ACIT CIR 6(1), MUMBAI V. AARTI DRUGS LTD, MUMBAI

ITA 6486/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8980 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 23-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAVIN M DEDHIA
• Keywords: Depreciation; Additional depreciation

Judgement Text

ITA NO.6486 OF 2011 AARTI DRUGS LTD MUMBAI PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.6486/MUM/2011 (ASSESSMENT YEAR: 2003-04) ASSTT. CIT, CIRCLE-6(1) ROOM NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020 VS. M/S AARTI DRUGS LTD, 4074 MATRU SMRUTI ROAD NO.4 SCHEME NO.6 SION (E), MUMBAI 400 022 PAN: AAACA 4410 D (APPELLANT) (RESPONDENT) DEPARTMENT BY: MS. NEERAJA PRADHAN, DR ASSESSEE BY: SHRI BHAVIN M. DEDHIA DATE OF HEARING: 22/08/2012 DATE OF PRONOUNCEMENT: 12/09/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDERS OF THE CIT (A)-14 MUMBAI, DATED 20/06/2011. THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE A DDITION OF ` .38,02,341/- BEING CLAIM OF ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY INSTALLED DURING THE YEAR WITHO UT APPRECIATING FACT THAT THE INSTALLED CAPACITY DURIN G THE YEAR HAS NTO INCREASED AT LEAST BY 25% IN COMPARISO N OF THE LAST YEAR AS PER PROVISIONS OF SECTION 32(I)(II A) OF THE I.T. ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF AO BE RESTOR ED. 2. THE ISSUE IN THE PRESENT APPEAL IS WITH REFERENCE T O THE CLAIM OF ADDITIONAL DEPRECIATION TO AN EXTENT OF ` .38,02,341/- ON PLANT & MACHINERY INSTALLED DURING THE YEAR. AOS CONTENTI ON WAS THAT THE REPORTED PRODUCTION DOES NOT INDICATE THAT THE INST ALLED CAPACITY HAS INCREASED BY MORE THAN 25% SO AS TO ALLOW THE A DDITIONAL ITA NO.6486 OF 2011 AARTI DRUGS LTD MUMBAI PAGE 2 OF 3 DEPRECIATION AS PER THE PROVISIONS OF SECTION 32(I) (IIA) OF THE I.T. ACT. HIS FINDING RUNS FROM PAGE 1 TO PAGE 5 OF THE ASSES SMENT ORDER. BEFORE THE CIT (A) ASSESSEE FURNISHED THE EXISTING CAPACITY, THE ADDITIONAL INSTALLED CAPACITY AND WHY ASSESSEE IS E LIGIBLE FOR ADDITIONAL DEPRECIATION. AFTER CONSIDERING THE FACT S THE CIT (A) ALLOWED ADDITIONAL DEPRECIATION STATING AS UNDER: 4.4 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ARGUMENTS ADVANCED BY THE AR. IT IS SEEN FROM THE ABOVE SUBMISSION THAT INSTA LLED CAPACITY OF K-40 METRONIDAZOLE BENZOATE PLANT IN TH E BEGINNING OF THE YEAR WAS 40 M.T. PER MONTH WHICH A T THE END OF THE YEAR WAS EXPANDED TO 55 M.T. PER MON TH. SIMILARLY, THE INSTALLED CAPACITY IN RESPECT OF N-1 98 TINIDAZOLE PLANT AT THE BEGINNING OF THE YEAR WAS 5 5 M.T. PER MONTH AND THE SAME GOT INCREASED TO 70 M.T . PER MONTH. THE INSTALLED CAPACITY IN RESPECT OF G-6 0 MULTIPURPOSE PRODUCT PLANT IN THE BEGINNING OF THE YEAR WAS 1 M.T. PER MONTH AND THE SAME GOT INCREASED TO 2 M.T. PER MONTH AT THE END OF THE YEAR. LASTLY, THE INSTALLED CAPACITY OF N-198 METHYL NITRO IMIDEZOLE PLANT IN THE BEGINNING OF THE YEAR WAS 140 M.T. PER MONTH AND IT GOT INCREASED TO 200 M.T PER MONTH AT THE EN D OF THE YEAR. 4.5. AO HAS HOWEVER NOT COMPUTED AND COMPARED THE INCREASED INSTALLED CAPACITY IN THIS FASHION. INSTE AD, HE HAS COMPUTED THE TOTAL PRODUCTION IN CONSECUTIVE YE ARS AND COMPARED THE INCREASE IN PRODUCTION WITH THE PRODUCTION OF EARLIER YEAR. IN MY VIEW, AOS METHOD OF COMPARING THE INSTALLED CAPACITY IS NOT THE CORRECT METHOD. IF THE INSTALLED CAPACITY HAS TO BE COMPARE D THEN WHAT SHOULD BE COMPARED IS THE CAPACITY AT THE BEGINNING OF THE YEAR WITH THAT AT THE END OF THE Y EAR. IF AOS METHOD IS ACCEPTED, WHAT WE WILL BE COMPARING WILL BE THE PRODUCTION PER YEAR AND NOT THE INSTALL ED CAPACITY. THEREFORE, IN MY VIEW THE METHOD ADOPTED BY THE APPELLANT IS THE CORRECT METHOD WHERE THE INSTA LLED CAPACITY AT THE BEGINNING OF THE YEAR FOR A UNIT PE RIOD, SAY PER MONTH OR PER DAY OR PER WEEK SHOULD FIRST B E ASCERTAINED AND THE SAME SHOULD BE COMPARED WITH TH E INSTALLED CAPACITY AT THE END OF THE YEAR FOR A UNI T PERIOD WHICH CAN BE PER MONTH, PER DAY OR PER WEEK. IF THIS CORRECT METHOD IS ADOPTED, IT IS EVIDENT THAT THE APPELLANT HAS GOT INCREASE IN THE INSTALLED CAPACIT Y BY MORE THAN 25% IN RESPECT OF THE FOUR PLANTS AND HEN CE, IT IS ENTITLED FOR ADDITIONAL DEPRECIATION AS PER S ECTION ITA NO.6486 OF 2011 AARTI DRUGS LTD MUMBAI PAGE 3 OF 3 32(1)(IIA) OF THE ACT. I ACCORDINGLY HOLD AND THE DISALLOWANCE OF ADDITIONAL DEPRECIATION ON ` .38,02,341/- IS HEREBY DELETED. THIS GROUND OF APPE AL IS ALLOWED. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE LEAR NED DR AND THE LEARNED AR, WE DO NOT SEE ANY REASON TO INTERFE RE WITH THE ORDER OF THE CIT (A). OBVIOUSLY AO HAS COMPUTED WRONGLY I N ARRIVING AT THE INCREASE IN THE INSTALLED CAPACITY BY COMPARING THE PRODUCTION FIGURES RATHER THAN MACHINE CAPACITY FIGURES. SINC E THIS ASPECT WAS EXAMINED BY THE CIT (A) ON FACTS WHICH THE REVENUE COULD NOT COUNTER, EXCEPT THE LEGAL ARGUMENTS, WE AGREE WITH THE FINDINGS OF THE CIT (A). THEREFORE, THE REVENUE APPEAL IS DISMI SSED. 4. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2012. SD/- SD/- ( B.R. MITTAL ) (B. RAMAK OTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH SEPTEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI