Zahi Rubbers, Aluva V. ACIT, Aluva

ITA 625/COCH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1022 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2011
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA; M ANIL KUMAR
• Assessee Lawyers: R SREEKANTAN NAIR
• Keywords: Depreciation
• Section: 143(3); 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NO. 625/COCH/2011 ASSESSMENT YEAR : 2007-08 ZAHI RUBBERS INDIA LTD., 5/452, NOCHIMA, NAD P.O., ALUVA. [PAN : AAACZ 0796P] VS. THE ADDL. COMMISSIONER OF INCOME-TAX, ALUVA RANGE, ALUVA. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R. SREEKANTAN NAIR REVENUE BY SMT S. VIJAYAPRABHA & SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 08/01/2013 DATE OF PRONOUNCEMENT 11/01/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 08-11-2011 PASSED BY LD CIT-I, KOCHI U/S 263 OF THE ACT FOR T HE ASSESSMENT YEAR 2007-08. THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE SAID OR DER. 2. THE FACTS RELATING THERETO ARE STATED IN BRI EF. THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED BY THE ASSESSING OFFICE R ON 11.12.2009 U/S 143(3) OF THE ACT. THE LD CIT, ON EXAMINATION OF RECORD, NOTICED THAT THE ASSESSEE DID NOT DEDUCT THE SUBSIDY AMOUNT OF RS.24,01,600/- FROM THE COST OF PLANT AND MACHINERY FOR THE PURPOSE OF COMPUTING DEPRECIATION AND THE SAME HAS RESULTED IN ALLOWING EXCESS DEPRECIATION TO THE TUNE OF RS.3,60,240/-. ACCOR DINGLY, THE LD CIT TOOK THE VIEW THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL T O THE INTERESTS OF THE REVENUE AND HENCE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED T HE AO TO RE-DO THE ASSESSMENT IN I.T.A. NO. 625 /COCH/2011 2 THE LIGHT OF THE OBSERVATIONS MADE IN THE REVISION ORDER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE ASSESSEE RECEIVED THE IMPUGNED SUBSIDY AMOUNT DURING THE YEAR 1994. AT T HE RELEVANT POINT OF TIME, THERE WERE DIVERGENT VIEWS ABOUT THE NECESSITY OF DEDUCTI NG THE SUBSIDY AGAINST THE COST OF ASSETS, AS THE SAID SUBSIDY WAS NOT GIVEN AGAINST A NY SPECIFIC ASSET. THE INCOME TAX ACT WAS AMENDED BY FINANCE (NO.2) ACT, 1998 BY INSE RTING EXPLANATION 10 TO SEC. 43 WITH EFFECT FROM 1.4.1999 AND AS PER THE SAID EXPLA NATION, THE SUBSIDY AMOUNT WAS REQUIRED TO BE DEDUCTED FROM THE COST OF THE ASSET. THE MEMORANDUM EXPLAINING THE SAID AMENDMENT CLEARLY PROVIDED THAT THE SAID AMEND MENT IS EFFECTIVE FROM ASSESSMENT YEAR 1999-2000 ONLY. ACCORDINGLY, THE LD A.R SUBMI TTED THAT THE VIEW ENTERTAINED BY LD CIT ABOUT THE DEDUCTIBILITY OF SUBSIDY FROM THE COST OF THE ASSET, AFTER A PERIOD OF ABOUT 12 YEARS IS NOT IN ACCORDANCE WITH THE LAW. THE LD A.R ALSO RELIED UPON THE FOLLOWING CASE LAW IN SUPPORT OF HIS CONTENTIONS:- SAHANPUR ELECTRIC SUPPLY CO. LTD VS. CIT (194 ITR 2 94) CIT VS. P.J. CHEMICALS LTD (210 ITR 830) 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE SUBSIDY AMOUNT IS REQUIRED TO BE DEDUCTED FROM THE COST OF ASSETS. THE NON-DEDUCTIO N OF SUBSIDY HAS RESULTED IN ALLOWING EXCESS DEPRECIATION AND THE SAME HAS RENDE RED THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE LD D.R SUBMITTED THAT WRITTEN DOWN VALUE OF THE ASSETS HAS TO BE RE-WORKE D FROM THE ASSESSMENT YEAR 1995- 96, I.E., FROM THE YEAR OF RECEIPT OF THE SUBSIDY A MOUNT AND THE CORRECT DEPRECIATION FOR THE YEAR UNDER CONSIDERATION HAS TO BE ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE UNDISPUTED FACT REMAINS THAT THE ASSESSEE HAS RECEIVED THE IMPUGNED SUBSIDY AMOUNT IN THE YEAR 1994 AND NOT DURING THE YEAR UNDER CONSIDERATION. HENCE , IN OUR VIEW, THE QUESTION OF DEDUCTION OF SUBSIDY FROM THE COST OF THE ASSETS AR ISES ONLY IN THE YEAR IN WHICH THE SAID SUBSIDY WAS RECEIVED BY THE ASSESSEE. CONSEQU ENTLY, THE SAID ISSUE DOES NOT ARISE I.T.A. NO. 625 /COCH/2011 3 OUT OF THE ASSESSMENT ORDER, WHICH WAS SOUGHT TO BE REVISED BY LD CIT. THE ASSESSING OFFICER MIGHT HAVE TAKEN THE VIEW THAT THE SUBSIDY IS NOT REQUIRED TO BE DEDUCTED FROM THE COST OF ASSETS IN THE YEAR IN WHICH THE SUBSIDY WAS RECEIVED. IN OUR VIEW, THE LD CIT MAY NOT BE ENTITLED TO EXERCISE THE POWER VESTE D WITHIN HIM DURING THE YEAR UNDER CONSIDERATION IN RESPECT OF AN ISSUE WHICH ORIGINAT ED ABOUT 12 YEARS BACK. THE REVISION, IF ANY, SHOULD HAVE BEEN DONE IN RESPECT OF THE ASS ESSMENT ORDER RELATING TO THE YEAR OF RECEIPT OF THE SUBSIDY AMOUNT. 6. THE LD A.R HAS POINTED OUT THAT THE EXPLANATI ON 10, WHICH PROVIDES FOR DEDUCTION OF SUBSIDY AMOUNT FROM THE COST OF ASSETS, WAS INSE RTED ONLY WITH EFFECT FROM 1.4.1999 AND HE HAS ALSO CONTENDED THAT IT IS PROSPECTIVE IN OPERATION. THE LD A.R ALSO POINTED OUT THAT THE QUESTION OF DEDUCTION OF SUBSIDY FROM THE COST OF ASSETS REMAINED A DEBATABLE ISSUE PRIOR TO THE ASSESSMENT YEAR 1999-2 000. THUS, THE SAID QUESTION REMAINED A DEBATABLE ISSUE IN WHICH TWO VIEWS WERE POSSIBLE AND HENCE, ON THAT COUNT ALSO, IT WOULD FALL OUTSIDE THE SCOPE OF THE REVISI ON PROCEEDINGS. 7. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE IMPUGNED REVISION ORDER PASSED BY LD CIT IS NOT IN ACCORDANC E WITH LAW AND ACCORDINGLY SET ASIDE THE SAME. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 11-01-2013 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11TH JANUARY, 2013 GJ COPY TO: 1. ZAHI RUBBERS INDIA LTD., 5/452, NOCHIMA, NAD P.O ., ALUVA. 2. THE ADDL. COMMISSIONER OF INCOME-TAX, ALUVA RANG E,ALUVA. I.T.A. NO. 625 /COCH/2011 4 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE.