M/s. Royal Suitings Private Limited, BHILWARA V. ITO, BHILWARA

ITA 72/JODH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5212 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MOURYA
• Keywords: Depreciation; Additional depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 7 2 / JODH /201 5 (ASST. YEAR : 20 1 0 - 11 ) M/S. ROYAL SUITINGS PVT. LTD., 6 - S - 1, BASANT VIHAR, BHILWARA . VS. ITO, WARD - 4, BHILWARA. PAN NO. AAACR 7971 G (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE . DEPARTMENT BY : S HRI S. L . MOURYA - DR DATE OF HEARING : 1 4 / 0 3 /201 6 . DATE OF PRONOUNCEMENT : 1 4 / 03 /201 6 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , AJMER , DATED 2 8 /0 1 /201 5. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : - 1. THAT ASSESSEE COMPANY FILLED RETURN OF INCOME ON DATED 24/09/2010 DECLARING TOTAL INCOME OF RS. 849296/ - AND SUBSEQUENTLY CASE WAS SELECTED UNDER SCRUTINY BY ITO WARD - 4 BHILWARA AND COMPLETED THE ASSESSMENT U/S 143(3) AND ASSESSED INCOME OF RS'1544500/ . 2. THAT ASSESSEE COMP ANY FILLED APPEAL BEFORE CIT (A ) AJMER AND CIT (A) AJMER PARTIALLY ALLOWED THE APPEAL OF THE ASSESSEE COMPANY. 3. THAT AO DISALLOWED ADDITIONAL DEPRECIATION CLAIM OF RS. 4,60,568/ - BY STATING THAT ASSESSEE COMPANY IS WRONGLY CLAIMED THE ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY. 4. THAT ASSESSEE COMPANY FILLED WRITTEN SUBMISSION BEFORE CIT (A.) AJMER AS WELL AS BEFORE A.O. THAT ASSESSEE INCURRED EXPENSES ON 2 ITA NO. 72 / JODH /201 5 REPAIRING AND MAINTENANCE AND SPARE PARTS SO IT SHOULD BE ALLOWED AS A REVENUE EXPENDITURE AND CIT (A.) STATED IN HIS ORDER ASSESEE HAS NOT SHOWN TO HAVE BROUGHT INTO EXISTENCE ANY NEW PLANT AND MACHINERY AND HAS MERELY PURCHASE THE SPARE PARTS AND ACCESSORIES OF THE MACHINERY ALREADY IN THE EXISTENCE AND THESE SPARE PARTS AR E PUT INTO USE OF REPAIRING AND MAINTENANCE AND IN MACHINERY AND NOT IN NATURE OF CAPITAL EXPENSES WHICH IS CURRENT REPAIRS AND NOT IN NATURE OF CAPITAL EXPENSE THEREFORE ALL THESE EXPENSES SHOULD BE 2145124/ - BE ALLOWED AS REVENUE EXPENDITURE. 5. THAT ORDER OF THE CIT APPEALS AS WELL AS A.O. ARE AGAINST THE NATURAL LAW OF JUSTICE. 6. THAT ADDITIONS OF RS. 460568/ - SHOULD BE DELETED AND EXPENDITURE INCURRED ON SPARE AND PARTS AND ACCESSORIES SHOULD BE ALLOWED AS CURRENT YEAR EXPENDITURES. THAT ASSESSEE CR AVES TO LEAVE OR ADD TO OR AMEND ANY GROUNDS OF APPEAL AT THE TIME . 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON MISCELLANEOUS FIXED ASSETS AT RS. 14,56,980/ - . FROM PERUSAL OF THE DEPRECIATION CHART, THE ASSESSING OFFICER FOUND TH A T WDV AS ON 01/04/2009 WAS RS. 50,23,463/ - IN BLOCK OF MISCELLANEOUS FIXED ASSET, ON WHICH THE ASSESSEE COMPANY HA D CLAIMED DEPRECIATION @ 15%. THE ASSESSEE COMPANY HAD CLAIMED ADDITION IN BLOCK OF MISCELLANEOUS FIXED ASSETS AT RS. 18,74,652/ - BEFORE 30/09/2009 CLAIMING DEPRECIATION @ 35% (15 % + 20% ADDITIONAL DEPRECIATION) AND AFTER 30/09/2009 , ADDITION WAS MADE IN FIXED ASSETS AT RS. 2,70,472/ - CLAIMING DEPRECIATION @ 17.50% [1/2 (15% + 20% ADDITIONAL DEPRECIATION) ] RES P ECTIVELY . 4 . FROM A PERUSAL OF THE BILLS AND VOUCHERS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COMPANY HAD ACTUALLY MADE IN MISCELLANEOUS FIXED ASSETS AT RS. 11,84,292/ - BEFORE 30/09/2009 AS AGAINST RS.18,74,652/ - CLAIMED AND MADE ADDITION AT RS. 9,60,832/ - AFTER 30/09/2009 AS AGAINST RS. 2,70,472/ - CLAIMED . THEREFORE, THE ASSESSING OFFICER CALCULATED THE DEPRECIATION AT RS. 10,03,225/ - ON MISCELLANEOUS FIXED ASSETS BY TAKING THE RATE OF DEPRECIATION AT 15% FOR THE BLOCK. THE ASSESSING OFFICER FURTHER OBSER VED THAT THE NEW ASSETS ON WHICH ADDITIONAL DEPRECIATION WAS CLAIMED BY THE ASSESSEE WERE NOT PURCHASED 3 ITA NO. 72 / JODH /201 5 IN THE SHAPE OF NEW MACHINERY OR PLANT . THE NEW ASSETS WERE SPARE & PARTS AND OTHER ACCESSORIES ONLY , ON W H ICH ADDITIONAL DEPRECIATION WAS NOT ALLOWABLE AS PER PROVISIONS OF SEC. 32(1) (IIA) OF THE ACT. THEREFORE, HE DISALLOWED THE DEPRECIATION OF RS. 4,53,755/ - (14,56,980 - 10,03,225) . 5. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD SHOWN ADDITION IN FACTORY BUILDING AT RS. 1,32,446/ - AND IN OFFICE EQUIPMENT AT RS. 3,800/ - BEFORE 30/09/2009 AND CLAIMED DEPRECIATION @ 10% AT RS. 13,245/ - AND RS. 380/ - RESPECTIVELY. FROM THE EXAMINATION OF THE BILLS AND VOUCHERS, THE ASSESSING OFFICER FOUND THAT THE ADDITIONS HAD BEEN MADE IN SUCH ASSETS AFTER 30/09/2009 . THEREFORE, HE HELD THAT THE DEPRECIATION WAS NOT ALLOWABLE FOR ENTIRE YEAR AND ALLOWED DEPRECIATION @ 10% FOR LESS THAN 180 DAYS . ACCORDINGLY , THE ASSE SSING OFFICER HAD ALLOWED THE EXCESS AMOUNT OF D EPRECIATION OF RS. 6,813/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE CONTENTION OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER. IT IS SEEN THAT THE ASSESSEE COMPANY HAS MADE ADDITION IN BLOCK OF MISC. FIXED ASSETS AT RS. 21,45,124/ - (18,74,652 + 2,70,472) DURING THE YEAR UNDER CONSIDERATION AND CLAIM ED ADDITIONAL DEPRECIATION @20% ON IT. HOWEVER, THE AO HAS NOTED THAT THESE NEW ASSETS WERE NOT NEW MACHINERY BUT ONLY SPARES & PARTS AND OTHER ACCESSORIES ON WHICH ADDITIONAL DEPRECIATION WAS NOT ALLOWABLE. IT IS SEEN THAT ASSESSEE HAS MADE ADDITION OF MISCELLANEOUS FIXED ASSET OF RS. 11,84,292/ - BEFORE 30.09.2009 AND RS. 9,60,832/ - AFTER 30.09.2009 IN THE PLANT AND MACHINERY. THE ASSESSEE HAS CLAIMED THAT ADDITIONAL DEPRECIATION @20% MAY BE GIVEN AS PER SEC. 32( 1 )(IIA) OF THE I.T. ACT. HOWEVER ASSESSEE IS NOT ELIGIBLE FOR THE SAME AS ASSESSEE HAS NOT SHOWN TO HAVE BROUGHT INTO EXISTENCE ANY NEW PLANT AND MACHINERY AND HAS MERELY PURCHASED THE SPARE PARTS AND ACCESSORIES OF THE MACHINERY ALREADY IN EXISTENCE AS POINTED OUT BY THE AO. THE ASSESSEE HAS NOT CONTROVERTED THE SAID FINDINGS OF THE AO IN ANY MANNER. FURTHER ASSESSEE HAS CLAIMED THAT SAID EXPENSES MAY BE TREATED AS 4 ITA NO. 72 / JODH /201 5 REVENUE EXPENSES INCURRED FOR MAINTAINING AND RUNNING OF THE MACHINERY AND ACCORDINGLY ASSESSEE MAY BE ALLOWED ENTIRE EXPENSES OF RS. 21,45,124/ - AS REVENUE EXPENSES. HOWEVER SAID CONTENTIONS OF THE ASSESSEE ARE WITHOUT ANY BASIS AS ASSESSEE HAS PURCHASED NEW SPARE PARTS AND ACCESSORIES OF THE MACHINERY AND MADE ADDITIONS IN THE FIXED ASSETS AND IT HAS NOT BEEN SHOWN THAT ASSESSEE HAS CARRIED OUT ANY CURRENT REPAIRS OF THE MACHINERY. THE EXPLANATION 1 TO SEC. 31 SPECIFICALLY MENTIONS THAT CURRENT REPAIRS SH ALL NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENSES. IN FACT COMPANY ITSELF HAS SHOWN THE SAME AS CAPITAL EXPENDITURE AND HAS MADE THE ADDITION IN BLOCK OF MISCELLANEOUS FIXED ASSET AND CLAIMED DEPRECIATION THEREON. IN VIEW OF ABOVE FACTS, TH E ASSESSEES CLAIM IS REJECTED. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO OF RS. 4,53,755/ - IS CONFIRMED. REGARDING REMAINING DISALLOWANCE OF DEPRECIATION OF RS. 6,813/ - FOR FACTORY BUILDING AND OFFICE EQUIPMENT , NO COMMENTS HAVE BEEN SUBMITTED BY THE ASSESSEE COMPANY DURING APPEAL. THE FINDINGS OF THE AO HAVE NOT BEEN CONTROVERTED. THEREFORE, THE DISALLOWANCE MADE BY THE AO FOR RS. 6,813/ - IS CONFIRMED. 7. NONE APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF NOTICE ISSUED AND SERVED ON THE ASSESSEE . 8. ON THE OTHER HAND , DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES . 9. WE FIND THAT IT IS NOT IN DISPUTE TH A T THE ASSESSEE HAS MADE ADDITION TO THE BLOCK OF MISCELLANEOUS FIXED ASSETS AT RS. 21,45,124/ - ( 18,74,652 + 2,71,472) DURING THE YEAR UNDER CONSIDERATION AND CLAIMED ADDITIONAL DEPRECIATION @ 20% ON IT. THE ASSESSING OFFICER FOUND THAT THE NEW ASSETS WERE NOT NEW MACHINERY, BUT ONLY SPARE & PARTS AND OTHER ACCESSORIES , ON WHICH ADDITIONAL DEPRECIATION WAS NOT A LLOWABLE . FURTHER , IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE MADE THE ADDITION TO THE MISCELLANEOUS FIXED ASSETS OF RS. 11,84,292/ - BEFORE 30/09/200 9 AND RS. 9,60, 832/ - AFTER 30/09/2009 IN THE PLANT AND MACHINERY . THE ASSESSEE CLAIMED THAT ADDITIONAL DEPRECIATION BE ALLOWED TO IT @ 20% AS PER SEC. 32(1)(IIA) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED THAT THE ASSESSEE HAS NOT SHOWN 5 ITA NO. 72 / JODH /201 5 TO HAVE BROUGHT INTO EXISTENCE ANY NEW PLANT AND MACHINERY AND HAS MERELY PURCHASE D THE SPARE PARTS AND ACCESSORIES OF THE MACHINERY ALREADY IN EXISTENCE AS POINTED OUT BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSEE WAS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO HELD THAT THE ENTIRE E XPENSES OF RS. 21,45,124/ - CANNOT BE ALLOWED AS REVENUE EXPENDITURE TO THE ASSESSEE AS AN ALTER CLAIM MADE BY THE ASSESSEE AS THE ASSESSEE HAS PURCHASED NEW SPARE & PARTS AND ACCESSORIES OF THE MACHINERY AND MADE THE ADDITIONS IN THE FIXED ASSETS AND IT HAS NOT SHOWN IT AS CURRENT REPAIRS OF THE MACHINERY. EXPLANATION (1) TO SEC. 3 1 SPECIFICALLY PROVIDES THAT CURRENT SPARE & PARTS SHOULD NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENSES. THE ASSESSEE COMPANY SINCE SHOWN T HE SAME AS CAPITAL EXPENDITURE AND HAS MADE THE ADDITION IN THE BLOCK OF MISCELLANEOUS FIXED ASSETS AND CLAIMED DEPRECIATION THEREON , THE CLAIM OF THE ASSESSEE IS REJECTED. 10. WE ARE NOT IN AGREEMENT WITH THE ABOVE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS). WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ITSELF IS CONTRADICTORY, HE HAS GIVEN A FINDING THAT THE ASSESSEE HAS MADE PURCHASE S OF NEW SPARE & PARTS AND ACCESSORIES FOR THE MACHINERY AND NO NEW ASSETS HAVE BEEN BROUGHT INTO EXISTENCE. THUS, THIS FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) SHOWS THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS TOWARDS CURRENT REPAIRS OF PLANT & MACHINERY . AS NO NEW ASSET HAS BEEN BROUGHT INTO EXISTENCE, THEREFORE, THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE OF RS. 21,45,124/ - IS ALLOWABLE AS REVENUE EXPENDITURE TO THE ASSESSEE. IT HAS BEEN HELD BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BERGER PAINTS (INDIA) LTD. (NO.2) (254 ITR 503) THAT IT IS NOW SETTLED LAND THAT IF ACCORDING TO THE R EVENUE LAWS , THE ASSESSEE IS ENTITLED TO TREAT A SUM AS A REVENUE EXPENDITURE , THEN THAT LEGAL RIGHT OF THE ASSESSEE IS NOT E STOPPED BY THE TREATMENT GIVEN BY THE ASSESSEE TO IT IN ITS OWN BOOKS OF ACCOUNT . THEREFORE, THE FINDING 6 ITA NO. 72 / JODH /201 5 OF THE COMMISSIONER OF INCOME TAX (APPEALS) SINCE THE ASSESSEE ITSELF HAS TREATED THE EXPENDITURE AS CAPITAL IN NATURE IN ITS BOOKS OF ACCOUNTS BY ADDING IT TO THE BLOCK OF THE ASSETS, THEREFORE, THE EXPENDITURE CANNOT BE ALLOWED AS REVENUE EXPENDITURE, CANNOT BE SUSTAINED. HENCE, WE SET ASIDE THE ORDER S OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION OF RS. 21,45,124/ - ON ACCO UNT OF PURCHASE OF SPARE PARTS ETC. AS A REVENUE EXPENDITURE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 1 4 TH DAY OF MARCH , 201 6 AT JODHPUR . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER D ATED : 1 4 TH MARCH , 201 6 . VR/ - COPY TO: 1. THE ASSESS E E. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE. BY ORDER