ACIT 4(2), MUMBAI V. MANGALAM DRUGS ORGANICS LTD, MUMBAI

ITA 4855/MUM/2010

• Counselvise Citation: 485519914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Assessee Lawyers: SUBRAMANIAN
• Keywords: Depreciation; Additional depreciation; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) ITA NO.4855/MUM/2010 ASSESSMENT YEAR- 2005-06 THE ACIT, CIR,4(2), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. MANGALAM DRUGS & ORGANICS LTD., 292, PRINCESS STREET, 2 ND FLOOR, NEAR FLY OVER, MUMBAI-400 002 PAN-AAACM 7880P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.P. TRIVEDI RESPONDENT BY: SHRI SUBRAMANIAN DATE OF HEARING :12.10.2011 DATE OF PRONOUNCEMENT: O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2005-06 AGAINST ORDER OF LD. CIT(A) DT.25.3.2010 ON FOLLOWI NG GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOU NT OF ADDITIONAL DEPRECIATION ON FIXED ASSETS U/S. 32 OF RS. 46,46,8 25/- WITHOUT APPRECIATING THE FACT THAT INSTALLED CAPACITY OF UN IT ID HAS ONLY INCREASED BY 13.5% WHEREAS QUALIFYING INCREASE IS 2 5%. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURE OF BULK DRUGS, ORGANIC/INORGANIC CHEMICALS, DISPERSE DYE INTERMEDI ATES, PERFUMERY ITA NO. 4855/M/10 2 CHEMICALS. DURING THE YEAR, ASSESSEE CLAIMED ADDIT IONAL DEPRECIATION OF RS. 46,46,825/- U/S. 32(1)(IIA) OF THE ACT. THE ASSESS ING OFFICER STATED THAT AS PER SECTION 32(1)(IIA), THERE ARE TWO IMPORTANT REQ UISITES TO CLAIM ADDITIONAL DEPRECIATION I.E. (I) PLANT AND MACHINERY SHOULD HAVE BEEN PURCHASED AND THERE SHOULD BE ATLEAST 25% INCREASE IN THE CAPACITY OF P RODUCTION COMPARED TO THE CAPACITY OF PRODUCTION AS ON 31.3.2 002 AND (II) A REPORT OF CHARTERED ACCOUNTANT U/S. 288(2) SHOULD BE FILED. 3. THE ASSESSING OFFICER STATED THAT ASSESSEE IN IT S RETURN OF INCOME HAD ATTACHED FORM NO. 3AA BUT NO DETAILS OF PLANT & MA CHINERY PURCHASED AND PUT TO USE HAVE BEEN FILED. THUS PERCENTAGE INCREA SED FROM INSTALLED CAPACITY IS NOT KNOWN. HOWEVER, AO HAS STATED THAT ON THE B ASIS OF PREVIOUS YEARS AUDIT REPORTS DETAILS WERE COLLATED AND SAME ARE ST ATED AT PARA 5.4 OF ASSESSMENT ORDER. THE AO STATED THAT THE INSTALLED CAPACITY DURING THE ASSESSMENT YEAR 2005-06 HAS NOT INCREASED ABOVE 25% AND THE ACTUAL INCREASE IS 24.94%. HE FURTHER STATED THAT ASSESSE E HAS FAILED TO FURNISH REPORT IN FORM NO. 3AA R.W.RULE 5A OF I.T. RULES. ACCORDINGLY, AO DISALLOWED CLAIM OF ADDITIONAL DEPRECIATION OF RS. 46,46,825/- AS CLAIMED BY ASSESSEE. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE FIRST APPELLATE AUTHORITY. 4. DURING THE COURSE OF HEARING, ASSESSEE STATED TH AT IT HAD FILED REPORT IN FORM NO. 3AA DURING THE COURSE OF ASSESSMENT PROCEE DINGS. IN ORDER TO VERIFY, LD. CIT(A) CALLED FOR REMAND REPORT FROM AO . SINCE AO STATED THAT NO SUCH REPORT WAS FILED BY ASSESSEE ALONGWITH RETURN OF INCOME OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE REQUESTE D TO SUMMON THE ASSESSMENT RECORD TO VERIFY THE SAID FORM NO. 3AA I S THERE OR NOT. IT WAS ALSO CONTENDED THAT EXPLANATION IN INSTALLED CAPACI TY U/S. 32(1)(IIA)(B) IS WITH RESPECT TO ANY INDUSTRIAL UNDERTAKING AND NOT WITH RESPECT TO ASSESSEE UPTO ASSESSMENT YEAR 2005-06 IS THE BASIS FOR ALLOWING A DDITIONAL DEPRECIATION. IT WAS CONTENDED THAT THE INCREASE IN CAPACITY WITH RE SPECT TO INDUSTRIAL UNITS OF ITA NO. 4855/M/10 3 BULK DRUGS AT UNITS 2A AND 1D WAS INCREASED TO 320% . IT WAS CONTENDED THAT THE CONFUSION WITH AO WAS ONLY ON ACCOUNT OF THE FACT THAT NO UNIT-WISE DETAILS WAS FURNISHED BY AUDIT AND ONLY PROJECT-WIS E DETAILS WERE FURNISHED. UNIT ID DEALS IN BULK DRUGS AND IT IS A SEPARATE UNI T AND ITS CAPACITY INCREASED FROM 31.3.2003 TO 31.3.2005 BV 13.5 TIMES WHEREAS THE QUALIFYING INCREASE IS 25%. IT WAS STATED THAT INSTALLED CAPACITY AS ON 3 1.3.2002 WAS 40 MT AND AS ON 31.3.2005 WAS 540 MT THUS THERE WAS AN INCREASE IN CAPACITY IS 1350%. THE LD. CIT(A) AFTER CONSIDERING THE ABOVE SUBMISSI ON OF ASSESSEE HELD THAT ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION U/ S. 32(1)(IIA) AS THE ASSESSEE HAS SATISFIED THE CONDITION LAID DOWN THEREIN. HE NCE DEPARTMENT HAS FILED THIS APPEAL BEFORE TRIBUNAL. 5. DURING THE COURSE OF HEARING, LD. DEPARTMENTAL R EPRESENTATIVE RELIED ON THE ORDER OF AO, WHEREAS LD. AR RELIED ON THE SU BMISSIONS MADE BEFORE LD. CIT(A). HE SUBMITTED THAT AO WHILE CONSIDERING THE CLAIM OF ASSESSEE FOR ADDITIONAL DEPRECIATION RELIED ON THE AMENDMENT MAD E BY FINANCE ACT 2005 WHEREIN THE WORD INDUSTRIAL UNDERTAKING WAS SUBSTITU TED WITH THE WORD AN ASSESSEE AND PRIOR TO SAID AMENDMENT THE INCREASE IN INSTALLED CAPACITY WAS TO BE CONSIDERED WITH RESPECT TO INDUSTRIAL UNDERTA KING AND NOT WITH RESPECT TO ASSESSEE AS CONSIDERED BY AO. HE FURTHER SUBMIT TED THAT LD. CIT(A) HAS SEEN FROM THE ASSESSMENT RECORD THAT ASSESSEE FILED REPORT IN FORM 3AA AND HE WAS SATISFIED THAT ASSESSEE INCREASED ITS INSTAL LED CAPACITY MUCH MORE THAN 25% OF ITS UNDERTAKING. HENCE, ORDER OF LD. CIT(A) IS JUSTIFIED. 6. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHO RITIES BELOW AND THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. CONSIDERING THE PROVISIONS OF SEC. 32(1)(IIA) OF THE ACT AS APPLICABLE TO ASSE SSMENT YEAR UNDER CONSIDERATION, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) HOLDING THAT ASSESSEE INCREASED ITS INSTALLED CAPACITY OF ITS IN DUSTRIAL UNDERTAKING MORE THAN 25%. FURTHER THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE FILED REPORT IN FORM NO. 3AA BEFORE ASSESSMENT WAS COMPLETED. HENC E LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATIO N AS THE ASSESSEE HAS ITA NO. 4855/M/10 4 FULFILLED THE REQUISITE CONDITIONS LAID DOWN U/S. 32(1)(IIA) OF THE ACT. HENCE GROUND OF APPEAL TAKEN BY DEPARTMENT IS REJECTED. 7. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED ON THIS 14 TH DAY OF OCTOBER, 2011 SD/- SD/- ( R.K. PANDA) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 14 TH OCTOBER, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 4855/M/10 5 DATE INITIALS 1. DRAFT DICTATED ON: 12.10.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 12.10.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: