ADDL CIT RG 1(2), MUMBAI V. INDIAN RARE EARTHS LTD, MUMBAI

ITA 7711/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8876 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 03-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 10-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDARAJIT SINGH
• Assessee Lawyers: ARVIND MOHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. : 7711/MUM/2010 ASSESSMENT YEAR : 2007-08 DCIT 1(2), R.NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 VS. M/S. INDIAN RARE EARTHS LTD. ECIL BLDG., PLOT NO.1207, PRABHADEVI, VEER SAVARKAR MARG, MUMBAI-400 028 PAN NO: AAACI 2799 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CHANDARAJIT SINGH RESPONDENT BY : SHRI ARVIND MOHAN DATE OF HEARING : 03.09.2012 DATE OF PRONOUNCEMENT : 12.09.2012 ORDER PER RAJENDRA SINGH, A.M. : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 09.08.2010 OF CIT(A)-2, MUMBAI FOR THE A.Y. 2007-08 . THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS REGARDING T HE CLAIM OF WRITE OFF OF NON MOVING STORES AND SPARES AMOUNTING TO `. 48,52,300/-. 2. THE FACTS IN BRIEF ARE THAT THE A.O. DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF `. 48,52,300/- AS LOSS ON ACCOUNT OF NON MOVING STORES AND SPARES. WHILE EXPLAINING THE LOSS, THE ASSESSEE SUBMITTED T HAT THE MAIN OPERATION OF THE ASSESSEE WAS SEPARATION OF BEACH S AND MINERALS AND, ITA NO : 7711/MUM/2010 M/S. INDIAN RARE EARTHS LTD. 2 THEREFORE, ALL ITS PLANTS WERE LOCATED VERY CLOSE T O SEA. THE STORES AND SPARES NOT USED WITHIN A SPECIFIC PERIOD GET CORROD ED DUE TO SALINE ATMOSPHERE CAUSING FASTER WEAR AND TEAR. THE ASSES SEE ALSO SUBMITTED THAT ON THE BASIS OF AGEING ANALYSIS OF THE MOVEMEN T OF STORES AND SPARES, COMMERCIAL USABILITY WAS ASCERTAINED AND ON THE BASIS OF SUCH ANALYSIS, 95% OF GROSS VALUE OF STORES AND SPARES W AS CHARGED TO THE PROFIT AND LOSS ACCOUNT. IT WAS ALSO POINTED OUT T HAT THIS WAS BEING CONSISTENTLY FOLLOWED SINCE THE YEAR 2000-01. THE ASSESSEE ALSO REFERRED TO THE DECISION OF THE TRIBUNAL IN A.Y. 2001-02 IN ITS OWN CASE IN SUPPORT OF THE CLAIM. THE A.O. HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT NO PHYSICAL VERIFICATION H AD BEEN MADE TO ASCERTAIN WHETHER STORES AND SPARES HAD ACTUALLY BE COME OBSOLETE AND UNUSABLE. THE CLAIM HAD BEEN MADE ON PRESUMPTION B ASIS WHICH WAS NOT ALLOWABLE. AS REGARDS THE ORDER OF THE TRIBUNA L, THE A.O. OBSERVED THAT THE SAME HAD NOT BEEN ACCEPTED BY THE DEPARTME NT. IT WAS ALSO POINTED OUT THAT IN THE A.Y. 2001-02, A SUPERCYCLO NE HAD OCCURRED AND, THEREFORE, FACTS IN THAT YEAR WERE APPARENT. THE A .O. ACCORDINGLY DID NOT ACCEPT THE CLAIM AND MADE AN ADDITION OF `. 48,52,300/-. IN APPEAL, THE CIT(A) OBSERVED THAT THIS WAS A RECURRING ISSUE WHI CH HAD BEEN DECIDED BY THE TRIBUNAL IN THE A.Y. 2001-02. THE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF THE JUDGM ENT OF HON'BLE SUPREME COURT IN THE CASE OF ALFA LEVEL INDIA LTD. (295 ITR 451). THE CIT(A) ALSO OBSERVED THAT THE FACTS THIS YEAR WERE IDENTICAL AND, THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE A.Y. 2001-02 (SUPRA), CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AGGRIEVED BY WHIC H THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS RE GARDING THE CLAIM OF DEDUCTION ON ACCOUNT OF WRITE OFF OF NON MOVING STO RES AND SPARES. THE ITA NO : 7711/MUM/2010 M/S. INDIAN RARE EARTHS LTD. 3 ASSESSEE IS A PUBLIC SECTOR UNDERTAKING ENGAGED IN THE BUSINESS OF MINING OF BEACH SAND MINERALS AND MANUFACTURING OF RARE EARTH CHEMICALS. SINCE, THE PLANTS OF THE ASSESSEE COMPA NY ARE LOCATED NEAR THE SEA DUE TO NATURE OF ITS ACTIVITIES, THE STORES AND SPARES GOT CORRODED DUE TO SALINE ATMOSPHERE CAUSING FASTER WEAR AND TE AR. THE ASSESSEE HAD, THEREFORE, BEEN WRITING OFF 95% OF GROSS VALUE OF STORES AND SPARES WHICH HAD NOT MOVED OVER A CERTAIN PERIOD OF TIME A ND CHARGING TO PROFIT AND LOSS ACCOUNT. THIS METHOD IS BEING CONSISTENTL Y FOLLOWED SINCE THE A.Y. 2001-02. IN THE A.Y. 2001-02, THE DISPUTE RAI SED ON THIS POINT HAD REACHED THE TRIBUNAL WHO VIDE ORDER DATED 30.09.200 8 IN ITA NO.64/MUM/2005 HAD ALLOWED THE CLAIM OF THE ASSESSE E. THE FACTS THIS ARE IDENTICAL AND NO DISTINGUISHING FEATURES HAVE B EEN BROUGHT TO OUR NOTICE BY THE LD. DR. THE A.O. HAS MENTIONED THAT IN THE A.Y. 2001-02, THERE WAS A SUPERCYCLONE. BUT THE ITAT IN THE A.Y. 2001-02 HAD NOT ALLOWED THE CLAIM ON THE GROUND OF ANY LOSS DUE TO CYCLONE BUT BECAUSE OF CONSISTENT METHOD BEING FOLLOWED BY THE ASSESSEE . THIS YEAR THE SAME METHOD HAS BEEN FOLLOWED. WE, THEREFORE, SEE NO IN FIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE AN D THE SAME IS THEREFORE, UPHELD. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF SEPTEMBER, 2012. SD/- SD/- - ( VIJAY PAL RAO ) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 12.09.2012 ITA NO : 7711/MUM/2010 M/S. INDIAN RARE EARTHS LTD. 4 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI