S. KANT PHARMA PVT. LTD., MUMBAI V. DCIT - 7(2), MUMBAI

ITA 5079/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7370 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 09-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT PATANKAR
• Assessee Lawyers: R S CHOKSHI; M K PATIL
• Keywords: Depreciation
• Section: 143(3); 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5079/M/2016 ASSESSMENT YEAR: 2009-10 M/S. S. KANT PHARMA PVT. LTD., (PROP. ESKAY FINE CHEMICALS), 3-A, SHIV SAGAR ESTATE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 018 PAN: AAACS7439J VS. DY. COMMISSIONER OF INCOME TAX 7(2), ACIT 8(1)(2), AAYAKAR BHAVAN, 6 TH FLOOR, R. NO.651, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SMT. M.K. PATIL, A.R. & SHRI R.S. CHOKSHI, A.R. REVENUE BY : SHRI ABHIJIT PATANKAR, D.R. DATE OF HEARING : 12.04.2018 DATE OF PRONOUNCEMENT : 27.04.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 11.05.2016 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ONLY COMMON ISSUE RAISED IN ALL THE GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF R S.5,97,602/- BY LD. CIT(A) AS MADE BY THE AO TOWARDS EXCESS DEPRE CIATION ITA NO.5079/M/2016 M/S. S. KANT PHARMA PVT. LTD. 2 ON OFFICE EQUIPMENT AND ELECTRICAL INSTALLMENTS CAL CULATED AT 10% AS AGAINST 15% CLAIMED BY THE ASSESSEE. 3. THE ASSESSMENT WAS FRAMED IN THIS CASE UNDER SEC TION 143(3) OF THE ACT VIDE ORDER DATED 25.11.11 ASSESSIN G THE INCOME AT RS.4,43,35,802/- AS AGAINST THE RETURNED I NCOME OF RS.4,42,42,224/-. THEREAFTER, THE AO ISSUED NOTICE UN DER SECTION 154 OF THE ACT ON 04.03.13 PROPOSING TO DISAL LOW DEPRECIATION ON VARIOUS EQUIPMENTS TO THE TUNE OF 5 % . AS ACCORDING TO THE AO THE DEPRECIATION ON THESE ASSET S SHOULD HAVE BEEN 10% WHEREAS THE ASSESSEE HAS CLAIMED 15% AND ACCORDINGLY THE SUM OF RS.5,97,602/- WAS ADDED TO THE INCOME OF THE ASSESSEE TOWARDS EXCESS DEPRECIATION BY FRAMING ORDER UNDER SECTION 154 OF THE ACT DATED 29 .10.13. 4. IN THE APPELLATE PROCEEDINGS, THE APPEAL OF THE A SSESSEE WAS DISMISSED BY THE LD. CIT(A) AFTER CONSIDERING TH E SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE BY HOLD ING THAT ELECTRICAL INSTALLATION IS A SEPARATE CATEGORY ON W HICH ONLY 10% DEPRECIATION IS ALLOWABLE AND THUS DISMISSED THE AP PEAL. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE US THAT T HE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AND IN LAW IN UPH OLDING THE ORDER OF AO PASSED UNDER SECTION 154 OF THE ACT UP HOLDING THE DISALLOWANCE OF RS.5,97,602/-. THE LD. A.R. SUBMI TTED BEFORE US BY REFERRING TO THE APPENDIX 1 OF INCOME TAX RULES WHICH PRESCRIBES THE RATE OF DEPRECIATION. AS PER T HE SAID APPENDIX, THE FURNITURE AND FIXTURE INCLUDES ELECTRI C FITTING ON WHICH THE RATE OF DEPRECATION IS 10% WHEREAS IN THE ITA NO.5079/M/2016 M/S. S. KANT PHARMA PVT. LTD. 3 ASSESSEES CASE THE ASSETS ON WHICH DEPRECATION HAS BEEN CLAIMED AT 15% COMPRISED OF ELECTRIC FITTING, OFFIC E EQUIPMENT AND OTHERS. THE ELECTRIC FITTING COMPRISED OF ELEC TRIC PANEL, TRANSFORMERS, MCC PANEL BOARD, ELECTRIC MOTORS OF VA RIOUS HORSE POWER SIZES, WORM REDUCTION GEAR BOXES AND SWI TCH GEARS USED FOR LABORATORY AND PRODUCTION PURPOSES I N PHARMACEUTICAL INDUSTRIES WHEREAS THE OFFICE EQUIPM ENTS CONSISTED OF HEATING VENTILATION & AIR CONDITIONING SYSTEM, STEEL RACKS FOR KEEPING THE RAW AND PACKING MATERIA LS, COPIER MACHINE AND AIR CONDITIONERS. THE LD. A.R. ALSO SUBMI TTED THAT THESE DETAILS WERE FILED BEFORE THE AO BUT THE Y WERE NOT LOOKED INTO BY THE AO. THE LD. A.R. VEHEMENTLY SUBM ITTED THAT THE RATE OF DEPRECIATION ON THESE ITEMS IS ONL Y 15% AS MENTIONED UNDER THE HEAD PLANT & MACHINERY AS THESE ARE NOT THE FURNITURE AND FIXTURE OR ELECTRICAL FITTING AS HAS BEEN OBSERVED BY THE AUTHORITIES BELOW. THE LD. A.R. RELIE D ON THE FOLLOWING DECISION IN SUPPORT OF HER ARGUMENTS: 1. CIT VS. EXPRESS RESORTS & HOTELS LTD. (2015) 56 TAXMANN.COM 171 (GUJARAT) 2. CERA SANITARYWARE LTD. VS. DCIT (2016) 68 TAXMANN.COM 433 (AHMEDABAD TRIB.) 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RELEVANT RECORDS PLACED BEFORE US. WE FIND THAT IN THIS CASE THE ASSETS ON WHICH THE DEPRECIAT ION WAS WITHDRAWN BY THE AO TO THE EXTENT OF 5% AS ALSO AF FIRMED BY THE FIRST APPELLATE AUTHORITY INCLUDED THE ITEMS LI KE ELECTRIC ITA NO.5079/M/2016 M/S. S. KANT PHARMA PVT. LTD. 4 PANEL, TRANSFORMERS, MCC PANEL BOARD, ELECTRIC MOTORS OF VARIOUS HORSE POWER SIZES, WORM REDUCTION GEAR BOXES AND SWITCH GEARS USED FOR LABORATORY AND PRODUCTION PUR POSES IN PHARMACEUTICAL INDUSTRIES AND THUS THESE ARE OSTENS IBLY NOT THE FURNITURE AND FIXTURE AND ELECTRIC FITTING ON WHICH THE RATE OF DEPRECATION IS 10% AS SPECIFIED IN APPENDIX 1 IN THE INCOME TAX RULES. AFTER HEARING BOTH THE PARTIES AND PERUS ING THE DETAILS OF PLANT & MACHINERY, WE FIND THAT THE ABOVE ITEMS CLEARLY FALL UNDER THE HEAD PLANT & MACHINERY AND I S ELIGIBLE FOR DEPRECIATION @ 15%. IN OUR OPINION, THE ASSESSEE H AS RIGHTLY CLAIMED THE DEPRECIATION AT THE RATE OF 15%. THERE FORE, THE ORDER OF LD. CIT(A) UPHOLDING THE WITHDRAWAL OF DEPR ECIATION BY THE AO CANNOT BE SUSTAINED. THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. EXPRESS R ESORTS & HOTELS LTD. (SUPRA) IT HAS BEEN HELD THAT ELECTRIC I NSTALLATION AND SANITARY FITTINGS SHOULD BE REGARDED AS PLANT FOR THE PURPOSE OF DEPRECIATION UNDER SECTION 32 AND IN THE CASE OF CERA SANITARYWARE LTD. VS. DCIT (SUPRA) IT HAS BEEN HELD THAT ELECTRIC FITTINGS, FANS ETC. ARE INTEGRAL PART OF PL ANT & MACHINERY AND DEPRECIATION HAS TO BE ALLOWED AT THE SAME RATE AS IS APPLICABLE IN THE CASE OF PLANT & MACHIN ERY. HOWEVER, IN THE PRESENT CASE BEFORE US THE ITEMS ON WHICH THE DEPRECIATION HAS BEEN CLAIMED AT THE RATE OF 15% AR E CLEARLY IN THE NATURE OF PLANT & MACHINERY AND NOT ELECTRIC FITTINGS. IN VIEW OF THE DISCUSSION HEREINABOVE AND THE RATIO LA ID DOWN BY THE ABOVE DECISIONS, WE ARE INCLINED TO SET ASIDE TH E ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE DEPRECIATI ON @ 15%. ITA NO.5079/M/2016 M/S. S. KANT PHARMA PVT. LTD. 5 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.04.2018. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27.04.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.