ACIT, CHENNAI V. M/s. Kothari Sugars and Chemicals Ltd., CHENNAI

ITA 597/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61082 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI (BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ) .. I.T.A. NO. 597/MDS/2012 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II(14), 121,M.G.ROAD, CHENNAI 34. (APPELLANT) V. M/S.KOTHARI SUGARS AND CHEMICALS LTD., KOTHARI BUILDINGS, NO.115,MAHATMA GANDHI SALAI, NUNGAMBAKAM, CHENNAI 34. PAN : AABCK 2495 F (RESPONDENT) APPELLANT BY : SHRI SHAJI P.JACOB, ADDL. C. I.T. DR RESPONDENT BY : SHRI SAROJ KUM ARPARIDA,ADVOCATE DATE OF HEARING : 14.05.12 DATE OF PRONOUNCEMENT : 18.05.12 O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-III, CHENNAI DA TED 14.12.2011. ITA NO.597/MDS/12 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CTI(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO ALLOW DEPRECIATION CLAIMED ON CERTAIN UNITS AFTER MAKING NECESSARY ADJUSTMENTS AS PER SEC.43(6) OF THE ACT. 2.1. THE COMMISSIONER OF INCOME TAX(A) FAILED TO AP PRECIATE THAT THE ASSETS PERTAINING TO THE UNITS OF THE ASS ESSEE AT CANE SEPARATION PLANT, KATTUR, TRICHIRAPPALLI, NITRO ARO MATICS PLANT, AMINATION AND HYDROGENERATION UNIT AT KARAIKAL AND NITRIC ACID PLANT, SANGAREDDY WERE NOT USED DURING THE FIN ANCIAL YEAR 2002-03 RELEVANT TO ASSESSMENT YEAR 2003-04. 2.2. IT IS SUBMITTED THAT THE DECISION OF THE BOM BAY HIGH COURT IN THE CASE OF DINESHKUMAR GULABCHAND AGRAWA L VS. C.I.T. [2004] 267 ITR 768 IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE WHEREIN IT WAS HELD THAT DEPRECIATION ON A SSET READY FOR USE BUT NOT ACTUALLY USED CANNOT BE ALLOWED EVE N THOUGH THEY FORM PART OF THE BLOCK; THIS DECISION HAS BEEN RENDERED SUBSEQUENT TO THE AMENDMENT OF BLOCK OF ASSETS CONC EPT; ITA NO.597/MDS/12 3 2.3. IT IS FURTHER SUBMITTED THAT SLP FILED IN THE ABOVE CASE BY THE ASSESSEE HAD BEEN DISMISSED AND THE ISSUE HAD R EACHED FINALITY. 2.4. . IT IS SUBMITTED THAT THE WORD USED MEAN S ACTUALLY USED AND NOT READY FOR USE. FURTHER THE DECISION OF HONBLE ITAT MUMBAI IN THE CASE OF ACIT VS. RISHIROOP POLY MERS LTD. (286 ITT 54) AND KARNATAKA HIGH COURTS DECISI ON IN THE CASE OF DCIT VS. YELLAMMA DASAPPA HOSPITAL (290 ITR 353) SUPPORTS THE DECISION OF THE ASSESSING OFFICER. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE SOLE ISSUE INVOLVED IN THE ABOVE GROUNDS OF APPEAL IS THAT THE COMMISSIONER OF INCOME TAX(A) ERRED IN DIRECTI NG THE ASSESSING OFFICER TO ALLOW DEPRECIATION CLAIMED ON CERTAIN UN ITS AFTER MAKING NECESSARY ADJUSTMENTS AS PER SEC.43(6) OF THE ACT . ITA NO.597/MDS/12 4 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A LIMITED COMPANY ENGAGED IN MANUFACTURE AND SALE OF SUGARS A ND CHEMICALS. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YE AR 2003-04 ON 29.11.2003 DECLARING NIL INCOME. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.03.2006 BY MAKING AN ADDITION OF RS.12,03,72,538/-. THE ASSESSEE FILED AN APPEAL AG AINST THIS ORDER. COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE O RDER OF THE ASSESSING OFFICER ON VARIOUS DISALLOWANCES. ON FUR THER APPEAL TO THE TRIBUNAL, THE TRIBUNAL VIDE ITS ORDER DATED 26.06.0 9 PASSED IN ITA NO.1917/MDS./2007 DATED 26.06.2009 REMITTED BACK T HE ISSUE TO THE ASSESSING OFFICER WITH A DIRECTION TO REEXAMINE THE ISSUES PERTAINING TO DISALLOWANCE OF PROVISION FOR FOREIGN EXCHANGE L OSS AMOUNTING TO ` 4,57,18,000/- AND DISALLOWANCE OF DEPRECIATION IN R ESPECT OF CERTAIN ASSETS. THE ASSESSMENT WAS COMPLETED IN PURSUANCE TO THE DIRECTION OF TRIBUNAL AND THE ASSESSING OFFICER PASSED AN OR DER ON 30.12.2010 UNDER SECTION 143(3) READ WITH SECTION 254 MADE ADD ITION OF ` 6,87,99,482/- TOWARDS DEPRECIATION. ITA NO.597/MDS/12 5 5. THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX(A) AND SUBMITTED THAT THE ASSESSING OFFI CER HAS FOUND THAT THE UNITS OF THE ASSESSEE AT CANE SEPARATION PLANT, KATTUR, TRICHIRAPPALLI, NITRO AROMATICS PLANT, AMINATION AN D HYDROGENERATION UNIT AT KARAIKAL AND NITRIC ACID PLANT, SANGAREDDY WERE NOT USED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2002-03 RELE VANT TO ASSESSMENT YEAR 2003-04. THE ASSESSEE SUBMITTED TH AT ONCE THE ASSET ENTERS A BLOCK, IT BECOMES ENTITLED FOR DEPRE CIATION THEREAFTER IRRESPECTIVE OF ITS BEING USED. THE ASSESSEE ALSO RELIED UPON THE GROUNDS OF APPEAL AND THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR ASSESSMENT YEAR 2002-03. THE ASSESSING OFFICER HOWE VER, DID NOT ACCEPT THE ABOVE CONTENTION OF THE ASSESSEE BECAUSE THE ASSESSEE STOPPED OPERATION OF CERTAIN UNITS AS A WHOLE. HE STATED THAT IT WAS NOT A CASE WHERE CERTAIN INDIVIDUAL ITEMS OF MACHIN ERY WERE NOT PUT TO USE. IN VIEW OF THIS, HE DISALLOWED, ON AN ESTI MATE BASIS ` 6,87,99,482/- TOWARDS DEPRECIATION ATTRIBUTABLE TO THE ABOVE UNITS. ITA NO.597/MDS/12 6 6. THE COMMISSIONER OF INCOME TAX(APPEALS) AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL OF THE ASSESSEE BY DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECI ATION AFTER MAKING NECESSARY ADJUSTMENTS AS PER THE PROVISIONS OF SECT ION 43(6) OF THE ACT BY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEE 'S OWN CASE FOR ASSESSMENT YEAR 2002-03 IN ITA NO.1335/MDS./2010 D ATED 04.02.2011 WHEREIN THE TRIBUNAL DISMISSED THE APPEA L OF THE DEPARTMENT BY OBSERVING AS UNDER:- SINCE THIS ISSUE IS ALREADY CRYSTALLIZED BY VARIOU S CO-ORDINATE BENCH DECISIONS, THE ORDER OF THE COMMISSIONER OF I NCOME TAX(A) DOES NOT REQUIRE ANY INTERFERENCE. IN FACT ONE UNIT, AS STATED BY THE COMMISSIONER OF INCOME TAX(APPEALS) I N HIS ORDER, HAS STOPPED ONLY IN AUGUST, 2001 RELEVANT FO R THE ASSESSMENT YEAR AND WAS USED PARTLY DURING THE YEAR ITSELF. DISALLOWING THE DEPRECIATION ON THAT UNIT ALSO BY T HE ASSESSING OFFICER IS NOT CORRECT. HOWEVER, THE ASSESSING OFFI CER IS DIRECTED TO KEEP IN MIND THE PROVISION OF SEC.43(6) WHILE WORKING OUT THE DEPRECIATION, IF ANY ASSETS WERE DI SCARDED OR DESTROYED OR DEMOLISHED, THEN SCRAP VALUE IF ANY TO BE ADJUSTED ITA NO.597/MDS/12 7 TO THE BLOCK OF ASSETS AS PER THE PROVISIONS. WITH THIS DIRECTION, THE REVENUE GROUNDS ARE TREATED AS DISMISSED. 7. THE DEPARTMENTAL REPRESENTATIVE BEFORE US RELIE D ON THE ORDER OF THE ASSESSING OFFICER. 8. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE S UPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . WE FIND THAT IN THE INSTANT CASE, THE ASSESSING OFFICER MADE AN EST IMATED DISALLOWANCE OF DEPRECIATION OF `6,87,99,482/- ON THE GROUND THAT THE ASSESSEE HAD STOPPED OPERATION OF CERTAIN UNITS AS A WHOLE. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2002-03 QUOTED ABOVE IN T HIS ORDER ALLOWED THE APPEAL OF ASSESSEE . THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUOTED ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS). HE SIMPLY REL IED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE QUOTED ORDER OF TRIBU NAL WAS VARIED IN APPEAL BY ANY HIGHER FORUM. WE THEREFORE, DO NOT F IND ANY GOOD AND ITA NO.597/MDS/12 8 JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF T HE COMMISSIONER OF INCOME TAX(APPEALS). IT IS CONFIRMED. THE GROUNDS OF APPEAL OF REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. ORDER PRONOUNCED ON FRIDAY, THE 18 TH MAY, 2012 AT CHENNAI SD/- SD/- (VIKAS AWASTHY) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH MAY, 2012. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE