ASST CIT CIR 19(2), MUMBAI V. D.M. POLYMERS, MUMBAI

ITA 5967/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8407 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 26-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER & SHRI P.M.JAGTAP, ACCOUNTANT MEMBER. I.T.A. NO.5967/MUM/2011 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX, M/S D.M. POLYMERS, 19(2), MUMBAI. VS. UNIT NO. 6, FAVOURITE INDUSTRI ES ESTATE, MASTANI LANE, HALA V POOL, KURLA, MUMBAI -40 00070. PAN AAEF 09722G. APPELLANT. RESPONDENT . APPELLANT BY : SHRI A.B. KOLI. RESP ONDENT : SHRI ANANT N. PAI. DATE OF HEARING : 07-11-2012 DATE OF PRONOUNCEMENT : 07-11-2012. O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(APPEALS)-35, MUMBAI DATED 20-06-2011 AND IN THE SOLITARY GROUND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE ACTION OF T HE LEARNED CIT(APPEALS) IN DELETING THE DISALLOWANCE OF RS.10,61,595/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF ELECTRICAL INSULATION CO MPONENTS AND DOING RELATED JOB WORK. THE RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION WAS FILED BY IT ON 30- 2 ITA NO.5967/MUM/2011 10-2007 DECLARING TOTAL INCOME AT NIL. IN THE SAID RETURN, DEPRECIATION OF RS.39,05,233/- WAS CLAIMED BY THE ASSESSEE. THE CLA IM OF THE ASSESSEE FOR DEPRECIATION WAS EXAMINED BY THE AO DURING THE COUR SE OF ASSESSMENT PROCEEDINGS AND ON SUCH EXAMINATION, HE FOUND THAT THE ASSESSEE HAD PURCHASED THE WATERJET MACHINE FROM M/S PRECISION AUTOMATION & ROBOTICS IN DIA LIMITED, PUNE ON 29- 03-2007 FOR RS.52,88,775/- AND CONNECTED SOFTWARE P ROGRAMME ON 31-03-2007 FOR RS.7,28,000/-. HE, THEREFORE, ISSUED A LETTER U/S 1 33(6) TO THE SAID SUPPLIER TO ASCERTAIN THE DATE OF INSTALLATION OF THE WATERJET MACHINE. IN REPLY, IT WAS SUBMITTED BY THE SAID SUPPLIER THAT THE COMMERCIAL INSTALLATI ON AND INTEGRATION OF THE MACHINERY SYSTEM SOLD TO THE ASSESSEE WAS COMPLETED ON 18-07-2007 AND THE COMMERCIAL SALES INVOICE FOR THE SAME WAS RAISED ON 07-09-2007. WHEN THIS REPLY WAS CONFRONTED BY THE AO TO THE ASSESSEE, THE LATTE R CLARIFIED THAT THE WATERJET MACHINE RECEIVED FROM THE SUPPLIER WAS INSTALLED IN LONAVALA FACTORY BY THE ENGINEERS DEPUTED BY THE SAID SUPPLIER ON 31 ST MARCH, 2007 ITSELF AND EVEN THE TRIAL PRODUCTION WAS IMMEDIATELY COMPLETED. IT WAS EXPLAI NED THAT THE COMMERCIAL INSTALLATION AND INTEGRATION OF THE SYSTEM AS REFER RED TO BY THE SUPPLIER IN ITS LETTER WAS AT THE STAGE WHERE OUTPUT FROM THE MACHINE WAS GIVEN TO THE ASSESSEES CUSTOMERS AS APPROVED BY THEM FOR COMMERCIAL PRODUC TION. IT WAS CONTENDED THAT THE WATERJET MACHINE THUS WAS PUT TO USE ON 31-03-2 007 ITSELF WHEN THE TRIAL RUN WAS TAKEN AND THE ASSESSEE WAS ENTITLED TO CLAIM DE PRECIATION THEREON. THE AO DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND RELY ING ON THE COMMISSIONING CERTIFICATE ISSUED BY THE SUPPLIER WHEREIN IT WAS S TATED HAT THE COMMERCIAL INSTALLATION WAS DONE ON 18-07-2007, HE DISALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.10,61,595/- RELATING TO WATERJET MACHI NE IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 31-12-2009. 3 ITA NO.5967/MUM/2011 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), A N APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AND AF TER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE MATE RIAL AVAILABLE ON RECORD, THE LEARNED CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DEPRECIATION FOR THE FOLLOWING REASONS GIVEN IN PAR AGRAPH NO. 4.3 OF HIS IMPUGNED ORDER : I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESEN TATIVE AND THE STAND TAKEN BY THE A.O. ADMITTEDLY, THE A.O. RECEIVED A L ETTER FROM THE SUPPLIER OF THE MACHINERY M/S PARI STATING THAT COMMERCIAL INST ALLATION AND INTEGRATION OF MACHINE SYSTEM WAS COMPLETED ON 18.7.2007 AND TH E BILL FOR COMMERCIAL SALE WAS RAISED ON 07-09-2007 FOR THE SAME. THE APP ELLANT CLARIFIED BEFORE THE A.O. THAT THE ABOVE LETTER REFERRED TO ONLY COM MERCIAL PRODUCTION WHEREAS THE TRIAL PRODUCTION AND TEST RUN WAS DONE BEFORE THE END OF THE PREVIOUS YEAR AND EVEN FILED A LETTER DT. 31.3.2007 ISSU4ED BY M/S PARI ALONGWITH THE LETTER. FROM THE LETTER OF THE APPELL ANT AND THE CERTIFICATE ISSUED BY M/S PARI, IT IS CLEAR THAT THE TEST RUN WAS MADE ON 30.3.2007 BY MR. MANJRE, WHO WAS DEPUTED BY M/S PARI AND, THEREFORE, THERE IS NO DISPUTE THAT THE TEST RUN WAS MADE ON 30.3.2007. THE A.O. R ELIED ON THE COMMERCIAL PRODUCTION AND DISALLOWED DEPRECIATION FOR CLAIMING DEPRECIATION. IT IS NOT NECESSARY THAT THE APPELLANT SHOULD COMMENCE COMMER CIAL PRODUCTION WITHIN THE PREVIOUS YEAR AS HELD BY THE HONBLE PUN E TRIBUNAL IN THE CASE OF M/S FINOLEX CABLES LTD. IT IS ENOUGH IF THE TRIAL R UN IS MADE BEFORE THE END OF THE PREVIOUS YEAR. THE WORD USED IN SECTION 32 SH ALL INCLUDE TRIAL PRODUCTION. THE A.O. COULD NOT APPRECIATE THE DIFFE RENCE BETWEEN THE COMMERCIAL PRODUCTION AND TRIAL PRODUCTION AND MERE LY BECAUSE THE COMMERCIAL PRODUCTION WAS STARTED IN THE NEXT YEAR, HE DISALLOWED THE DEPRECIATION IGNORING THE CLAIM OF TRIAL PRODUCTIO N DURING THE PREVIOUS YEAR. THE COMMERCIAL SALES INVOICE N-045 ON 07-09-2007 SH OWS THAT IT WAS ONLY FOR INSTALLATION AND COMMISSIONING CHARGES AND NOT TOWARDS COST OF MACHINE. IN THE CIRCUMSTANCES, THE A.O. IS DIRECTED TO ALLOW DEPRECIATION AND ADDITIONAL DEPRECIATION OF RS.10,61,595/-. 4 ITA NO.5967/MUM/2011 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CLAIM O F THE ASSESSEE OF HAVING INSTALLED THE WATERJET MACHINE PURCHASED FROM M/S PRECISION A UTOMATION & ROBOTICS INDIA LIMITED, PUNE AND HAVING TAKEN THE TRIAL RUN THEREO N DURING THE YEAR UNDER CONSIDERATION WAS SUPPORTED BY THE CERTIFICATE ISSU ED BY THE SUPPLIER AND THERE WAS NOTHING BROUGHT ON RECORD BY THE AO TO DISPUTE THE SAME. HE, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON WATER JET MACHINE RELYING ON THE CERTIFICATE ISSUED BY THE SUPPLIER STATING THEREIN THAT COMMERCIAL INSTALLATION AND INTEGRATION OF THE SAID MACHINE WAS COMPLETED ON 18 -07-2007. AS EXPLAINED ON BEHALF OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE US, THE COMMERCIAL INSTALLATION AND INTEGRATION OF THE SYS TEM WAS REQUIRED TO BE DONE ONLY AT THE STAGE WHERE OUTPUT FROM THE MACHINE WAS SUPPLIED TO THE CUSTOMERS AS COMMERCIAL PRODUCTION. IN ANY CASE, THERE BEING NOT HING BROUGHT ON RECORD BY THE AO TO DISPUTE THAT THE TRIAL PRODUCTION WAS TAKEN F ROM THE WATERJET MACHINE DURING THE YEAR UNDER CONSIDERATION, WE ARE OF THE VIEW TH AT THE USE OF THE SAID MACHINE AS ENVISAGED IN SECTION 32 FOR THE PURPOSE OF CLAIMING DEPRECIATION WAS DULY ESTABLISHED AND THE LEARNED CIT(APPEALS) WAS FULLY JUSTIFIED IN DIRECTING THE AO TO ALLOW THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE SAID MACHINE. THIS VIEW ALSO GETS SUPPORT FROM THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL AT PUNE IN THE CASE OF PHINOLEX CABLES LTD. (SUPRA) RELIED UPON BY THE LEARNED CIT(APPEALS) IN HIS IMPUGNED ORDER. WE, THEREFORE, UPHOLD THE IMPUG NED ORDER OF THE LEARNED CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS THIS APPEAL FILED BY THE REVENUE. 5 ITA NO.5967/MUM/2011 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF NOV., 2012. SD/- SD/- (B.R. MITTAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 7 TH NOV., 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, D-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES, MUMB AI. WAKODE