M/s. Srinidhi Textiles, Erode V. ACIT, Erode

ITA 470/CHNY/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8173 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 27-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Court: TRIBUNAL
• Department Lawyers: MILIND MADHUKAR BHUSARI
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation
• Section: 143(3); 63

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI . . . , ! ' .. # $!% , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ! ./ ITA NO.470/MDS/2012 * +* /ASSESSMENT YEAR: 2008-09 M/S.SRINIDHI TEXTILES, NO.18, THIRUNAGAR COLONY, ERODE 638 003. VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. [PAN:AA O FS 9972 P] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ! ./ ITA NO.1891/MDS/2013 * +* /ASSESSMENT YEAR: 2009-10 M/S.SRINIDHI TEXTILES, NO.18, THIRUNAGAR COLONY, ERODE 638 003. VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-I, ERODE. [PAN:AACFS 9972 P] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.S. SRIDHAR, ADV. ./,- 0 1 /RESPONDENT BY : MR.MILIND MADHUKAR BHUSARI, CIT (DR) # 0 2' /DATE OF HEARING : 27.12.2016 34+ 0 2' /DATE OF PRONOUNCEMENT : 13.01.2017 ITA NO.470/MDS/2012 & ITA NO.1891/MDS/2013 :- 2 -: / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : 1.0 THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 02.12.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)- I, COIMBATORE, IN ITA NO.286/10-11 FOR THE AY 2008-09.ALL THE GROUNDS OF APPEAL ARE RELATED TO THE DEPRECIATION ON THE EFFLUENT TREATME NT PLANT. 2.0 THE ASSESSMENT WAS COMPLETED U/S.143(3) BY AN ORDER DATED 31.12.2010. CONSEQUENT TO THE REVISION ORDER U/S.2 63 OF THE LD.CIT(A)- II, COIMBATORE, DATED 30/03/2012 THE AO DISALLOWED THE DEPRECIATION AMOUNTING TO RS.1,75,95,696/- FOR THE AY 2007-08 HO LDING THAT THE TRANSFER OF ASSETS ON WHICH THE DEPRECIATION WAS C LAIMED WAS A SHAM TRANSACTION. FOR THE AY 2008-09, THE AO DISALLOWED THE DEPRECIATION ON THE SAME REASONS MERELY ON THE GROUND THAT THE COMP ANY HAS OBTAINED A LOAN FROM TIIC AND WITHOUT TAKING APPROVAL FROM LEN DER THE COMPANY CANNOT TRANSFER THE ASSETS. 4.0 THE ENTIRE BUILDING AND MACHINERY ON WHICH THE DEPRECIATION CLAIMED WAS MORTGAGED TO TIIC AND THE ASSESSEE HAS BORROWED THE LOANS FROM TIIC. AS PER THE MORTGAGE DEED, TRANSFER/LETTING O UT OF THE PROPERTY TO THE THIRD PARTY WITHOUT WRITTEN CONSENT FROM THE TI IC IS NOT PERMISSIBLE. THE RELEVANT PARAGRAPHS NOS.6 & 7 OF THE MORTGAGE D EED, WAS REPRODUCED BY THE AO IN HIS ORDER WHICH READS AS UNDER: THAT THE POWER OF LEASING CONTAINED IN SECTION 65 -A OF THE TRANSFER OF PROPERTY ACT, 1882, SHALL NOT BE EXERCISED BY THE BORROWER W ITHOUT THE WRITTEN CONSENT OF THE CORPORATION FIRST HAD AND OBTAINED PROVIDED THAT SO LONG AS THE BORROWER SHA11 LAWFULLY BE ITA NO.470/MDS/2012 & ITA NO.1891/MDS/2013 :- 3 -: IN POSSESSION OF THE MORTGAGED PREMISES IT SHALL BE LAWFUL FOR THE BROWER FROM TIME TO TIME TO LET THE WHOLE OR PART OR PARTS THEREOF ON MONTHL Y TENANCIES OR ON LEASES FOR ANY TERM AGREED TO BY THE CORPORATION WITH THE WRITTEN CONSE NT OF THE CORPORATION FIRST AND OBTAINED. AND ALSO AT PAGE NO.7 ITEM NO.(P) READS AS UNDER: THAT THE BORROWER UNDERTAKE TO TAKE ALL THE MACHI NERIES PURCHASED WITH THE FINANCE MODE BY THE CORPORATION UNDER THIS DEED OR OTHERWISE TO THE PREMISES OF ITS FACTORY SITUATED ON THE FIRST SCHEDULE LANDS AND ERECT THEM IN DUE-COURSE AND NOT TO TAKE THEM ELSEWHERE OR TO CREATE ANY CHARGE THEREON IN FAVOUR OF ANYBODY ELSE. THE ABOVE SAID MORTGAGE DEED WAS REGISTERED UNDER DOCUMENT NO.887/2003 AT THE OFFICE OF THE SUB-REGISTRAR, ERODE. 4.1 IN VIEW OF CLAUSES IN THE MORTGAGE DEED THE AO WAS OF THE OPINION THAT THE COMPANY CANNOT TRANSFER THE PROPERTIES HEL D UNDER MORTGAGE TO THE ASSESSEE AS SHARE CAPITAL AND THUS THE ENTIRE T RANSACTION IS A SHAM TRANSACTION. ACCORDINGLY, THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS ALLOWED BY THE AO. 5.0 ON THE SAME FACTS FOR THE AY 2007-08, THIS TRIB UNAL HAS REMITTED THE MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE DO CUMENTS RELATING TO TRANSFER OF ASSETS FROM COMPANY TO THE ASSESSEE IND EPENDENTLY WITHOUT LINKING TO THE MORTGAGE DEED AND DECIDE AFRESH ON M ERITS. SINCE THE FACTS ARE THE SAME, WE DEEM IT FIT TO REMIT THE ASSESSMEN T FOR THE AY 2008-09 ALSO TO THE FILE OF THE AO TO EXAMINE THE ISSUE OF TRANSFER OF ASSETS INDEPENDENTLY WITHOUT LINKING TO THE CONDITION OF T HE MORTGAGE DEED AND DECIDE THE CASE ON MERITS. IN THE RESULT, THE APPE AL OF THE ASSESSE IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO.470/MDS/2012 & ITA NO.1891/MDS/2013 :- 4 -: ITA NO.1891/2013 FOR THE AY 2009-10 : FOR THE AY 2009-10, THE AO DISALLOWED THE DEPRECIA TION OF RS.29,57,307/- SINCE THE ASSETS OF M/S.SRINIDHI FAB RICS (P) LTD., WAS BROUGHT AS SHARE CAPITAL CONTRIBUTION AS PER THE FA CTS DISCUSSED IN 143(3) FOR THE AY 2008-09. THE ASSESSEE WENT ON APPEAL BE FORE THE LD.CIT(A) AND THE LD.CIT(A) DISMISSED THE APPEAL. SINCE, THE FACTS OF THE CASE ARE SAME AS OF AY 2008-09, WE REMIT THE MATTER BACK TO THE AO TO RE- EXAMINE THE ISSUE INDEPENDENTLY WITHOUT LINKING TO THE CONDITIONS IN MORTGAGE DEED AND DECIDE THE CLAIM OF DEPRECIATION ON MERITS. ACCORDINGLY, THE ORDER OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF AO. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' . . # $!% ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5! /DATED: 13 TH JANUARY, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 6 9 .2 /DR 3. # 82 ( ) /CIT(A) 6. * < /GF ITA NO.470/MDS/2012 & ITA NO.1891/MDS/2013 :- 5 -: