Suryavanshi Spinning Mills Limited, Secunderabad V. Dy.CIT, Circle-3(2), Hyderabad

ITA 526/HYD/2013

• Counselvise Citation: 52622514 RSA 2013
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.526/HYD/2013 ASSESSMENT YEAR 2004-2005 SURYAVANSHI SPINNING MILLS LTD. (SINCE SURYAVANSHI TEXTILES LTD. WAS AMALGAMATED WITH SURYAVANSHI SPINNING MILLS LTD.) SECUNDERABAD PAN AACCS 8143B VS. DCIT, CIRCLE 3(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. V. SIVAKUMAR FOR REVENUE : MR. B. YADAGIRI DATE OF HEARING : 26.02.2014 DATE OF PRONOUNCEMENT : 05.03.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE FOR THE A.Y. 2004-2005 I S DIRECTED AGAINST THE ORDER OF THE CIT(A)-IX, MUMBAI DATED 12.02.2013. ASSESSEE HAS RAISED FOUR GROUNDS. 2. GROUNDS NO. 1 AND 4 ARE GENERAL IN NATURE. GROUND NO.2 IS ON THE ISSUE OF ADDITION ON ACCOUNT OF EXCISE DUTY ON CLOSING STOCK AND GROUND NO.3 IS DISALLOWAN CE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON FIXED ASSET S IN ITS UNDERTAKING AT AMBERNATH ON THE REASON THAT THEY AR E NOT USED DURING THE YEAR. 3. WE HAVE HEARD THE LEARNED COUNSEL AND LEARNED D.R. 2 ITA.NO.526/HYD/2013 SURYAVANSHI SPINNING MILLS LTD. SECUNDERABAD. 4. GROUND NO.2 IS THAT THE AO/CIT(A) ERRED IN NOT APPRECIATING THE LEGISLATIVE INTENTION IN INSERTING THE PROVISIONS OF SECTION 145A OF THE I.T. ACT. THE CIT(A) SHOULD NOT HAVE SUSTAINED THE ADDITION ON ACCOUNT OF EXCISE DUTY ON CLOSING STOCK AS THE PROVISION CREATED TOWARDS EXCISE DUTY PAYABLE ON CLOSING STOCK OF FINISHED GOODS IS ONLY A CONTINGEN T LIABILITY AND NOT AS ASCERTAINED LIABILITY AS ON 31ST MARCH OF TH E ACCOUNTING YEAR. 5. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME UP FOR CONSIDERATIO N BEFORE THIS TRIBUNAL VIDE ORDER DATED 18.2.2010 IN THE CAS E OF M/S SURYAVAMSHI COTTON MILLS LTD. IN ITA NO.1176/H/2009 FOR THE ASSESSMENT YEARS 2003-04 WHEREIN THE TRIBUNAL DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS FOLLO WS: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT THE CASE OF THE REVENUE THAT THE FINISHED GOOD LEFT THE PREMISES SO AS TO ADD THE EXCISE DUTY PAYABLE TO THE CLOSING STOCK . IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE FINISHED GOODS LEF T THE PREMISES OF THE ASSESSEE, IN OUR OPINION, THE JUDGMENT OF TH E MADHYA PRADESH HIGH COURT IN THE CASE OF ACIT VS. D & H SE CHERON ELECTRODES (P) LTD. (2008) (173 TAXMAN 188) WOULD B E SQUARELY APPLICABLE. A SIMILAR VIEW WAS TAKEN BY THIS TRIBUN AL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2004-05 . SINCE THE MADHYA PRADESH HIGH COURT DECIDED THE ISSUE AFTER C ONSIDERING THE PROVISIONS OF SEC. 145A AS AMENDED, WE DO NOT F IND ANY REASON TO TAKE A CONTRARY VIEW FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION. ACCORDINGLY, BY FOLLOWING THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2004-05 IN THE ASSESSEE'S O WN CASE AND FOR THE REASONS STATED HEREIN, WE UPHOLD THE ORDER OF THE CIT(A). 6. IN VIEW OF THE ABOVE ORDER OF THIS TRIBUNAL, W E ARE INCLINED TO DECIDE THE IMPUGNED ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THIS GROUND R AISED BY ASSESSEE IS ALLOWED. 3 ITA.NO.526/HYD/2013 SURYAVANSHI SPINNING MILLS LTD. SECUNDERABAD. 7. THE NEXT GROUND NO.3 IS ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION OF ASSETS OF AMBERNATH UNIT OF RS.2,16,77,940/-. A.O. FOUND THAT AMBERNATH UNIT OF THE ASSESSEE WAS NOT OPERATIVE DURING THE YEAR DUE TO T HE STRIKE RESORTED TO BY WORKMEN. ASSESSEE SUBMITTED THAT CON CEPT OF PASSIVE USER HAS ALSO BEEN RECOGNIZED FOR ALLOWING DEPRECIATION. IT RELIED ON VARIOUS DECIDED CASES IN SUPPORT OF ITS CLAIM. HOWEVER, A.O. DISALLOWED THE DEPRECIATION ON ASSETS INSTALLED AT AMBERNATH UNIT AND RELIED ON THE DECIS IONS IN THE CASE OF CIT VS. ORIENTAL COAL CO. LIMITED 206 ITR 6 82 AND ALSO DINESH KUMAR GULABCHAND AGARWAL VS. CIT 267 ITR 768 (BOM.). 8. IN APPEAL, ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS BEFORE THE CIT(A) AND DISTINGUISHED THE DECISIONS RELIED ON BY THE A.O. STATING THAT THEY ARE PRIOR T O THE CONCEPT OF BLOCK OF ASSETS AND THEREFORE, DEPRECIATION IS ALLOWABLE UNDER BLOCK OF ASSETS WHETHER SOME OF THE ASSETS ARE USED OR NOT. HOWEVER, THE LEARNED CIT(A) RELYING ON THE DEC ISION OF THE APEX COURT IN THE CASE OF LIQUIDATORS OF PURSA LTD. VS. CIT 25 ITR 265 (SC) UPHELD THE DISALLOWANCE. IT WAS THE SU BMISSION THAT BOTH AUTHORITIES HAVE RELIED ON THE CASE LAW G IVEN IN THE CONTEXT OF 1922 ACT AS WELL AS BEFORE THE CONCEPT O F BLOCK OF ASSETS CAME INTO PICTURE. 9. LD. COUNSEL REFERRED TO THE WRITTEN SUBMISSIONS PLACED BEFORE THE LEARNED CIT(A) AND RELIED ON THE PRINCIPLES LAID DOWN BY THE BOARD CIRCULAR NO. 469 DT. 23RD SE PT., 1986 AND RELIED ON PRINCIPLES LAID DOWN BY JABALPUR BENC H OF ITAT IN THE CASE OF INDUCTOTHERM (I) LTD. VS. DCIT 73 IT D 329. IT WAS SUBMITTED THAT A.O. IN THE SCRUTINY ASSESSMENTS FRO M AY 2000-01 TO AY 2003-2004 ALLOWED THE DEPRECIATION ON THE 4 ITA.NO.526/HYD/2013 SURYAVANSHI SPINNING MILLS LTD. SECUNDERABAD. SAME UNIT AND THERE IS NO DISALLOWANCE. IT WAS FURT HER SUBMITTED THAT THE AMBERNATH UNIT HAS BEEN SOLD BY THE ASSESSEE ON 29.09.2004 I.E., IN THE LATER ASSESSMEN T YEAR FOR A CONSIDERATION OF RS. 4.31 CRORES. THEREFORE, THE DE PRECIATION WAS REQUIRED TO BE ALLOWED WHICH WAS ALLOWED IN THE PAST SEVERAL YEARS. LEARNED D.R. RELIED ON THE ORDERS OF THE AUTHORITIES. 10. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RIVAL CONTENTIONS. THE CASE LAW RELIED ON BY THE A. O. AS WELL AS BY THE LD.CIT(A) DO PERTAIN TO THE CLAIM OF DEPRECI ATION AS PROVIDED UNDER SECTION 32 IN THE EARLIER PROVISIONS WHERE DEPRECIATION WAS TO BE ALLOWED ON AN ASSET INDIVIDU ALLY. HOWEVER, CONSEQUENT TO THE BLOCK OF ASSETS CONCEP T INTRODUCED W.E.F. AY 1989-1990 AND THE CIRCULAR IS SUED BY THE CBDT (SUPRA), ONCE THE VALUE OF ASSET FORMS PART OF THE BLOCK OF ASSETS, DEPRECIATION HAS TO BE ON THE WDV VALUE WHETHER AN ASSET FORMING PART OF THE BLOCK OF ASSETS IS IN USE OR NOT. SIMILAR PRINCIPLE WAS CONSIDERED IN THE TWO DECISIO NS RELIED ON BY THE ASSESSEE BEFORE THE CIT(A). NOT ONLY THAT T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. OSWAL AGRO MILLS LTD. 238 CTR 113 CONSIDERED SIMILAR CLAIM AND ALLOWED DEPRECIATION HOLDING THAT THE ASSESSEE CLAIMED DEPRECIATION UNDER SECTION 32 IN RESPECT OF THE ASSETS AT ITS BH OPAL UNIT WHICH WAS CLOSED FOR SIX YEARS. THE CLAIM WAS ON TH E BASIS THAT (I) DESPITE CLOSURE OF THE UNIT THERE WAS A PASSIVE USER OF ASSETS FOR PART OF THE BLOCK OF ASSETS AND DEPRECIATION CO ULD NOT BE DISALLOWED . THE HONBLE DELHI HIGH COURT HELD THAT DESPITE NOT USING THE ASSETS, DEPRECIATION IS ALLOWABLE, IF IT IS PART OF BLOCK OF ASSETS. IN VIEW OF THE ABOVE PRINCIPLE, WE HAVE NO HESITATION IN DIRECTING THE A.O. TO ALLOW DEPRECIAT ION. 5 ITA.NO.526/HYD/2013 SURYAVANSHI SPINNING MILLS LTD. SECUNDERABAD. 11. HOWEVER, AS SEEN FROM THE ORDER OF THE A.O. T HE A.O. DISALLOWED THE DEPRECIATION TO THE EXTENT OF RS.2,1 6,77,940/- AS DEPRECIATION OF AMBERNATH UNIT BUT ALSO STATES THAT DEPRECIATION OF ASSETS AT THE CORPORATE OFFICE WAS ALSO NOT ALLOWED ACCORDING TO IT RULES, AS THE ASSESSEE HAS NOT FURNISHED DETAILS OF DEPRECIATION. THE SALE OF THE ASSETS AT RS.4.31 CRORES IN LATER YEAR DO NOT INDICATE THAT T HE ENTIRE DEPRECIATION DISALLOWED MAY PERTAIN TO THE ASSETS O F AMBERNATH UNIT. THEREFORE, A.O. IS DIRECTED TO EXAM INE THE WDV OF THE AMBERNATH UNIT SEPARATELY AND ALLOW THE DEPRECIATION PERTAINING TO THIS UNIT, WHICH IS UNDE R DISPUTE. NOT ONLY THAT, AO IS ALSO DIRECTED TO WORKOUT THE N ECESSARY ADJUSTMENTS, IF REQUIRED, IN THE LATER YEAR TO THE EXTENT OF DEPRECIATION ALLOWED IN THIS YEAR, AS THE SAID UNIT WAS SOLD. THE ADJUSTMENTS IN THE BLOCK OF ASSETS AS PER THE I .T. PROVISIONS REQUIRED TO BE EXAMINED, IF THE DEPRECIA TION IS ALLOWED IN THIS YEAR. CONSEQUENTLY, ORDER IN LATER YEAR MAY HAVE TO BE MODIFIED ON THE BASIS OF WDV IN THIS YEA R ON THE ASSETS INVOLVED. WITH THESE DIRECTIONS, ASSESSEES GROUNDS ARE ALLOWED. 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.03.20 14. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 05 TH MARCH, 2014 VBP/- 6 ITA.NO.526/HYD/2013 SURYAVANSHI SPINNING MILLS LTD. SECUNDERABAD. COPY TO : 1. SURYAVANSHI SPINNING MILLS LTD. (SINCE SURYAVANSHI TEXTILES LTD. WAS AMALGAMATED WITH SURYAVANSHI SPINNING MILLS LTD.), 105, 6 TH FLOOR, SURYA TOWERS, S.P. ROAD, SECUNDERABAD 500 003. 2. DCIT, CIRCLE 3(2), HYDERABAD. 3. CIT(A)-9, MUMBAI & CIT(A)-IV, HYDERABAD 4. C IT - III , HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.