Dy.CIT, Circle-1(3), Hyderabad V. Bhagyanagar India Limited, Secunderabad

ITA 5/HYD/2014

• Counselvise Citation: 522514 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: K C DEVDAS
• Keywords: Business income; Depreciation; Additional depreciation
• Section: 263; 154; 15; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.5/HYD/2014 ASSESSMENT YEARS 2008-2009 DCIT, CIRCLE-1(3), HYDERABAD. VS. BHAGYANAGAR INDIA LIMITED SECUNDERABAD. PAN AAACR8963C (APPELLANT) (RESPONDENT) FOR REVENUE : MR. D. SUDHAKAR RAO FOR ASSESSEE : MR. K.C. DEVDAS DATE OF HEARING : 07.05.2015 DATE OF PRONOUNCEMENT : 27.05.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-II, HYDERABAD DATED 01. 10.2013 WHEREBY SHE DELETED THE ADDITIONS MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSEE BY WAY OF RECTIFICATIO N ORDER PASSED UNDER SECTION 154 OF THE I.T. ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND SELLING OF COPPER PRODUCTS, TELEPHONE CABLES AS WELL AS GENERATION OF WIND POWER. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.09.2008 D ECLARING TOTAL INCOME OF RS.18,74,72,717. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 29.12.2010, T HE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE A.O. A T 2 ITA.NO.5/HYD/2014 BHAGYANAGAR INDIA LTD., SECUNDERABAD. RS.20,28,41,540. THE RECORD OF THE SAID ASSESSMENT SUBSEQUENTLY CAME TO BE EXAMINED BY THE LD. CIT AND ON SUCH EXAMINATION, HE WAS OF THE OPINION THAT THE ORDER P ASSED BY THE A.O. UNDER SECTION 143(3) HAS THE FOLLOWING ERR ORS. (I) EXCESS DEPRECIATION ALLOWED ON ELECTRICAL INSTALLATION AT 15%. (II) EXCESS DEPRECIATION ALLOWED ON OFFICE EQUIPMENT AT 15%. (III) PAYMENT OF CONTRIBUTIONS OF P.F./ESI BEYOND THE DUE DATE REMAIN TO BE DISALLOWED. (IV) INCOME ARISING OUT OF THE DEVELOPMENT AGREEMENT WITH VANSH BUILDERS TAXED AS CAPITAL GAINS INSTEAD OF BUSINESS INCOME. 3. THE LD. CIT THEREFORE ISSUED A NOTICE UNDER SEC TION 263, IN RESPONSE TO WHICH, A DETAILED REPLY WAS FIL ED BY THE ASSESSEE OBJECTING TO THE REVISION OF ASSESSMENT PR OPOSED BY THE LD. CIT UNDER SECTION 263. THE SUBMISSIONS MADE BY THE ASSESSEE IN THE SAID REPLY WAS PARTLY FOUND ACCEPTA BLE BY THE LD. CIT WHO DID NOT REVISE THE ASSESSMENT ORDER PAS SED BY THE A.O. UNDER SECTION 143(3) ON THE ISSUES OF EXCESS D EPRECIATION AND BELATED PAYMENT OF CONTRIBUTIONS TOWARDS P.F. A ND ESI. HE HOWEVER PASSED ORDER UNDER SECTION 263 DIRECTING TH E A.O. TO ASSESS THE INCOME ARISING OUT OF DEVELOPMENT AGREEM ENT WITH VANSH BUILDERS IN THE HANDS OF THE ASSESSEE AS BUSI NESS INCOME AS AGAINST CAPITAL GAINS. ACCORDINGLY, ORDER UNDER SECTION 143(3) READ WITH SECTION 263 WAS PASSED BY THE A.O. ON 14.06.2012 BRINGING TO TAX THE SAID INCOME IN THE H ANDS OF THE ASSESSEE AS BUSINESS INCOME. MEANWHILE, THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD. CI T UNDER SECTION 263 CAME TO BE DISPOSED OF BY THE TRIBUNAL VIDE ORDER DATED 06.11.2012 PASSED IN ITA.NO.599/HYD/2012 WHER EBY IT WAS HELD BY THE TRIBUNAL THAT THE INCOME ARISING TO THE 3 ITA.NO.5/HYD/2014 BHAGYANAGAR INDIA LTD., SECUNDERABAD. ASSESSEE OUT OF DEVELOPMENT AGREEMENT WITH VANSH BU ILDERS WAS CHARGEABLE TO TAX AS INCOME FROM CAPITAL GAINS. 4. WHILE GIVING EFFECT TO THE ORDER OF THE TRIBUNA L DATED 06.11.2012 VIDE ORDER DATED 06.11.2012, THE A .O. COMMITTED A MISTAKE OF ADDING THE SHORT TERM CAPITA L GAIN OF RS.46,27,052 TWICE. THE ASSESSEE THEREFORE MOVED AN APPLICATION UNDER SECTION 154 SEEKING RECTIFICATION OF THE SAID MISTAKE AND THE A.O. VIDE ORDER DATED 28.12.2012 PA SSED UNDER SECTION 154 DULY RECTIFIED THE MISTAKE COMMIT TED BY HIM BY MAKING THE ADDITION ON ACCOUNT OF SHORT TERM CAP ITAL GAIN TWICE. WHILE PASSING THE SAID ORDER, HE ALSO MADE R ECTIFICATION ON ACCOUNT OF THE FOLLOWING ISSUES WHICH, ACCORDING TO HIM, ALSO CONSTITUTED MISTAKES IN THE ORDER DATED 06.12. 2012. SL.NO. NATURE OF ADDITIONS AMOUNT IN RS. I. DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED UNDER I.T. ACT ON PLANT AND MACHINERY 8,44,715 II. DISALLOWANCE OF DEPRECIATION CLAIMED UNDER I.T. ACT ON ELECTRICAL INSTALLATION 1,41,713 III. DISALLOWANCE OF DEPRECIATION CLAIMED UNDER I.T. ACT ON OFFICE EQUIPMENT 1,19,457 IV. NON CONSIDERATION OF EMPLOYEES CONTRIBUTION MADE TO P.F. & ESI. 41,600 5. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECT ION 154, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE FOLLOWING SUBMISSION WAS MADE ON BEH ALF OF THE ASSESSEE BEFORE HIM IN SUPPORT OF ITS CASE THAT THE RE WERE NO MISTAKES IN THE ORDER OF THE A.O. DATED 06.12.2012 CALLING FOR ANY RECTIFICATION AS DONE BY THE A.O. VIDE ORDER PA SSED UNDER SECTION 154 OF THE ACT. 4 ITA.NO.5/HYD/2014 BHAGYANAGAR INDIA LTD., SECUNDERABAD. COMING TO THE ISSUE OF ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY, IT WAS EXPLAINED THAT THE ADDITION TO PLANT AND MACHINERY OF RS.84,4 7,149 1 WERE MADE AFTER 30.09.2006 DURING THE A.Y. 2007-08. ACCORDINGLY, THE DEPRECIATION AT THE RATE OF 10% OF RS. 84,47,149 I - WAS CLAIMED IN A. Y. 200708 AND THE BALANCE AT THE RATE OF 10% OF RS.8,44,715/- WAS CLAIMED IN A.Y.2008-09. EXACTLY IDENTICAL ISSUE WAS DEAL WITH IN THE CASE OF ACIT VS . SIL INVESTMENTS LTD. - 73 DTR 233 (DELHI), WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. FROM THE DEPRECIATION SCHEDULE AS SHOWN IN I.T. RULES, THERE ARE THREE CATEGORIES OF DEPRECIATION REGARDING ELECTRICAL FITTINGS. (A) FIRST CATEGORY, FURNITURE AND FITTINGS - IN THIS CATEGORY ELECTRIC ITEMS LIKE ELECTRIC WIRING, SWITCHES, SOCKETS OTHER FITTINGS ETC., ARE INCLUDED AND THEY ARE ENTITLED FOR DEPRECIATION AT THE RATE OF 10%. (B) THE SECOND CATEGORY INCLUDED IN PLANT AND MACHINERY III(8)(E) WHICH INCLUDES CONDENSERS, AUTOMATIC POWER CUT DEVICE, CAPACITORS ETC., ENTITLED FOR DEPRECIATION AT THE RATE OF 80%. (C) ALL OTHER ELECTRICAL EQUIPMENT OTHER THAN THE ABOVE TWO CATEGORIES CLASSIFIED UNDER THE HEAD PLANT AND MACHINERY. PART III(1) ENTITLED FOR DEPRECIATION AT THE RATE OF 15%. IT WAS EXPLAINED BY THE APPELLANT THAT THE DEPRECIATION IN THIS CASE WAS CLAIMED ON ELECTRIC TRANSFORMERS, GEAR BOXES HEAVY DUTY MOTORS, POWER DISTRIBUTION BOARDS ETC., WHICH WERE CLASSIFIED AS PLANT AND MACHINERY, PART III(1) OF DEPRECIATION SCHEDULE. ACCORDINGLY, 15% OF DEPRECIATION WAS CORRECTLY CLAIMED BY THE APPELLANT. 5.1. AFTER TAKING INTO CONSIDERATION THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(A) HE LD THAT THE ISSUES RAISED BY THE A.O. IN THE ORDER UNDER SECTIO N 154 WERE 5 ITA.NO.5/HYD/2014 BHAGYANAGAR INDIA LTD., SECUNDERABAD. ALL DEBATABLE ISSUES AND THE SAME THEREFORE WERE BE YOND THE SCOPE OF RECTIFICATION PERMISSIBLE UNDER SECTION 15 4. ACCORDINGLY, THE ADDITIONS MADE BY THE A.O. ON THE SAID ISSUES BY WAY OF RECTIFICATION UNDER SECTION 154 WERE DELE TED BY THE LD. CIT(A) ALLOWING THE APPEAL OF THE ASSESSEE. AGG RIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE BEFORE T HE LD. CIT(A), WHICH HAS BEEN REITERATED BY THE LD. COUNSE L FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US, IS SUFFI CIENT TO SHOW THAT ALL THE ISSUES RAISED BY THE A.O. IN HIS ORDER UNDER SECTION 154 WERE CERTAINLY DEBATABLE AND AS RIGHTLY HELD BY THE LD. CIT(A), THE SAME WERE BEYOND THE SCOPE OF RECTIFICA TION PERMISSIBLE UNDER SECTION 154. MOREOVER, IT IS ALSO OBSERVED THAT EVEN THOUGH ALL THESE ISSUES WERE RAISED BY TH E LD. CIT IN THE NOTICE ISSUED UNDER SECTION 263, THE SAME WERE DROPPED BY HIM WHILE PASSING THE ORDER UNDER SECTION 263 INASM UCH AS THE ORDER OF THE A.O. ON THESE ISSUES WAS NOT REVIS ED BY HIM. THESE ISSUES THEREFORE WERE NOT INVOLVED IN THE APP EAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 263 AND THERE WAS THUS NO OC CASION FOR THE TRIBUNAL TO GIVE ANY DECISION OR DIRECTION ON T HESE ISSUES. THE ORDER PASSED BY THE A.O. ON 06.12.2012 GIVING E FFECT TO THE ORDER OF THE TRIBUNAL THUS DID NOT INVOLVE THESE IS SUES AS THE SCOPE OF THE SAID ORDER WAS LIMITED TO GIVE EFFECT TO THE ORDER OF THE TRIBUNAL WHICH DID NOT INVOLVE THESE ISSUES AT ALL. IT THEREFORE CANNOT BE SAID, BY ANY STRETCH OF IMAGINA TION, THAT THERE WAS ANY MISTAKE IN THE ORDER OF THE A.O. DATE D 6 ITA.NO.5/HYD/2014 BHAGYANAGAR INDIA LTD., SECUNDERABAD. 06.12.2012 ON THESE ISSUES CALLING FOR ANY RECTIFIC ATION UNDER SECTION 154 AND THIS POSITION CLEARLY EVIDENT FROM THE RELEVANT ORDERS, COPIES OF WHICH ARE PLACED ON RECORD BEFORE US, HAS NOT BEEN DISPUTED EVEN BY THE LEARNED D.R. WE THEREFORE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) HOLDING THAT T HERE WERE NO MISTAKES IN THE ORDER OF THE A.O. DATED 06.12.20 12 CALLING FOR ANY RECTIFICATION UNDER SECTION 154 AND UPHOLDI NG THE SAME, WE DISMISS THIS APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05.2015. SD/- SD/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 27 TH MAY, 2015 VBP/- COPY TO 1. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(3), 4 TH FLOOR, AAYAKAR BHAVAN, HYDERABAD. 2. BHAGYANAGAR INDIA LIMITED, 5 TH FLOOR, SURYA TOWERS, S.P. ROAD, SECUNDERABAD. 3. CIT(A)-II, HYDERABAD. 4. CIT-I, HYDERABAD. 5. D.R. I.T.A.T. B BENCH, HYDERABAD. 6. GUARD FILE