The ACIT, Vapi Circle, Vapi V. M/s. Bilag Industries Pvt.Ltd., Vapi

ITA 840/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5814 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-06-2010
• Assessment Year: 1994-1995
• Appeal Filed On: 07-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Depreciation

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 : 14/06/2010 DRAFTED ON: 18/06/2010 ITA NO.840/AHD/2008 ASSESSMENT YEAR : 1994-95 THE ASSTT.CIT VAPI CIRCLE VAPI VS. BILAG INDUSTRIES P.LTD. (FORMERLY KNOWN AS MITSU IND. LTD.] PLOT NO.304/2, IIND PHASE, GIDC VAPI PAN/GIR NO. : AABCB 2100 L (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K.MADHUSUDAN, SR.D.R. RESPONDENT BY: SHRI MEHUL K. PATEL O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-VAL SAD DATED 30/11/2007 AND THE GROUNDS RAISED ARE AS FOLLOWS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW , THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT O F DEPRECIATION @ 100% ON EFFLUENT TREATMENT PLANT TO THE TUNE OF RS. 12,38,347/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF TO ASSESSEE-COM PANY WITHOUT CONSIDERING FACT THAT ASSESSEE DID NOT SUBMIT DETAI LS OF PUT TO USE/COMMISSIONING OF THE SAID ETP PLANT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE OF RS.50,000/- ITA NO .840/AHD/2008 ASSTT.CIT VS. BILAG INDUSTRIES P.LTD. ASST.YEAR 1994-95 - 2 - ON ACCOUNT PAYMENT MADE TO SMT. ASMITA A.PATEL AS L EGAL AND PROFESSIONAL FEES WITHOUT CONSIDERING THE FACT THAT NO DETAILS WHATSOEVER WERE FILED BY ASSESSEE AT THE TIME OF AS SESSMENT PROCEEDINGS. 2. AT THE OUTSET, IT HAS BEEN INFORMED THAT FOR THE YEAR UNDER CONSIDERATION, I.E. 1994-95 EARLIER THE MATTER WAS RESTORED BACK TO THE FILE OF LEARNED CIT(APPEALS) BY THE RESPECTED CO-ORDINAT E BENCH C AHMEDABAD IN ITA NO.301/AHD/1998 FOR A.Y.1994-95 D ATED 20/05/2005. ACCORDINGLY, LEARNED CIT(APPEALS) HAS PASSED A REASONED ORDER WHICH IS NOW UNDER APPEAL BEFORE US. IT IS ALSO INFORMED THAT THIS ASSESSEE WAS FORMERLY KNOWN AS MITSU INDUSTRIES LTD . 3. GROUND NOS.1 & 2 :- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS C LAIMED 100% DEPRECIATION IN RESPECT OF EFFLUENT TREATMENT PLANT (ETP). THE DETAILS OF THE EXPENDITURE WERE AS FOLLOWS:- DATE SUPPLIER DESCRIPTION VALUE 20-6-93 RATAN REFRACTORY & INSULATION E.T. TANK RS. 58,347 10-3-94 BHATI CONSTRUCTION ET COOLING TOWER RS. 350,000 20-3-94 CHHAYAL CONSTRUCTION M.M. CONSTRUCTION E.T.TANK E.T. PLANT RS. 710,000 RS. 850,000 -DO- -DO- RS. 450,000 RS.2418,374 ITA NO .840/AHD/2008 ASSTT.CIT VS. BILAG INDUSTRIES P.LTD. ASST.YEAR 1994-95 - 3 - 3.1. SINCE THE PAYMENTS WERE STATED TO BE MADE IN T HE MONTH OF MARCH- 1994 FOR ASSESSMENT YEAR 1994-95, THEREFORE, THE AS SESSING OFFICER HAS RAISED THE OBJECTION THAT WHETHER THE PLANT IN QUES TION WAS ASSEMBLED AND COMMISSIONED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS DOUBTED WHETHER THE SAID PLANT WAS PUT TO USE DURING THE YEAR UNDER CONSIDERATION. THOUGHT THE ASSESSEE HAS FURNISHED THE DETAILS OF THE CONSTRUCTION AND THE PAYMENTS MADE IN THE LI GHT OF THE EVIDENCES AVAILABLE BUT THE ASSESSING OFFICER WAS NOT CONVINC ED AND, THEREFORE, THE CLAIM OF DEPRECIATION WAS DISALLOWED. THE FIRST A PPELLATE AUTHORITY HAS DULY FOLLOWED THE DIRECTIONS OF THE TRIBUNAL(SUPRA) AND THEREAFTER HELD AS UNDER:- 7.3. I HAVE PERUSED THE SUBMISSION MADE BY THE APP ELLANT COMPANY AND THE FINDINGS OF THE ASSESSING OFFICER. IT IS SEEN THAT THE ASSESSING OFFICER HAS DOUBTED THE CLAIM OF THE APPELLANT COMPANY THAT THE PLANT HAS BEEN COMMISSIONED AND US ED DURING THE YEAR. THE APPELLANT COMPANY HAD SUBMITTED THAT THE EXPENDITURE HAS BEEN INCURRED FOR INSTALLING AND CO MMISSIONING OF EFFLUENT TREATMENT PLANT WHICH INCLUDED CIVIL CONST RUCTION OR FOUNDATION AS PUT OF THE PLANT. THE APPELLANT COMP ANY ALSO SUBMITTED THAT OWNING TO 380% INCREASE IN TURNOVER IN ONE YEAR IT HAD TO INSTALL THE PLANT WITHIN A VERY LIMITED TIME DUE TO THE EXIGENCIES OF MEETING PRODUCTION TARGETS AND THAT T HE ENTIRE EXPENDITURE HAS BEEN CAPITALIZED IN THE BOOKS OF AC COUNTS. THE ASSESSING OFFICE3R HAS ACCEPTED THE ACCOUNTS WHICH ARE DULY AUDITED U/S.44AB OF THE INCOME TAX ACT AS WELL. TH E DISALLOWANCE HAS BEEN MADE MAINLY ON THE BASIS OF A DOUBT THAT NO ITA NO .840/AHD/2008 ASSTT.CIT VS. BILAG INDUSTRIES P.LTD. ASST.YEAR 1994-95 - 4 - EXPENDITURE IS CLAIMED ON THE RUNNING OF THE SAID P LANT BY THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATI ON. THE APPELLANT COMPANY HAS EXPLAINED THAT IT IS MAINTAIN ING CONSOLIDATED ACCOUNTS WHERE ALL THE EXPENDITURE IN RUNNING THE MANUFACTURING ACTIVITIES AS A WHOLE HAS BEEN DULY S UBMITTED TO THE ASSESSING OFFICER AND NO DEFECTS HAVE BEEN FOUND IN SUCH ACCOUNTS. IN THE CIRCUMSTANCES THE ADDITION IS SEEN TO BE MAD E ON THE BASIS OF MERE DOUBTS AND INFERENCES. 7.4. I HAVE PERUSED THE FACTS OF THE CASE. THE APP ELLANT COMPANY HAS PURCHASED THE ASSETS AND INSTALLED THE SAME FOR EFFLUENT TREATMENT. THE COMPANYS TURNOVER HAS INCREASED 38 0% DURING THE YEAR FOR WHICH PURPOSE IT SHOULD HAVE BEEN POSS IBLE TO TREAT INCREASED QUANTITY OF EFFLUENTS ARISING OUT OF INCR EASED PRODUCTION. I FIND MERIT IN THE APPELLANT COMPANYS CONTENTION THAT THE EVIDENCES ON RECORD AND THE FACTS OF THE CASE SUPPO RT THE ARGUMENT OF THE APPELLANT COMPANY THAT IT HAS PUT TO USE THE EFFLUENT TREATMENT PLANT INSTALLED DURING THE YEAR. 7.6. IN VIEW OF THE ABOVE FACTUAL MATRIX OF THE CAS E I FIND MERIT IN THE CONTENTION OF THE APPELLANT COMPANY AND THE ASS ESSING OFFICER IS DIRECTED TO GRANT DEPRECIATION ON EFFLUENT TREAT MENT PLANT WITHOUT THE IMPUGNED DISALLOWANCE. THE APPELLANT COMPANY SUCCEEDS IN THIS GROUND OF APPEAL. 4. FROM THE SIDE OF THE REVENUE THE LEARNED DEP ARTMENTAL REPRESENTATIVE SHRI K.MADHUSUDAN APPEARED AND SUPPO RTED THE ACTION OF ITA NO .840/AHD/2008 ASSTT.CIT VS. BILAG INDUSTRIES P.LTD. ASST.YEAR 1994-95 - 5 - THE ASSESSING OFFICER PRIMARILY ON THE GROUND THAT THE ASSESSEE WAS UNABLE TO PLACE ON RECORD THE EXACT DATE OF COMMISS ION AND WHETHER IT WAS PUT TO USE DURING THE YEAR UNDER CONSIDERATIO N. ON THE OTHER HAND, FROM THE SIDE OF THE RESPONDENT-ASSESSEE, SHRI MEHU L K.PATEL, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS PLACE D VEHEMENT RELIANCE ON A LETTER OF M/S.M.M.CONSTRUCTION, ADDRESSED TO THE THEN DY.CIT. LIKEWISE A LETTER OF CHAYAL CONSTRUCTION AND BHATI CONSTRUCTION DIRECTLY ADDRESSED TO THE DCIT, WHO HAD DEMANDED THE REQUISI TE INFORMATION DIRECTLY FROM THOSE PARTIES. THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE HAS EXPLAINED THAT THE EFFLUENT TREATM ENT PLANT REQUIRED THE CONSTRUCTION OF TANK AT THE CITE. IT HAD ALSO REQU IRED A CONSTRUCTION OF RCC PLATFORM AND THE CONSTRUCTION OF A COOLING TOWE R. THE SAID CIVIL CONSTRUCTION WAS EXECUTED BY DIFFERENT FOUR PARTIES AND ON COMPLETION OF WORK THEY HAVE RAISED THE BILLS. IT HAS ALSO BEEN POINTED OUT THAT VIDE PARAGRAPH NO.3 OF THE ASSESSMENT ORDER, THE ASSESSI NG OFFICER HAS ACCEPTED THE PRIMARY FACT THAT THE TURNOVER OF THE COMPANY HAD GONE UP FROM RS.2.22 CRORES TO RS.9.21 CRORES DURING THE Y EAR UNDER CONSIDERATION. 5. WE HAVE HEARD BOTH THE SIDES. WE HAVE CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE EXAMINED THE EVIDENCES PLACED ON RECORD. IN THE LIGHT OF THE ABOVE FACTUAL MATRI X, IT IS EVIDENT THAT THE PARTIES IN QUESTION HAVE DULY AFFIRMED ABOUT THE CO NSTRUCTION WORK, NAMELY CONSTRUCTION OF TANK, CONSTRUCTION OF RCC PL ATFORM AND CONSTRUCTION OF COOLING TOWER AND ALSO CONFIRMED THAT IT WAS EXECUTED DURING THE FINANCIAL YEAR UNDER CONSIDERATION AND THEREAFTER THE BILLS WERE RAISED. ON THE PART OF THE ASSESSEE, THE RELE VANT INVOICES OR BILLS ITA NO .840/AHD/2008 ASSTT.CIT VS. BILAG INDUSTRIES P.LTD. ASST.YEAR 1994-95 - 6 - WERE PLACED BEFORE THE ASSESSING OFFICER ALONGWITH THE DETAILS OF PAYMENT WHICH WERE SATED TO BE MADE THROUGH CHEQUES . IT WAS ALSO EXPLAINED THAT INSTEAD OF DEPLOYING ONE CONTRACTOR TO SAVE THE TIME THE CONTRACT WAS GRANTED TO DIFFERENT CONTRACTORS FOR S PEEDY IMPLEMENTATION OF THE PROJECT. IT IS ALSO NOT IN DISPUTE THAT THE TURNOVER HAD GONE UP AS STATED BY THE ASSESSING OFFICER. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT IT WAS NOT CONCLUSIVELY PROVED BY THE REVENUE DEPARTMENT THAT THE ETP WAS NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION, R ATHER CONTRARY TO THIS, ON THE BASIS OF THE SURROUNDING CIRCUMSTANCES AND EVIDENCES PLACED ON RECORD IT WAS DEMONSTRATED THAT THE CONSTRUCTION O F THE CIVIL WORK WAS IMPLEMENTED PRIOR TO THE PAYMENT AS IT GENERALLY HA PPENS IN THE NORMAL COURSE OF BUSINESS. RESULTANTLY, THE VIEW TAKEN BY THE LEARNED CIT(APPEALS) IS HEREBY AFFIRMED. 6. GROUND NO.3 :- THE OBSERVATION OF THE ASSESSING OFFICER WAS TH AT THE PAYMENT WAS MADE TO SMT. ASMITA A.PATEL OF RS.5 0,000/- TOWARDS A TECHNICAL CONSULTANCY WAS ONLY SUPPORTED BY AN INTE RNAL VOUCHER OF THE COMPANY, THAT TOO AGAINST A BILL ISSUED ON A PLAIN -PAPER. IT WAS ALSO OBJECTED BY THE ASSESSING OFFICER THAT THE RELEVANC Y OF THE SAID PAYMENT WAS NOT PROVED BY THE ASSESSEE. HENCE, HELD THAT THE IMPUGNED EXPENDITURE WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS, THEREFORE, DISALLOWED. 7. THE FIRST APPELLATE AUTHORITY HAS NOTED THAT THE SAID LADY BEING A HIGHLY QUALIFIED PERSON IN CHEMISTRY SUBJECT AND HA VING EXPERIENCE IN THE PAST, THEREFORE, THE EXPENDITURE WAS MEANT FOR THE PURPOSE OF THE ITA NO .840/AHD/2008 ASSTT.CIT VS. BILAG INDUSTRIES P.LTD. ASST.YEAR 1994-95 - 7 - BUSINESS, THEREFORE, ALLOWABLE IN THE EYES OF LAW. THE CLAIM OF THE ASSESSEE WAS ALLOWED. 8. ON HEARING BOTH THE SIDES AS WELL AS ON EXAMININ G THE CORRESPONDENCE IN THIS REGARD, WE ARE OF THE VIEW T HAT ONCE THE PERSON IN QUESTION HAPPENED TO BE A TECHNICALLY QUALIFIED PE RSON AND INDEPENDENTLY ASSESSED TO TAX AND THE PAYMENT OF RS .50,000/- WAS IN RESPECT OF TRAINING OF PERSONNEL OF THE COMPANY, TH EREFORE, TOTALITY OF THE CIRCUMSTANCES THUS DEMANDED TO AFFIRM THE VIEW OF T HE LEARNED CIT(APPEALS). WE FIND NO FORCE IN THIS GROUND OF REVENUE, HENCE, DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/ 06 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30 / 06 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT . 2. THE RESPO NDENT 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-VALSAD 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD