M/s Hindon River Mills Ltd., Ghaziabad V. DCIT, Ghaziabad

ITA 6268/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3386 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 06-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI S.K.YADAV , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6268/DEL/2016 (ASSESSMENT YEAR: 2013 - 14 ) HIND ON RIVER MILLS LTD, PO HINDON NAGAR, DASNA, GHAZIABAD PAN: AAACH9966K VS. DCIT, CIRCLE 1, GHAZIABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR, ADV SHRI KISLAYA PARASHAR, ADV REVENUE BY: SHRI S. L. ANURAGI, SR. DR DATE OF HEARING 24/05 / 2018 DATE OF PRONOUNCEMENT 23 / 08 / 2018 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT ( A), GHAZIABAD DATED 28.09.2016 FOR THE ASSESSMENT YEAR 2013 - 14 , WHEREIN, THE DISALLOWANCE MADE BY THE LD AO ON ACCOUNT OF DEPRECIATION OF RS. 634717/ - IS CONFIRMED . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ADDITION/ DISALLOWANCE MADE BY ASSESSING OFFICER AND CONFIRMED BY CIT(A) IS UNJUST, ILLEGAL, ARBITRARY, AND BAD IN LAW. 2. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD ASSESSING OFFICER DISALLOWING THE DEPRECIATION CLAIM OF INR 6,34,717/ - IN RESPECT OF THE FIXED ASSETS. 3. THE HONBLE CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY HAS NEVER BEEN CLOSED BUT ONLY MANUFACTURING ACTIVITIES WERE DISCONTINUED FOR A TEMPORARY PERIOD. 4. THAT THE EXPLANATION FILED AND THE MATERIAL AVAILABLE ON RECORD HAS NOT BEEN PROPERTY CONSIDERED AND LEGALLY INTERPRETED. THE ADDITION MADE CANNOT BE JUSTIFIED BY AN MATERIAL ON RECORD. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN AND FABRICS. THE MANUFACTURING OF THE ASSESSEE COMPANY IS DISCONTINUED TEMPORARILY BECAUSE OF HEAVY LOSS AND LABOUR PROBLEMS . THE LOSS OF THE COMPANY HAS ALSO EXCEEDED THE NET - WORTH AND PAGE | 2 THEREFORE IT WAS DECLARED A SEE K COMPANY. IT FILED ITS RETURN OF INCOME ON 29.09.2013 DECLARING NIL INCOME. THE ASSESSMENT U/S 143(3) WAS MADE AT NIL INCOME AS PER ORDER DATED 15.10.2015. THE ONLY DISALLOWANCE MADE IN THE RETURN OF INCOME WAS WITH RESPECT TO DEPRECIATION OF RS. 634717/ - . 4 . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT ( A) WHO CONFIRMED THE DISALLOWANCE. THEREFORE, THE ASSESSEE IN APPEAL BEFORE US. 5 . THE LD AR REITERATED THE STATEMENT MADE BEFORE THE LOWER AUTHORITIES AS WELL AS SUBMITTED THAT THE LD CIT(A) IN ASSESSEE S OWN CA SE FOR ASSESSMENT YEAR 2011 - 12 HAS ALLOWED THE DEPRECIATION VIDE PARA NO. 5.3 HOLDING THAT THE ASSESSEE HAS NOT CLOSE D DOWN ITS BUSINESS BUT TEMPORARILY DISCONTINUED THE SAME AND THEREFORE, DEPRECIATION SHOULD BE ALLOWED TO THE ASSESSEE. HE FURTHE R REFERRED TO THE ORDER OF THE LD CIT(A) FOR ASSESSMENT YEAR 2012 - 13 WHERE IN ALSO THE IDENTICAL WORDED FINDING WERE GIVEN BY THE LD CIT(A) THEREFORE, HIS SUBMISSION WAS THAT EXCEPT IN ASSESSMENT YEAR 2013 - 14, THE LD CIT(A) HAS ALLOWED THE CLAIM OF THE ASSE SSEE. HE FURTHER SUBMITTED THAT THOUGH THE CASE BEFORE US FOR ASSESSMENT YEAR 2013 - 14 THE LD CIT ( A) HAS NOT FOLLOWED ITS OWN ORDER IN ASSESSEES OWN CASE FOR EARLIER YEARS. HE SUBMITTED THAT THERE IS NO CHANGE IN THE FACTS OF THE CASE . HE FURTHER SUBMITTED A COMPILATION OF CASE LAWS WHEREIN, CLAIM OF DEPRECIATION IS ALLOWED TO THE PARTIES TO SUPPORT HIS CLAIM. 6 . THE LD DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. IN THE PRESENT CASE, THE ASS ESSEE IS A SICK INDUSTRIAL UNIT WHO WAS EARLIER ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN AND FABRIC. THE BUSINESS OF THE ASSESSEE WAS TEMPORARILY DISCONTINUED AS NO MANUFACTURING OPERATION COULD BE CARRIED OUT BECAUSE OF HEAVY LOSS, LABOUR PROBLEMS , AND OTHER FA CTORS . THEREFORE, THE LD AO NOTED THAT THE ASSESSEE HAS DECLARED BUSINESS LOSS OF RS. 200622734/ - AS PER PROFIT AND LOSS ACCOUNT. AS PER THE COMPUTATION OF THE ASSESSEE, IT HAS DISALLOWED THE EXPENSES CLAIMED OF RS. 24.49 CRORES AND NET INCOM E SHOWN WAS RS. 4.43 CRORES. THE ASSESSEE FURTHER REDUCED THE RENTAL INCOME OF RS. 4.55 CRORES. THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 6.34 LACS THAT WAS DISALLOWED BY THE LD AO STATING THAT AS THE ASSETS OF THE ASSESSEE WERE NOT USED FOR ABOUT 10 YE ARS CLAIMED IT COULD NOT BE ALLOWED. THE LD CIT ( A) ALSO CONFIRMED THE SAME. HOWEVER, FOR ASSESSMENT YEAR 20 1 1 - 12 AND 2012 - 13 THE LD CIT ( A) HAS ALLOWED THE CLAIM OF DEPRECATION ON THE SAME FACTS. THE MAIN REASON FOR CONFIRMING THE DISALLOWANCE BY THE LD C IT ( A) WAS THAT THE AS S ETS HAVE NOT BEEN USED DURING THE YEAR AND THE ASSESSEE DOES NOT HAVE RUNNING BUSINESS. ON IDENTICAL FACTS PAGE | 3 AND CIRCUMSTANCES FOR ASSESSMENT YEAR 2012 - 13 THE LD CIT(A) FOR ASSESSMENT YEAR 2012 - 13 VIDE PARA NO. 5.3 OF HIS ORDER AS HELD THAT U/S 32 OF THE ACT EVEN THE PASSIVE USER OF THE ASSET ARE ALSO ENTITLED FOR DEPRECIATION ALLOWANCE. HE RELIED UPON THE SEVERAL DECISIONS OF THE HON'BLE HIGH COURT AND HELD THAT IT IS NOT THE CASE THAT APPELLANT HAS CLOSED DOWN ITS BUSINESS BUT HAS BEE N TEMPORARILY DISCONTINUED DUE TO CERTAIN PROBLEMS BEYOND THE CONTROL OF THE MANAGEMENT. HE FURTHER HELD THAT THE MANAGEMENT HAS KEPT PLANT AND MACHINERY READY FOR USE AS AND WHEN THE BUSINESS IS REVIVE D . WE FIND THAT THE REASONS GIVEN BY THE LD CIT ( A) FOR EARLIER YEARS ARE REASONABLE AND SOUNDER . THE REASONS GIVEN BY THE LD CIT ( A) FOR THIS YEAR ARE WITHOUT REFERRING TO HIS DECISIONS IN EARLIER YEARS. THE LD CIT ( A) HAS NOT SHOWN THAT WHAT ARE THE FACTORS DIFFERENT FROM THE EARLIER YEARS FORCING HIM TO CHANGE HIS OPINION FOR THIS YEAR. IN VIEW OF THE FACT THAT FOR EARLIER YEARS THE LD CIT ( A) HAS FOLLOWED THE DECISIONS OF SEVERAL HIGH COURTS INCLUDING THE JURISDICTIONAL HIGH COURT FOR ALLOWING THE CLAIM OF THE ASSESSEE, SUCH ORDERS OF THE LD CIT (A) WERE ALSO NOT CHALLENGED BY REVENUE , WE ARE NOT INCLINED TO UPHOLD THE ORDER OF THE LD CIT ( A) FOR THIS YEAR. IN VIEW OF THIS, WE REVERSE THE FINDING OF T HE LOWER AUTHORITIES AND DIRECT THE LD AO TO GRANT DEPRECATION OF RS. 634717/ - TO THE ASSESSEE. 8 . RESU LTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 3 / 08 / 2018 . - SD/ - - SD/ - ( S.K.YADAV ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23/08 / 2018 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI