DCIT 1(2), MUMBAI V. INDIAN RARE EARTHS LTD, MUMBAI

ITA 7604/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92973 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 22-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 27-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: V MOHAN
• Section: 142(1); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' I ' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA , ACCOUNTANT MEMBER ITA NO. 7604/MUM/2013 (ASSESSMENT YEAR: 2010 - 11 ) D C I T - 1(2) VS. M/S. INDIAN RARE EARTHS LTD. ROOM MO. 535. 5TH FLOOR AYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 ECIL BLDG., PLOT NO. 12107 PRABHA DEVI, V.S. BUILDING MUMBAI 400028 PAN - AAACI2799F APPELLANT RESPONDENT APPELLANT BY: SHRI SACCHIDANAND DUBEY RESPONDENT BY: SHRI V. MOHAN DATE OF HEARING: 22.06. 2015 DATE OF PRONOUNCEMENT: 26 .06.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A) - 2 AND IT PERTAINS TO A.Y. 2010 - 11. 2. THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF LOSS ON NON MOVING STORES. 3. WE HAVE HEARD THE LEARNED D.R. AND THE LEARNED COUNSEL FOR THE ASSESSEE AND CAREFULLY PERUSED THE RECORD. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF SEPARATION AND PROCESSING OF RARE EARTH MINERALS. FOR THE YEAR UNDER CONSIDERATION IT DECLARED TOTAL INCOME OF ` 83.45 CRORES. THOUGH THE SAME WAS PROCES SED UNDER SECTION 143(1) OF THE ACT IT WAS LATER ON TAKEN UP FOR SCRUTINY AND ACCORDINGLY NOTICE WAS ISSUED UNDER SECTION 143(2) AND THEREAFTER UNDER SECTION 142(1) OF THE ACT A DETAILED QUESTIONNAIRE WAS ISSUED. ON EXAMINATION OF THE BOOKS OF ACCOUNT, ETC . THE AO NOTICED TH A T THE ASSESSEE CLAIMED AN AMOUNT OF ` 53,31,499/ - AS LOSS ON NON - MOVING STORES. ITA NO. 7604/MUM/2013 D C I T - 1(2) 2 ACCORDING TO THE AO THE ASSESSEE HAS FOLLOWED NO SCIENTIFIC BASIS IN CLAIMING THE DEDUCTION BUT IT WAS ONLY AN ADHOC CL A I M. ASSESSEE SIMPLY WRITES OFF 95% OF THE COST OF STORES, SPARES, ETC. WHICH HAVE NOT BEEN MOVED FOR THREE YEARS. NO PHYSICAL VERIFICATION IS MADE TO ASCERTAIN AS TO WHETHER SUCH SPARES HAVE ACTUALLY BECOME OBSOLETE AND UNUSABLE. SUCH WRITE OFF ON A PRESUMPTIVE BASIS, IN THE OPINION OF THE AO , IS NOT AN ALLOWABLE DEDUCTION. THOUGH HE NOTED THAT THE TRIBUNAL, IN ASSESSEES OWN CASE FOR 2007 - 08, HAS GRANTED RELIEF, SINCE THE DEPARTMENT HAS FILED AN APPEAL UNDER SECTION 260A OF THE ACT, FOR THE SAKE OF CONSISTENCY, HE DISALLOWED THE CLAIM OF DEDUCTI ON. 4. IT MAY BE NOTICED THAT THE CASE OF THE ASSESSEE IS THAT THE OPERATION OF THE COMPANY IS MAINLY SEPARATION OF BEACH SAND MINERALS AND ITS PLANTS ARE LOCATED VERY CLOSE TO SEA. STORES AND SPARES, WHICH ARE NOT IN USE FOR SOME PERIOD , GET CORRODED DUE TO SALINE ATMOSPHERE. SO, ON THE BASIS OF AGEING ANALYSIS OF THE MOVEMENT OF STORES AND SPARES, COMMERCIAL USABILITY IS ASCERTAINED. BASED ON SUCH ANALYSIS 95% OF THE GROSS VALUE OF STORES AND SPARES IS CHARGED TO PROFIT & LOSS ACCOUNT. 5. THE LEARNED CIT(A) OBS ERVED THAT ALL THE MATERIAL FACTS IN THE INSTANT ASSESSMENT YEAR ARE ENTIRELY S IMILAR TO THE FACTS IN ASSESSEES OWN CASE IN WHICH THE APPEALS ARE ALREADY DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE. FOR THE SAME REASONS HE ALLOWED THE CLAIM OF THE ASSES SEE FOR THIS YEAR ALSO. THE OPERATIVE PORTION OF THE ORDER READS AS UNDER: - ...... THE RELEVANT FINDINGS RECORDED BY MY PREDECESSOR FOR A.Y. 2007 - 08 ARE REPRODUCED HEREUNDER: - 2. APPELLANT IS A PUBLIC SECTOR UNDERTAKING ENGAGED IN THE MINING OF BEACH S ANDS, BENEFICIATING THE MINERALS AND MANUFACTURE OF RARE EARTH CHEMICALS. THE ONLY GROUND OF APPEAL IS AGAINST ASSESSING OFFICER DISALLOWING RS.48,52,300/ - BEING 95% OF THE VALUE OF STORES AND SPARES THAT HAVE NOT MOVED FOR OVER THREE YEARS AND WHICH HAVE BEEN WRITTEN OFF BY THE ASSESSEE. ACCORDING TO LD COUNSEL OF APPELLANT THEY ARE FOLLOWING THE CONSISTENT ACCOUNTING POLICY BASED ON AGEING ANALYSIS OF MOVEMENT OF STORES AND SPARES ASCERTAINING COMMERCIAL USABILITY. ON THIS BASIS WHAT HAS NOT MOVED OVER A PERIOD OF THREE YEARS IS WRITTEN OFF TO THE EXTENT OF 95%. ACCORDING TO THE ASSESSING OFFICER, NO PHYSICAL VERIFICATION IS UNDERTAKEN AND THE WRITING OFF IS PURELY ON PRESUMPTION AND THEREFORE DEDUCTION CANNOT BE ALLOWED. THIS IS A RECURRING ISSUE IN THE C ASE OF APPELLANT AND HAS BEEN DECIDED BY HONOURABLE MUMBAI TRIBUNAL IN APPELLANTS OWN CASE FOR ASSESSMENT YEAR 2001 - 02 AS WELL AS BY THE FIRST APPELLATE COMMISSIONERS IN VARIOUS APPEALS OF APPELLANT. THE ISSUE IS ITA NO. 7604/MUM/2013 D C I T - 1(2) 3 BEING DECIDED IN FAVOUR OF THE APPELLANT O N THE BASIS OF DECISION OF HONOURABLE SUPREME COURT IN THE CASE OF ALFA LEVEL INDIA LTD. REPORTED IN 295 ITR 451 AS WELL AS THE DECISION OF THE CUTTACK ITAT IN THE CASE OF NATIONAL ALLUMINIUM COMPANY LTD IN IT NUMBER 66 - 68 OF 2003. THE FACTS THIS YEAR ARE THE SAME AS THAT IN THE EARLIER YEARS. THERE BEING NO CHANGE IN FACTS, I FIND NO REASON TO DEVIATE FROM THE DECISION OF PREDECESSOR APPELLATE COMMISSIONER AND HOLD THAT THE DEDUCTION HAS TO BE ALLOWED TO APPELLANT. THE GROUND OF APPEAL IS THEREFORE ALLOWED . ALL MATERIAL FACTS IN THE CURRENT ASSESSMENT YEAR BEING IDENTICAL TO THE FACTS IN THE PRECEDING ASSESSMENT YEARS, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT AND MY LEARNED PREDECESSOR CITED ABOVE, I DELETE THE DISALLOWANCE OF RS.53,31,499/ - AND THE GROUND RAISED BY THE APPELLANT IS ALLOWED. THIS GROUND OF APPEAL IS, THEREFORE, ALLOWED. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. NO MATERIAL, WHATSOEVER, WAS PLACED BY THE REVENUE TO CONTRADICT THE FINDINGS AND CONCLUSIONS ARRIVED BY THE CIT(A ) IN ASSESSEES OWN CASE FOR EARLIER YEARS. THERE BE ING NO CHANGE IN THE FACTS, THE VIEW TAKEN BY THE LEARNED CIT(A), BEING CONSISTENT WITH THE VIEW TAKEN IN EARLIER YEARS BY THE ITAT, IT DOES NOT CALL FOR ANY INTERFERENCE. WE, THEREFORE, UPHOLD THE ORDER PASSED BY THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JUNE, 2015. SD/ - SD/ - ( SANJAY ARORA ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 26 TH JUNE, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 2 , MUMBAI 4. THE CIT 1 , MUMBAI CITY 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.