Shivajirao Nilangekar Patil SSK Ltd., Latur V. Deputy Commissioner of Income-tax,

ITA 667/PUN/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7575 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-03-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Depreciation; Retrospective amendment
• Section: 43B; 143(3); 139(1); 32

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI S.S. VISWANETHRA RAVI, JM . / ITA NO.667/PUN/2014 / ASSESSMENT YEAR : 2005-06 SHIVAJIRAO NILANGEKAR PATIL SAHAKARI SAKHAR KARKHANA LTD., A/P AMBULGA TAL. NILANGA, DIST. LATUR. PAN : AAAAS4651E. . / APPELLANT. V/S THE INCOME TAX OFFICER, WARD 3(1), NANDED. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE. REVENUE BY : SHRI PANKAJ GARG. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A), AURANGABAD DATED 15.01.201 4 FOR THE ASSESSMENT YEAR 2005-06. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE SOCIETY STATED TO BE ENGAGE D IN THE BUSINESS OF MANUFACTURING AND SALE OF SUGAR. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2005-06 ON 30.10.2005 DECLARING TOTAL LOSS OF RS.14,11,14,150/-. ASSESSEE THEREAFTER REVISED THE RETURN OF INCOME ON / DATE OF HEARING : 23.09.2019 / DATE OF PRONOUNCEMENT: 24.10.2019 2 16.10.2006 BY DECLARING LOSS OF RS.14,81,84,366/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRA MED U/S 143(3) OF THE ACT VIDE ORDER DT.13.12.2007 AND THE TOTAL INCOME WAS DETERMINED AT RS.4,83,83,066/-. AGGRIEVED BY THE ORDER OF AO, ASSES SEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 15.01.2014 (IN APPEAL NO.ABD/CIT(A)/42/2007-08) GRANTED PARTIAL RELIEF TO THE ASS ESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACT AND IN TH E CIRCUMSTANCE OF THE CASE AND IN L AW O F THE LEARNED COMMISSIONER OF I N COME TAX (APPEALS), AURANGABAD HAS ERRED IN DISALLOWING AND ADDING BACK AN AMOUNT OF R S.5,68,51,950/- ON ACCOUNT OF DISALLOWANCE OF MSC BANK INTEREST U/S . 43B OF IT ACT 1961. 2. ON THE FACT AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW OF T - HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURAN GABAD HAS ERRED I N DISALLOWING AND ADDING BACK AN AMOUNT OF RS.48 , 44,132/- ON ACCOUNT OF DISALLOWANCE OF BANO OF BARODA INTER EST U/S. 43B OF IT ACT 1961 . 3. ON THE FACT AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURAN GABAD HAS ERRED IN DISALLOWING AND ADDING BACK AN AMOUNT OF R S.3,65,544/- ON ACCOUNT OF DISALLOWANCE OF PROVIDENT FUND. 4. ON THE FACT AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURAN GABAD HAS ERRED IN DISALLOWING AND ADDING BACK AN AMOUNT ' O F RS.2,81,32,366/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT HE DOE S NOT WISH TO PRESS GROUND NOS. 2 AND 3. IN VIEW OF THE SUBMISSION OF LD.A.R., THE GROUND NOS. 2 AND 3 ARE DISMISSED AS NOT PRESSED. NOW THE GROUNDS REMAINED FOR ADJUDICATION ARE GROUNDS 1 AND 4 ONLY. 4. GROUND NO.1 IS WITH RESPECT TO DISALLOWANCE OF INTEREST U/S 43B OF THE ACT. 3 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT ASSESSEE HAD DEBITED INTEREST OF RS.5,68,51,950/- PAYABLE T O MAHARASHTRA STATE CO-OPERATIVE BANK LIMITED WHICH WAS U NPAID DURING THE YEAR 2004-05 AND WAS CONVERTED INTO LOAN ON 01.04 .2005. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAME NOT BE DISALLOWED U/S 43B OF THE ACT. ASSESSEE INTER-ALIA SUBMITTED THAT MAHA RASHTRA STATE CO-OPERATIVE BANK IS NOT A SCHEDULED BANK AND THEREFORE PROVISIONS OF SEC.43B OF THE ACT ARE NOT APPLICABLE. THE SUBMISSIONS MAD E BY THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE AO. AO NOTE D THAT MAHARASHTRA STATE CO-OPERATIVE BANK IS A SCHEDULED BA NK. HE FURTHER NOTED THAT AS PER EXPLANATION 3D INSERTED BY THE FINANC E ACT, 2006 TO SEC.43B OF THE ACT WITH RETROSPECTIVE EFFECT FROM 01.04.1997 , IF THE UNPAID INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT IS CONVERTED INTO A LOAN IN A SUBSEQUENT YEAR THE AMOUNT IS DISALLOWABLE. H E ACCORDINGLY DISALLOWED THE SAME U/S 43B OF THE ACT. AGGRIEVED BY TH E ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD AS UNDER : - 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOT ICED THAT THE APPELLANT HAS AGREED FOR THE ADDITION OF RS.3,56,43 ,814/- IN RESPECT OF INTEREST PAYABLE AND OUTSTANDING IN RESPECT OF T HE SCHEDULED BANK AND HAS DISPUTED THE AMOUNT OF INTEREST EXCESS CONS IDERED AND TAXED BY THE A.O. IN RESPEC T OF BANK OF BARODA RS . 48,43,843/-, INTEREST PAYABLE TO NON-SCHEDULED BANK I . E. MUMBAI DISTRICT CENTRAL COOPERATIVE BANK RS . 51 , 44,021/- AND INTEREST PAID TO MSC BANK DURING THE YEAR AND UP TO THE DUE DATE OF FILI NG THE RETURN OF INCOME U/S 139(1) RS.1,60,64,115/-. THE A.O. IS DIRECTED TO AL LOW THE RELIEF CLAIMED BY THE APPELLANT AS MENTIONED IN THE ABOVE MENTIONED TABULAR CHART AFTER VERIFYING THE FACTS C LAIMED BY THE APPELLANT. GROUND NOS.1 & 2 ARE TREATED AS PARTLY ALLOWED WITH THE ABOVE DIRECTION. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE LD.CIT(A) HAD DIREC TED THE AO 4 TO GRANT RELIEF AS PER THE TABULAR CHART. HE SUBMITTED T HAT THERE ARE CERTAIN CALCULATION ERRORS IN THE CHART AND FURTHER THE A O HAS NOT YET ACTED UPON THE DIRECTION GIVEN BY LD.CIT(A). HE THEREFORE FAIRLY SUBMITTED THAT THE NECESSARY DIRECTION BE GIVEN TO AO T O DECIDE THE ISSUE AS PER THE FINDINGS OF LD.CIT(A). LD. D.R. DID NOT OBJECT TO THE CONTENTION MADE BY LD.A.R. AND HAD SUBMITTED THAT REVENU E HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DISALLOWANCE U/S 43B OF THE ACT. WITH RESPECT TO THE UNPAID INTEREST TO MAHARASHTRA STATE CO-OPERATIVE BANK LIMITED WHICH HAS BEEN CONVERTE D INTO LOAN AS ON 01.04.2005, WE FIND THAT LD.CIT(A) AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE HAS DIRECTED THE AO TO DECIDE THE ISSUE AFTER VERIFYIN G THE FACTS. BEFORE US, LD.A.R. HAS SUBMITTED THAT THE AO HAS YE T TO PASS ORDER ON THE DIRECTIONS OF LD.CIT(A). CONSIDERING THE AFORE SAID UNDISPUTED FACTUAL POSITION, WE DIRECT THE AO TO DECIDE THE ISSUE IN LINE WITH THE DIRECTIONS GIVEN BY LD.CIT(A) AND IN ACCORDANCE WI TH THE LAW. NEEDLESS TO STATE THAT AO SHALL GRANT ADEQUATE OPPORTU NITY OF HEARING TO THE ASSESSEE. ASSESSEE IS ALSO DIRECTED TO PROMPTLY FURN ISH ALL THE DETAILS CALLED FOR BY THE AUTHORITIES. THE AO IS ALSO AT LIBERTY TO PROCEED WITH THE CASE, IF THE ASSESSEE FAILS TO PRODUCE THE REQUIRED DOCUMENTS. THUS, THE GROUND NO.1 OF ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. 7. GROUND NO. 4 IS WITH RESPECT TO DISALLOWANCE OF DEPRECIATION. 7.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSES SEE HAD CLAIMED DEPRECIATION AGGREGATING TO RS.2.81 CRORES (ROUNDE D OF) WHICH 5 COMPRISED OF RS.71,08,419/- ON NON-RESIDENTIAL BUILDINGS AND RS.2,10,33,947/- ON PLANT AND MACHINERY. AO NOTICED THAT THE ASSESSEE DID NOT OPERATE PLANT AND MACHINERY DURING T HE YEAR UNDER CONSIDERATION. HE WAS THEREFORE OF THE VIEW THAT THE CLA IM OF DEPRECIATION ON SUCH ASSETS REQUIRED TO BE DISALLOWED. HE ACCORDINGLY DISALLOWED THE CLAIM OF DEPRECIATION. AGGRIEVED BY THE ORD ER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD T HE ORDER OF AO BY OBSERVING AS UNDER : 9.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. THE CONTENTION OF THE APPELLANT THAT 'PUT TO USE' MEANS 'READY TO USE' CANNOT BE ACCEPTED IN VIEW OF THE DE CISION OF HON'BLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF DIN ESHKUMAR GULABCHAND AGRAWAL VS. CIT (2004) 267 ITR 168. IN THIS CASE, THE HON'BLE HIGH COURT HAS LAID DOWN THAT THE WORD 'USE D' DENOTES ACTUALLY USED AND NOT MERELY READY FOR USE. THE EXP RESSION USED MEANS ACTUALLY USED FOR THE PURPOSES OF THE BUSINES S. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF DCIT VS. YALLAM A DASAPPA HOSPITAL (2007) 290 ITR 353 HAS HELD THAT KEPT READ Y THEORY IS NOT AVAILABLE TO THE ASSESSEE AS THE LEGISLATURE (IN SE CTION 32) HAS CHOSEN TO USE THE WORD 'USED'. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, THE CONTENTION OF THE APPELLANT THAT THE ASSET WAS KEPT READY TO USE AND HENCE THE DISALLOWANCE OF DEPRECIATION ON NON-RESID ENTIAL BUILDINGS AND PLANT AND MACHINERY IS NOT JUSTIFIED IS REJECTE D. THE ADDITION OF RS.71,08,419/- AND RS.2,10,23,947/- IN RESPECT OF D ISALLOWANCE OF DEPRECIATION ON NON-RESIDENTIAL BUILDING AND PLANT AND MACHINERY RESPECTIVELY IS CONFIRMED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 8. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ASSESSEE NOT OP ERATED THE FACTORY DURING THE YEAR ON ACCOUNT OF NON AVAILABILITY OF R AW MATERIAL BUT THE ASSESSEE WAS WORKING IN A.Y. 2004-05 AND ALSO IN A.Y. 2006-07. HE FURTHER SUBMITTED THAT IN SUCH A SITUATION THOUGH THE FACTORY WAS READY TO USE AND MERELY BECAUSE OF THE FACTORY COULD N OT WORK DUE TO NON AVAILABILITY OF RAW-MATERIAL, THE DEPRECIATION CANNOT BE D ENIED TO THE ASSESSEE. HE ALSO RELIED ON THE DECISION IN THE CASE OF BOMBAY TRIBUNAL IN THE CASE OF DCIT VS. BOSKALIS DREDGING INDIA (P) LTD., 6 REPORTED IN (2012) 23 TAXMANN.COM 4 (MUM). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF AO AND LD.CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO THE CLAIM OF DEPRECIATION. IT IS REVENUES CASE THAT DURING THE YEA R THE KARKHANA OF THE ASSESSEE WAS NOT IN OPERATION AND THEREFORE THE C LAIM OF DEPRECIATION ON NON-OPERATIONAL ASSETS CANNOT BE ALLOWED. WE FIND THAT HONBLE MUMBAI HIGH COURT IN THE CASE OF DINESHKUMAR GU LABCHAND AGARWAL VS. CIT REPORTED IN (2004) 141 TAXMAN 62 HAS H ELD THAT THE WORD USED IN SECTION 32 OF THE I.T. ACT IS NOT RESTRIC TED TO FULL OR CONTINUOUS USE OF PLANT AND MACHINERY AND IT INCLUDES WITHIN THE AMBIT OF THE STATUS OF KEPT READY TO USE AS WELL. WE FURTHE R FIND THAT HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENNAI PETROLEU M CORPORATION LTD. REPORTED IN (2013) 358 ITR 314 HAS HELD THAT SO LONG AS THE BUSINESS IS GOING ON AND THE MACHINERY IS READY TO USE AND DUE TO CERTAIN EXTRANEOUS CIRCUMSTANCES OF THE CASE, THE MA CHINERY COULD NOT BE PUT TO USE, THE SAID FACT COULD NOT STAND IN THE WAY OF GRANTING RELIEF U/S 32 OF THE ACT. 10. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL TO CONTROVERT THE SUBMISSIONS OF THE ASSESSEE AND THAT IN SUBSEQUENT YEAR S THE KARKHANA OF THE ASSESSEE HAD OPERATED. DURING THE COURSE OF HEAR ING A QUESTION WAS PUT UP BY THE BENCH TO THE LD.A.R. AS TO WHETHER T HE DEPRECIATION WAS ALLOWED TO THE ASSESSEE IN SUBSEQUENT YEARS AND WH AT WAS THE WDV CONSIDERED BY REVENUE FOR GRANTING DEPRECIATION. THE LD.A .R. SUBMITTED THAT HE IS NOT IN A POSITION TO GIVE THOSE FIGURES BUT HOW EVER 7 DEPRECIATION WAS ALLOWED TO THE ASSESSEE. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND RELYING ON THE DECISIONS CITED HEREINAB OVE, WE HOLD THAT ASSESSEE BE GRANTED THE CLAIM OF DEPRECIATION IN THE YEAR UNDER CONSIDERATION. THE AO SHALL ALSO CONSIDER THE AFORESAID FAC T WHILE CONSIDERING THE WDV AND CONSEQUENTIAL DEPRECIATION IN SUBS EQUENT YEARS. THUS, THE GROUND NO.4 OF ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 3. ORDER PRONOUNCED ON 24 TH DAY OF OCTOBER, 2019. SD/- SD/- ( S.S. VISWANETHRA RAVI) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 24 TH OCTOBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A), AURANGABAD. CIT, AURANGABAD. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.