Spictex Cotton Mills (P) Ltd., Tiruppur V. JCIT, Tiruppur

ITA 769/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8742 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Cost of acquisition
• Section: 143(3); 115JB

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 769 /MDS/2016 / ASSESSMENT YEAR :20 11 - 12 SPICTEX COTTON MILLS (P) LTD., 63 - B, P.N. ROAD, TIRUPUR 641 602. [PAN: A A D C S8164R ] VS. THE JOINT COMMISSIONER OF INCOME TAX , TIRUPUR RANGE, TIRUPUR. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI T. BANUSEKAR, C.A. / RESPONDENT BY : SHRI A. V. SREEKANTH J CIT / DATE OF HEARING : 30 . 0 5 .201 6 / DATE OF P R ONOUNCEMENT : 20 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3 , C OIMBATORE , DATED 17 . 1 2 .20 1 5 RELEVANT TO THE ASSESSM ENT YEAR 20 11 - 12. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION TO THE TUNE OF .13,51,846/ - . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF Y ARN BESIDES ENGAGED IN GENER ATION OF ELECTRICITY FROM THE I.T.A. NO . 769 /M/ 16 2 WIND ELECTRICAL GENERATORS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2011 ADMITTING A TOTAL INCOME OF .1,87,16,600/ - AFTER CLAIMING DEDUCTION OF .1,88,71,560/ - UNDER SECTION 80IA OF THE INCOME TAX ACT [ ACT IN SHORT ] UNDER NORMAL COMPUTATION AND .2,47,70,430/ - UNDER MAT PROVISIONS OF SECTION 115JB OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 24.09.2012 WAS ISSUE AND SERVED ON THE ASSESSEE ON 28.09.20 12. IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS. AFTER VERIFICATION OF DETAILS, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .3,36,512,976/ - BY MAKING VARIOUS DISALLOWANCE. 3. ON APPE AL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSE SSEE HAS PURCHASED A SECOND HAND WIND MILL FROM M/S. MP TAPES P. LTD. AT A COST OF .33,80,200/ - AND THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE PURCHASE COST TO THE TUNE OF .13,52,080/ - . IN VIEW OF THE EXPLANATION 3 AND 4A TO SECTION 43 OF THE ACT, THE ASSESSING OFFICER CALLED FOR THE DETAILS OF DEPRECIATION CLAIM FROM M/S. M.P. TAPES P. LTD. ON THE WIND MILL SOLD TO THE ASSESSEE. THE ASSESSING I.T.A. NO . 769 /M/ 16 3 OFFICER FOUND THAT THE CLOSING WDV OF THE SAID WIND MILL DURING THE ASSESSMENT YEAR 2010 - 11 WAS .586/ - AND THEREFORE BY APPLYING EXPLANATION 3 AND 4A TO SECTION 43 OF THE ACT, HE ADOPTED THE CO ST OF THE WIND MILL AT .586/ - AND ALLOWED DEPRECIATION AT .234/ - AND THE EXCESS CLAIM OF DEPRECIATION OF .12,51,846/ - WAS DISALLOWED. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. IN THIS CASE THE ASSESSEE HAS PURCH ASED THE SECOND HAND WIND MILL AT .33,80,200/ - . WE FIND THAT UNDER EXPLANATION 3 TO SECTION 43 OF THE ACT, THE ASSESSING OFFICER IS REQUIRED TO RECORD HIS SATISFACTION THAT THE MAIN PURPOSE OF TRANSFER OF SUCH ASSETS, DIRECTLY OR INDIRECTLY TO THE ASSESSE E, WAS THE REDUCTION OF A LIABILITY TO INCOME TAX (BY CLAIMING DEPRECIATION WITH REFERENCE TO AN ENHANCED COST) THE ACTUAL COST TO THE ASSESSEE BY TAKING IN ACCOUNT OF ALL THE CIRCUMSTANCES OF THE CASE. IN THIS CASE, THE ASSESSING OFFICER HAS NOT RECORDED THE SATISFACTION BY TAKING INTO ACCOUNT OF ALL THE CIRCUMSTANCES WHILE DETERMINING THE COST OF THE SECOND HAND WIND MILL. IF THE WIND MILL IS THROWN TO SCRAP SALE, IT WOULD DEFINITELY FETCH MUCH MORE THAN WHAT THE ASSESSING OFFICER HAS DETERMINED THE COST OF THE WIND MILL. THUS, WE REMIT THE MATTER BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO FIRST RECORD THE SATISFACTION BY NOT ONLY CONSIDERING THE DEPRECIATION CLAIM OF THE SELLER FOR THE ASSESSMENT YEAR 2010 - 11 ON THE CLOSING OF THE WDV OF THE WIND M ILL BUT ALSO OTHER ASPECTS SUCH AS WORKING CONDITION OF THE WIND MILL, ELECTRICITY GENERATION, ETC. TO DETER MINE COST OF THE SECOND HAND WIND MILL FOR CLAIMING DEPRECIATION AND I.T.A. NO . 769 /M/ 16 4 DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING OPPORTUNITY OF HEARING T O THE ASSESSEE. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 20 TH JULY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDR A POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 20 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.