Anand Transport, CHENNAI V. ACIT, CHENNAI

ITA 737/CHNY/2014

• Counselvise Citation: 73721714 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Depreciation; Permanent establishment
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.737/MDS/2014 ' (' / ASSESSMENT YEAR : 2005-06 M/S ANAND TRANSPORT, NO.1, 9 TH STREET, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI - 600 034. PAN : AAAFA 1037 D V. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE I, CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : DR. ANITA SUMANTH, ADVOCATE ,-*+ . / / RESPONDENT BY : SH. P. RADHAKRISHNAN, JCIT 0 . 1$ / DATE OF HEARING : 24.06.2015 2!( . 1$ / DATE OF PRONOUNCEMENT : 14.08.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) (CENTRAL-I ), CHENNAI, DATED 16.12.2013 AND PERTAINS TO ASSESSMENT YEAR 20 05-06. 2 I.T.A. NO.737/MDS/2014 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO REO PENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. DR. ANITA SUMANTH, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSEE ASKED FOR THE REASONS F OR REOPENING IN THE LIGHT OF THE JUDGMENT OF THE APEX COURT IN GKN DRIVESHAFTS (INDIA) LTD. V. ITO 259 ITR 19. HOWEVER, THE REASO NS WERE NOT FURNISHED. THE LD.COUNSEL FURTHER SUBMITTED THAT H OWEVER, IN THE COURSE OF APPELLATE PROCEEDINGS, THE REASONS WERE B ROUGHT TO THE NOTICE OF THE ASSESSEE. ACCORDING TO THE LD.COUNSE L, WHEN THE ASSESSEE WAS NOT FURNISHED THE REASONS, THE ENTIRE PROCEEDING IS VITIATED. THEREFORE, THE ASSESSMENT ORDER DOES NOT STAND IN THE EYE OF LAW. 4. COMING TO THE MERIT OF THE APPEAL, THE LD.COUNSE L SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT FOR CRE ATION AND OPERATION OF A JETTY AT ENNORE PORT FOR LOADING IRO N ORE VESSELS FOR EXPORT BY MMTC LIMITED. REFERRING TO THE AGREEMENT , A COPY WHICH IS AVAILABLE AT PAGE 1 OF THE PAPER-BOOK, THE LD.CO UNSEL SUBMITTED THAT ON 06.05.2004, THE ASSESSEE ENTERED INTO THE A GREEMENT FOR ESTABLISHING A TEMPORARY JETTY FOR A PERIOD OF THRE E YEARS. REFERRING 3 I.T.A. NO.737/MDS/2014 TO CLAUSE 6.1 OF THE AGREEMENT, THE LD.COUNSEL SUBM ITTED THAT THE PERIOD IS ONLY THREE YEARS FROM THE DATE OF COMMENC EMENT OF VESSEL LOADING OPERATION. THEREFORE, IT IS A TEMPORARY ST RUCTURE CREATED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. REFERRIN G TO SUBSEQUENT AGREEMENT, A COPY OF WHICH IS AVAILABLE AT PAGE 57 OF THE PAPER- BOOK, THE LD.COUNSEL SUBMITTED THAT ON 12.08.2009, THE AGREEMENT DATED 06.05.2004 WAS MODIFIED AND THE OPERATION OF JETTY WAS RESTRICTED TILL THE ENNORE PORT ALLOWS THE OPERATIO N OR FOR A PERIOD OF THREE MONTHS FROM 24.06.2009, WHICHEVER IS EARLIER. AN OPTION WAS GIVEN TO THE PARTIES TO EXTEND THE OPERATION TILL 3 1.03.2010. 5. ACCORDING TO THE LD. COUNSEL, THE JETTY ERECTED BY THE ASSESSEE IS PURELY TEMPORARY STRUCTURE IN THE LAND BELONGING TO ENNORE PORT TRUST. THEREFORE, THE ASSESSEE IS ENTI TLED FOR DEPRECIATION @ 100%. THE LD.COUNSEL PLACED HER REL IANCE ON THE JUDGMENT OF BOMBAY HIGH COURT IN NATIONAL ORGANIC C HEMICAL V. CIT (1993) 203 ITR 410 AND SUBMITTED THAT ON IDENTI CAL CIRCUMSTANCES, THE BOMBAY HIGH COURT ALLOWED 100% D EPRECIATION. THE LD.COUNSEL HAS ALSO PLACED HER RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN GEETHA HOTELS (P) LTD. V. CIT (2002) 254 ITR 649. REFERRING TO THE JUDGMENT OF APEX COURT IN CI T V. ANAND THEATRES (2000) 244 ITR 192, THE LD.COUNSEL SUBMITT ED THAT THE 4 I.T.A. NO.737/MDS/2014 TEMPORARY STRUCTURE ERECTED BY THE ASSESSEE WOULD F ALL WITHIN THE DEFINITION OF BUILDING. THEREFORE, IT IS ENTITLE D FOR DEPRECIATION @ 100%. 6. ON THE CONTRARY, SH. P. RADHAKRISHNAN, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE ERECTED THE JETTY FOR TRANSPORT OF IRON ORE IN ENNORE PORT TRUST. REFERR ING TO SUBSEQUENT AMENDMENT MADE TO THE AGREEMENT, THE LD. D.R. POINT ED OUT THAT THE ASSESSEE WAS ALLOWED TO CONTINUE TILL 31.03.201 0 OR THE ENNORE PORT ALLOWS OPERATIONS OF TEMPORARY JETTY, WHICHEVE R IS EARLIER. THEREFORE, IT IS NOT FOR A PERIOD OF THREE YEARS, I T IS FOR PERMANENT. THEREFORE, THE STRUCTURE CANNOT BE CONSTRUED AS TEM PORARY STRUCTURE. HENCE, ACCORDING TO THE LD. D.R., THE C LAIM CANNOT BE ALLOWED @ 100%. ACCORDING TO THE LD. D.R., THE CI T(APPEALS) HAS RIGHTLY RESTRICTED THE CLAIM OF DEPRECIATION @ 25%. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE A LSO CAREFULLY GONE THROUGH THE DEPRECIATION SCHEDULE AT OLD APPEN DIX 1, WHICH IS APPLICABLE FOR 2003-04 TO 2005-06. FOR THE ASSESSM ENT YEAR 2005- 06, UNDER PART-A HEADING TANGIBLE ASSET, AND SU B-HEADING I BUILDING TEMPORARY ERECTIONS SUCH AS WOODEN STRUC TURE ARE FALLING 5 I.T.A. NO.737/MDS/2014 UNDER THE CLASSIFICATION BUILDING AND 100% DEPREC IATION WAS PRESCRIBED. OLD APPENDIX-1 PART A (1)(4) READS AS FOLLOWS:- PURELY TEMPORARY ERECTION SUCH AS WOODEN STRUCTURE . THE WORD TEMPORARY ERECTION WAS SUBJECT MATTER FO R CONSIDERATION BEFORE THE COCHIN BENCH OF THIS TRIBUNAL IN ACIT V. KITEX GARMENTS LTD. 2014 (1) TMI 126. THE COCHIN BENCH OF THIS TR IBUNAL, WHILE CONSIDERING THE WORD TEMPORARY ERECTION FOUND THA T WHAT IS TO BE EXAMINED IS THE NATURE/PURPOSE FOR WHICH THE STRUCT URE WAS MADE. IF IT IS FOR TEMPORARY PURPOSE, THEN IRRESPECTIVE O F THE USAGE OF THE MATERIAL, IT HAS TO BE CONSIDERED AS ONLY A PURELY TEMPORARY PURPOSE. IN THE CASE BEFORE US, THE AGREEMENT ENTE RED INTO BETWEEN THE ASSESSEE AND MMTC LIMITED CLEARLY SAYS THAT IT IS FOR A PERIOD OF THREE YEARS FROM THE END OF THE COMMENCEM ENT OF OPERATION. IN FACT, PARA 6.1 READS AS FOLLOWS:- THE BOT OPERATOR SHALL OPERATE THE JETTY AND OTHER I RON- ORE LOADING FACILITIES FOR A PERIOD OF THREE YEARS FROM THE DATE OF COMMENCEMENT OF VESSEL LOADING OPERATION. ON CESSATION OF OPERATIONS AT THE END OF THREE YEARS, THE BOT OPERATOR SHALL DISMANTLE AND REMOVE ALL THE EQUIPME NTS / STRUCTURES INSTALLED INCLUDING THE JETTY AT HIS OWN COST. THIS CONDITION WAS FURTHER MODIFIED BY SAYING AS UN DER:- BOT OPERATOR SHALL OPERATE THE JETTY AND OTHER IRON ORE FACILITIES TILL SUCH TIME AS ENNORE PORT ALLOWS OPE RATIONS OR FOR A PERIOD OF THREE MONTHS FROM 24.06.09 WHICHEVER IS EARLIER AND WHICH PERIOD MAY BE EXTENDED BY MMTC ON THE 6 I.T.A. NO.737/MDS/2014 SAME RATES AND TERMS AND CONDITIONS ON MUTUAL CONSE NT DEPENDING ON THE IRON ORE EXPORT MARKET CONDITIONS T ILL 31.03.2010 OR ENNORE PORT ALLOWS OPERATIONS OF TEMPORARY JETTY WHICHEVER IS EARLIER. ON CESSATION OF OPERAT IONS, THE BOT OPERATOR SHALL DISMANTLE AND REMOVE ALL THE EQUI PMENTS / STRUCTURES INSTALLED INCLUDING THE JETTY AT HIS O WN COST. 8. FROM THE ABOVE, IT IS OBVIOUS THAT A PERIOD OF T HREE MONTHS WAS GIVEN FROM 24.06.2009 WHICH CAN BE EXTENDED BY THE CONSENT OF PARTIES SUBJECT TO THE PERMISSION THAT MAY BE GI VEN BY ENNORE PORT. THE OBJECT AND PURPOSE OF ERECTION OF JETTY WAS FOR TEMPORARY IN NATURE AND NOT AS A PERMANENT ESTABLISHMENT. ME RELY BECAUSE AN OPTION WAS GIVEN TO THE ASSESSEE TO CONTINUE TIL L 31.03.2010 SUBJECT TO EXPORT MARKET CONDITIONS, THAT DOES NOT MEAN THAT THE JETTY WAS A PERMANENT STRUCTURE. ULTIMATELY, THE A SSESSEE HAS TO DISMANTLE AND REMOVE ALL THE EQUIPMENTS / STRUCTURE S INSTALLED AT JETTY AT ITS OWN COST. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS INSTALLED A TEMPORARY STRUCTURE FOR THE PURPOSE OF ITS BUSINESS. THIS TEMPORARY STRUCTURE HAS TO BE CONSTRUED AS BUILDING UNDER OLD APPENDIX-1 PART A (1)(4). HENCE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION @ 100%. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO GRANT DEPRECIATION @ 100% ON THE COS T OF ERECTION OF TEMPORARY STRUCTURE, NAMELY, THE JETTY AT ENNORE PO RT TRUST. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 7 I.T.A. NO.737/MDS/2014 ORDER PRONOUNCED ON 14 TH AUGUST, 2015 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 14 TH AUGUST, 2015. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A), CENTRAL-I, CHENNAI 4. 0 81 /CIT, CHENNAI-I, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.