Enchante Jewellery Ltd., Gurgaon V. ITO, New Delhi

ITA 6005/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6553 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.6005/DEL/2016 ASSESSMENT YEAR : 2012-13 ENCHANTE JEWELLERY LTD., PLOT NO.3 & 4, PHASE IV, UDYOG VIHAR, GURGAON. VS. ITO, WARD- 8(2), NEW DELHI. PAN : AABCE 1308 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIVEK KUMAR, CA RESPONDENT BY : SHRI S. K. JAIN, SR.DR DATE OF HEARING : 02-02-2017 DATE OF PRONOUNCEMENT : 17-02-2017 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 16.08.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-3, DELHI, U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT T HE ACT) RELATING TO ASSESSMENT YEAR 2012-13. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME DECLARING LOSS OF RS.9,36,393/-. THE ASSESSING OFF ICER NOTICED THAT ASSESSEE COMPANY WAS STATED TO BE ENGAGED IN THE BUSINESS OF DEALING IN GOLD AND DIAMOND BUSINESS BUT NO RECEIPTS AND PURCHASE IN RE GARD TO THIS BUSINESS WERE RETURNED BY THE ASSESSEE. HOWEVER, THE ASSESS EE HAD DECLARED INCOME 2 ITA NO.6005/DEL/2016 FROM HOUSE PROPERTY BEARING NO.3 AND 4, UDYOG VIHAR , PHASE-IV, GURGAON, HARYANA GIVEN ON RENT THE FIRST FLOOR TO M/S PEREGR INE TECHNICAL SERVICES PVT. LTD.. THE ASSESSING OFFICER NOTED THAT ASSESS EE COMPANY HAD CLAIMED DEPRECIATION AMOUNTING TO RS.9,17,796/- WHICH WAS D ISALLOWED BY OBSERVING THAT NO BUSINESS ACTIVITIES WERE ESTABLISHED ON WHI CH THE DEPRECIATION WAS CLAIMED. LD. CIT(A) WHILE PARTLY ALLOWING THE ASSE SSEES APPEAL SUSTAINED THE DISALLOWANCE OF DEPRECIATION. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE ASSESSMENT MADE IS BAD IN LAW AND IN F ACTS. 2. THAT THE L.D. CIT ERRED WHILE MAKING AN ADDITIO N OF RS.9,17,796/- WHICH WAS ALLOWABLE U/S 32. 3. THAT THE ASSESSEE RESERVES THE RIGHT TO ADD, DE LETE, ALTER AND MODIFY TO THE ABOVE GROUNDS OF APPEAL. 3. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 16 OF PAPER BOOK, WHEREIN, THE ORDER OF THE APPELLATE AUTHORITY FOR I NDUSTRIAL & FINANCIAL RECONSTRUCTION, NEW DELHI IS CONTAINED DIRECTING TH E BIFR TO RECONSIDER THE SETTLEMENT AFRESH. THE SAID ORDER IS REPRODUCED HE REUNDER :- AFTER HEARING THE SUBMISSIONS OF LEARNED COUNSEL F OR THE APPELLANT AND THE AUTHORIZED REPRESENTATIVE OF THE OA AND MOST IMPORT ANTLY CONSIDERING THE FACT THAT THE APPELLANT HAS REACHED AN OUT OF COURT SETT LEMENT WITH THE STATE BANK OF INDIA, A SECURED CREDITOR, THE TERMS OF WHICH ARE C ONTAINED IN A DEED OF SETTLEMENT, BY CONSENT OF THE REPRESENTATIVE OF THE OPERATING AGENCY, THE ORDER UNDER CHALLENGE IS SET ASIDE AND THE BOARD IS DIREC TED TO RECONSIDER THE SETTLEMENT AFRESH AND PROCEED ACCORDINGLY. THE APPLICATION FILED BY THE APPELLANT RECORDING TH E ABOVE SETTLEMENT IS KEPT ON RECORD AND THE APPEAL IS DISPOSED OF ON CONSIDERATI ON OF THE SUBMISSIONS MADE IN THE APPLICATION. THE APPLICATION IS NOT OPPOSED BY THE OPERATING AGENCY. 3 ITA NO.6005/DEL/2016 4. LD. COUNSEL FURTHER REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INTEGRATED TECHNOLOGIE S LTD. IN ITA NO.530/2011 DATED 16 TH DECEMBER, 2011, WHEREIN, IN PARA 4, THE HONBLE DELHI HIGH COURT NOTICED THE CONTENTIONS OF THE ASS ESSEE, WHICH ARE REPRODUCED HEREUNDER :- IT WAS CONTENDED BY THE ASSESSEE THAT EVEN THOUGH THERE WAS NO SALE OR PURCHASE OR ANY MANUFACTURING ACTIVITY CARRIED ON I N THE RELEVANT PREVIOUS YEAR, THE BUSINESS WAS STILL A GOING CONCERN AND IN ORDER TO KEEP IT ALIVE AND FULFILL SEVERAL LEGAL AND STATUTORY FORMALITIES, SOME EXPEN DITURE HAS TO BE INCURRED. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT IT HAD APPR OACHED THE BIFR UNDER SECTION 15(1) OF THE SICK INDUSTRIAL COMPANIES (SPE CIAL PROVISIONS) ACT, 1985, THAT THE APPLICATION WAS BEING PROCESSED AND SOON T HE MANUFACTURING AND SALE ACTIVITIES WILL START AND THEREFORE IN THESE CIRCUM STANCES IT CANNOT BE SAID THAT THE BUSINESS OF THE ASSESSEE HAD CEASED TO EXIST. IT WA S POINTED OUT THAT THERE WAS ONLY A TEMPORARY LULL AND THE BUSINESS WOULD REVIVE SHORTLY. WITH PARTICULAR REFERENCE TO THE CLAIM OF DEPRECIATION OF RS.2,16,4 1,897/-, IT WAS CONTENDED THAT THE PLANT AND MACHINERY WERE KEPT READY FOR USE ONC E THE BUSINESS REVIVED AND SUCH PASSIVE USE ALSO AMOUNTED TO USE OF THE ASSET WITHIN THE MEANING OF SECTION 32 OF THE ACT. IT WAS THEREFORE CONTENDED THAT THE CLAIM OF DEPRECIATION OUGHT TO BE ALLOWED. IN SUPPORT OF THE CLAIM FOR ALLOWANCE O F DEPRECIATION, SEVERAL AUTHORITIES WERE RELIED UPON BY THE ASSESSEE, INCLU DING THE JUDGMENT OF THIS COURT IN CAPITAL BUS SERVICE PVT. LTD. VS. CIT (1980) 123 ITR 404. 5. HE FURTHER REFERRED TO PARA 9 OF THE AFOREMENTIO NED DECISION OF THE HONBLE DELHI HIGH COURT, WHICH IS REPRODUCED HEREU NDER :- 9. THE TRIBUNAL HAS REFERRED TO THE JUDGMENTS IN C APITAL BUS SERVICE (SUPRA), CIT VS. REFRIGERATION AND ALLIED INDUSTRIES LTD. (S UPRA) & CIT VS. PANACEA BIOTECH LTD. (SUPRA) AND HAS APPLIED THE RATIO LAID DOWN THEREIN TO THE FACTS OF THE PRESENT CASE. THE RATIO IN BRIEF IS THAT IT IS NOT NECESSARY THAT THE PLANT AND MACHINERY OWNED BY THE ASSESSEE SHOULD BE ACTUALLY PUT TO USE IN THE RELEVANT ACCOUNTING YEAR TO JUSTIFY THE CLAIM OF DEPRECIATIO N AND THAT EVEN IF THE PLANT AND MACHINERY OR OTHER ASSET IS KEPT READY FOR USE IN T HE ASSESSEES BUSINESS, THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION. THE ONL Y CONDITION IS THAT THE BUSINESS SHOULD NOT HAVE BEEN CLOSED DOWN ONCE FOR ALL AND T HAT THE ASSESSEE SHOULD DEMONSTRATE THAT THE HOPES OF THE BUSINESS BEING RE VIVED ARE ALIVE AND REAL. IT IS HOWEVER NOT A MATTER THAT CAN TURN ENTIRELY ON THE ASSESSEES HOPES ALONE. THERE 4 ITA NO.6005/DEL/2016 SHOULD BE EVIDENCE OR MATERIAL TO SHOW THAT THE ASS ESSEE TOOK EFFORTS TO KEEP THE BUSINESS ALIVE IN THE HOPE OF REVIVING THE SAME. MA INTAINING THE OFFICE AND ESTABLISHMENT, COMPLYING WITH THE STATUTORY FORMALI TIES, NOT DISPOSING OF THE PLANT AND MACHINERY, INCURRING EXPENSES ON THE REPAIR OF PLANT AND MACHINERY ETC. ARE SOME OF THE INDICATIONS OF NURTURING THE HOPES OF R EVIVING THE BUSINESS. THE ABOVE ARE ONLY ILLUSTRATIVE INSTANCES AND ARE BY NO MEANS EXHAUSTIVE AND THE QUESTION AS TO WHETHER THE ASSETS WERE KEPT READY FOR USE IN THE BUSINESS IS LARGELY TO BE DECIDED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE . IN OUR OPINION, THE TRIBUNAL HAS NOT COMMITTED ANY ERROR IN APPLYING THE RATIO L AID DOWN IN THE JUDGMENTS OF THIS COURT TO THE FACTS OF THE PRESENT CASE IN ORDE R TO UPHOLD THE ASSESSEES CLAIM FOR DEPRECIATION. 6. LD. COUNSEL SUBMITTED THAT IN VIEW OF THE AFOREM ENTIONED DECISION (SUPRA), IF IT IS ESTABLISHED THAT ASSESSEE WAS STR IVING FOR REVIVING ITS BUSINESS BY FULFILLING ALL STATUTORY FORMALITIES; NOT DISPOS ING OF THE PLANT AND MACHINERY; INCURRING EXPENSES ON THE REPAIR OF PLAN T AND MACHINERY ETC. THEN IT CANNOT BE CONCLUDED THAT BUSINESS HAD CLOSE D. LD. COUNSEL REFERRED TO PARA 5.1 OF LD. CIT(A)S ORDER, WHEREIN, LD. CIT (A) HAS OBSERVED THAT NOTHING HAD BEEN BROUGHT ON RECORD TO ESTABLISH THA T THE EFFORT IS BEING MADE TO REVIVING THE BUSINESS. HE SUBMITTED THAT THIS F INDING IS NOT CORRECT IN VIEW OF THE EFFORTS MADE BY THE ASSESSEE FOR REVIVI NG ITS BUSINESS AND RE- SCHEDULING LOAN FACILITIES. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE RECORD OF THE CASE. ADMITTEDLY, THE ASSESSEE COMPA NY WAS UNDER BIFR AND AFTER CERTAIN DIRECTIONS OF BIFR, THE MATTER WAS TA KEN BEFORE THE APPELLATE AUTHORITY WHICH GAVE DIRECTIONS IN REGARD TO SETTLE MENT WITH THE STATE BANK OF INDIA. THE LETTER DATED 02.12.2013 OF STATE BAN K OF INDIA CONTAINED AT 5 ITA NO.6005/DEL/2016 PAGES 17 TO 19 OF PAPER BOOK ALSO SHOWS THAT THE AS SESSEE WAS PUTTING IN ALL TYPES OF EFFORTS FOR REVIVING ITS BUSINESS. THEREF ORE, THE CLAIM OF PASSIVE USE OF ASSETS WAS CLEARLY SUPPORTED BY THE EFFORTS MADE BY ASSESSEE TO RESTART ITS BUSINESS AND, THEREFORE, IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT (SUPRA), THE ASSESSEES CLAIM IS TO BE ALLOWED. I DIRECT ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF FEBRUARY, 2017. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED : 17-02-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI