Garg Acrylic Ltd., Delhi V. DCIT, Circle-10(1), New Delhi

ITA 6965/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7538 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 21-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURMIL SINGH
• Assessee Lawyers: RAHUL CHAURASIA
• Keywords: Depreciation
• Section: 143(3); 22; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO.6965/DEL/2017 ASSESSMENT YEAR 2013-14 GARG ACRYLIC LTD., A-50/1, WAZIPUR INDUSTRIAL AREA, DELHI, NEW DELHI. V. DCIT, CIRCLE-10(1), NEW DELHI. TAN/PAN: AAACG3332N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR, CA & SHRI RAHUL CHAURASIA, CA RESPONDENT BY: SHRI GURMIL SINGH, SR.DR DATE OF HEARING: 06 01 2021 DATE OF PRONOUNCEMENT: 22 01 2021 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 07.09.2017 PASSED BY COMMISSIONER OF INCOME TAX (APPEALS)-XXXV, NEW DELH I FOR THE QUANTUM OF ASSESSMENT PASSED U/S. 143(3) FOR TH E ASSESSMENT YEAR 2013-14. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS RAISED GROUNDS AS UNDER: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF DEPRECIATION CLAIMED ON THE MACHINERIES PURCHASED A T THE END OF THE YEAR AMOUNTING TO RS. 36,35,372/-. A) BECAUSE THE ASSESSEE HAS SUBMITTED BILLS OF MAC HINERY PURCHASED ON 26.02.2013 WHICH WERE INSTALLED ON 30. 03.2012 I.T.A. NO. 6965/DEL/2017 2 BY ENGINEERS OF VOLTAS LTD. A UNIT OF TATA AND THE PROOF OF VISIT FOR INSTALLATION AND COMMISSIONING OF ENGINEERS WER E SUBMITTED, THUS THE MACHINE WAS NOT ONLY INSTALLED & COMMISSIONED BUT ALSO SUBJECTED TO TRIAL RUN BY ENG INEERS OF TATA, THAT WAS IGNORED BY THE LD. CIT(A). B) BECAUSE THE CERTIFICATE OF EXCISE COMMISSIONER DT. 13.05.2013 STATED THAT PLANT & MACHINERY WERE FOUND TO BE INSTALLED ON THE SAID DATE AND NOT THE DATE OF INST ALLATION OF SUCH PLANT & MACHINERY, AS RELIED BY LD. CIT(A). 2. THE BRIEF FACTS QUA THE ISSUE INVOLVED ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF YARNS AND GARMENTS. DURING THE YEAR, THE ASSESSEE HAS MADE ADDITION IN THE FIXED ASSETS TO THE TUNE O F RS.227,43,20,548/-, OUT OF WHICH MACHINERIES AMOUNT ING TO RS.2,08,36,413/- WERE PURCHASED IN THE MONTH OF FEB RUARY AND MARCH. THE DETAILS OF WHICH ARE AS UNDER: FIXED ASSETS UNDER HEAD PURCHASED FROM DATE OF BILL DATE OF PUT TO USE AMOUNT OF BILL PLANT & MACHINERY LAKSH M I MACHINE WORKS LIMITED 26.02.2013 30.03.2012 83,69,030 PLANT & MACHINERY LAKSHMI MACHINE WORKS LIMITED 26.02.2013 30.03.2012 83,69,030 PLANT & MACHINERY LA KSHMI MACHINE WORKS LIMITED 07.03.2013 30.03.2012 40,98,353 TOTAL 2,08,36,413 I.T.A. NO. 6965/DEL/2017 3 3. THE ASSESSING OFFICER HAS HELD THAT, SINCE CERTI FICATE HAS BEEN ISSUED BY SUPERINTENDENT OF CENTRAL EXCISE WHI CH WERE DATED 13.05.2013 AND 24.07.2013, WHICH FALLS IN THE NEXT FINANCIAL YEAR, THEREFORE, IT GOES TO PROVE THAT TH E SAID MACHINERY HAVE NOT BEEN PUT TO USE FOR THE YEAR END ING 31 ST MARCH, 2013. FURTHER THE FIXED ASSETS HAVE BEEN CAP ITALIZED ON THE SECOND LAST DAY OF THE YEAR JUST TO CLAIM DEP RECIATION. ACCORDINGLY, HE DISALLOWED DEPRECIATION AMOUNTING T O RS.34,46,372/-. 4. LD. CIT (A) HAS CONFIRMED THE SAID FINDING OF THE ASSESSING OFFICER. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT, NOT ONLY THE MACHINES HAVE BEEN PURCHASED IN THE MONTH OF FEBRUARY AND 1 ST WEEK OF MARCH, BUT THEY WERE DULY INSTALLED AND PUT TO USE ON 30 TH MARCH, 2012, WHICH IS EVIDENT FROM PURCHASE INVOICE PLACED IN THE PAPER B OOK AND CERTIFICATE OF INSTALLATION BY M/S. VOLTAS LTD ON 3 0 TH MARCH, 2012. THE COPY OF WHICH HAS BEEN PLACED IN THE PAPE R BOOK AT PAGES 44 AND 45, WHO WERE AUTHORIZED AGENT FOR INST ALLATION AND COMMISSIONING OF THEIR MACHINES. THE INVOICE FO R INSTALLATION AND COMMISSIONING WAS AS UNDER: INVOICE NO. DATE AMOUNT DESCRIPTION 8002047552 30.03.2013 RS. 9303 INSTALLATION AND COMMISSIONING OF LR9AXL I.E. BILL NO.11211203303 & 1211203307 OF LMW I.T.A. NO. 6965/DEL/2017 4 8002048005 30.03.2013 RS.9303 INSTALLATION AND COMMISSIONING OF LH-15 I.E. BILL NO. 1111201285 OF LMW 5. THE MACHINES WERE FULLY INSTALLED AND COMMISSION ED AND WAS PUT TO USE ON 30 TH MARCH, 2013, HENCE THE PLANTS/MACHINES WERE ELIGIBLE FOR DEPRECIATION AS P ER THE INCOME TAX RULES. IN SUPPORT, HE HAS STRONGLY PLACE D RELIANCE UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF STITCHWELL QUALITEX (RF) VS. ITO & ANOTHER AS REPORTED IN 2015 (9) TMI 850 AND NATIONAL THERMAL POWER CORPORATION VS. CIT REPORTED IN (2013) 357 ITR 253 (DEL), WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS H ELD THAT THE EXPRESSION USED FOR THE PURPOSE OF BUSINESS I N SECTION 32 OF THE ACT IS TO BE INTERPRETED TO INCLUDE A CAS E WHERE THE ASSET IS KEPT READY FOR USE EVEN IF ACTUALLY IT IS NOT PUT IN USE. THIS FACTUM OF INSTALLATION AND COMMISSIONING WAS SPECIFICALLY CONTENDED BY THE ASSESSING OFFICER AND LD. CIT (A) IN THE REPLIES FILED BEFORE THEM. THE COPY OF WHICH IS APPEARING AT PAGES 39 TO 47 WHICH IS A REPLY FILED BEFORE THE ASSESSING OFFICER AND THE COPY OF WRITTEN SUBMISSIO N FILED BEFORE THE LD. CIT(A) ARE AT PAGES 1 TO 38 AND RELE VANT PAGES 30 AND 31. 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON T HE FINDING OF THE ASSESSING OFFICER AND LD. CIT (A) AN D SUBMITTED THAT THE CENTRAL EXCISE DEPARTMENT HAS CERTIFIED TH E COMMISSIONING IN THE MONTH OF MAY, THEREFORE, THE A SSET WAS I.T.A. NO. 6965/DEL/2017 5 NOT PUT TO USE IN THE RELEVANT FINANCIAL YEAR. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON P ERUSAL OF THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDE R AS WELL AS MATERIAL PLACED BEFORE US, WE FIND THAT IT IS AN UN DISPUTED FACT THAT THE ASSESSEE HAD PURCHASED MACHINES FROM M/S. LAKSHMI MACHINE WORKS LIMITED ON 26.02.2013 AND 07.03.2013. AS PER THE INVOICE AND CERTIFICATE ISSU ED BY M/S. VOLTAS LIMITED, IT HAS BEEN CERTIFIED THAT THE MACH INES WERE INSTALLED AND COMMISSIONED ON 30.03.2013. THUS, FRO M THESE EVIDENCES, IT IS QUITE EVIDENT THE MACHINES WERE NO T ONLY INSTALLED BUT READY TO USE AS ON 30.03.2013. ONCE T HIS IS AN ACCEPTED POSITION, THEN IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH CITED SUPRA, IF THE ASSETS IN T HE FORM OF MACHINERY EQUIPMENT ARE KEPT READY FOR USE, THEN SA ME IS ELIGIBLE FOR DEPRECIATION AS PER THE INCOME TAX RUL ES. IN NTPC VS. CIT (SUPRA), THE HONBLE HIGH COURT HELD THAT T WO CONDITIONS ARE NECESSARY TO BE FULFILLED BEFORE AN ALLOWANCE BY WAY OF DEPRECIATION UNDER SECTION 32 OF THE ACT CAN BE GRANTED TO THE ASSESSEE. THE FIRST IS OWNERSHIP OF THE ASSET AND THE SECOND, THE USER OF THE ASSETS FOR THE PURP OSES OF THE BUSINESS. THE COURT ON THE FACTS OF THE SAID CASE R EJECTED THE STAND OF THE REVENUE THAT THE MACHINERY AND EQUIPME NT HAD NOT BEEN PUT TO ACTUAL USE AND THAT IT WOULD NOT BE ENOUGH IF THEY WERE 'KEPT READY FOR USE'. THE COURT REFERRED TO A LARGE NUMBER OF DECISIONS OF THE HIGH COURTS AND HELD THA T THE EXPRESSION ' USED FOR THE PURPOSE OF BUSINESS ' IN SECTION 32 OF THE ACT WAS INTERPRETED TO INCLUDE A CASE WHERE THE ASSET IS I.T.A. NO. 6965/DEL/2017 6 KEPT READY FOR USE BUT IS NOT ACTUALLY PUT TO USE. THESE JUDGEMENTS INCLUDED, WHITTLE ANDERSON LTD. V. CIT (1971) 79 ITR 613 (BOM); CIT V. YAMAHA MOTOR INDIA PVT. LT D. (2010) 328 ITR 297 (DEL); CIT V. VAYITHRI PLANTATIO NS LTD. (1981)128 ITR 675 (MAD) AND CIT V. REFRIGERATION AN D ALLIED INDUSTRIES LTD. (2001) 247 ITR 12 (DEL). FURTHER THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INTEGRATED TECHNOLOGIES LTD. IN ITA NO.530/2011 VIDE JUDGMENT AND ORDER DATED 16 TH DECEMBER, 2011 UPHELD THE SIMILAR PRINCIPLE THAT IT IS NOT NECESSARY THAT THE PLANT AND MACHINE RY OWNED BY THE ASSESSEE SHOULD BE ACTUALLY PUT TO USE IN TH E RELEVANT ACCOUNTING YEAR TO JUSTIFY THE CLAIM OF DEPRECIATION AND THAT EVEN IF THE PLANT AND MACHINERY OR OTHER ASSET IS K EPT READY FOR USE IN THE ASSESSEES BUSINESS, THE ASSESSEE WO ULD BE ENTITLED TO DEPRECIATION. RESPECTFULLY FOLLOWING TH E RATIO AND PRINCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL H IGH COURT, WE HOLD THAT ASSESSEE IS ELIGIBLE FOR DEPRECIATION AND SAME IS DIRECTED TO BE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2021 . SD/- SD/- [O.P. KANT] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 ND JANUARY, 2021 PKK: