Vegepro Foods & Feeds Ltd., Kanpur V. Dy. Commissioner of Income Tax-6, Kanpur

ITA 747/LKW/2013

• Counselvise Citation: 74723714 RSA 2013
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-07-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 19-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARE BEING DISPOSED OF
• Keywords: Depreciation
• Section: 32

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.747 & 748/LKW/2013 ASSESSMENT YEARS:2003 - 04 & 2004 - 05 M/S VEGEPRO FOODS & FEEDS LTD., C/O MEHROTRA PRADEEP & CO., 37/17, ROLAND COMPLEX, THE MALL, KANPUR. PAN:AAACV4548F VS. DY.C.I.T. - 6, KANPUR (APPELLANT) (RESPONDENT) O R D E R PER A. K. GARODIA, A.M. BOTH THESE APPEALS ARE FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LEARNED CIT(A) - I, KANPUR BOTH DATED 22/08/2013 FOR THE ASSESSMENT YEAR 2003 - 04 AND 2004 - 05. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2003 - 04 I.E. I.T.A. NO.747/LKW/2013. IN THIS APPEAL, THE ASSESSEE HAS R AISED THE FOLLOWING GROUNDS: THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ASSESSEE DOES NOT SATISFIED THE PRIMARY CONDITIONS OF SECTION 32(1) AND IS NOT ENTITLED TO DEPRECIATION U/S 32(1). APPELLANT BY SHRI PRADEEP MEHROTRA, ADVOCATE RESPONDENT BY SHRI AJAY KUMAR, D.R. DATE OF HEARING 01/07/2014 DATE OF PRONOUNCEMENT 2 1 /08/2014 2 THAT THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR CLAIM OF DEPRECIATION U/S 32(1) OF THE INCOME TAX ACT. THAT THE ORDER OF THE LEARNED CIT(A) IS ARBITRARY AND BAD IN LAW. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT MANUFACT URING ACTIVITIES WERE DISCONTINUED WITH EFFECT FROM 11/10/2000 AND THE MANUFACTURING UNIT BECAME SICK BUT THE BUSINESS ACTIVITIES WERE CONTINUED AS THE ASSESSEE MADE PURCHASE AND SALES IN THESE YEARS AS WELL AS IN SUBSEQUENT YEARS. HE ALSO SUBMITTED THAT THE ASSESSEE COMPANY APPLIED TO BIFR FOR RECONSTRUCTION ON 04/09/2000. HE ALSO SUBMITTED THAT THE APPLICATION IS PENDING BEFORE BIFR AND ASSESSEE HA S EVERY HOPE OF THE RECONSTRUCTION AND REVIVAL AFTER GETTING PROPER SUPPORT AND ASSISTANCE FROM BIFR. ACCORDINGLY THE PLANT & MACHINERY WAS KEPT READY FOR USE DURING THE PENDENCY OF THE APPLICATION BEFORE BIFR. HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. SWARUP VEGETABLE PRODUCTS, 2 77 ITR 60 . HE ALSO PLACED RELIANCE ON A JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. INTEGRATED TECHNOLOGIES LTD. IN I.T.A. NO.530/2011 DATED 16/12/2 011, COPY OF WHICH IS AVAILABLE ON PAGE NO. 123 TO 127 OF THE PAPER BOOK. HE ALSO SUBMITTED THAT ON PAGE NO. 119 TO 122 ARE VARIOUS INTERIM ORDERS PASSED BY BIFR AS PER WHICH IT CAN BE SEEN THAT EVEN ON 27/05/2014 , THE MATTER WAS DIRECTED TO BE LISTED FOR FURTHER HEARING ON 2 2 /0 7 /2014. 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 4 & 5 OF HIS ORDER THAT VIDE ORDER DATED 02/08/2011 3 IN M.C.A. NO. 1 OF 2010 OF HON'BLE ALLAHABAD HIGH COURT, THE COMPANY HAS GONE INTO LIQUIDATION AND THERE HAS BEEN NO MANUFACTURING FOR THE LAST 13 YEARS FROM THE YEAR 2000 & AFTER GOING INTO LIQUIDATION , THERE IS NO PROSPECT OF ANY MANUFAC TURING ACTIVITY. ON PAGE NO. 119 TO 122 OF THE PAPER BOOK ALSO, IT IS SEEN THAT THE PROCEEDINGS WHICH ARE PENDING IS REGARDING THE APPEAL AGAINST BIFR ORDER DATED 19/08/2010 IN CASE NO. 321/2000. SINCE THE COMPANY HAS GONE INTO LIQUIDATION, THESE PROCEED INGS CANNOT RESULT INTO RESTARTING OF THE MANUFACTURING ACTIVITIES OF THE ASSESSEE COMPANY AND HENCE THE SAME ARE NOT RELEVANT. THE ASSESSEE IS APPELLANT IN THIS APPEAL AND THE RESPONDENT IS BIFR AND OTHERS. COPY OF BIFR ORDER HAS NOT BEEN PRODUCED BEFORE US. REGARDING THIS CLAIM OF THE ASSESSEE THAT THE ASSETS WERE KEPT READY FOR USE, WE FIND THAT AS PER PROFIT & LOSS ACCOUNT FOR THE CURRENT YEAR AVAILABLE ON PAGE NO. 91, NO EXPENDITURE HAS BEEN INCURRED FOR KEEPING THE ASSETS READY FOR USE. EVEN NO EXP ENDITURE FOR STAFF WAS INCURRED NOR ANY EXPENDITURE FOR SECURITY ETC. WAS INCURRED. UNDER THESE FACTS, NOW WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. INTEGRATED TECHNOLOGIES LTD. (SUPRA). IN T HAT CASE, THE ASSESSEE INCURRED AN AMOUNT OF RS.3.95 LAC ON ACCOUNT OF PERSONAL EXPENSES AND RS.6.43 LAC ON ACCOUNT OF ADMINISTRATIVE EXPENSES. UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL IN THAT CASE THAT THE P LANT AND MACHINERY AND OTHER ASSETS ON WH ICH DEPRECIATION WAS CLAIMED W ERE KEPT READY FOR USE AND THEREFORE, DEPRECIATION WAS ALLOWABLE U/S 32 OF THE ACT. IN THE FACTS OF THE PRESENT CASE, WHERE NO EXPENDITURE WAS INCURRED BY THE ASSESSEE EVEN ON ACCOUNT OF SALARY OR SECURITY EXPENSES, IT CANNOT BE SAID THAT THE PLANT AND MACHI NERY AND OTHER ASSETS WERE KEPT READY FOR USE. IN ADDITION TO THAT, 4 THE ASSESSEE COMPANY HAS ALREADY GONE INTO LIQUIDATION AS PER THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT AND BIFR PROCEEDINGS ARE ALSO COMPLETED ALTHOUGH ORDER HAS NOT BEEN MADE AVAILAB LE AND THE APPEAL OF THE ASSESSEE IS PENDING AGAINST THAT ORDER OF BIFR AS PER THE DOCUMENTS AVAILABLE ON PAGE NO. 119 TO 222 OF THE PAPER BOOK. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE JUDGMENT OF HON'BLE DELHI HIGH COURT IS NOT RENDE RING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. 6. NOW WE EXAMINE THE APPLICABILITY OF JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT CITED BY LEARNED A.R. OF THE ASSESSEE. IN THIS CASE , IT WAS HELD THAT IF THE PLANT & MACHINERY WAS KEPT READY FOR USE BUT N OT ACTUALLY USED, THE ASSESSEE IS ENTITLED FOR DEPRECIATION. HENCE, EVEN IF THE PLANT & MACHINERY WERE NOT ACTUALLY USED, IT HAS TO BE SHOWN BY THE ASSESSEE THAT THE SAME WERE KEPT READY FOR USE AND THEN ONLY THE ASSESSEE CAN CLAIM DEPRECIATION. IN TH E P RESENT CASE , THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE PLANT & MACHINERY WERE KEPT READY FOR USE BECAUSE NO EXPENDITURE WAS INCURRED EVEN ON ACCOUNT OF SALARY AND SECURITY. IN OUR CONSIDERED OPINION, THIS JUDGMENT OF HON'BLE ALLAHABAD HIGH COUR T IS ALSO NOT RENDERING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. HENCE, IN THE FACTS OF THE PRESENT CASE, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). 7. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004 - 05 I.E. I.T.A. NO. 748/LKW/2013. IN THE APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT DURING THE COURSE OF PROCEEDING NO EVIDENCE WAS PRODUCED BEFORE 5 HIM DURING THE COURSE OF HEARING TO CONTROVERT THE ESTIMATE OF THE A.O., IN THE RESULT THE GROUNDS NO, 1,2, AND BARE DISMISSED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED ON FACTS AND IN LAW IN DISMISSING THE APPEAL WITHOUT PROPER CONSIDERATION OF FACTS AND CASE LAWS CITED BY THE APPELLANT BEFORE HIM. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE AD HOC DISALLOWANCE OF RS.25,000/ - OUT OF LEGAL EXPENSE ON ESTIMATE BASIS. 4. THAT THE ORDER O F THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) IS ARBITRARY AND BAD IN LAW IN DISMISSING THE APPEAL. 8. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE ISSUE IN THE PRESENT APPEAL REGARDING THE DEPRECIATION IS IDENTICAL TO THE ISSUE INVOLVE D IN THE ASSESSMENT YEAR 2003 - 04. HE ALSO SUBMITTED THAT AD HOC DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER FOR RS.30,000/ - OUT OF POSTAL EXPENSES AND RS.25,000/ - OUT OF LEGAL EXPENSES WHICH IS NOT JUSTIFIED. 9. ON THE OTHER HAND, LEARNED D.R. OF TH E REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARDING THE DISALLOWANCE OF DEPRECIATION, WE DECIDE THE ISSUE AGAINST THE ASSESSEE IN LINE WITH OUR DECISION IN ASSESSMENT YEAR 2003 - 04. 11. REGARDING THE REMAINING TWO DISALLOWANCES OF RS.30,000/ - OUT OF POSTAL EXPENSES AND RS.25,000/ - OUT OF LEGAL EXPENSES, IT IS SEEN THAT THESE DISALLOWANCES WERE MADE ON AD HOC BASIS. IN OUR CONSIDERED 6 OPINION, SUCH AD HOC DISALLOWANCE IS NOT JUSTIFIED AND HENCE, THE SAME ARE DELETED. THE ASSESSEE GETS RELIEF OF RS.55,000/ - . 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 13. IN THE COMBINED RESULT, THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 20003 - 04 IS DISMISSED AND APPEAL FOR ASSESSMENT YEAR 2004 - 05 IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 /08/2014 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR