The DCIT, Circle-1(1), Baroda V. Asian Petroproduct & Exports Limited, Baroda

ITA 730/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63005 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-08-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SHANKAR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation

Judgement Text

ITA NO 730/ AHD/2010 A.YR.. 2004 -05 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI D. K. TYAGI, JM & SHRI ANIL CHATURVED I A.M.) I.T.A. NO.730 /AHD/2010. (ASSESSMENT YEAR: 2004 -05) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), AAYAKAR BHAVAN, NEAR RACE COURSE CIRCLE, BARODA (APPELLANT) VS. ASIAN PETRO PRODUCTS & EXPORTS PVT. LTD., 204/5 STERLING CENTRE, R.C.DUTT ROAD, ALKAPURI, BARODA. (RESPONDENT) PAN: AACCA 8443J APPELLANT BY : MR. T. SHANKAR, SR. D.R. RESPONDENT BY : MR. M. K.PATEL. ( )/ ORDER DATE OF HEARING : 6-8-2012 DATE OF PRONOUNCEMENT : 12-10-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT (A)-I, BARODA DATED 17-11-2009 FOR THE ASSESSMENT YEAR 200 4-05. 2. THE BRIEF FACTS ARE THAT ASSESSEE IS A COMPANY E NGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF VARIOUS CH EMICALS. ASSESSEE FILED ITS RETURN OF INCOME ON 1-11-2004 DECLARING TOTAL L OSS OF RS.2,40,05,449/- THE CASE WAS SELECTED FOR SCRUTINY. ITA NO 730/ AHD/2010 A.YR.. 2004 -05 2 3. FIRST GROUND OF THE REVENUE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS.23,351/- MADE ON ACCOUNT OF DEPRECIATION ON ELECTRICAL INSTA LLATION. THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION. NO EXPLAN ATION WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS REGARDI NG EXCESS CLAIM OF DEPRECIATION. AGAINST THE APPLICABLE RATE OF DEP RECIATION @ 15% THE ASSESSEE HAS CLAIMED 25% AND THEREFORE, THE DIS ALLOWANCE WAS MADE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSERVED THAT ASSESSEE HAS CLAIMED DEPRECIATION ON ELECTRICAL INS TALLATION AT 25%.A.O. WAS OF THE VIEW THAT THE DEPRECIATION SHOULD BE AT THE RATE OF 15%. HE ACCORDINGLY DISALLOWED THE EXCESS CLAIM OF DEPRECIA TION OF RS.23,351/-. 5. AGGRIEVED WITH THE ADDITION THE ASSESSEE CARRIED THE MATTER BEFORE CIT (A). BEFORE CIT (A) IT WAS SUBMITTED THAT SINC E THE ELECTRICAL FITTINGS WERE ATTACHED TO PLANT AND MACHINERY THEY FORMED PA RT OF PLANT AND MACHINERY AND WAS NOT PART OF BUILDING. IT WAS FUR THER SUBMITTED THAT IN THE EARLIER YEAR DEPRECIATION AT 25% HAS BEEN ALLOWED O N ELECTRICAL INSTALLATION. CIT (A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE AND ALLOWED THE DEPRECIATION AT 25%.AGGRIEVED BY THE ORDER OF CIT ( A),THE REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF A .O. ON THE OTHER HAND THE LD. A.R. SUBMITTED THAT THE ELECTRICAL INSTALLA TION WERE ATTACHED TO PLANT AND MACHINERY AND THEREFORE FORMED PART OF PLANT AN D MACHINERY AND THE ITA NO 730/ AHD/2010 A.YR.. 2004 -05 3 CIT(A) HAS RIGHTLY ALLOWED THE DEPRECIATION AT 25%. HE THUS SUPORTEDF THE ORDER OF CIT (A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORDS. WE FIND THAT THE CIT (A) HAS GIVEN A FIND ING THAT THE ITEMS ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION AT 25% HAVE BEEN ATTACHED TO PLANT AND MACHINERY AND NOT BUILDING AND THEREFO RE IT FORMED PART OF PLANT AND MACHINERY. FURTHER, IN EARLIER YEARS DEPRECIATI ON HAS BEEN ALLOWED AT 25% TO THE ASSESSEE. THE LD. D.R. COULD NOT CONTROV ERT THESE FACTS. IN VIEW OF TOTALITY OF FACTS, WE FIND NO REASON TO INTERFER E TO THE ORDER OF CIT (A). WE ACCORDINGLY UPHOLD THE ORDER OF CIT (A) AND THEREFO RE THIS GROUND OF REVENUE IS DISMISSED. 8. GROUND NO.2 OF THE REVENUE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF R S.1,23,68,527/- MADE U/S.41(1) OF THE ACT. THESE WERE TRADING LIABI LITIES SINCE VERY LONG AND NO CONFIRMATIONS FROM THE CREDITORS OR ANY OTHER DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSESSEE WERE FILED DURING THE ASSESSMENT PROCEEDINGS. 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NOTICED THAT CREDITORS AGGREGATING TO RS.1,23,68,527/- WERE OUTS TANDING SINCE VERY LONG TIME. THE ASSESSEE SUBMITTED THAT DUE TO FINANCIAL DIFFICULTIES FACED BY IT THE AMOUNTS ARE OUTSTANDING AND ARE PAYABLE BY THE ASSE SSEE. THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. HE WAS O F THE VIEW THAT IN THE ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE TO F URNISH CONFIRMATION LETTERS ITA NO 730/ AHD/2010 A.YR.. 2004 -05 4 AND ANY DOCUMENTARY EVIDENCE, THERE HAS BEEN CESSAT ION OF LIABILITY. HE ACCORDINGLY ADDED THE OUTSTANDING AMOUNT OF RS.1,23 ,68,527/- AS INCOME U/S.41(1). AGGRIEVED BY THE ACTION OF A.O. THE ASSE SSEE CARRIED THE MATTER BEFORE CIT (A). BEFORE CIT (A) IT WAS SUBMITTED THA T THE ASSESSEE CONTINUED TO HAVE TRANSACTION WITH THE PARTIES EVEN IN LATER YEARS. IN MANY CASES THE PAYMENTS WERE FULLY MADE IN SUBSEQUENT YE ARS AND OUTSTANDING AMOUNT WAS REDUCED TO NIL AND IN SOME CASES THE OUT STANDING HAVE REDUCED ON ACCOUNT OF PAYMENTS MADE BY ASSESSEE. NO NE OF THE PARTIES HAVE AGREED TO WAIVE THE AMOUNT NOR HAVE THE BALANC ES BEEN WRITTEN-BACK BY THE ASSESSEE. CIT (A) AGREED WITH THE CONTENTION S OF THE ASSESSEE AND HELD THAT EXCEPT FOR THE AMOUNT PAYABLE TO AHMEDABA D STOCK EXCHANGE (RS.40,000/-) THERE HAS BEEN NO REMISSION OF LIABIL ITY AND THEREFORE HE DIRECTED THE DELETION OF BALANCE AMOUNT OF RS.1,23 ,28,527/-. AGGRIEVED BY THE ACTION OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, THE LD. D.R. POINTED OUT TO THE TABL E DEPICTED ON PAGE-4 OF THE ORDER WHERE IN CASE OF PANKAJ ENKA PVT. LTD., I T HAS BEEN STATED THAT THE NATURE OF TRANSACTION TO BE JV PASSED. ACCORD INGLY HE WAS OF THE VIEW THAT IN THAT CASE THERE HAS BEEN NO PAYMENT. HE FUR THER RELIED ON THE ORDER OF A.O. ON THE OTHER HAND THE LD. A.R. SUBMITTED TH AT THE ASSESSEE HAS NOT WRITTEN-BACK THE AMOUNT IN ITS BOOKS, AND THE OUTST ANDING AMOUNT AS ON THE BALANCE SHEET DATE ARE STILL PAYABLE. FROM THE TABL E AS REPRODUCED BY CIT (A) ON PAGE 3 & 6 OF ORDER, HE POINTED OUT THAT IN SOME CASES THE ASSESSEE HAD IN FACT MADE PAYMENTS SUBSEQUENTLY. HE ALSO REL IED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. NITIN GAR G. (TAX APPEAL NO.2428 TO 2431 OF 2010) ORDER DATED 11-4-2012. HE THUS SUP PORTED THE ORDER OF CIT (A). ITA NO 730/ AHD/2010 A.YR.. 2004 -05 5 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE CREDITORS WERE APPEARING IN THE BOOKS OF THE ASSESSEE SINCE EARLIER YEARS. I N THE ABSENCE OF BALANCE CONFIRMATIONS FROM THE CREDITORS OR ANY EVIDENCE, T HE A.O. WAS OF THE VIEW THAT THE AMOUNTS OUTSTANDING TO BE THE CASE OF CESS ATION OF LIABILITIES AND THEREFORE TAXABLE U/S. 41(1). CIT (A) AFTER CONSIDE RING THE SUBMISSIONS BY THE ASSESSEE HAS HELD THAT IN SOME CASES THE ASSESS EE HAS MADE PAYMENTS IN SUBSEQUENT YEARS AND IN CASES WHERE THE AMOUNTS ARE STILL OUTSTANDING, THE PROVISIONS OF SECTION 41(1) CANNOT BE APPLIED. THE ASSESSEE ACKNOWLEDGES ITS LIABILITY TO PAY. THE REV ENUE HAS NOT BEEN IN A POSITION TO CONTROVERT THE FINDINGS OF CIT (A). FUR THER THE REVENUE HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THE CREDITORS T O BE NON EXISTENT OR THE CREDITORS APPEARING IN BALANCE SHEET TO BE OF BOGUS IN NATURE. IN THE CASE OF CIT VS. NITIN GARG (SUPRA) THE HONBLE HIGH COUR T HAS HELD THAT WHEN THE ASSESSEE HAD CONTINUED TO SHOW THE AMOUNTS AS LIABI LITIES IN ITS BALANCE SHEET THE SAME CANNOT BE TREATED AS CESSATION OF LI ABILITIES. IT FURTHER HELD THAT MERELY BECAUSE THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS, IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE C EASED TO EXIST. IN VIEW OF THE TOTALITY OF FACTS AND RELYING ON THE AFORESAID DECISION OF GUJARAT HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER OF CIT (A) AND ACCORDINGLY NO INTERFERENCE TO THE ORDER OF CIT (A) IS CALLED FOR. WE THUS CONFIRM THE ORDER OF CIT (A) AND THE GROUND OF THE REVENUE IS DISMISS ED. ITA NO 730/ AHD/2010 A.YR.. 2004 -05 6 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 12 -12 - 2012. SD/- SD/- (D. K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-I, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 6 - 8 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 3 / 10 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 8 -10 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 12 - 10 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 12 -10 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 2 - 10 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..