Baba Kaluroy Heemgar P Ltd., Hooghly V. ACIT, CIR-1, HOOGHLY, Hooghly

ITA 833/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9198 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANAND KR SINGH J
• Keywords: Depreciation
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 833 / KOL / 2014 ASSESSMENT YEAR :2009-10 BABA KALUROY HEEMGHAR PVT. LTD., C/O SHRI SOMNATH GHOSH, ADVOCATE, SEVEN BROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST. HOOGHLY, PIN-712 105 [ PAN NO.AACCB 2483 R ] V/S . ACIT, CIRCLE-1, HOOGHLY, AAYAKAR BHAWAN, G.T RPOOAD, KHADINA MORE, P.O. & P.S. CHINSURAH, DIST. HOOGHLY, PIN 712 101 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SOMNATH GHOSH, ADVOCATE /BY RESPONDENT SHRI ANAND KR. SINGH, JCIT-DR /DATE OF HEARING 13-02-2017 /DATE OF PRONOUNCEMENT 22-03-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 17.03.2014. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-1, HOOGHLY U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 30.12.2011 FOR ASSESSMENT YEAR 2009-10. SHRI SOMNATH GHOSH, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE AND SHRI ANAND KR. SINGH, LD. DEPARTMENTAL REPRESENTATIVE RE PRESENTED ON BEHALF OF REVENUE. ITA NO.833/KOL/2014 A.Y. 2009-10 BBAKALUROY HEEMGHAR PVT. LTD. VS. ACIT, CIR-1 HGY. PAGE 2 2. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEA L ARE AS UNDER:- 1. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) XXXVI, KOLKATA ACTED UNLAWFULLY IN UPHOLDING THE DISALLOWA NCE IN THE SUM OF RS.17,052/- OUT OF DEPRECIATION U/S. 32(1) OF THE I NCOME TAX ACT, 1961 CLAIMED @ 15% ON THE STORAGE BUILDING BY THE APPELL ANT VIS-A-VIS 10% ALLOWED BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, HOOGHLY AND THE PURPORTED FINDING ON THAT BEHALF IS ABSOLUTELY ARBITRARY, UNWARRANTED AND PERVERSE. 2. FOR THAT THE SPECIOUS ACTION OF THE LD. COMMISSI ONER OF INCOME TAX (APPEALS0 XXXVI, KOLKATA OF UPHOLDING THE ADDITION IN THE SUM OF RS.17,052/- MADE BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, HOOGHLY ALLEGEDLY ON THE MISINTERPRETATIO N OF THE EXPRESSION PLANT CONTAINED IN THE PROVISIONS OF S. 43(3) OF THE AC T AS WELL AS BY MISREADING THEE STATUTORY PRESCRIPTION CONTAINED IN S 32(1) OF THE ACT READ WITH NEW APPENDIX UNDER THE INCOME TAX RULES, 1962 IS COMPLETELY UNFOUNDED, UNJUSTIFIED AND UNTENABLE IN LAW. 3. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) XXXVI, KOLKATA WAS REMISS IN UPHOLDING THE PURPORTED ADDIT ION IN THE AMOUNT OF RS.17,052/- MADE BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, HOOGHLY ON EXTRANEOUS CONSIDERATIONS NOT GERMANE TO THE ISSUE AND THE IMPUGNED FINDING ON THAT ACCOUNT WITH OUT CONSIDERING THE JUDGMENT IN THE CASE OF CIT VS SHREE GOPIKISHAN IN DUSTRIES (P) LTD. (2003) 262 ITR 568 (CAL) IS WHOLLY ILLEGAL, ILLEGIT IMATE AND INFIRM IN LAW. 3. THE ONLY INTER-CONNECTED AND COMMON ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN UPHOLDING THE OR DER OF ASSESSING OFFICER BY TREATING THE COLD STORAGE BUILDING AS NORMAL BUILDI NG THOUGH THE SAME IS IN THE NATURE OF PLANT AND MACHINERY. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE IS A PRIVAT E LIMITED COMPANY AND RUNNING A COLD STORAGE. THE ASSESSEE HAS CLAIMED DE PRECIATION ON ITS COLD STORAGE BUILDING @ 15% BY TREATING THE SAME AS PLAN T AND MACHINERY. HOWEVER, THE AO DISREGARDED WITH THE CLAIM OF ASSES SEE AND HELD THAT THE BUILDING CANNOT BE TREATED AS PLANT AND MACHINERY A ND THEREFORE HE ALLOWED THE DEPRECIATION ON SUCH BUILDING @ 10%. THUS, THE EXCESS DEPRECIATION CLAIMED BY ASSESSEE FOR 17,052/- BEING @ 5% EXCESS DEPRECIATION WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSE E. ITA NO.833/KOL/2014 A.Y. 2009-10 BBAKALUROY HEEMGHAR PVT. LTD. VS. ACIT, CIR-1 HGY. PAGE 3 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE PURPO SE OF COLD STORAGE IS TO PRESERVE THE PRODUCTS FROM GETTING DECAY, ROTTEN, S POIL ETC. FOR THAT PURPOSE, THE BUILDING IS MAINTAINED AT A PARTICULAR TEMPERAT URE CONSTANTLY AND THEREFORE SAME CANNOT BE CATEGORIZED AS ANY OTHER BUILDING BU T IT WILL CERTAINLY BELONG TO THE CATEGORY OF PLANT AND MACHINERY. HOWEVER, THE L D. CIT(A) DISREGARDED THE CLAIM OF ASSESSEE BY OBSERVING AS UNDER:- 5.0 APPELLANTS SUBMISSION IS CAREFULLY CONSIDERED AS PER SECTION 43(3), PLANT HAS BEEN DEFINED AS UNDER:- (3) PLANT INCLUDES SHOPS, VEHICLES, BOOKS, SCIENTIF IC APPARATUS AND SURGICAL EQUIPMENT USED FOR THE PURPOSES OF THE BUS INESS OR PROFESSION [BUT DOES NOT INCLUDE TEA BUSHES OR LIVE STOCK] [FOR BUILDINGS OR FURNITURE AND FITTINGS]. IN VIEW OF THE CLARIFICATORY AMENDMENT DONE IN THE ASSESSMENT YEA 2004-05, THERE IS NO FURTHER DISPUTE, THAT NO BUILD ING UNDER ANY PRETEXT CAN BE DEFINED AS PLANT FOR CLAIMING DEPRECIATION. IN VIEW OF THE ABOVE, THE AO HAS CORRECTLY DISALLOWED THE CLAIM OF HIGHER DEPRECIATION ON BUILDING. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE CAME IN SECOND APPEAL BEFORE US. 6. LD. AR FOR THE ASSESSEE BEFORE US FILED PAPER BO OK WHICH IS RUNNING PAGES FROM 1 TO 71 AND HE REITERATED SAME SUBMISSIO NS AS MADE BEFORE LD. CIT(A). ON THE OTHER HAND, LD. DR FOR THE REVENUE VEHEMENTL Y RELIED ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO THE DEPRECIATION WHETHER THE COLD STORAGE BUILDING IS A NORMAL BUILDING OR IT COMES UNDER THE CATEGORY OF PLANT & MACHINERY. THE AUTH ORITIES BELOW HAS TREATED THE COLD STORAGE BUILDING AS NORMAL BUILDING AND ACCORDINGLY ALLOWED THE DEPRECIATION. ADMITTEDLY THE IMPUGNED BUILDING IS USED FOR THE PU RPOSE OF COLD STORAGE WAREHOUSE. THERE IS NO DISPUTE WITH REGARD TO THE U SE OF THE IMPUGNED ITA NO.833/KOL/2014 A.Y. 2009-10 BBAKALUROY HEEMGHAR PVT. LTD. VS. ACIT, CIR-1 HGY. PAGE 4 BUILDING. COLD STORAGE PRESERVES PRODUCTS BY WAY OF REFRIGERATING THEM IN ORDER TO SAVE FROM ELIMINATING SPROUTING , ROTTING AND INSECT DAMAGE. COLD STORAGES PROVIDE WAREHOUSING OF THE PRODUCTS AT A R EQUIRED A STORAGE TEMPERATURE. NOW THE QUESTION ARISES AT WHAT RATE THE DEPRECIATI ON ON SUCH COLD STORAGE OF BUILDING SHOULD BE PROVIDED UNDER THE INCOME TAX AC T. UNDER THE ACT THERE ARE DIFFERENT RATES OF DEPRECIATION FOR DIFFERENT A SSETS. UNDER THE ACT THE ASSETS HAS BEEN CLASSIFIED UNDER DIFFERENT CATEGORIES SUCH AS TECHNICAL KNOW-HOW, PLANT & MACHINERY, BUILDING AND FURNITURE ETC. THE ASSESSEE IN THE INSTANT CASE IS TREATING THE COLD STORAGE BUILDING AS PLANT & MA CHINERY AND ACCORDINGLY CLAIMING THE APPRECIATION AT THE RATE OF 15% ON ITS VALUE. HOWEVER THE LOWER AUTHORITIES ARE TREATING THE SAME AS BUILDING AND A LLOWING THE APPRECIATION AT THE RATE OF 10% AS PROVIDED UNDER THE ACT. FOR THIS PURPOSE IT IS APPROPRIATE TO REFER THE DEFINITION OF PLANT WHICH HAS BEEN PROVID ED U/S43(3) OF THE ACT BY THE FINANCE ACT 2003 W.E.F. 1.4.2004 WHICH READS AS UND ER : DEFINITIONS OF CERTAIN TERMS RELEVANT TO INCOME FRO M PROFITS AND GAINS OF BUSINESS OR PROFESSION. 43. IN SECTIONS 28 TO 41 AND IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES (1) (2) (3) PLANT INCLUDES SHIPS, VEHICLE, BOOKS SCIENTIFIC APPARATUS AND SURGICAL EQUIPMENT USED FOR THE PURPOSE OF THE BUSINESS OR P ROFESSION [BUT DOES NOT INCLUDE TEA BUSH OR LIVESTOCK] [OR BUILDING OR FURNITURE AND FITTINGS] FROM THE ABOVE DEFINITION OF PLANT IT IS CLEAR THAT THE BUILDING IS NOT A PART OF THE PLANT. HOWEVER THE HONBLE JURISDICTIONAL HIGH COURT OF CALCUTTA IN THE CASE OF CIT VERSUS SHRI GOPIKISHAN INDUSTRIES PRIVATE LIMIT ED REPORTED IN 262 ITR 568 (CAL) VIDED ORDER DATED 11.06.2003 HAS OBSERVED THA T THE ROOFS AND WALLS OF THE BUILDING ARE CONSTRUCTED AND MAINTAINED IN A PA RTICULAR MANNER WITH THE PURPOSE TO STORE THE STORE THE GOODS FOR LONG TIME. THEREFORE THE COLD STORAGE BUILDINGS ARE INSULATED. THE INSULATION WITHOUT THE BUILDING CANN OT PRODUCE THE RESULT AND THE BUILDING WITHOUT THE INSULATION ALSO EQUALLY DISASTROUS FOR THE ITA NO.833/KOL/2014 A.Y. 2009-10 BBAKALUROY HEEMGHAR PVT. LTD. VS. ACIT, CIR-1 HGY. PAGE 5 PURPOSE. THUS THE COLD STORAGE BUILDING WITH THE IN SULATION CANNOT BE USED FOR OTHER ACTIVITIES. THEREFORE, THE COLD STORAGE BUILDINGS ARE DEFINITELY PLANT AS DEFINED U/ S 43(3) OF THE ACT. THE RELEVANT EXTRACT OF THE ORD ER IS REPRODUCED BELOW : BUILDING OF A COLD STORAGE WHICH HOUSES THE CHAMBER S IS CONSTRUCTED AND INSULATED IN A PARTICULAR MANNER ACCORDING TO SPECI FICATION AND IT IS THE MEANS OR APPARATUS OR THE TOOLS THROUGH WHICH THE BUSINES S IS CARRIED ON AND, THEREFORE, THE CHAMBERS OF THE COLD STORAGE ARE PLA NT AS DEFINED IN S. 43(3), WHILE THE REST OF THE BUILDING WOULD NOT BE A PLANT . IT IS IMPORTANT TO NOTE THAT THE ABOVE THE JUDGMENT WAS DELIVERED PRIOR TO THE AMENDMENT IN SECTION 43(3) OF THE ACT. NOW THE PROV ISIONS OF SECTIONS ARE VERY CLEAR WHICH STATES THAT THE BUILDING CANNOT BE TREATED AS PLANT AS DISCUSSED ABOVE. HOWEVER THE HONBLE ALLAHABAD HIGH COURT AFTER CONSIDERING THE AMENDED PROVISIONS OF THE ACT HAS A LLOWED THE ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF M/S SHYAM ENTERPRISES VS. CIT IN INCOME TAX APPEAL NO. 209 OF 2008 DATED 04.08.2011 BY HOLDING AS UNDER:- THE AMENDMENT IN S. 43(3) W.E.F. 1.4.2004 IS ONLY C LARIFICATORY IN NATURE AND WHICH EXCLUDED THE LIVE STOCK OR BUILDINGS OR FURNI TURE AND FITTINGS FROM THE PLANT. WHAT WAS EXCLUDED IN THE CONTEXT WAS BUILDIN G OR FURNITURE AND FITTINGS AND NOT BUILDING OF SPECIAL NATURE, WHICH DOES NOT HAVE EXISTENCE INDEPENDENT FROM THE PLANT. IN CASE OF COLD STORAGE AS IT WAS FOUND BY CALCUTTA HIGH COURT, THE BUILDING S REQUIRED TO BE CONSTRUCTED FOR COOLING CHAMBERS IN A SPECIFIC PROCESS AND MANNER AND WITHO UT SUCH SPECIFIC PROCESS AND MANNER A CHAMBER CANNOT BE COMMISSIONED, FOR WH ICH A LICENCE IS ALSO REQUIRED TO BE OBTAINED. THE WHOLE BUILDING, WHICH HOUSES THE CHAMBERS HAS TO BE CONSTRUCTED ACCORDING TO SPECIFICATIONS IN A PARTICULAR MANNER. WITHOUT A THERMOCOLE A CHAMBER CANNOT FUNCTION INDEPENDENTLY AND AT THE SAME TIME WITHOUT THE BUILDING THE THERMOCOLE CANNOT HAVE A S EPARATE EXISTENCE. BOTH THESE PART ARE INTEGRAL PARTS OF EACH OTHER. THE COLD STORAGE AS SPECIAL FACILITIES FOR REFRIGER ATION. JUST AS A REFRIGERATOR CANNOT BE DIVIDED INTO TWO PARTS NAMELY THE COOLING SYSTEM BEHIND OR UNDER THE REFRIGERATOR, AND THE CABINET IN FRONT, OR ON T OP THEREOF, THE PLANT OF COLD STORAGE ALSO CANNOT BE SEPARATED IN A MANNER THAT T HE SPECIAL CHAMBERS MAY HAVE SEPARATE EXISTENCE AND BE TREATED AS BUILDING, SANS COOLING PLANT FOR PROVIDING A DIFFERENT RATE OF DEPRECIATION. IN DELHI COLD STORAGE P. LTD. VS. COMMISSIONER OF I NCOME TAX, 1991 (19) ITR 656, THE SUPREME COURT WAS CONCERNED WITH THE WORD PROCESSING TO BE UNDERSTOOD AS AN ACTION WHICH BRINGS SOME CHANGE OR ALTERATION OF THE GOODS ITA NO.833/KOL/2014 A.Y. 2009-10 BBAKALUROY HEEMGHAR PVT. LTD. VS. ACIT, CIR-1 HGY. PAGE 6 OR MATERIAL SUBJECTED TO THE ACT OF PROCESSING. THE COURT WAS CONCERNED WITH THE DEFINITION OF INDUSTRIAL COMPANY AS DEFINED UNDER S. 2(7) (C) OF THE FINANCE ACT, 1973 FOR THE PURPOSES OF 1 ST SCHEDULE OF THE ACT. THIS JUDGMENT IN OUR OPINION, DOES NOT APPLY TO THE PRESENT CASE AS THERE IS NO MATERIAL OR ANY PLEA THAT ANY MANUFACTURING OR PROCESSING OF GO ODS IS CARRIED OUT IN THE COLD STORAGE. THE INCOME TAX APPEAL IS ALLOWED. BOTH THE QUESTION S ARE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE PRINCIPLES LAID DOWN BY THE HONBLE ALLAHABAD H IGH COURT IN THE CASE OF M/S SHYAM ENTERPRISES (SUPRA) ARE FULLY APPLICABLE TO THE FACTS OF THE I NSTANT CASE. THEREFORE, WE, AFTER HAVING RELIANCE IN THE A FORESAID JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT REVERSE THE ORDER OF AUTHORITI ES BELOW. AO IS DIRECTED ACCORDINGLY. HENCE, THIS GROUND OF APPEAL OF THE AS SESSEE IS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 22/ 03/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 22 / 03 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-BABA KALUROY HEEMGHAR PVT. LTD. C/O SHRI SOMNATH GHOSH, ADVOCATE SEVEN B ROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST HOOGHLY, PIN 712 105 2. /RESPONDENT-ACIT, CIRCLE-1, AAYAKAR BHAWAN, G.T. RO AD, KHADINA MORE, P.O. & P.S. CHIN SURH, DIST. HOOGHLY, PIN 712 101 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,