The ACIT, Circle-8, Ahmedabad V. Vepar Pvt. Ltd., Ahmedabad

ITA 775/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5627 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 29-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 05/07/2010 DRAFTED ON: 0 5/07/2010 ITA NO.775/AHD/2008 ASSESSMENT YEAR : 2005-06 THE ACIT CIRCLE-8 AHMEDABAD VS. VEPAR PVT.LTD. KAIVANNA 9 TH FLOOR PANCHVATI, ELLISBRIDGE AHMEDABAD PAN/GIR NO. : AAACV 3821 F (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K.MADHUSUDAN, SR. D.R. RESPONDENT BY: SHRI P.M. MEHTA O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIV, AHMEDAB AD DATED 18/12/2007. THE SUBSTANTIAL GRIEVANCE OF THE REVEN UE IS AS PER GROUND NO.1; WHICH IS REPRODUCED BELOW:- 1. THE LD. COMMISSIONER OF INCOME-TAX (A)-XIV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWA NCE OF DEPRECIATION ON FACTORY BUILDING AMOUNTING TO RS.13,96,990/-. 2. AT THE OUTSET, PARTIES APPEARING BEFORE US HAVE INFORMED THAT THE ISSUE IN HAND WAS IDENTICALLY RAISED IN THE PAST AN D REACHED UPTO THE STAGE OF SECOND APPEAL BEFORE THE ITAT AHMEDABAD BENCH D AND TRIBUNAL VIDE AN ORDER DATED 27/02/2009 BEARING ITA NO.957/A HD/2006 FOR ITA NO.775/AHD/ 2008 ACIT VS. VEPAR PVT.LTD. ASST.YEAR - 2005-06 - 2 - ASSESSMENT YEAR 2002-03 & ITA NO.1641/AHD/2006 FOR ASSESSMENT YEAR 2003-04 HAS DECIDED VIDE PARAGRAPH NO.9 AS UND ER:- 9. THE BRIEFLY STATED FACTS LEADING TO THIS COMMON ISSUE ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS DISALLOWED THE DEPRECIATION OF RS.13,97,621/- OUT O F THE DEPRECIATION ON THE BLOCK OF BUILDINGS CLAIMED BY THE ASSESSEE IN A SSESSMENT YEAR 2002- 03. THE ASSESSING OFFICER HAS FOUND THAT THE ASSE SSEE HAD CLAIMED DEPRECIATION OF RS.91,52,869/- ON FACTORY BUILDING AND ON A PERSON VISITS ON THE BUILDING, IT WAS FOUND THAT THE ENTIR E BUILDING WAS NOT USED BY THE ASSESSEE-COMPANY FOR ITS BUSINESS PURPOSES, BUT PART OF THE BUILDING WAS GIVEN TO SUBSIDIARY COMPANY, VIZ., VEP ARE EXPORTS PVT.LTD., VEPAR MFG. C.PVT.LTD. & VEPAR DESIGNS P.L TD. AND NO RENT WAS CHARGED FROM THESE COMPANIES. THESE SUBSIDIARY COMPANIES WERE WORKING UNDER THIS PREMISES FOR STITCHING WORK FOR THE ASSESSEE- COMPANY. THE AO DISALLOWED 20% OF THE DEPRECIATIO N SAYING THAT 20% OF THE BUILDING IS NOT USED BY THE ASSESSEE BUT SUB SIDIARY COMPANIES OF THE ASSESSEE. THE DISALLOWANCE WAS MADE OF RS.18,3 0,574/- WHICH WAS LATER ON RECTIFIED AND DISALLOWANCE WAS MADE FOR RS .13,97,621/-. THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT ALTHOUGH THE SUBSIDIARY COMPANIES HAVE OCCUPIED A PORTION OF THE PREMISES B UT THEY WERE DOING THE WORK FOR THE ASSESSEE-COMPANY ITSELF, AS THEY W ERE STITCHING THE CLOTHES ONLY FOR THE ASSESSEE. IT WAS MUTUALLY AG REED UPON THAT NO RENT WILL BE CHARGED AS THEY WERE DOING THE WORK ONLY FO R THE ASSESSEE- COMPANY. HENCE THE COMPLETE BUILDING WAS USED FOR THE BUSINESS OF THE ASSESSEE ITSELF AND NOT FOR ANY OTHER PARTIES. HE NCE, IT WAS ARGUED THAT THE DEPRECIATION SHOULD BE ALLOWED. THE ASSESSEE F URTHER SUBMITTED BEFORE CIT(A) THAT THE DEPRECIATION CANNOT BE DISAL LOWED FOR ITS PART OF THE BLOCK AS HELD BY THE ITAT AHMEDABAD BENCH IN TH E CASE OF INDUCTOTHERM (INDIA) LTD. V. DCIT 73 ITD 329 (AHD). IN VIEW OF THIS, CIT(A) HELD THAT A PORTION OF THE BUILDING GIVEN TO SUBSIDIARY COMPANIES WAS USED ONLY FOR THE BUSINESS OF THE ASSESSEE AS T HEY WERE DOING THE STITCHING WORK FOR THE ASSESSEE ONLY AND NOT FOR AN Y OUTSIDER. HENCE, THE BUILDING WAS BEING USED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE ASSESSEE AND BY THIS WAY, THE ASSES SEE WAS ABLE TO MAINTAIN AND CONTROL THE QUALITY OF THE MATERIALS E TC. HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE DEPRECIATION IN RESPECT OF THIS BUILDING AND THE ADDITION WAS DELET ED BY HIM. WE FIND THAT THE ASSESSEE IS A SUBSIDIARY COMPANY AND USING THIS BUILDING FOR THEIR BUSINESS ONLY AND THERE ARE DOING STITCHING W ORKS ON JOB-WORK ITA NO.775/AHD/ 2008 ACIT VS. VEPAR PVT.LTD. ASST.YEAR - 2005-06 - 3 - BASIS FOR THE ASSESSEE BUT ACTUALLY THE BUILDING IS NOT USED FOR THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, THE DEPREC IATION IS RIGHTLY DISALLOWED BY THE AO AND WE REVERSE THE ORDER OF C IT(A) OF THIS ISSUE. THIS COMMON ISSUE OF THE REVENUES APPEALS IS ALLOW ED. 2.1. LATER ON, THE SAID ORDER OF THE TRIBUNAL WAS R ECTIFIED THROUGH A MISCELLANEOUS APPLICATION (MA) ORDER BECAUSE THERE WERE CERTAIN FACTUAL ERRORS STATED TO HAVE BEEN COMMITTED, SO THEREUPON VIDE MA NO.139- 141/AHD/2009 (ARISING OUT OF ITA NO.1239 & 1641/AHD /2006 AND ITA NO.957/AHD/2006) ORDER DATED 30/11/2009, THE MISTAK E WAS RECTIFIED AND THE CLAIM WAS ALLOWED VIDE PARAGRAPH NO.2; REPRODUC ED BELOW:- 2. THE ONLY COMMON ISSUE IN THESE THREE MA OF THE ASSESSEE IS THAT THE FACTUAL THE TRIBUNAL HAS COMMITTED A MISTA KE THAT THE SUBSIDIARY-COMPANY HAD OCCUPIED A PORTION OF THE PR EMISES, WHEREAS AS PER THE ASSESSEE, THE ASSESSEE IS NOT A SUBSIDIA RY-COMPANY AND THIS FACTUAL MISTAKE HAS MADE SUBSTANTIAL DIFFERENC E IN THE FACTS. WE FIND THAT THE TRIBUNALS FINDING IS TOTALLY BASED O N THIS ASPECT ALSO, WHICH READS AS UNDER:- :WE FIND THAT THE ASSESSEE IS A SUBSIDIARY COMPAN Y AND USING THIS BUILDING FOR THEIR BUSINESS ONLY AND THE RE ARE DOING STITCHING WORKS ON JOB-WORK BASIS FOR THE ASSESSEE BUT ACTUALLY THE BUILDING IS NOT USED FOR THE BUSINESS OF THE AS SESSEE. ACCORDINGLY, THE DEPRECIATION IS RIGHTLY DISALLOWED BY THE AO AND WE RESERVE THE ORDER OF CIT(A) OF THIS ISSUE. WE FIND THAT IN THE PRESENT CASE ALSO THE FACTUAL P OSITION AVAILABLE ON RECORDS CLEARLY SHOWS THAT PART OF THE BUSINESS PRE MISES WAS MADE AVAILABLE TO THE SUBSIDIARY COMPANY UNDER BUSINESS COMPULSION AND ON ACCOUNT OF COMMERCIAL EXPEDIENCY FOR THE SIMPLE REASON THAT PART OF THE STITCHING PROCESS HAD TO BE CARRIED OUT UNDER T HE DIRECT TECHNICAL SUPERVISION OF THE ASSESSEE COMPANY WHICH WAS NOT P OSSIBLE IF THIS WORK WOULD HAVE BEEN CARRIED OUT BY THE SUBSIDIARY COMPANY ELSEWHERE. ACCORDINGLY, THE BUSINESS PREMISES WERE FULLY USED FOR THE BUSINESS PURPOSES OF THE ASSESSEE COMPANY AND FOR N O OTHER PURPOSE AND THEREFORE THE ASSESSEE COMPANY IS CLEARLY ELIGI BLE FOR GRANT OF DEPRECIATION IN RESPECT OF THE WHOLE BUSINESS PREMI SES. ACCORDINGLY, WE AMEND THE FINDINGS OF THE TRIBUNAL TO THAT EXTEN T AND ALLOW THESE ITA NO.775/AHD/ 2008 ACIT VS. VEPAR PVT.LTD. ASST.YEAR - 2005-06 - 4 - MAS OF THE ASSESSEE. ACCORDINGLY, THE RESULT IN TH E TRIBUNALS DECISION IS THAT THE REVENUES APPEAL IN ITA NO.1239/AHD/2006 ON THIS ISSUE IS DISMISSED. 3. ON HEARING THE RIVAL SIDES ONCE IT IS APPARENT T HAT THE RESPECTED CO-ORDINATE BENCH HAS ALLOWED THE CLAIM OF DEPRECIA TION AFTER APPRECIATING THE FACTS AS WELL AS THE LEGAL POSITIO N OF THE CASE, THEREFORE, WE HAVE NO REASON TO TAKE ANY OTHER VIEW BUT TO FOL LOW THE VIEW ALREADY TAKEN IN ASSESSEES OWN CASE. CONSEQUENTLY, FOR THIS YEAR, AS WELL REVENUES GROUND IS HEREBY DISMISSED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/ 07 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09 / 07 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(APPEALS)-XIV, AHMEDABAD 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD