ACIT, CHENNAI V. M/s. Sundaram Fasterners Ltd., CHENNAI

ITA 676/CHNY/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4742 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 27-01-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 30-03-2012
• Court: TRIBUNAL
• Department Lawyers: MURUGA BHOOBATHY JT
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Depreciation; Additional depreciation; Wrong claim; Revised return
• Section: 143(3); 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D, CHENNAI , ! '# $ %# $ & ' ', ( ! )* BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 590/MDS/2012 ( - #.- / ASSESSMENT YEAR : 2004-05 SUNDARAM FASTENERS LTD., 98-A, 7 TH FLOOR, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. [PAN: AAACS 8779D ] (01/ APPELLANT ) VS. ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), AAYAKAR BHAVAN, NEW BLOCK, CHENNAI 600 034. (2301/ RESPONDENT) ./ ITA NO. 676/MDS/2012 ( - #.- / ASSESSMENT YEAR : 2004-05 ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), AAYAKAR BHAVAN, NEW BLOCK, CHENNAI 600 034. (01/ APPELLANT ) VS. SUNDARAM FASTENERS LTD., 98-A, 7 TH FLOOR, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. [PAN: AAACS 8779D ] (2301/ RESPONDENT) 01 4 5 / ASSESSEE BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE 2301 4 5 /DEPARTMENT BY : SHRI MURUGA BHOOBATHY, JT. CIT $ # 4 6 /DATE OF HEARING : 27.01.2017 7. 4 6 /DATE OF PRONOUNCEMENT : 26.04.2017 2 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. / O R D E R PER SANJAY ARORA, AM : THESE ARE CROSS APPEALS, BY THE ASSESSEE AND THE REVENUE, ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEAL S)-VI, CHENNAI (CIT(A) FOR SHORT) DATED 23/12/2011, PARTLY ALLOWING THE AS SESSEES APPEAL CONTESTING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCO ME TAX ACT, 1961 (THE ACT HEREINAFTER) BY THE ASSESSING OFFICER (AO) FOR THE ASSESSMENT YEAR (AY) 2004- 05 VIDE HIS ORDER DATED 26/3/2009. 2. THE ISSUE ARISING IN THESE APPEALS IS THE MAINT AINABILITY IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE IMPUGNED PENALTY, WHICH IS IN RESPECT OF TWO DISALLOWANCES EFFECTED IN ASSESSMENT, AS UND ER: (AMOUNT IN RS .) A) DEPRECIATION ON HARDENING AND TEMPERING FURNACE : 1,40,56,407 (AT THE ASSESSEES FASTENER DIVISION, PADI) B) DISALLOWANCE OF DEDUCTION UNDER SECTION 80-IB : 2,77,65,509 WE SHALL TAKE UP EACH IN SERIATIM. 3. THE CLAIM FOR DEPRECIATION WAS MADE ON THE BASIS OF THE PLANT UNDER REFERENCE, A FURNACE, BEING AN AIR POLLUTION CONTROL EQUIPMENT (ELIGIBLE FOR DEPRECIATION AT THE RATE OF 100 PER PERCENT), AT 50 % (I.E., 50% OF THE ELIGIBLE RATE) OF ITS COST OF RS. 281.13 LACS, BEING PURPORT EDLY COMMISSIONED ON 31/3/2004, THE DATE ON WHICH IT WAS ADDED AS AN ITE M OF FIXED ASSETS (REFER ANNEXURE 5 TO FORM 3CD). THE ASSESSEE WAS CALLED UP ON TO JUSTIFY ITS CLAIM; ADDUCE PROOF OF COMMISSIONING AS WELL AS THE DATE O N WHICH THE PLANT (HARDENING AND TEMPERING FURNACE) LANDED IN THE ASS ESSEES FACTORY. THE ASSESSEE REPLIED (VIDE LETTER DATED 27/12/2006), ST ATING THAT IT HAD WRONGLY CLASSIFIED THE MACHINERY AS AN AIR POLLUTION CONTRO L EQUIPMENT, WHICH THOUGH IS AN ENERGY-SAVING DEVICE (BEING AN ITEM UNDER COL. III(8)(IX)(A)(B) OF PART A OF APPENDIX I TO THE INCOME TAX RULES, 1962 OR RULES ), ENTITLED TO DEPRECIATION 3 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. AT THE RATE OF 80%. THE CLAIM WAS ACCORDINGLY STATE D AS WITHDRAWN FOR THE BALANCE EXCESS, I.E., RS. 28,11,281. THE SAME PLANT , IT FURTHER ADDED, WAS ALSO ACQUIRED DURING THE FOLLOWING YEAR, AND DEPRECIATIO N THEREON CLAIMED AT THE BASE RATE OF 25 PERCENT, I.E., AS APPLICABLE TO THE GENE RAL PLANT AND MACHINERY. IN THE VIEW OF THE ASSESSING OFFICER (AO), THE FURNACE IS NOT AN ENERGY SAVING DEVICE IN-AS-MUCH AS IT DID NOT FALL WITHIN ANY ONE OF THE SPECIFIED BOILERS OR FURNACES UNDER ITEM III (8)(IX)(A) (OF PART A OF APP-I), REP RODUCING THE SAME AND, ACCORDINGLY, EXIGIBLE TO DEPRECIATION ONLY @ 25%, A S APPLICABLE TO GENERAL PLANT AND MACHINERY. IN FACT, NO PROOF OF COMMISSIONING OF THE PLANT BY 31.03.2004, THE LAST DATE OF THE RELEVANT YEAR, AS STATED, HAD BEEN FURNISHED, SO THAT NO DEPRECIATION WAS, ON FACTS, ALLOWABLE, I.E., IRRESP ECTIVE OF THE ASPECT OF RATE OF DEPRECIATION. THE ENTIRE CLAIM WAS ACCORDINGLY DISA LLOWED IN ASSESSMENT (VIDE ORDER U/S. 143(3) DATED 29.12.2006). THOUGH THE ASS ESSEE CARRIED THE MATTER IN THE APPEAL, IT DID NOT PRESS THE SAME BEFORE THE FI RST APPELLATE AUTHORITY, LEADING TO ITS DISMISSAL BY HIM (VIDE ORDER DATED 08.10.200 7 / COPY ON RECORD). IT APPEARS THAT THE SAME WAS REAGITATED IN APPEAL BEFO RE THE TRIBUNAL WHICH, VIDE ITS ORDER DATED 17.12.2008 (IN ITA NO.205/MDS/2008/ COPY ON RECORD) RESTORED THE MATTER TO THE FILE BACK TO THE AO, WHO THOUGH C ONFIRMED THE DISALLOWANCE. THE PENALTY PROCEEDINGS, INITIATED EARLIER, WERE CO MMENCED. THE ASSESSEES EXPLANATION WAS THAT THE ASSET HAVING COME TO BE OW NED, I.E., ACQUIRED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR, ENTERS THE BLOCK OF ASSETS AS AT THE YEAR-END AND, AS SUCH, DEPRECIATION IS ALLOWABLE IN RESPECT OF THE WRITTEN DOWN VALUE (WDV) OF THE RELEVANT BLOCK OF ASSETS, ADVERT ING TO SECTIONS 2(11), 32(1)(II) AND 43(6)(C). THE ASSESSEE, CLAIMING THE MACHINERY TO BE IN A READY-TO- USE STATE, HAD NOT SHOWN ITS COMMISSIONING BY 31.0 3.2004, SO THAT THERE WAS NO FACTUAL BASIS TO ITS CLAIM. PENALTY WAS ACCORDINGL Y LEVIED AT THE MINIMUM AMOUNT OF 100% OF THE TAX SOUGHT TO BE EVADED QUA THE CLAIMED AMOUNT. THE SAME WAS CONFIRMED IN APPEAL AS THE ASSET WAS NOT P UT-TO-USE, RELYING ON DECISION IN CIT V. MAPS TOURS & TRAVELS [2003] 260 ITR 655 (MAD) AND DY. 4 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. CIT VS. YELLAMMA DASAPPA HOSPITAL [2007] 290 ITR 353 (KAR) (REFER PG. 7 OF THE IMPUGNED ORDER). THE ASSESSEE HAD, HOWEVER, WIT HDRAWN ITS CLAIM FOR AN AMOUNT OF . 28.11 LACS. THE PENALTY WAS, ACCORDINGLY, RESTRI CTED WITH REFERENCE TO THE BALANCE CLAIM OF . 1,12,45,126. AGGRIEVED, BOTH THE PARTIES ARE IN A PPEAL. 4. BEFORE US, THE ASSESSEES PRINCIPAL CASE WAS THA T THE MACHINERY HAD BEEN SUBJECT TO TRIAL RUN (I.E., AT THE SUPPLIERS PREMI SES) ON 18.02.2004, PRIOR TO ITS DISPATCH, IN THE PRESENCE OF THE ASSESSEES ENGINEE RS, ADDUCING A TEST CERTIFICATE/ NOTE BY THE SUPPLIER CERTIFYING ITS PERFORMANCE AS SATISFACTORY. THAT IS, IT HAD BEEN PUT-TO-USE , RELYING ON THE DECISION IN ASST. CIT V. CHENNAI PETROLEUM CORPORATION LTD. [2010] 125 ITD 396 (CHNY) (TM) [2 ITR (TRIB.) 325]. NO PENALTY COULD BE LEVIED EVEN IF THE ASSESSEES CLAI M IS WRONG. ON BEING QUESTIONED ABOUT THE DATE OF RECEIPT OF THE MACHINE RY BY THE ASSESSEE AT ITS PREMISES, THE LD. AR COULD FURNISH NO SATISFACTORY ANSWER, EVEN AS THE SAME WOULD IN ANY CASE HAVE TO BE WITH REFERENCE TO SOME MATERIAL ON RECORD. THE REVENUES CASE WAS THAT THE ASSESSEES ENTIRE CONDU CT, RIGHT FROM THE CLAIM OF DEPRECIATION AS AN AIR POLLUTION CONTROL EQUIPMENT, IS MISLEADING AND NEEDS TO BE KEPT IN VIEW FOR THE PURPOSE OF LEVY OF PENALTY AS WELL AS ITS CLAIM OF HAVING FURNISHED ALL THE MATERIAL FACTS. FURTHER, THE EXCE SS WAS NOT WITHDRAWN PER A REVISED RETURN AND, FURTHER, WAS ONLY ON THE AO EXA MINING THE CLAIM. FURTHER, NO MATERIAL TO SUPPORT THE CLAIM AS AN ENERGY SAVIN G DEVISE HAS ALSO BEEN PLACED ON RECORD. THE ASSESSEES RESPONSE WAS THAT THE EX CESS CLAIMED ( . 28.11 LACS) STANDS ALREADY WITHDRAWN BY THE ASSESSEE, RESTRICTI NG IT TO . 112.45 LACS. 5. WE HAVE HEARD BOTH THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. WE FIND THE ASSESSEES CASE, SOUGHT TO BE SUPPORTE D BY SEVERAL CASE LAW, AS WHOLLY WITHOUT ANY FACTUAL BASIS. THE FIRST AND FOR EMOST QUESTION, I.E., THE DATE ON WHICH THE RELEVANT PLANT LANDED AT THE ASSESSEE S FACTORY PREMISES, ASKED BY THE AO AT THE VERY OUTSET IN THE ASSESSMENT PROCEED INGS, REMAINS UNANSWERED , 5 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. MUCH LESS IN CLEAR TERMS, THROUGHOUT, WITH THE ASSE SSEE SKIRTING THE SAME. THE MATTER IS ONE OF FACT, AND HAS TO BE NECESSARILY DE CIDED ON THE BASIS OF EVIDENCE. IT IS ONLY THEREAFTER, I.E., RECEIPT, THAT IT COULD BE INSTALLED AND, FURTHER, COMMISSIONED, ENTITLING THE ASSESSEE FOR DEPRECIATI ON IN ITS RESPECT. THE QUESTION OF A PASSIVE USER, I.E., AS AGAINST AN ACTIVE USER, AS WHERE THE MACHINERY IS IN READY-TO-USE STATE, BUT COULD NOT BE, AS FOR EXAMPL E, FOR WANT OF RAW MATERIAL, OR OTHER ACCENTUATING CIRCUMSTANCES, RESULTING IN FORC ED IDLENESS, TO WHICH EFFECT CASE LAW STAND CITED, AND WHICH IS THE PURPORT OF T HE DECISION IN CHENNAI PETROLEUM CORPORATION LTD. (SUPRA), COMES ONLY THEREAFTER. IN THE FACTS OF TH E CASE, THE FURNACE HAVING NOT BEEN DELIVERED AT SITE , MUCH LESS INSTALLED OR COMMISSIONED, THE QUESTION OF ITS USER DOES NOT AR ISE. SIMILARLY, THE DECISIONS WITH REGARD TO THE TRIAL PRODUCTION AS CONSTITUTING USER, ALSO DO NOT ARISE FOR CONSIDERATION IN THE FACTS AND CIRCUMSTANCES OF THE CASE. TRIAL PRODUCTION OR TRIAL RUN, AS IT IS VARIOUSLY CALLED, SIGNIFIES THE STAGE WHERE THE PLANT/MACHINERY IS BEING COMMISSIONED. DURING THIS PHASE, THE SAME IS SUBJECT TO TESTS UNDER DIFFERENT CONDITIONS, TO SEE IF THE PLANT IS WORKIN G PROPERLY AND IS CAPABLE OF PRODUCTION IN TERMS OF ACCEPTABLE, STANDARD AND QUA LITY PARAMETERS. IT IS ONLY ON BEING SUCCESSFULLY SO RUN, REMOVING ALL GLITCHES OR BOTTLENECKS, THAT A PLANT IS STATED AS COMMISSIONED OR READY-TO-USE. THE EXPEND ITURE ON TRIAL PRODUCTION IS ACCORDINGLY CAPITALIZED IN-AS-MUCH AS ALL THE COSTS UP TO THE STAGE OF (ON COMMISSIONING, WHEREAT ONLY IT CAN BE SAID TO BE IN A READY-TO-USE STATE, FORM PART OF THE COST OF THE CAPITAL ASSET (REFER CHALLAPALLI SUGARS LTD. V. CIT [1975] 98 ITR 167 (SC)). BE THAT AS IT MAY, THE PLANT BEI NG NOT RECEIVED (AT THE ASSESSEES SITE) THE QUESTION OF IT BEING COMMISSIO NED OR PUT TO TRIAL PRODUCTION (BY YEAR-END) DOES NOT ARISE. THE CONTROVERSY AS T O WHETHER THE MACHINERY, WHICH IS READY-TO-USE, COULD BE REGARDED AS PUT TO USE, THUS, DOES NOT ARISE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, EVEN AS LD. CIT(A) RELIED ON MAPS TOURS AND TRAVELS (SUPRA), WHILE THE LD. DR RELIES ON VINOD BHARGAVA V. CIT [2014] 367 ITR 122 (TN & AP). IN THE LATTER TWO DEC ISIONS, IT STANDS CLARIFIED 6 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. THAT MERE INSTALLATION OR PREPARATION FOR USER CANN OT AMOUNT TO USER, AND THAT THERE MUST BE ACTUAL, EFFECTIVE AND REAL USER IN TH E COMMERCIAL SENSE, REFERRING TO CASE LAW, EVEN AS THE HONBLE JURISDICTIONAL HIG H COURT IN MAPS TOURS & TRAVELS (SUPRA) ALSO DRAWS ON THE DECISION IN LIQUIDATORS OF PURSA LIMITED V. CIT [1954] 25 ITR 265 (SC). THE TEST RUNNING AT THE SU PPLIERS PREMISES, AS CONTENDED BEFORE US, IS ONLY TO CONFIRM IF THE PLAN T BEING DELIVERED, BEING FROM A FOREIGN LAND, IS IN A OK STATE, AND CANNOT IN ANY MANNER BE REGARDED AS COMMISSIONING OF ITS PLANT BY THE ASSESSEE. THE AS SESSEES CASE, AS MADE BEFORE US, IS WHOLLY UN-MERITED. THE TEST CERTIFICATE/NOT E BEING NOT A PART OF THE TRIBUNALS RECORD, IT IN FACT IS TO BE REJECTED AT THE THRESHOLD. THAT A PLAUSIBLE EXPLANATION SAVES PENALTY IS WELL- SETTLED. WHERE THE ASSESSEE IS UNABLE TO FURNISH ANY EXPLANATION, DULY SUPPORTED, IT CANNOT BE SAID TO BE SAVED BY CLAUSE (A) OR CLAUSE (B) OF EXPLANATION 1 TO S. 271(1)(C), AND TOWARD WHICH WE MAY CITE SEVERAL DECISIONS, SETTLIN G THE LAW, AS FOLLOWS, WITH THE REVENUE BEFORE US PLACING RELIANCE OF UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC) AND SHARMA ALLOYS (INDIA) LTD. V. ITO [2013] 357 ITR 379 (MAD): MAK DATA P. LTD. VS. CIT [2013] 358 ITR 593 (SC); CIT V. ATUL MOHAN BINDAL [2009] 317 ITR 1 (SC); DHARMENDRA TEXTILE PROCESSORS (SUPRA); K.P. MADHUSUDHANAN VS. CIT [2001] 251 ITR 99 (SC); B.A. BALASUBRAMANIAM AND BROS V. CIT (1999) 236 ITR 977 (SC); ADDL. CIT VS. JEEVAN LAL SHAH [1994] 205 ITR 244 (SC); CIT VS. K. R. SADAYAPPAN [1990] 185 ITR 49 (SC); AND CIT VS. MUSSADILAL RAM BHAROSE [1987] 165 ITR 14 (SC). IN FACT, MOST OF THE DECISIONS CITED INFRA, I N THE CONTEXT OF VARIOUS ARGUMENTS RAISED, ARE AGAIN BASED ON THIS PRINCIPLE OR EDIFICE, AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AND THERE IS N O AMBIVALENCE IN THE POSITION OF LAW IN THE MATTER. IN THE CITED CASE, SHARMA ALLOYS (INDIA) LTD. (SUPRA), WHICH CONSIDERS THE DECISION IN CIT V. RELIANCE PTEROPRODUCTS (P.) LTD . [2010] 322 ITR 158 (SC), IT STANDS HELD BY THE HON'BLE JURISDI CTIONAL HIGH COURT THAT WHERE 7 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. THE ASSESSEES CLAIM FOR DEDUCTION IS NOT SUSTAINAB LE, IT COULD NOT ESCAPE PENALTY U/S. 271(1)(C). IN FACT, THE CASE, AS PROJECTED BEFORE US, IS AN AF TER THOUGHT, AND DOES NOT REPRESENT THE ASSESSEES EXPLANATION BEFORE THE AO, WHICH MUST BE REGARDED, IN LAW AND ON FACTS, AS THE ASSESSEES CASE, AND ON WH ICH THE QUESTION OF LEVY OF PENALTY IS TO BE DETERMINED. THE EXPLANATION BEFORE THE AO WAS THAT THE PLANT AND MACHINERY HAVING BEEN ACQUIRED, IT ENTERS THE B LOCK OF ASSETS, SO THAT THE DEPRECIATION WITH REFERENCE TO IT BECOMES EXIGIBLE WHERE THE BLOCK IS PUT TO USE , ALLUDING TO A CONJOINT READING OF SS. 2(11), 32(1) AND 43(6)(C). THIS, THEREFORE, OUGHT TO, STRICTLY AND CORRECTLY SPEAKING, BE REGAR DED AS THE ASSESSEES EXPLANATION, AND ON THE TOUCHSTONE OF WHICH I.E., I N LAW, THE QUESTION OF LEVY OF PENALTY IN THE PRESENT CASE DECIDED, EVEN AS WE HAV E ALREADY CONSIDERED THE ASSESSEES EXPLANATION/CASE AS ADVANCED BEFORE US. ON MERITS, THE ARGUMENT IS, AGAIN, WITHOUT ANY BASIS, BOTH ON FACTS AND IN LAW. ON FACTS, IT PRESUMES ACQUISITION, CONSIDERING ON THAT BASIS THE RELEVANT CAPITAL ASSET AS ENTERING THE BLOCK OF ASSETS, W.R.T. THE WDV OF WHICH ONLY DEPRE CIATION IS ALLOWABLE. THE TRANSFER OF MOVABLE PROPERTY, WHICH THE SUBJECT MAC HINERY IS, IS ON DELIVERY, WHICH HAS NOT TAKEN PLACE AS ON 31.3.2004, AND ONLY WHERE-UPON THE ASSET CAN BE SAID AS HAVING BEEN ACQUIRED. THERE IS NOTHING ON RECORD EVIDENCING THAT DELIVERY HAD TAKEN PLACE AT THE ASSESSEES PREMISES BY THAT DATE. THE ARGUMENT IS WITHOUT ANY FACTUAL BASIS AND, ACCORDINGLY, FAILS. FURTHER, EVEN ASSUMING CONSTRUCTIVE DELIVERY AT THE SELLERS PREMISES, SO THAT THE PLANT STANDS ACQUIRED, IT IS ONLY UPON BEING PUT TO USE THAT IT SHALL ENTER T HE BLOCK OF ASSETS. THIS IS AS DEPRECIATION, THOUGH RECKONED WITH REFERENCE TO WDV OF A BLOCK OF ASSETS, IS YET ALLOWED ONLY ON THE SEVERAL ASSETS COMPRISING I T (FOR THE TIME BEING) ON BEING PUT-TO-USE. THIS IS ABUNDANTLY CLEAR FROM THE LANGUAGE OF THE SECOND PROVISO TO S. 32(1), WHICH READS AS UNDER: DEPRECIATION. 32. (1) IN RESPECT OF DEPRECIATION OF 8 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. (I) BUILDINGS, MACHINERY, PLANT OR .. (II) KNOW-HOW, PATENTS, COPYRIGHTS. OWNED , WHOLLY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SH ALL BE ALLOWED PROVIDED . PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO IN CLAUSE ( I ) OR CLAUSE ( II ) OR CLAUSE ( IIA ), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS I N THAT PREVIOUS YEAR , THE DEDUCTION UNDER THIS SUB-SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE P ERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE ( I ) OR CLAUSE ( II ) OR CLAUSE ( IIA ), AS THE CASE MAY BE: ( EMPHASIS, OURS ) USER, THEREFORE, CONTINUES TO BE A DETERMINATIVE TE ST FOR DEPRECIATION. HOW, ONE WONDERS, COULD A BLOCK (OF ASSETS) BE USED ? AN ASSET SHALL THEREFORE ENTER A BLOCK OF ASSETS ON SATISFYING THE CONDITION OF USER , WHICH IS A CONDITION PRECEDENT FOR THE CLAIM OF DEPRECIATION, AND THERE IS NO QUESTION OF IT HAVING ENTERED THE BLOCK OF ASSETS WITHOUT BEING PUT TO US E. IT IS ONLY AS THE VALUE OF DIFFERENT ASSETS MERGE IN THE WDV OF THE BLOCK OF A SSETS ONCE AN ASSET ENTERS THE BLOCK, THAT IT IS STATED THAT THE USER TEST IS NOT APPLICABLE FOR THE YEARS SUBSEQUENT TO ITS FIRST PUT-TO-USE. IT IS ONLY WHEN THE USER C ONDITION IS SATISFIED FOR LESS THAN 180 DAYS DURING THE YEAR OF ACQUISITION THAT DEPRECIATION IS TO BE, AS CLAIMED , ALLOWED AT 50 PER CENT OF THE DEPRECIATION OTHERWIS E ALLOWABLE. NOW, THE QUESTION OF IT BEING USED OR EVEN READY-TO-USE COUL D ONLY BE SUBSEQUENT TO ITS RECEIPT AT THE ASSESSEES PREMISES, ITS INSTALLATI ON AND, IN FACT, COMMISSIONING. EVEN IF THEREFORE THE FURNACE HAD BEEN RECEIPTED BY 31.3.2004, IT WOULD NOT MATERIALLY IMPACT THE CLAIM FOR DEPRECIATION. TO SA Y THEREFORE THAT THE ASSET ENTERS THE BLOCK OF ASSETS WITHOUT IT BEING ACQUIRE D, MUCH LESS PUT-TO-USE, IS PRESUMPTUOUS. IN FACT, THE LANGUAGE OF THE PROVISO ITSELF ABUNDANTLY CLARIFIES THE PREMISE OF THE USER TEST OF AN ASSET, AT LEAST FOR THE YEAR OF ACQUISITION. THERE COULD IN FACT BE A CASE WHERE NONE OF THE ASSETS CO MPRISING THE BLOCK OF ASSETS IS PUT TO USE. COULD IT BE SAID THAT DEPRECIATION IS, NEVERTHELESS, ADMISSIBLE. REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE DE CISION BY THE TRIBUNAL IN 9 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. INDIAN REFRIGERATOR COMPANY LTD. (IN ITA NOS.3949/MUM/2013 & 941/MUM/2014 DATED 18/1/2017). NOT A SINGLE CASE LAW SUPPORTING THE PROPOSITION STANDS ADVANCED, WHICH, IN FACT, CANNOT BE SAID TO BE OR CAST IN TERMS OF A PROPOSITION, WITH, ON THE CONTRARY, THE REVENU E PLACING RELIANCE ON CASE LAW, WHICH ARE ON THE POINT, COVERING DIFFERENT ASP ECTS OF THE MATTER. IN ANY CASE OF THE MATTER, THAT DEPRECIATION FOR THE FIRST YEAR IS SUBJECT TO THE CONDITION OF USER IS UNEXCEPTIONAL, BEING ALSO IMPLICIT IN THE A SSESSEES CONTENTION, AS MADE BEFORE US, I.E., OF THE FURNACE HAVING BEEN SUBJECT TO TRIAL PRODUCTION AND, THUS, USED, AND ITS CLAIM AT 50%, WHICH IS ONLY ON BEI NG PUT TO USE FOR A PERIOD LESS THAN 180 DAYS DURING THE RELEVANT YEAR. THE ASSESSE ES CLAIM, IN FACT, IS NOT A WRONG OR ERRONEOUS CLAIM, MUCH LESS BONA FIDE , BUT A FALSE CLAIM. FINALLY, WE MAY CONSIDER THE ASPECT OF THE CLAIM FO R DEPRECIATION AT A HIGHER RATE, SINCE WITHDRAWN, I.E., FOR RS. 28.11 L ACS, WHICH IS THE SUBJECT MATTER OF THE REVENUES APPEAL. WE, AGAIN, OBSERVE THE ASS ESSEES CLAIM AS SANS ANY EXPLANATION. THE SAID WITHDRAWAL HAS ONLY BEEN ON T HE REVENUE (AO) SEEKING A SPECIFIC EXPLANATION FROM THE ASSESSEE AS TO THE BA SIS OF ITS CLAIM THEREON AS A POLLUTION-CONTROL EQUIPMENT, ON WHICH BASIS THE CLA IM FOR ADDITIONAL DEPRECIATION STANDS MADE. THERE IS, WE MAY CLARIFY, NOTHING ON RECORD TO SUPPORT THE CLAIM OF DEPRECIATION AS A POLLUTION-CONTROL EQ UIPMENT. THE DIFFERENCE, IT MAY BE APPRECIATED, IS ONLY ON ACCOUNT OF THE CLAIM BEING MADE AT A HIGHER RATE OF DEPRECIATION AND WHICH, CONSEQUENTLY, IS ONLY PU RPORTEDLY ON A DEFINITE BASIS THEREFOR, I.E., QUA THE RELEVANT PLANT; THE RULES PRESCRIBING ENHANCED RATES FOR SPECIFIED CATEGORIES OF PLANT AND MACHINERY. ON THE CONTRARY, THE ASSESSEE ITSELF STATES THE CLAIM FOR DEPRECIATION ON THE SAME PLANT FOR THE FOLLOWING YEAR AS HAVING BEEN MADE AT THE BASE RATE OF 25%, APPLICABL E TO GENERAL PLANT AND MACHINERY, FURTHER UNDERSCORING THE IMPUGNED CLAIM TO BE WITHOUT BASIS. THE WITHDRAWAL OF THE CLAIM CANNOT UNDER THE CIRCUMSTAN CES BE REGARDED AS VOLUNTARY. THE ASSESSEE, ACCORDINGLY, IS LIABLE FOR PENALTY U/S. 271(1)(C) ON THE ENTIRE CLAIM FOR DEPRECIATION ON THE RELEVANT PLANT AND MACHINERY, I.E., FOR RS. 10 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. 140.56 LACS, I.E., INCLUDING THE CLAIM TO THE EXTEN T STATED AS WITHDRAWN. WITH REGARD TO THIS, I.E., THE ADDITIONAL CLAIM, WE OBSE RVE THAT THE ASSESSEE HAS RELIED ON THE DECISION IN CIT V. SRI SARADHA TEXTILE PROCESSORS (P.) LTD . [2006] 286 ITR 499 (MAD), WHEREIN, IN RATIO, IT STANDS HELD TH AT AN ERRONEOUS CLAIM BY THE ASSESSEE, MADE BONA FIDE ; IT WITHDRAWING THE SAME, FILING A REVISED RETURN AS SOON AS THE ERROR WAS POINTED OUT TO IT, WOULD SAVE PENALTY. BONA FIDE BELIEF, COUPLED WITH A HONEST CONDUCT, AS BORNE OUT BY THE FURNISHING OF ALL THE FACTS MATERIAL TO THE COMPUTATION OF INCOME, WOULD EXCLUD E PENALTY. THERE IS NO DOUBT ON THIS POSITION OF LAW, FOR WHICH WE MAY REF ER, INTER ALIA , TO SARABHAI CHEMICALS V. CIT [2002] 257 ITR 355 (GUJ); SHIV LAL V. CIT [2001] 251 ITR 373 (RAJ); CIT V. RAHULJEE [2001] 250 ITR 225 (DEL). THE ONUS, HOWEVER, TO EXHIBIT THIS ONLY ON THE ASSESSEE. IN THE PRESENT C ASE, WEVE ALREADY CLARIFIED THE CLAIM AS WITHOUT BASIS, I.E., THERE IS NO BASIS TO CONTEND THAT THE RELEVANT ASSET IS A POLLUTION CONTROL EQUIPMENT, EXIGIBLE TO DEPRECIA TION AT A HIGHER RATE, SO AS TO HOLD A BONA FIDE BELIEF. WHY, THE ASSESSEE ITSELF STATES (VIDE ITS LETTER DATED 27/12/2006 FURNISHED IN THE COURSE OF ASSESSMENT PR OCEEDINGS) THAT IT HAS CLAIMED DEPRECIATION ON THE SAME FURNACES INSTALLED DURING THE FOLLOWING YEAR AT THE REGULAR (NORMAL) RATE OF DEPRECIATION! IN FACT, THE CLAIM WAS RAISED BEFORE THE FIRST APPELLATE AUTHORITY AS WELL, THOUGH WAS NOT PRESSED (REFER SR. NO.2, PG. 1 OF THE PENALTY ORDER). AGAIN, THE TRIBUNAL, AS IT APPE ARS, RESTORED THE MATTER BACK TO THE AO, I.E., FOR THE ENTIRE CLAIM OF . 140.56 LACS, INCLUDING THE WITHDRAWN CLAIM FOR . 28.11 LACS (REFER PARA 3(3)/PG.2 OF THE PENALTY O RDER). EACH CASE MUST DEPEND ON ITS CIRCUMSTANCES (REF.: CIT V. VEDLAPATLA VEERA VENKATARAMIAH. [1943] 11 ITR 308 (MAD); MANEY & CO. V. CIT [1963] 47 ITR 434 (KER)). THE LAW WITH REGARD TO ADMISSION IS AGA IN TRITE, WITH IN FACT REVISION OF A RETURN OF INCOME, WHERE NOT BONA FIDE , AND ONLY ON DETECTION, SO THAT IT (THE REVISION) IS NOT VOLUNTARY, IS NOT VAL ID IN THE EYES OF LAW, SO AS TO SAVE PENALTY. REFERENCE IN THIS CONTEXT BE MADE TO THE D ECISIONS IN CIT V . JKA SUBRAMANIA CHETTIAR [1977] 110 ITR 602 (MAD); SIVAGAMINATHA MOOPANAR V. CIT 11 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. [1964] 52 ITR 591 (MAD); AYYASOAMI NADAR & BROS. V. CIT [1956] 30 ITR 565 (MAD). NOTHING THUS TURNS ON THE PLEA AS TO WITHDRAWAL O F THE CLAIM, WHICH IS, AGAIN, FALSE, WITH THERE BEING NOTHING TO SHOW THAT THE EXCESS CLAIM WAS INADVERTENT , NOT EVEN AS MUCH AS A REFERENCE TO THE RELEVANT I TEM OF PART A (OF APPENDIX I TO THE RULES). IN FACT, THE DECISIONS IN THE CASE OF SHARMA ALLOYS (INDIA) LTD. (SUPRA) AND BY THE HONBLE APEX COURT CITED SUPRA, ARE EQUALLY APPLICABLE IN THE UNDISPUTED FACTS AND CIRCUMSTANCE S OF THE CASE. FURTHER, IT ALSO NEEDS TO BE BORNE IN MIND THAT THE ADDITIONAL CLAIM ONLY IMPACTS THE QUANTUM THEREOF AND NOT THE MERITS OF THE CLAIM. AS SUCH, W ITHOUT PREJUDICE, OUR DECISION QUA THE CLAIM FOR DEPRECIATION ON THIS PLANT (TO THE EX TENT OF RS. 112.45 LACS) SHALL BE EQUALLY APPLICABLE TO THE CLAIM FOR THE AD DITIONAL AMOUNT AS WELL. WHEN THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION ON THE FURNACE, THE QUESTION OF EXTENT OF DEPRECIATION OR ADDITIONAL DEPRECIATION D OES NOT ARISE. THE LEVY OF PENALTY U/S. 271(1)(C) ON THE ENTIRE CL AIM OF DEPRECIATION FOR RS. 140.56 LACS IS THUS SUSTAINABLE IN LAW. WE DECI DE ACCORDINGLY. 6. THE SECOND ISSUE IN THESE APPEALS, ARISING IN TH E REVENUES APPEAL, IS QUA THE DISALLOWANCE OF DEDUCTION U/S. 80-IB, MADE IN T HE SUM OF . 2,77,65,509/-. OUT OF THE ASSESSEES FOUR UNITS ELIGIBLE FOR DEDUC TION U/S. 80-IB, TWO SUSTAINED LOSSES FOR THE CURRENT YEAR WHILE THE OTHER TWO HAD PROFITS. IT CLAIMED DEDUCTION ON THE PROFITS OF THE PROFIT MAKING UNITS I.E., SOC KETS HEADS SCREW CAPS UNIT AND FASTENERS UNIT, ON A STAND-ALONE BASIS, I.E., WITH OUT SETTING THEM OFF AGAINST THE LOSSES FROM THE OTHER TWO UNITS, AT . 277.66 LACS. AS THE CUMULATIVE INCOME FROM THE FOUR ELIGIBLE UNDERTAKINGS WORKED TO A LOS S, THE ASSESSEES CLAIM WAS DISALLOWED IN ASSESSMENT, AND WHICH CAME TO BE CONF IRMED BY THE TRIBUNAL. PENALTY U/S. 271(1)(C) WAS LEVIED ON THE GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME IN-AS-MUCH AS THE ASSESSEE HA D PREFERRED THE CLAIM FOR DEDUCTION IN THE ABSENCE OF POSITIVE INCOME. THE LD . CIT(A) ALLOWED RELIEF TO THE ASSESSEE IN APPEAL ON THE GROUND THAT THE TRIBU NAL HAD REJECTED THE ASSESSEES 12 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. CLAIM (IN QUANTUM PROCEEDINGS) BY INTERPRETING THE RELEVANT PROVISION OF LAW, WITH THE ASSESSEE HAVING FURNISHED ALL THE RELEVANT DETAILS, SO THAT THERE WAS NO CONCEALMENT, OR FURNISHING INACCURATE, PARTICULARS OF INCOME. AGGRIEVED, THE REVENUE IS IN APPEAL. 7. BEFORE US, WHILE THE REVENUE RELIES UPON ON THE FINDINGS IN THE ASSESSMENT PROCEEDINGS (APPELLATE PROCEEDINGS BEING A CONTINUA TION OF THE ASSESSMENT PROCEEDINGS), STATING THAT THERE WAS THEREFORE NO B ASIS FOR THE CLAIM IN THE ABSENCE OF ANY POSITIVE INCOME (FROM THE FOUR ELIGI BLE UNITS), THE ASSESSEE RELIED ON THE DECISION IN CIT V. SONA KOYO STEERING SYSTEMS LTD. [2010] 321 ITR 463 (DEL). WHY, THE TRIBUNAL ITSELF HAD FOR THE FOLLOWI NG YEAR, I.E., AY 2005-06, REMANDED BACK TO THE FILE OF THE AO FOR CONSIDERATI ON OF THE ASSESSEES CLAIM WITH REFERENCE TO THE SAID DECISION (IN ITA NO.956/ MDS/2011 DATED 15.07.2016/COPY ON RECORD). 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE FACTS NECESSARY FOR THE COMPUTATION OF INCOME, I.E., QUA THE SAID DEDUCTION, REFLECTING NON-SET OFF OF THE LOSS FROM TWO ELIGIBLE UNITS AGAINST THE PROFIT FROM THE OTHER TWO UNITS, IS BORNE OUT BY TH E ASSESSEES RETURN (COPY ON RECORD) AS WELL AS OTHER MATERIAL ON RECORD. FURTHE R, THERE IS NO UNABSORBED BROUGHT FORWARD LOSS FROM THE TWO PROFIT MAKING UNI TS (REFER PARA 4, PG. 4 OF THE ASSESSMENT ORDER), ON THE PROFIT FROM WHICH THE DED UCTION STANDS CLAIMED. SECTION 80IB(13) MAKES, INTER-ALIA , THE PROVISION CONTAINED IN SUB-SECTION (5) OF S. 80-IA, WHICH READS AS UNDER, APPLICABLE TO S. 80 -IB: DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IN DUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT, ETC. 80-IA. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WH ICH THE PROVISIONS OF SUB- SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERM INING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE O NLY SOURCE OF INCOME OF 13 ITA NO.590 & 676/MDS/2012 (AY 2004-05) SUNDARAM FASTENERS LTD. THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO T HE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND I NCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. TRUE, WE OBSERVE THE TRIBUNAL TO HAVE DISALLOWED TH E ASSESSEES CLAIM IN QUANTUM PROCEEDINGS (IN ITA NO.205/MDS/2008 DATED 1 7.12.2008) FOLLOWING SYNCO INDUSTRIES LTD. V. AO [2002] 254 ITR 608 (BOM) (AFFIRMED IN [2008] 299 ITR 444 (SC)); IPCA LABORATORY LTD. V. DY.CIT [2004] 266 ITR 521 (SC) AND ASVIN COLD STORAGE PVT. LTD. V. CIT [2007] 290 ITR 183 (MAD), THE HONBLE HIGH COURT IN SONA KOYO STEERING SYSTEMS LTD (SUPRA) HAS CONSIDERED THE DECISION IN SYNCO INDUSTRIES LTD. (SUPRA), WHICH IS ALSO IN CONTEXT OF S. 80I, A PARI MATERIA PROVISION. AGAIN, IT IS NOTABLE THAT THE ASSESSEE HAS AN OVERALL POSITIVE (BUSINESS) INCOME. IN VIEW OF THE FOREGOING, THE ASSESSEE IN OUR VIEW HAD A REASONABLE BASIS TO STAKE A CLAIM FOR DEDUCTION U/S. 80IB IN THE MANNER IT DOES, I.E., AT RS. 277.66 LACS. NO GROUND FOR LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME IS IN OUR VIEW THEREFORE MADE OUT. WE DECIDE ACCORDINGLY, CONFIRMING ITS DELETION. 9. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D AND THE REVENUES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON APRIL 26, 2017 AT CHENNAI . SD/- SD/- ( $ %# $ & . ' ' ) ( ) (DUVVURU RL REDDY) ( SANJAY ARORA ) ( ! / JUDICIAL MEMBER !/ ACCOUNTANT MEMBER / CHENNAI, 8 / DATED, APRIL 26, 2017 . EDN 9 4 2(6:; <;.6 / COPY TO: 1. 01 /APPELLANT 2. 2301 /RESPONDENT 3. $ =6 ( )/CIT(A) 4. $ =6 /CIT 5. ;#>? 2(6( /DR 6. ?- @ /GF