Tamilnadu Newsprint and Papers Ltd., CHENNAI V. ACIT, CHENNAI

ITA 772/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7964 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-04-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI JCIT
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Depreciation; Opportunity of being heard; Additional depreciation
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , ! , ' #$ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NOS.772 & 773 /MDS./2015 ( / ASSESSMENT YEARS :2006-07 & 2007-08) M/S.TAMILNADU NEWSPRINT AND PAPERS LTD., 67,MOUNT ROAD, GUINDY, CHENNAI 600 032. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 3(1), CHENNAI. PAN AAACT 2935 J ( () / APPELLANT ) ( %*() / RESPONDENT ) / APPELLANT BY : MR.R.VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : MR.A.B.KOLI,JCIT, D.R / DATE OF HEARING : 16.02.2016 ! /DATE OF PRONOUNCEMENT : 19.02.2016 + / O R D E R PER CHALLA NAGENDRA PRASAD, ACCOUNTANT MEMBER: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE DIFFERENT ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX(A)-11, ITA NOS.772 & 773 /MDS/2015 2 CHENNAI BOTH ORDER DATED 22.12.2014 IN ITA NO.122 6 1227 /2013- 14 PASSED UNDER SEC.143(3) READ WITH SECTION 147 OF THE ACT FOR ASSESSMENT YEARS 2006-07 & 2007-08. 2.(A) THERE ARE TWO COMMON ISSUES IN BOTH THESE AP PEALS. THE FIRST COMMON ISSUE IS THAT THE CIT(A) ERRED IN SUSTAINING REOPENING OF ASSESSMENT U/S.147 OF THE ACT. 2.(B) THE SECOND COMMON ISSUE IS THAT CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 20% OF RETENTION MONEY AS INCOME OF ASSESSEE ON THE GROUND THAT CLAIMS OF REMITTANCE HAVE NOT BEEN PROVED. 2.(C) THE THIRD ISSUE PERTAINING TO APPEAL FOR ASS ESSMENT YEAR 2007- 08 IS THAT CIT(A) ERRED IN DISALLOWING THE ADDITION AL DEPRECIATION BEING 50% OF THE SPECIFIED RATE APPLIED ON THE COST OF PL ANT AND MACHINERY NOT ALLOWED IN THE PRECEDING YEAR ON ASSET PUT TO USE FOR LESS THAN 180 DAYS. 3. AS FAR AS THE ADDITION/ DISALLOWANCE OF RETENTI ON OF MONEY AT 20% IS CONCERNED, THE COUNSEL FOR THE ASSESSEE SUBM ITS THAT THIS AMOUNT REPRESENTS THE AMOUNT DEDUCTED FROM THE BILL S OF CONTRACTORS AS PER THE TERMS OF THE CONTRACT AS SECURITY. THIS AMOUNT IS TO BE REFUNDED TO THE CONTRACTORS AFTER SATISFACTORY DISC HARGE OF THE ITA NOS.772 & 773 /MDS/2015 3 CONTRACTUAL OBLIGATION. THE COUNSEL FOR THE ASSESS EE SUBMITS THAT THE AO DISALLOWED 20% OF RETENTION MONEY AND TREA TED AS INCOME ON THE GROUND THAT COMPLETE DETAILS WERE NOT FURNI SHED AND HE ESTIMATED THE RETENTION MONEY TO BE CONSIDERED AS I NCOME AT 20% STATING THAT CLAIMS OF REMITTANCE HAVE NOT BEEN PRO VED. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ENTIRE RETENTION MONEY IS PAID BACK BY THE ASSESSEE AND THE COMPLETE DETAILS ARE AVAILA BLE WITH THE ASSESSING AUTHORITY, THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION. LD.D.R HAS NO SERIOUS OBJECTION IN REMITTING THE MATTER TO THE AO FOR PROPER VERIFICATION IN THE LIG HT OF THE SUBMISSIONS OF THE ASSESSEE THAT COMPLETE DETAILS ARE AVAILABLE AND THE ENTIRE RETENTION MONEY IS PAID BACK BY THE ASSESSEE. THUS , WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER AND WE D IRECT THE AO TO EXAMINE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW AF TER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD. 4. AS FAR AS THE ADDITIONAL DEPRECIATION IS CONCER NED, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT AN IDENTICAL ISSUE HA S BEEN DECIDED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ACI T VS. M/S.RITTAL ITA NOS.772 & 773 /MDS/2015 4 INDIA PVT. LTD., REPORTED IN 2016-TIOL-180-HC-KAR-I T, COPY OF WHICH IS PLACED ON RECORD. REFERRING TO THIS DECISION, T HE COUNSEL FOR THE ASSESSEE SUBMITS THAT 50% OF DEPRECIATION IS TO BE ALLOWED IN THE YEAR OF PURCHASE AND IF THE ASSESSEE IS ELIGIBLE ON LY 50%, THE BALANCE 50% SHOULD BE CARRIED FORWARD FOR SUBSEQUENT YEAR A ND SHOULD BE ALLOWED IN THE SUBSEQUENT YEAR. THE DEPARTMENTAL R EPRESENTATIVE PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORIT IES. 5. WE FIND THAT THIS ISSUE IN APPEAL HAS BEEN DECI DED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S . WHEELS INDIA LTD.,CHENNAI IN ITA NO.383/MDS./2014 VIDE ORDER DAT ED 26 TH SEPTEMBER, 2014 WHEREIN HELD THAT:- 22. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT COM MISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALL OWANCE OF ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE BEING 50% OF THE SPECIFIED RATE APPLIED ON THE COST OF PLANT AND MACHINERY NOT ALLO WED IN THE PRECEDING YEAR ON ASSET PUT INTO USE FOR LESS THAN 180 DAYS. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN ASSESSEES OWN CAS E FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.364/MDS/2013 DAT ED 30.04.2014 FOR THE ASSESSMENT YEAR 2008-09. HOWEVER, HE ALSO P LACES RELIANCE ON ITA NOS.772 & 773 /MDS/2015 5 THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. DEVI POLYMERS PVT. LTD. VS. ACIT IN ITA NO.165/MDS /2014 DATED 9.4.2014 FOR THE ASSESSMENT YEAR 2007-08, WHEREIN T HIS TRIBUNAL ACCORDING TO THE COUNSEL ALLOWED THE CLAIM OF ADDIT IONAL DEPRECIATION. 23. WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIES AND DECISIONS OF THIS TRIBUNAL IN THE ASSESSEESOWN CASE AND ALS O IN THE CASE OF M/S. DEVI POLYMERS PVT. LTD.(SUPRA) THE ISSUE IN APPEAL HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 OBSERVING AS UNDER:- 3. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSE E SUBMITS THAT THE ISSUE HAS BEEN DECIDED BY THE TRIB UNAL AGAINST THE ASSESSEE IN ITS OWN CASE FOR THE ASSESS MENT YEAR 2007-08 IN ITA NO.2136/MDS/2010 BY ORDER DATED 26.11.2013. COPY OF THE ORDER IS PLACED ON RECORD. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS CON SIDERED THIS ISSUE AT PARA 7 OF THE ORDER AGAINST THE ASSES SEE OBSERVING AS UNDER:- 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGMENTS/ORDERS RELIED UPON BY THE REPRESENTATIVES OF BOTH THE SIDES. WE FIRST TAKE UP THE APPEAL OF THE ASSESSEE I.E., I TA NO.2136/MDS/2010. THE ASSESSEE IS CLAIMING ADDITION AL DEPRECIATION AMOUNTING TO ` 3,15,48,837/- IN RESPECT OF PLANT & MACHINERY CARRIED FORWARD FROM THE PRECEDING YEAR . WE FIND THAT THE CLAIM OF THE ASSESSEE FOR CARRY FORWA RD OF ADDITIONAL DEPRECIATION CANNOT BE ALLOWED AS THERE IS NO PROVISION IN THE ACT TO ALLOW CARRY FORWARD OF UN-A BSORBED ADDITIONAL DEPRECIATION IN THE NEXT YEAR. THE CO-OR DINATE BENCH OF THE TRIBUNAL IN ITA NO. 1069/MDS/2010 IN T HE CASE OF DCIT VS. BRAKES INDIA LTD.,HAS HELD THAT ADDITIO NAL DEPRECIATION IS ALLOWABLE ON THE PLANT & MACHINERY ONLY FOR THE YEAR IN WHICH THE CAPACITY EXPANSION HAS TAKEN PLACE ITA NOS.772 & 773 /MDS/2015 6 WHICH HAS RESULTED IN THE SUBSTANTIAL INCREASE IN T HE INSTALLED CAPACITY. IN THE INSTANT CASE, IT IS AN ADMITTED FA CT THAT THE PLANT & MACHINERY HAS BEEN INSTALLED IN THE PRECEDI NG YEAR AND THE ASSESSEEINTENDS TO CARRY FORWARD UN-ABSORBE D ADDITIONAL DEPRECIATION IN THE AY UNDER REFERENCE, WHICH IS NOT PERMISSIBLE. HENCE, THIS GROUND OF APPEAL OF TH E ASSESSEE IS DISMISSED. 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE ASSE SSEE ON THE ISSUE OF ADDITIONAL DEPRECIATION. 24. WE ALSO FIND THAT THE ISSUE IN APPEAL HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT IN TH E CASE OF M.M.FORGINGS (349 ITR 673) HOLDING AS UNDER:- CLAUSE (IIA) WAS INSERTED BY THE FINANCE ACT, 2002, WITH EFFECT FROM APRIL 1, 2003, IN THE SECOND PROVISO TO SECTION 32(1) OF THE INCOME-TAX ACT, 1961. THEREFORE, IT WAS IMPE RATIVE THAT ON AND AFTER APRIL 1, 2003, THE CLAIM OF THE ASSESS EE MADE UNDER SECTION 32(1)(IIA) HAD TO BE NECESSARILY ALLO WABLE BY APPLYING THE SECOND PROVISO TO SECTION 32(1).HELD A CCORDINGLY, DISMISSING THE APPEAL, (I) THAT WHEN THERE WAS STAT UTORY STIPULATION PROVIDING FOR RESTRICTION TO 50 PER CEN T OF THE AMOUNT ALLOWABLE UNDER SECTION 32(1)(IIA) NO FAULT COULD B E FOUND WITH THE ASSESSING AUTHORITY APPLYING THE SECOND PROVISO TO SECTION 32(1) TO RESTRICT THE ALLOWABILITY OF THE DEPRECIAT ION TO 50 PER CENT. OF THE AMOUNT PERMISSIBLE UNDER SECTION 32(1) (IIA) AS WELL AS THAT OF THE FIRST APPELLATE AUTHORITY AND THE TR IBUNAL IN HAVING AFFIRMED THE ACTION OF THE ASSESSING AUTHORITY.( A. Y. 2005-2006 ) ITA NOS.772 & 773 /MDS/2015 7 25. WE HAVE ALSO GONE THROUGH THE DECISION OF THE C O-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. DEVI POLY MERS PVT. LTD. (SUPRA) AND FIND THAT THIS TRIBUNAL ALLOWED THE CLA IM OF THE ASSESSEE IN VIEW OF THE CONFLICTING DECISIONS OF VARIOUS TRIBUN ALS ON THIS ISSUE AND BY FOLLOWING THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF VEGETABLE PRODUCTS LTD. (88 ITR 192). WHILE ARRIVI NG AT SUCH CONCLUSION THE CO-ORDINATE BENCH DID NOT NOTICE THE DECISION OF THE JURISDICTIONAL HIGH COURT RENDERED AGAINST THE ASSE SSEE IN THE CASE OF M.M. FORGINGS LTD. (SUPRA) ON THIS ISSUE. THEREFORE , WE HAVE TO FOLLOW THE DECISION OF JURISDICTIONAL HIGH COURT WHICH IS BINDING ON US. THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE TH EREFORE REJECTED. THUS THE APPEAL OF THE ASSESSEE IS DISMISSED. RESPECTFULLY FOLLOWING THE SAID DECISION AND THE JU RISDICTIONAL HIGH COURT IN THE CASE OF M/S.M.M.FORGINGS VS. ACIT (SUP RA), WE UPHOLD THE ORDERS OF THE LOWER AUTHORITIES AND CONFIRM THE DISALLOWANCE OF ` 3,08,12,812/- MADE U/S.32(1)(IIA) OF THE ACT TOWAR DS ADDITIONAL DEPRECIATION FOR ASSESSMENT YEAR 2007-08. 6. AS FAR AS THE REOPENING OF ASSESSMENT U/S.147 I S CONCERNED, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS GROU ND IS NOT PRESSED. THUS THIS GROUND IS DISMISSED AS NOT PRESSED. 7. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ITA NOS.772 & 773 /MDS/2015 8 ORDER PRONOUNCED ON FRIDAY, THE 19 TH OF FEBRUARY,2016 AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) ( ' #$ % ) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 19 TH FEBRUARY,2016 . K S SUNDARAM. '#$$ %&$'& /COPY TO: $ 1. /APPELLANT 2. /RESPONDENT 3. $ ($)* /CIT(A) 4. $ ( /CIT 5. &+,$ - /DR 6. ,.$/ /GF