Asstt. Commissioner of Income Tax-6, Kanpur V. M/s Pan parag India Ltd, Kanpur

ITA 656/LKW/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92174 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PINKI MAHAWAR
• Assessee Lawyers: P K KAPOOR
• Keywords: Depreciation
• Section: 32

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 6 56 /LKW/201 3 ASSESSMENT YEAR: 20 1 0 11 ACIT 6 , KANPUR VS. M/S PAN PARAG INDIA LIMITED , 24/19 , THE MALL , KANPUR - 208001 PAN:AA ECP3930F (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI P. K. KAPOOR, C.A. DEPARTMENT BY SMT. PINKI MAHAWAR, SR. DR DATE OF HEARING 23/04/2015 DATE OF PRONOUNCEMENT 1 7 /06/2015 O R D E R PER A. K. GARODIA, A.M. T HIS IS REVENUE S APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT I KANPUR DATED 06 .0 6 .201 3 FOR A.Y. 20 1 0 11 . 2. THE REVENUE HAS RAISED AS MANY AS 4 GROUNDS BUT THE ONLY GRIEVANCE OF THE REVENUE IS FOR DELETING BY LEARNED CIT (A) OF THE DISALLOWANCE OF DEPRECIATION OF RS. 25,32,656/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE ITSELF ADMITTED THAT THE JORHAT NIT IS NOT WORKING SINCE ASSESSMENT YEAR 2008 09. 3 . LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER . HE ALSO SUBMITTED THAT JORHAT UNIT OF THE ASSESSEE HAS NOT RESUMED ITS FUNCTIONING EVEN TILL DATE. LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT (A). HE ALSO SUBMITTED THAT THE ASSESSMENT ORDER U/S 143 (3) FOR A.Y. 2 2009 10 IS AVAILABLE ON PAGES 93 96 OF THE PAPER BOOK AND THERE IS NO SUCH DISALLOWANCE IN THAT YEAR. RELIANCE WAS PLACED BY HIM ON THE TRIBUNAL ORDER IN THE CASE OF M/S SWATI SYNTHETICS LTD. VS. ITO IN ITA NO. 1165/M/2006 DATED 17.12.2009 COPY AVAILABLE ON PAGES 125 154 OF THE PAPER BOOK. 4 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT LEARNED CIT (A) HAS DELETED THE DISALLOWANCE OF DEPRECIATION ON THIS BASIS THAT THE ASSETS WERE PUT TO USE IN EARLIER YEARS AND DEPRECIATION WAS ALLOWED IN EARLIER YEARS AND THEREFORE, AFTER INSERTION OF THE CONCEPT OF BLOCK OF ASSETS, DEPRECIATION CANNOT BE DISALLOWED IF SOM E ASSET BEING PART OF BLOCK OF ASSET IS NOT USED IN A YEAR. BEFORE US, RELIANCE WAS PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S SWATI SYNTHETICS LTD. VS. ITO (SUPRA). IN THIS CASE, THE TRIBUNAL HAS NOTED A DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF GULATI SAREE CENTRE VS. ACIT AS REPORTED IN 71 ITD 73 (CHD.) ( SB). IT WAS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN THIS CASE THAT WHERE AN ASSET IN BLOCK OF ASSETS IS SEPARATELY IDENTIFIABLE, PROVISIONS OF SECTION 38 ( 2) CAN BE INVOKED FOR MAKING PROPORTIONATE DISALLOWANCE OF DEPRECIATION. THE TRIBUNAL IN THAT CASE HELD THAT THIS DECISION OF SPECIAL BENCH OF THE TRIBUNAL IS NOT APPLICABLE IN THAT CASE BECAUSE IN THAT CASE, THE ASSETS WERE NOT USED FOR PERSONAL PURPOSES BUT IN THE CASE OF GULATI SAREE CENTRE VS. ACIT (SUPRA), THE ASSETS WERE PARTLY USED FOR PERSONAL PURPOSES OF PARTNERS. NOW AT THIS JUNCTURE, WE FEEL IT PROPER TO REPRODUCE THE PROVISIONS OF SECTION 38 (2) OF THE I. T. ACT. IT READS AS UNDER: - SECTION 38 ( 2) WHERE ANY BUILDING, MACHINERY, PLANT OR FURNITURE IS NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE DEDUCTIONS UNDER SUB - CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30, CLAUSES (I) AND (II) OF SECTION 31 AND CLAUSE (II ) OF SUB - SECTION (1) OF SECTION 32 SHALL BE RESTRICTED TO A FAIR PROPORTIONATE PART THEREOF WHICH THE 3 ASSESSING OFFICER MAY DETERMINE, HAVING REGARD TO THE USER OF SUCH BUILDING, MACHINERY, PLANT OR FURNITURE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. 5. FROM THESE PROVISIONS OF SECTION 38 (2), IT COMES OUT THAT IF AN IDENTIFIABLE ITEM OF FIXED ASSET OUT OF BLOCK OF ASSET IS NOT EXCLUSIVELY USED FOR BUSINESS PURPOSE, PROPORTIONATE DISALLOWANCE OF DEPRECIATION IS JUSTIFIED. NOW, CAN WE SAY THAT IF AN IDENTI FIABLE ITEM OF FIXED ASSET OUT OF BLOCK OF ASSET IS NOT USED FOR BUSINESS PURPOSE AT ALL, DEPRECIATION HAS TO BE ALLOWED ON FULL VALUE OF THE ASSET BUT IF SOME PART OF THE SAME ASSET IS USED FOR PERSONAL PURPOSES, THEN PROPORTIONATE DISALLOWANCE CAN BE MAD E? IN OUR CONSIDERED OPINION, THIS INTERPRETATION OF SECTION 38 (2) IS LEADING TO ABSURD RESULT BECAUSE AS PER THIS INTERPRETATION, IF THE ASSETS OF JORHAT UNIT IS USED FOR PERSONAL PURPOSES, DEPRECIATION IS NOT ALLOWABLE BUT IF THE ASSETS OF THAT UNIT ARE NOT USED AT ALL WHETHER FOR BUSINESS PURPOSE OR PERSONAL PURPOSES AS IN THE PRESENT CASE, FULL DEPRECIATION IS TO BE ALLOWED. IN OUR CONSIDERED OPINION, THE THRUST IN THE PROVISIONS OF SECTION 38 (2) IS ON USER FOR BUSINESS PURPOSE AND NOT ON THIS THAT IT IS PARTLY USED FOR PERSONAL PURPOSES. HENCE, IF THE ASSET ALTHOUGH PART OF A BLOCK OF ASSET BUT IDENTIFIABLE IS NOT USED AT ALL, NO DEPRECIATION IS ALLOWABLE U/S 32 IN RESPECT OF THAT ASSET. THEREFORE, THE ISSUE IN DISPUTE IN THE PRESENT CASE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE PROVISIONS OF SECTION 38 (2) OF THE I. T. ACT AND THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF GULATI SAREE CENTRE VS. ACIT (SUPRA) AND THEREFORE, WE PREFER TO FOLLOW THIS DECISION OF SPECIAL BENCH IN PREFERENCE TO DIVISION BENCH DECISION RENDERED IN THE CASE OF M/S SWATI SYNTHETICS LTD. VS. ITO (SUPRA) AND RESPECTFULLY FOLLOWING THE SAME, WE REVERSE THE ORDER OF CIT (A) AND RESTORE THAT OF THE A.O. BECAUSE, IT IS UNDISPUTED FACT THAT THE JOR HAT UNIT OF THE ASSESSEE DID NOT FUNCTION AT ALL IN THE PRESENT YEAR AND ITS ASSETS ALTHOUGH PART OF BLOCK OF ASSETS OF THE ASSESSEE COMPANY ARE IDENTIFIABLE AND THEREFORE AS PER PROVISIONS OF SECTION 4 38 (2) OF THE ACT, DEPRECIATION IS NOT ALLOWABLE IN RES PECT OF THE UNITS OF JORHAT UNIT BECAUSE THE ASSETS OF THIS UNIT WERE NOT USED FOR BUSINESS PURPOSES IN THE PRESENT YEAR. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED . (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KU MAR YADAV) ( A. K. GARODIA ) JUDI CIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 / 0 6 /201 5 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR