABLISHED THAT THE MACHINERY O N WHICH DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE, HAD BEEN PROVIDED BY THE ASSESSEE TO DYNAMIX FOR THE PURPOSE OF MANUFACTURING THE PROD UCT OF THE ASSESSEE, NECESSARILY THE MACHINERY WAS USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. THAT BEING SO, USED FOR THE PURPOSES O F THE BUSINESS IN SECTION 32 OF THE ACT IS APPLICABLE TO THE ASSESSEE, IN KE EPING WITH THE LIQUIDATORS OF PURSA LIMITED V. CIT(SUPRA), AS HELD BY THE TR IBUNAL IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 2004-05. 9. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID TRIBUNAL ORDER, WE DO NOT FIND ANY FORCE IN THE GRIEVANCE SOUGHT TO BE RA ISED BY THE DEPARTMENT. THE LD. CIT(A) HAS CORRECTLY FOLLOWED THE TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05(SUPRA). ACCOR DINGLY, THE IMPUGNED ORDER IS UPHELD, WHILE REJECTING THE GROUND RAISED BY THE DEPARTMENT. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.06.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.06.2011 *RM ITA 4631(DEL)2010 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR