Turbo Scaffolding Pvt. Ltd., Ludhiana V. Addl. CIT, Ludhiana

ITA 486/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8544 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: NAVNEET SEHGAL
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.486/CHD/2015 (ASSESSMENT YEAR : 2005-06) TURBO SCAFFOLDING PVT. LTD., VS. THE ADDL.C.I.T. , NOW -TURBO INDUSTRIES PVT. LTD., RANGE 1, INDUSTRIAL AREA C, SURJIT CINEMA ROAD, LUDHIANA. DHANDARI KALAN, LUDHIANA. PAN: AABCT3463C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVNEET SEHGAL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 17.11.2015 DATE OF PRONOUNCEMENT : 21.01.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA DATED 23.7.2013 FOR ASSESSME NT YEAR 2005-06. 2. THE GROUND NOS. 1 AND 2 RELATES TO THE DISALLOWANCE OF DEPRECIATION ON HYDRAULIC MACHINES AT RS.7,12,189/-. THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT NOTICED THAT THE ASSESSEE HAS PURCHASED 2 CERTAIN HYDRAULIC MACHINES AS ON 30.3.2005. THESE MACHINES WERE DISPATCHED FROM JALANDHAR AND DELIVER ED TO THE ASSESSEE AS ON 31.3.2005, WHICH IS EVIDENT FROM OCTROI SLIP. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE MANUAL OF THESE MACHINES AND SHOW ANY EVIDENCE TO PROVE THAT THESE MACHINES HAD BEEN PUT TO USE. THE ASSESSEE SUBMITTED THAT THESE MACHINES WERE READY T O USE PLUG IN COMPUTERIZED MACHINES AND, THEREFORE, INSTA LLED ON SAME DAY AS PER COPY OF INSTALLATION BILL ALREAD Y FILED WITH THE ASSESSING OFFICER. THE ASSESSEE CLAIMED T HAT EVEN IF THE MACHINERY IS READY TO PUT TO USE CONDIT ION, ACTUAL USE OF MACHINERY WAS NOT NECESSARY FOR ALLOW ING DEPRECIATION ON THE SAME. THE ASSESSING OFFICER PO INTED OUT THAT THE MACHINERY HAS BEEN RECEIVED ONLY ON 31.3.2005 THEREAFTER, IT WAS REQUIRED TO BE UNLOADE D, UNPACKED AND TAKEN TO THE DESIRED SPOT IN THE FACTO RY PREMISES. AFTER THAT, THE ELECTRONIC BOARDS, WHICH ARE TRANSPORTED SEPARATELY AFTER REMOVAL FROM THE MACHI NERY AS THEY ARE SPECIAL PARTS REQUIRING DUST-FREE AND S HOCK- PROOF PACKING AND OTHER ACCESSORIES, NEED TO BE LIF TED APART FROM THE VARIOUS ADJUSTMENTS TO BE DONE AND ELECTRICAL CONNECTIONS TO BE GIVEN FOR THE MACHINES TO BE READY. HE OBSERVED THAT THERE IS A NEED TO DO SOME TRIAL RUNS BEFORE THE MACHINES CAN BE PUT TO USE FOR THE COMMERCIAL PRODUCTION. AS THE ASSESSEE HAS NOT SUBMITTED ANY DOCUMENTS EVIDENCING THE FACT THAT COMMERCIAL PRODUCTION WAS TAKEN OUT OF THIS MACHINE AS ON 31.3.2005 AND ALSO FAILED TO ESTABLISH THROUGH A NY 3 DOCUMENTS LIKE INSTRUCTIONS AND INSTALLATION MANUAL TO PROVE THAT THE MACHINES COULD BE INSTALLED WITHIN A PERIOD OF ONE DAY. IN THIS VIEW, THE ASSESSING OFFICER HE LD THAT THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH WITH A NY EVIDENCE EXCEPT THE INSTALLATION BILL THAT THE MACH INERY WAS EVEN READY FOR PUT TO USE ON 31.3.2005 AND DISA LLOWED THE DEPRECIATION AMOUNTING TO RS.7,12,189/-. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THE COMPLETE DETAILS OF THE HYDRAULIC MAC HINES ALONGWITH THE BILL, DATE, DATE OF INSTALLATION, BIL L NUMBER, COST OF THE ASSET AND THE DEPRECIATION CLAIMED BY T HE ASSESSEE. AS PER THE ASSESSEE THE MACHINES PURCHA SED WERE DISPATCHED FROM JALANDHAR ON 30.3.2005 AND REA CHED TO THE ASSESSEE ON 31.3.2005, WHICH IS EVIDENT FROM OCTROI SLIP. THE COPIES OF PURCHASE BILLS, INSTALLATION B ILLS AND CERTIFICATE OF CHARTERED ACCOUNTANT REGARDING THE INSTALLATION WERE ALSO FILED, WHICH PROVES THAT THE MACHINERY WAS INSTALLED ON 31.3.2005. THE EXISTEN CE OF THESE DOCUMENTS WERE NEVER DENIED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER WAS NOT CORRECT I N ASSUMING AND HOLDING THAT THERE IS ALWAYS A NEED TO CONDUCT TRIAL RUN BEFORE THE MACHINERY IS PUT TO AC TUAL USE FOR COMMERCIAL PRODUCTION. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS AND PRAYER WAS MADE TO DELETE T HE DISALLOWANCE. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT (APPEALS) OBSERVED THAT I N 4 RESPECT OF A SPECIFIC QUERY RAISED BY THE ASSESSING OFFICER TO PRODUCE THE MANUAL OF THESE MACHINES AS ALSO EVI DENCE TO PROVE THAT THESE MACHINES HAD BEEN PUT TO USE, N O SUCH EVIDENCE WAS PRODUCED BY THE ASSESSEE. AFTER OBSE RVING THAT THE ASSESSING OFFICER IN A DETAILED ANALYSIS O N VARIOUS STEPS REQUIRED FOR THE INSTALLATION OF THES E MACHINES AS ALSO FOR THE USE OF THESE MACHINES FOR COMMERCIAL PRODUCTION, HAS BEEN ABLE TO ESTABLISH T HAT IT IS VIRTUALLY IMPOSSIBLE FOR SUCH MACHINE TO BE INST ALLED AND PUT TO COMMERCIAL USE WITHIN SUCH A SHORT PERIO D. AFTER PERUSING CASE LAWS RELIED ON BY THE ASSESSEE, THE LEARNED CIT (APPEALS) OBSERVED THAT THE ASSESSEES ALTERNATE PLEA PERTAINS TO THE CASES WHERE THE MACH INES WERE BEING USED FOR THE BUSINESS PURPOSES IN THE EA RLIER YEARS BUT FOR SOME REASON THEY WERE NOT USED DURING THE YEAR OR PERTAINS TO MACHINES WHICH WERE STAND BY MACHINES READY FOR USE BY ASSESSEE IN CASE OF CONTI NGENCY OR BREAKDOWNS. SINCE THE FACTS OF THESE CASES WER E NOT APPLICABLE TO THE PRESENT CASE, THE LEARNED CIT (AP PEALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 5. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ENOUGH EVIDENCE TO PROVE THAT THE MACHINES WERE INSTALLED AS ON 31.3.2005, WHILE THE ASSESSING OFFICER ONLY ON SUPE RFICIAL FACTS STATING THAT IS NOT POSSIBLE FOR THESE KINDS OF 5 MACHINES TO GET READY FOR USE WITHIN ONE DAY HAS MA DE THE DISALLOWANCE. 6. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS ARE THAT THE MACHINES WERE DEL IVERED AT THE PREMISE OF THE ASSESSEE AS ON 31.3.2005, WHI CH IS EVIDENT FROM THE ORCROI SLIP AND THIS FACT HAS NOT BEEN DISPUTED EVEN BY THE ASSESSING OFFICER. THE ASSESS EE HAS PRODUCED COPIES OF BILL, INSTALLATION BILLS AND CER TIFICATE OF CHARTERED ACCOUNTANT REGARDING INSTALLATION AND WER E FILED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO FIND OUT ANY DISCREPANCY IN TH ESE DOCUMENTS. FURTHER THE ASSESSEE OFFERED AN EXPLAN ATION, WITH REGARD TO THE INSTALLATION OF MACHINERY, THAT THESE ARE READY TO USE PLUG IN KIND OF MACHINERY AND DOES NOT REQUIRE ANY LONG PROCEDURE OF INSTALLATION. THE AS SESSING OFFICER HAS NOWHERE IN HIS ORDER BEEN ABLE TO PROVE THIS EXPLANATION OF THE ASSESSEE TO BE WRONG. HE JUST B RUSHED ASIDE THIS EXPLANATION AND MADE HIS OWN ASSUMPTION WITH REGARD TO THE PROCEDURE OF INSTALLATION. AS PER TH E ASSESSING OFFICER, THE MACHINERY AFTER BEING DELIVE RED IN THE PREMISES OF THE ASSESSEE, NEED TO BE UNLOADED, UNPA CKED AND TAKEN TO DESIRED SPOT. THEREAFTER ELECTRONIC B OARDS AND OTHER ACCESSORIES NEED TO BE FITTED APART FROM OTHE R 6 ADJUSTMENTS, WHICH MAY REQUIRE A LONG TIME. THE AVERMENT OF THE ASSESSING OFFICER IS NOT BACKED BY ANY DOCUMENTARY EVIDENCE AND IN VIEW OF THE FACT THAT T HE EXPLANATION OF THE ASSESSEE AS TO THE MACHINERY BEI NG READY TO USE BEING NOT DISPROVED BY THE ASSESSING O FFICER. WE DO NOT SEE ANY REASON FOR THE ASSESSING OFFICER TO FIND THAT THE MACHINERY WAS NOT INSTALLED AS ON 31.3.200 5. IF THE ASSESSING OFFICER HAD ANY APPREHENSION WITH REG ARD TO THE SAID EXPLANATION OF THE ASSESSEE, HE COULD HAVE GONE AHEAD AND MAKE FURTHER ENQUIRIES, RATHER THAN ASSU MING HIMSELF THE PROCEDURE FOR INSTALLATION. IN VIEW OF THIS, WE DO NOT FIND OURSELVES IN AGREEMENT WITH THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE DEPRECIATION O N THESE MACHINES. THE ASSESSING OFFICER IS HEREBY DIRECTED TO ALLOW THE ASSESSEE THE DEPRECIATION ON THE SAID MAC HINES AS PER LAW. 8. THE NEXT ISSUE IS WITH REGARD TO THE ACTION OF THE ASSESSING OFFICER IN ALLOWING DEPRECIATION @ 15% ON ELECTRICAL INSTALLATION AS AGAINST 25% CLAIMED BY T HE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIM ED DEPRECIATION @ 25% ON CERTAIN ELECTRICAL INSTALLATI ONS. THE EXPLANATION OF THE ASSESSEE WAS THAT THESE ELEC TRICAL INSTALLATIONS ARE AN INTEGRAL PART OF PLANT & MACHI NERY, HENCE DEPRECIATION @ 25% WAS CLAIMED. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS IN THIS REGARD. TH E 7 ASSESSING OFFICER DISTINGUISHING THESE CASE LAWS, M ADE THE DISALLOWANCE. 9. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT DEPRECIATION CLAIMED ON ELECTRICAL INSTALLATIONS, WHICH ARE VERY MUCH PART OF PLANT & MACHINERY IN RESPECT OF WHICH IT WAS INSTALLED. FO R THE PURPOSES OF ASSESSEES BUSINESS, THE INSTALLATION O F SUCH MACHINERY ELECTRICAL PANEL/OTHER ELECTRIC INSTALLAT IONS ARE REQUIRED TO RUN THE HEAVY MACHINERY. RELYING ON A NUMBER OF JUDGMENTS, IT WAS PLEADED THAT DEPRECIATI ON @ 25% BE PROVIDED ON SUCH ELECTRICAL INSTALLATIONS. THE LEARNED CIT (APPEALS) OBSERVED THAT THE SUBMISSION OF THE ASSESSEE THAT ELECTRICAL INSTALLATIONS ARE PART OF MACHINERY IS NOT BACKED UP BY ANY EVIDENCE. HE ALSO OBSERVED THAT THE ASSESSING OFFICER HAD POINTED OUT IN HIS ORDER THAT THE ITEMS INCLUDED IN ELECTRICAL INSTALLATIONS WERE ELE CTRICAL FITTINGS/WIRINGS. THESE ITEMS WERE SPECIFICALLY D EFINED UNDER THE HEAD ELECTRICAL FITTING. THE ASSESSEE HAD NEITHER CONTROVERTED THESE FINDINGS NOR HAD CLAIMED ADDITIONAL DEPRECIATION ON THE SAME. IN THIS WAY, DISALLOWANCE WAS CONFIRMED BY THE LEARNED CIT (APPE ALS). 10. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSION MADE BEFORE THE LOWER AUTHORITIES. RELIANCE WAS PLACED ON A NUMBER OF JUDGMENTS, WHICH WERE ALSO RELIED ON BEFORE THE LEARNED CIT (APPEALS ), SPECIFICALLY IN THE CASE OF CIT VS. OSWAL WOOLLEN M ILLS LTD.. 289 ITR 261 (2007) (P&H). 8 11. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 12. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. IN VIEW OF THE FACT THAT THE CLAIM OF THE ASSESSEE THA T THESE ELECTRICAL INSTALLATIONS WERE A PART OF THE PLANT & MACHINERY, WAS NOT PROPERLY EXAMINED AT ANY STAGE NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LEARNED CIT (APPEALS). WE THINK IT FIT TO SEND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER THESE INSTALLATIONS ARE PART OF PLANT & MACHINERY OR NOT. THE ASSESSEE IS FREE TO ADDUCE ANY EVIDENCE WHICH IT DE EMS FIT ON THIS ISSUE AND THE ASSESSING OFFICER IS HEREBY D IRECTED TO GIVE A CLEAR FINDING WHETHER THESE INSTALLATIONS ARE PART OF THE PLANT & MACHINERY. IF IT IS SO, DEPRECIATIO N @ 25% IS TO BE ALLOWED, OTHERWISE DEPRECIATION ONLY TO TH E EXTENT OF 15% IS TO BE ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST JANUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9