Angi Plast Pvt. Ltd., Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 549/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6584 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M MEHTA
• Keywords: Depreciation; Opportunity of being heard; Additional depreciation
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA NO.549/AHD/2009 [ASSTT. YEAR : 2005-2006] ANGI PLAST PVT. LTD. PLOT NO.4803, PHASE-IV, GIDC VATVA, AHMEDABAD. PAN : AABCA 8320 P VS. ITO, WARD-1(2) AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P.M. MEHTA ASSESSEE BY : SHRI K. MADHUSUDAN O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX(APPEALS)- VI, AHMEDABAD DATED 07.11.2008 ARISING OUT OF THE O RDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF TH E INCOME TAX ACT, 1961. 2. THE FIRST GROUND OF THE ASSESSEES APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE IN RESPECT OF CAR PURCHASED IN THE NAME OF A DIRECTOR THE DEPA RTMENTAL AUTHORITEIS HAVE ERRED IN MAKING THE FOLLOWING DISA LLOWANCES: (I) DEPRECIATION : RS.32,459 (II) INTEREST ON THE LOAN TAKEN FOR FINANCING : RS. 1,714 THE CAR (III) ESTIMATED EXPENDITURE ALLEGEDLY INCURRED : R S.50,000 ON THAT CAR --------------- RS.84,173 ======= ITA NO.549/AHD/2009 -2- 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE IS A COMPANY. DURING THE YEAR U NDER CONSIDERATION, IT PURCHASED A CAR IN THE NAME OF A DIRECTOR. THAT TH E PAYMENT FOR PURCHASE OF CAR WAS MADE BY THE ASSESSEE COMPANY AND THE SAM E IS SHOWN IN THE ASSESSEES BOOKS OF ACCOUNTS AS ITS ASSET. THE CAR IS USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE COMPANY. THE AO DI SALLOWED DEPRECIATION ON THE ABOVE CAR. HE ALSO DISALLOWED THE INTEREST AMOUNTING TO RS.1,714/- WHICH WAS IN FACT NOT PAID FOR THE CA R BUT ON ACCOUNT OF LOAN TAKEN FOR OTHER VEHICLE I.E. TEMPO. THE AO ALSO DI SALLOWED THE ESTIMATED EXPENDITURE ON THE RUNNING OF THE ABOVE CAR WHICH W AS ESTIMATED AT RS.50,000/-. HE SUBMITTED THAT THE ISSUE IS SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE ALLAHAB AD HIGH COURT IN THE CASE OF CIT VS. VARANASI AUTO SALES P. LTD., 326 IT R 182 (ALL). THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND ARGUMENTS OF THE BOTH THE SIDES AND PERUSED THE MATERIAL PLAC ED BEFORE US. IN THE CASE OF VARANASI AUTO SALES P. LTD. (SUPRA), THE HO NBLE ALLAHABAD HIGH COURT HELD AS UNDER: DISMISSING THE APPEAL, THAT THE TRIBUNAL ALLOWED D EPRECIATION BASED ON THE FINDINGS THAT THE TRUCKS HAD BEEN PURC HASED IN THE NAMES OF THE DIRECTORS JUST FOR THE CONVENIENCE, TH AT THE FUNDS HAD BEEN INVESTED BY THE ASSESSEE AND THE HIRE RENTS RE CEIVED ON SUCH TRUCKS HAD BEEN CREDITED BY THE ASSESSEE IN ITS OWN ACCOUNT, THAT SUCH RECEIPTS HAD BEEN TAXED BY THE DEPARTMENT AND THAT THE ASSESSEE WAS THE DE FACTO OWNER OF THE TRUCKS. THES E FINDINGS OF THE TRIBUNAL HAD NOT BEEN CHALLENGED BY THE DEPARTMENT. THE ASSESSEE WAS ENTITLED TO DEPRECIATION. ITA NO.549/AHD/2009 -3- WHEN THE FACTS OF THE ASSESSEES CASE ARE EXAMINED IN THE LIGHT OF THE ABOVE DECISION, WE FIND THAT ADMITTEDLY IN ASSESSEE S CASE FUND HAS BEEN INVESTED BY THE ASSESSEE COMPANY AND NOT BY THE DIR ECTOR. THE ASSET IS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AND THE ASSET HAS BEEN USED FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE-COMPANY. ON THE ABOVE FACTS, IN OUR OPINION, THE RATIO OF THE ABOVE DECISION OF THE HONBLE ALLAHABAD HIGH COURT WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE GROUND NO.1 OF THE ASSESSEES APPEAL. 5. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80IB. 6. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSEE DERIVES INCOME FROM MANUF ACTURING OF IV SETS AND SYRINGES (INTRAVENOUS INJECTION SETS) ETC. THE ASSESSEE STARTED MANUFACTURING OF THESE ITEMS IN THE YEAR 1996 AND E ARLIER YEARS DEDUCTION UNDER SECTION 80IB AS CLAIMED BY THE ASSESSEE WAS A LLOWED. THAT IN THE YEAR UNDER CONSIDERATION, BY MISTAKE IN THE STATEME NT ACCOMPANYING THE RETURN OF INCOME THE DEDUCTION UNDER SECTION 80IB H AS BEEN CLAIMED WITH WRONG DESCRIPTION I.E. TELECOM SERVICES WHICH SHO ULD HAVE BEEN IN FACT MANUFACTURING OF IV SETS AND SYRINGES. HE SUBMI TTED THAT OTHER EVIDENCES FURNISHED ALONG WITH RETURN DULY PROVED T HAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF IV SETS AND SYRINGES. IN SUPPORT OF THIS CONTENTION, HE REFERRED TO AUDIT RE PORT. THE LEARNED DR, ON THE OTHER HAND, STATED THAT THE ASSESSEES CONTENTI ON WOULD REQUIRE VERIFICATION AT THE END OF THE AO AND THEREFORE MAT TER MAY BE SET ASIDE TO THE FILE OF THE AO ON THIS POINT. ITA NO.549/AHD/2009 -4- 7. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ARGUMENTS OF BOTH THE SIDES, WE FIND FORCE IN THE C ONTENTION OF THE LEARNED DR. IN THE STATEMENT OF INCOME FURNISHED ALONG WIT H RETURN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB W ITH THE FOLLOWING DESCRIPTION: TELECOM SERVICES STARTED ON 19.02.1996. NOW THE ASSESSEE HAS CONTENDED BEFORE US THAT IT IS IN THE BUSINESS OF MANUFACTURE OF IV SETS AND SYRINGES AND BY MISTAKE THE WORDS TELECOM SERVICES WERE MENTIONED. IN OUR OPINION, THIS CON TENTION OF THE ASSESSEE WOULD REQUIRE VERIFICATION AT THE END OF THE AO. W E THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS POINT A ND RESTORE THE MATTER BACK TO THE FILE OF THE AO. WE DIRECT HIM TO EXAMI NE THE ASSESSEES CONTENTION IN DETAIL AND THEREAFTER RE-ADJUDICATE T HE MATTER IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THE AO WILL ALLOW A DEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. GROUND NO.3 OF THE ASSESSEE READS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN REJECTING TH E ASSESSEES CLAIM FOR ADDITIONAL DEPRECIATION OF RS.84,631 CLAI MED U/S.32(IIA) 9. THE AO DISALLOWED ASSESSEES CLAIM FOR ADDITIONA L DEPRECIATION WITH THE FOLLOWING OBSERVATIONS: DURING THE YEAR ASSESSEE HAS MADE ADDITION TO PLAN T & MACHINERY WHICH HAVE RESULTED IN INCREASE OF INSTALLED CAPACI TY OF PRODUCTION FROM. 250 LAC UNITS TO 300 LAC. ASSESSEE HAS CLAIME D ADDITIONAL DEPRECIATION OF RS.84,631/- AS PER PROVISION OF SEC TION 32(IIA). ASSESSEE HAS SUBMITTED COPY OF REPORT OF THE CHARTE RED ACCOUNTANT ITA NO.549/AHD/2009 -5- IN THE PRESCRIBED PROFORMA. IT HAS BEEN SEEN FROM T HE RECORDS THAT IN F.Y. 2003-04 (A.Y.2004-05) ALTHOUGH INSTALLED CA PACITY WAS 250 LAC UNITS, UTILIZED CAPACITY WAS 191.81 LAC UNI TS. IN F.Y. 2004- 05 (A.Y. 2005-06) ALTHOUGH INSTALLED CAPACITY HAS I NCREASED BUT UTILIZED CAPACITY IS 191.07 LAC UNITS ONLY. THIS SH OWS THAT EVEN THE EARLIER INSTALLED CAPACITY OF 250 LAC UNITS HAS NOT BEEN UTILIZED. DEPRECIATION IS ALLOWED SUBJECT TO THE CONDITION TH AT THE ASSET SHOULD BE PUT TO USE. IN THE PRESENT CASE SINCE EVE N THOUGH THE EARLIER INSTALLED CAPACITY HAS NOT BEEN UTILIZED FU LLY THE ADDITIONAL CAPACITY HAS NOT AT ALL BEEN UTILIZED. THEREFORE, T HE ASSESSEE'S CLAIM OF ADDITIONAL DEPRECIATION DUE TO INCREASE IN INSTA LLED CAPACITY IS NOT ALLOWABLE. THE SAME AMOUNTING TO RS.84,631/- IS THEREFORE DISALLOWED. 10. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL THAT THE ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECI ATION IF INSTALLED CAPACITY IS INCREASED. THERE IS NO REQUIREMENT OF ACTUAL IN CREASE IN PRODUCTION. HE FURTHER SUBMITTED THAT THE PRESUMPTION OF THE AO THAT THE ADDITIONAL CAPACITY WAS NOT AT ALL UTILISED IS FACTUALLY NOT C ORRECT. IN FACT, THE ENTIRE PLANT AND MACHINERY WAS UTILISED THOUGH THE SAME CO ULD NOT BE UTILISED ON ALL 365 DAYS. THEREFORE, ANNUAL PRODUCTION HAS NOT INCREASED IN COMPARISON TO LAST YEAR. HE ALSO STATED THAT THE A O HAS HIMSELF ALLOWED NORMAL DEPRECIATION ON ENTIRE PLANT & MACHINERY. H E DISALLOWED ONLY ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE UND ER SECTION 32(IIA). THE LEARNED DR ON THE OTHER HAND RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. THAT SECTION 32(IIA) AS IT STOOD AT THE REL EVANT TIME READS AS UNDER: 6(IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLE D AFTER THE 31ST DAY OF MARCH, 2002, BY AN ASSESSEE ENGAGED IN THE B USINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO FIFTEEN PER CENT. OF THE ACTUAL COST OF SU CH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (I I) : ITA NO.549/AHD/2009 -6- PROVIDED THAT SUCH FURTHER DEDUCTION OF FIFTEEN PER CENT. SHALL BE ALLOWED TO (A) A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIOU S YEAR IN WHICH SUCH UNDERTAKING BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING ON OR AFTER THE 1ST DAY OF APR IL, 2002 ; OR (B) ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THE 1ST DAY OF APRIL, 2002, DURING ANY PREVIOUS YEAR IN WHICH IT A CHIEVES THE SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INS TALLED CAPACITY BY NOT LESS THAN 7TEN PER CENT : PROVIDED FURTHER THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTAL LATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE IND IA BY ANY OTHER PERSON ; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE ; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLE S ; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION OF ANY ONE PREVIOUS YEAR : FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSEES C ASE FALLS WITHIN THE CLAUSE (B) OF SECTION 32(IIA) BECAUSE ADMITTEDLY, T HE ASSESSEE IS AN INDUSTRIAL UNDERTAKING EXISTING BEFORE THE 1 ST DAY OF APRIL 2002 AND DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION IT ACHIEVED SUBSTANTIAL EXPANSION BY WAY OF INCREASE I N THE INSTALLED CAPACITY BY 20%. TILL LAST YEAR, THE INSTALLED CAP ACITY OF THE ASSESSEE WAS 250 LAKHS UNITS PER ANNUM WHICH IS INCREASED TO 300 LAKHS UNITS PER ANNUM DURING THE YEAR UNDER CONSIDERATION. THUS, T HERE WAS AN INCREASE ITA NO.549/AHD/2009 -7- OF 20% IN THE INSTALLED CAPACITY. AS PER SECTION 3 2(IIA)(B) WHAT IS THE RELEVANT IS INCREASE IN THE INSTALLED CAPACITY AND NOT THE ACTUAL PRODUCTION. ADMITTEDLY IN ASSESSEES CASE, THERE WAS INCREASE O F 20% IN THE INSTALLED CAPACITY. DISALLOWANCE BY THE AO WAS MAINLY ON THE GROUND THAT THERE WAS NO INCREASE IN THE ACTUAL PRODUCTION. IN OUR O PINION FOR ALLOWING THE ADDITIONAL DEPRECIATION UNDER SECTION 32(IIA) INCRE ASE IN ACTUAL PRODUCTION IS NOT RELEVANT. WE THEREFORE DIRECT THE AO TO ALL OW ADDITIONAL DEPRECIATION AS CLAIMED BY THE ASSESSEE. ACCORDING LY, GROUND NO.3 OF THE ASSESSEES APPEAL IS ALLOWED. 11. IN RESULT, ASSESSEES APPEAL IS DEEMED TO BE AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 20 TH MAY, 2011 SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 20-05-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD