ISPAT INFRASTUCTURE (I) P. LTD, NAVI MUMBAI V. ACIT 10(3), MUMBAI

ITA 810/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7661 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 29-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIALMEMBER I.T.A.NO.810/MUM/2010 A.Y 2006-07 ISPAT INFRASTRUCTURE (INDIA) PRIVATE LTD., 152, CENTRAL FACILITY BLDG. PHASE II, APCM MARKET, VASHI, NAVI MUMBAI 400 705. PAN: AABCI 0639 P VS. ASST. COMMISSIONER OF I.T. 10(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMEER G. DALAL. RESPONDENT BY : SHRI C.G.K.NAIR. DATE OF HEARING: 29-12-2011. DATE OF PRONOUNCEMENT: 06-01-2012. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING G ROUND: 1) THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACIT S ORDER DISALLOWING DEPRECIATION OF RS. 17,58,674/- ON ASSE TS GIVEN ON RENTAL BASIS TO THE CUSTOMERS WITHOUT APPRECIATING THAT TH E ASSETS WERE GIVEN ON RENTAL BASIS IN THE DUE COURSE OF ITS BUSINESS AND ASSETS WERE ACCORDINGLY USED FOR THE PURPOSE OF THE BUSINESS. 1 ) THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACITS ORDER DISALLOW ING DEPRECIATION OF RS. 17,58,674/- ON ASSETS GIVEN ON RENTAL BASIS TO THE CUSTOMERS WITHOUT APPRECIATING THAT THE ASSETS WERE GIVEN ON RENTAL BASIS IN THE DUE COURSE OF ITS BUSINESS AND ASSETS WERE ACCORDI NGLY USED FOR THE PURPOSE OF THE BUSINESS. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE WAS IMPORTING CERTAIN MACHINES AND SELLING THE SAME. FURTHER, ASS ESSEE HAD PURCHASED SOME MACHINES WHICH HAVE BEEN GIVEN ON RE NT ON WHICH ITA NO.810 OF 2010 2 DEPRECIATION WAS CLAIMED. ON A QUERY AS TO WHY DEPR ECIATION COULD NOT BE DISALLOWED, THE ASSESSEE VIDE LETTER DATED 24-10 -08 REPLIED AS UNDER: THE ASSESSEE HAS ACQUIRED MACHINERY WORTH RS.1,88, 81,149/- DURING THE YEAR UNDER REVIEW. THE SAID MACHINES & EQUIPME NT ALONG WITH MACHINERY HELD AS ON 01-04-2005 HAVE BEEN PUT TO U SE BY THE COMPANY DURING THE YEAR UNDER REVIEW. THE SAID MACHINES HA VE BEEN GIVEN ON RENTS. THE AO AFTER EXAMINING THE REPLY DID NOT AGREE AND OBSERVED THAT THOUGH ASSESSEE IS THE OWNER OF THE MACHINES, BUT T HE SAME HAVE NOT BEEN PUT TO USE FOR SELF BUSINESS. ACCORDINGLY, DEP RECIATION WAS DISALLOWED. 3. ON APPEAL, IT WAS MAINLY SUBMITTED THAT MACHINES WERE BEING HIRED AND ASSESSEE WAS EVEN INCURRING CERTAIN REPAI R EXPENSES ON SUCH HIRE MACHINES, THEREFORE, SAME SHOULD BE INTERPRETE D AS USE OF THE MACHINES. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: I. CIT VS. SHRC RAJASTHAN SYNTEX LTD. [2009] 178 TAXMA N 33 (RAJ). II. SARWESHWAR NATH NIGAM (1963) 48 ITR 85 (GUJ) III. HINDUSTAN ALUMINIUM LTD. (1989) 176 ITR 206 (CAL) IV. LIQUIDATORS OF PURSA LTD. VS. CIT 25 ITR 265. THE LD. CIT(A) AFTER EXAMINING THE ISSUE DECIDED TH E SAME AGAINST THE ASSESSEE VIDE PARA 2.4 WHICH READS AS UNDER: 2.4 1 HAVE CONSIDERED THE FACTS OF THE CASE, PERUS ED THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT AND ALS O DISCUSSED THE EASE WITH THE A/R OF THE APPELLANT. IN THIS CASE T HE A.O. HAS DISALLOWED DEPRECIATION ON THE MACHINERY ON THE GRO UND THAT THE SAID MACHINERY HAS NOT BEEN USED BY THE ASSESSEE FAR ITS BUSINESS AND RENTING OUT OF THE MACHINERY IS NOT AN ACTIVITY TO SUPPORT THE MAIN BUSINESS. DURING THE COURSE OF THE APPELLATE PROCEE DINGS IT WAS STATED THAT THE APPELLANT IS GIVING MACHINERY ON HIRE AS P ER REQUIREMENT OF CUSTOMER IN ADDITION TO ITS TRADING BUSINESS AND GE TS REVENUE ON THAT. ACCORDINGLY, IT CLAIMED DEPRECIATION THEREON. THE A PPELLANT HAS FILED ITA NO.810 OF 2010 3 COPY OF AGREEMENT [NOT ALL] TO PROVE THAT THE MACHI NERY HAS BEEN LEASED OUT AND HENCE WAS USED FOR BUSINESS WHICH SHOULD BE INTERPRETED LIBERALLY. APPELLANT ALSO RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SHREE RAJASTHAN S YNTEX LTD. HOWEVER, IT IS NOTED THAT THE SAID DECISION IS DELI VERED WITH REFERENCE TO THE QUESTION AS TO WHETHER EVEN THOUGH THE BUSIN ESS WAS CLOSED THERE WAS PASSIVE USE OF MACHINERY OF THE COLD STORAGE AN D ACCORDINGLY IT WAS HELD THAT THERE WAS NO REQUIREMENT THAT ASSET S HOULD BE USED IN THE WHOLE ASSESSMENT YEAR IN QUESTION IN ORDER TO CLAIM DEPRECIATION U/S.32. HENCE, THIS CASE LAW IS NOT APPLICABLE TO T HE FACTS OF THE APPELLANTS CASE. THE FACTS IN ANOTHER CASE LAW I.E . LIQUIDATORS OF PURSA LTD. VS. CIT 25 ITR 265 ARE ALSO DIFFERENT SINCE IN THAT CASE THE ISSUE DID NOT RELATE TO THE DEPRECIATION ON MACHINERIES L EASED OUT. THE APPELLANT HAS PRODUCED COPIES OF THE HIRE CHARGES C ONTRACT WITH LARSON & TOUBRO AND PODDAR ASHISH DEVELOPERS. HOWEVER, THI S SO CALLED CONTRACT WITH LARSON & TOUBRO IS NOTHING BUT A COPY OF BILL RAISED BY THE COMPANY WHEREIN CONDITIONS FOR LEASING OUT ARE NOWHERE MENTIONED. IN CASE OF PODDAR ASHISH DEVELOPERS, THE LETTER DATED 17- 11-2005 DOESNT MENTION AS TO WHETHER THE WORK AWAR DED INCLUDES A SUPPLY OF THE PLATFORM OR IT IS ONLY FOR INSTALLATI ON, ERECTION LOADING-UN- LOADING, CONNECTING THE MACHINERIES, OPERATING DEPL OYMENT OF LABOUR. FURTHER, THE APPELLANT COULD NOT PRODUCE THE MEMORA NDUM OF ASSOCIATION NOR PROVED ITS CLAIM THAT THE LEASING I S PART OF BUSINESS OF THE APPELLANT. FURTHER, THE LEASE PAPERS DO NOT PRO VIDE THE CONDITIONS THEREIN AS MENTIONED IN THE DECISION OF HON'BLE RAJ ASTHAN HIGH COURT IN THE CASE OF CIT VS. SHREE RAJASTHAN SYNTEX LTD. ON WHICH THE APPELLANT HAS RELIED. THE OTHER CASE LAW ON WHICH T HE APPELLANT RELIES IS SARWESHWAR NATH NIGAM [1963] 48 ITR 85 [PUN]. HOWEV ER, IT IS NOTED THAT THIS RELATES FOR DETERMINATION OF THE PERIOD F OR WHICH THE DEPRECIATION IS APPLICABLE IN CASE THE MACHINE HAS BEEN LET OUT FOR PART PERIOD HENCE BASED ON DIFFERENT FACTS. FURTHER, THE APPELLANT RELIED ON DECISION IN HINDUSTAN ALUMINUM LTD, WHICH AGAIN REL ATES TO THE ALLOWANCE OF DEVELOPMENT REBATE. THUS, IT MAY BE NO TED THAT THE DECISIONS AS MENTIONED ABOVE AND RELIED UPON BY THE APPELLANT ARE NOT RELEVANT TO THE FACTS OF THE APPELLANTS CASE. IN V IEW OF THE ABOVE DISCUSSED LEGAL POSITION, I AM OF THE OPINION THAT AO WAS JUSTIFIED IN DISALLOWING DEPRECIATION WHICH IS UPHELD. 4. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ONCE MACHINES WERE LEASED OUT TO THE OUTSIDERS AND THE S AME WERE USED BY OUTSIDERS, THEN SAME HAS TO BE CONSTRUED AS USAGE O F THE MACHINERY FOR THE PURPOSE OF THE BUSINESS, PARTICULARLY WHEN HIRE CHARGES FROM SUCH MACHINES HAVE BEEN INCLUDED IN THE BUSINESS IN COME. HE HIMSELF ITA NO.810 OF 2010 4 ADMITTED THAT MAY BE SOME PARTICULARS COULD NOT BE SUBMITTED AND HE IS READY TO FURNISH THOSE PARTICULARS BEFORE THE AO . 5. ON THE OTHER HAND, LD. DR STRONGLY RELIED ON THE ORDER OF THE CIT(A). 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AGRE E WITH THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT ONCE HIRE CHARGES FROM MACHINERY HAVE BEEN INCLUDED IN THE BUSINESS I NCOME AND THE SAME HAVE BEEN TAXED, THEN GIVING OF SUCH MACHINES ON HIRE AND THEIR USAGE BY THIRD PARTIES ITSELF CAN BE SAID TO BE USA GE OF SUCH MACHINES. ACCORDINGLY, ASSESSEE IS ENTITLED TO DEPRECIATION O N SUCH LEASED OUT MACHINES. IT SEEMS SOME DETAILS HAVE NOT BEEN FURNI SHED AS POINTED OUT BY THE LD. CIT(A), THEREFORE IN THE INTERESTS O F JUSTICE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE SAME TO T HE FILE OF THE AO FOR VERIFICATION OF PARTICULARS OF ASSETS AND USAGE ETC ., AND THEN ALLOW THE DEPRECIATION ACCORDINGLY. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 6/1/2012. SD/- SD/- (VIJAY PAL RAO) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 6/1/2012. P/-*