ITO 9(2)(4), MUMBAI V. P & R AUTOMATION P. LTD, MUMBAI

ITA 4759/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8895 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-01-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 13-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: S K SOMANI
• Keywords: Depreciation; Business expenditure
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKO TAIAH,(AM) ITA NO.4759/MUM/2009 ASSESSMENT YEAR : 2001-02 INCOME TAX OFFICER-9(2)(4) ROOM NO.255 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020. ..( APPELLANT ) VS. M/S. P&R AUTOMATION PVT. LTD. PATEL VANIKA, WESTERN EXPRESS HIGHWAY, GOREGAON (E) MUMBAI-400 063. ..( RESPONDENT ) P.A. NO. (AAACP 6834 A) APPELLANT BY : SHR I SURENDRA KUMAR RESPONDENT BY : SHRI S.K. SOMANI O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 9.6.2009 READ WITH ORDER DATED 10.7.200 9 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF EXPORT IN TRADING GOODS FILE D RETURN DECLARING TOTAL LOSS AT RS.12,86,310/-. IN THIS CASE NOTI CE U/S.148 WAS ISSUED BY THE ASSESSING OFFICER AFTER RECORDING FOLLOWING R EASONS:- THE ASSESSEE HAS FILED RETURN OF INCOME ON 31.10.2 001 DECLARING INCOME OF RS.(-)12,86,310/- . THE RETURN IS ITA NO.4759/M/09 A.Y:01-02 2 PROCESSED U/S.143(1) BY THE ACIT 9(2) MUMBAI ON 8.1.2003. THE ASSESSEE HAS CLAIMED FINANCE CHARGES OF RS.12,07,070/- ON THE BORROWED FUND AND DEPRECIATIO N OF RS.30,36,280/- ON PLANT & MACHINERY. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) FOR A.Y. 2003 -04, IT WAS NOTICED THAT THE BORROWED FUND WAS USED TO PURCHASE THE MACHINERY AND THE MACHINERY WAS USED B Y THE ASSESSEE. IT IS USED BY THE ASSESSEES SISTER CONCERN M/S. PATEL ALUMINIUM P. LTD. SINCE THE ASSETS ARE NOT USED BY THE ASSESSEE FOR DEPRECIATION CLAIMED BY TH E ASSESSEE IS NOT ALLOWABLE AND INTEREST PAID ON BORR OWED FUND IS ALSO NOT ALLOWABLE AS NOT COVERED BY THE PROVISIONS OF SECTION 36(1)(III) OF THE I.T. ACT, 1 961. DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE WAS ASKE D TO SHOW CAUSE AS TO WHY IN VIEW OF REASONS RECORDED U/S.147 THE DEPRECIATION CLAIMED AND INTEREST PAID ON BORROWED FUN DS SHOULD NOT BE DISALLOWED. IN RESPONSE IT WAS SUBMITTED BY THE ASSESSEE THAT THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE B Y THE LD. CIT(A) FOR THE VARIOUS ASSESSMENT YEARS. HOWEVER, THE ASSESSI NG OFFICER DID NOT ACCEPT THE ASSESSEE'S REPLY. THE ASSESSING OF FICER AFTER CONSIDERING CERTAIN CLAUSES OF THE AGREEMENT AND THE PRO VISIONS OF SEC.32 HELD THAT THE DEPRECIATION ON MACHINERY TO THE E XTENT OF RS.17,07,908/- IS NOT ALLOWABLE AS THE SAME HAS NOT BEE N USED BY THE ASSESSEE AND SIMILARLY THE INTEREST DEBITED RS.12,07,070/- IS ALSO NOT ALLOWABLE AS THE BORROWED FUNDS WAS NOT USED BY THE ASSESSE E FOR ITS BUSINESS PURPOSES AND ACCORDINGLY HE COMPLETED THE ASSESSMENT AT AN INCOME OF RS.29,57,040/- VIDE ORDER DATED 29.12.2008 PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961(THE ACT). ON APPEAL THE LD. CIT(A) FOLLOWING THE TRIBUNAL ORDER IN ASSESSEE'S OW N CASE ON BOTH THE ISSUES HAS DELETED BOTH THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ITA NO.4759/M/09 A.Y:01-02 3 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) R EVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS (REVI SED) THE DELETION OF DISALLOWANCE OF INTEREST AND DEPRECIATION. 4. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE OR DER OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITS THAT THE ISSUE I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TR IBUNAL IN ASSESSEE'S OWN CASE IN ITO VS. P & R AUTOMATION PRODUCTS P. L TD. IN ITA NO.2119/MUM/2007 DATED 25.3.2009 FOR THE ASSESSMENT YEAR 2003-04 . HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 7. AS REGARDS GROUND NO.1 WHEREIN REVENUE HAS CHALLENGE D THE DELETION OF INTEREST OF RS.12,07,070/- WE FIND THAT T HE ASSESSING OFFICER HAS DISALLOWED THE INTEREST OF RS.12,07,070/- VI DE FINDING RECORDED IN PARA-4 OF HIS ORDER WHICH READS AS UNDER :- 4. THE ASSESSEE HAS ALSO DEBITED INTEREST OF RS.12,07,070/-. THE SAME IS IN RESPECT OF THE TERM LOAN TAKEN FROM CANARA BANK. THE LOAN WAS UTILIZED FOR THE PURPOSE OF ACQUIRING THE FIXED ASSETS AND MACHINERY WHICH ARE INSTALLED AT THE PREMISES OF THE SISTER C ONCERN VIZ. M/S. PATEL ALUMINIUM P. LTD. IN VIEW OF THE F ACTS DISCUSSED ABOVE, SINCE IT IS ESTABLISHED THAT THE MACHINERY IS NOT WHOLLY AND EXCLUSIVELY USED FOR TH E ITA NO.4759/M/09 A.Y:01-02 4 PURPOSE OF THE ASSESSEE'S BUSINESS, THE INTEREST IS ALSO DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE AS THE SAME IS NOT ALLOWABLE U/S.36(1)(III). HOWEVER, THE LD. CIT(A) HAS OBSERVED AND HELD THAT THE APPELLANT BEING 100% EXPORTER, INTEREST EARNED ON FIXED DEPOSI TS KEPT FOR BUSINESS CONSIDERATION WAS ALLOWED AS DEDUCTION FOR THE BUSINESS PURPOSES AND ACCORDINGLY HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. SINCE THE TRIBUNAL IN ITS ORDER DATED 25.3.2009 SUPRA, HAS HELD THAT THE ASSESSEE IS THE OWNER OF THE MA CHINERY AND ENTITLED TO DEPRECIATION, THEREFORE, IN OUR VIEW TH E INTEREST OF RS.12,07,070-/- TAKEN BY THE ASSESSEE IN RESPECT OF TERM L OAN FROM CANARA BANK FOR THE PURPOSE OF ACQUIRING MACHINERY, IS ALLOWABLE AS BUSINESS EXPENDITURE AND ACCORDINGLY THE DISALLOWANCE OF RS.12,07,070/- IS DELETED AND THE ORDER PASSED BY THE L D. CIT(A) IN DELETING THE DISALLOWANCE OF INTEREST IS UPHELD BUT WIT H DIFFERENT REASONS. THE GROUND NO.1 TAKEN BY THE REVENUE IS, THE REFORE, REJECTED. 8. WITH REGARD TO THE DISALLOWANCE OF DEPRECIATION ON MACHINERY WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE A SSESSEE THAT IN THE ASSESSEE'S OWN CASE (SUPRA), THE TRIBUNAL HAS ALLOWED THE CL AIM OF DEPRECIATION VIDE ITS FINDING RECORDED IN PARA-10 WHICH READS AS UNDER :- 10. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. IN OUR CONSIDERED VIEW, THE ASSESSEE I S ENTITLED TO DEDUCTION UNDER SECTION 32 BY WAY OF DEPRECIATION ON THE MACHINERY, IF IT IS OWNED BY IT AND IS USED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HAS PURCHASED THE MACHINERY AND THE SAME HAS BEEN PROVIDED TO THE SISTER CONCERN ESSENTIALLY TO MANUF ACTURE THE GOODS FOR THE ASSESSEE AND SUPPLYING THE SAME A T FAIR MARKET PRICE. THERE IS NO DISPUTE ON FACTS. THE CON DITIONS ITA NO.4759/M/09 A.Y:01-02 5 REQUIRED TO BE SATISFIED FOR DEDUCTION UNDER SECTIO N 32 ARE SATISFIED IN THIS CASE AND THEREFORE, THE CIT(A), I N OUR CONSIDERED VIEW, WAS JUSTIFIED IN ALLOWING THE CLAI M OF THE ASSESSEE. THE VIEW FURTHER GETS SUPPORT FROM THE DE CISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF INDIA N EXPRESS PVT.LTD., 255 ITR 68(MAD) ON WHICH THE CIT( A) HAS PLACED RELIANCE. FINDING NO INFIRMITY IN THE OR DER OF THE CIT(A), WE DECLINE TO INTERFERE. THE APPEAL OF THE REVENUE ON THIS GROUND IS DISMISSED. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE ORDER OF THE TR IBUNAL DECLINE TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) ON THIS ACCOUNT AND ACCORDINGLY THE GROUND NO.2 TAKEN BY THE REVENUE IS RE JECTED. 9. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.1.2011. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.1.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.