The ACIT, Central Caircle-2(2), V. M/s. Mardia Chemicals Ltd.,

ITA 855/AHD/2004

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9627 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2013
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2000-2001
• Appeal Filed On: 14-03-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B.K.S. PANDYA
• Keywords: Depreciation; Tax effect
• Section: 251

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, , , , अहमदाबाद यायपीठ अहमदाबाद यायपीठ अहमदाबाद यायपीठ अहमदाबाद यायपीठ ‘बी बीबी बी’ अहमदाबाद । अहमदाबाद । अहमदाबाद । अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ B ” BENCH, AHMEDABAD सव ौी मुकु ल कु मार ौावत, याियक सदःय एवं एवंएवं एवं ौी ट .आर.मीणा, लेखा सदःय के सम$ । BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No.855/Ahd/2004 (िनधा रण वष िनधा रण वष िनधा रण वष िनधा रण वष / / / / Assessment Year : 2000-01) The ACIT Central Circle 2(2) Now The DCI T Ci r-4 Ah medabad बनाम बनामबनाम बनाम/ Vs. M/s.Mardia Che mi cals Ltd. Mardia Plaza, C G Road Ah medabad ःथा यी ले खा सं ./ जी आ इ आ र सं ./PAN/ GIR No. : AAB CM 8626 J (अपीलाथ+ / // /Appellant) .. (ू-यथ+ / Respondent) अपीलाथ+ ओर से / Appellant by : Shri B.K.S. Pandya,CIT-D.R. ू-यथ+ क/ ओर से/Respondent by : None सुनवाई क/ तार ख / / / / Dat e of H ea rin g : 6. 12 .2 0 12 घोषणा क/ तार ख /Date o f P ro no u nce me nt : 1 1/1 /1 3 आदेश / O R D E R PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER : At the outset, it was informed that the Hon’ble Gujarat High Court in Tax Appeal No.962 of 2010 titled as “CIT vs. M/s.Mardia Chemicals Ltd.” vide an order dated 12.7.2011 has quashed a judgement of the Tribunal dated 13.11.2009 and remanded the issue to the Tribunal for consideration on merits. We have noted that ITAT “B” Bench Ahmedabad in ITA No.855/A/2009 for A.Y. 2000-01 vide an order dated 13.11.2009 has held as under:- ITA No.855/Ahd/2004 ACIT/DCIT vs. M/s.Mardia Chemicals Ltd. Asst.Year – 2000-01 - 2 - “6. The learned departmental representative before us could not controvert the fact that even if the order of the assessing officer is upheld, the income of the assessee would still be negative and therefore, the tax effect involved in the appeal would be less than the limit prescribed by the CBDT in Instruction No.2 of 2005 dated 24-10-2005 (F.No.279/Miscellaneous.64/05-ITJ). The Hon'ble Delhi High Court in the case of CIT vs. Mangalam Recinus Ltd. (2008) 174 Taxman 186 (Del), under identical set of facts and circumstances, upheld the order of the Tribunal, where the Tribunal dismissed the appeal of the revenue by holding that even if the additions/disallowances made by the assessing officer is upheld, the resultant assessed income would be loss and therefore, the tax limit prescribed by the CBDT for filing the appeal before the Tribunal comes into play, by observing as follows: “5. We are in agreement with the view of the Tribunal that even if the order of the Assessing Officer is upheld the tax recovery so far as the revenue is concerned would be nil. In the event the question has any impact on subsequent years, we leave it open to the revenue to raise it in the succeeding years, if need arises.” In view of the above, and respectfully following the judgment of the Hon'ble Delhi High Court cited supra, we dismiss the appeal filed by the revenue.” 2. The Revenue has therefore challenged the said dismissal of appeal on the ground of low tax effect. The Revenue had succeeded and the Hon’ble Court has remanded to decide on merits. In consequence thereof, we hereinbelow proceed with the matter. It is also worth to note that from the side of the respondent-assessee no one has appeared, therefore we have proceeded ex-parte qua the assessee after hearing the ld.DR. ITA No.855/Ahd/2004 ACIT/DCIT vs. M/s.Mardia Chemicals Ltd. Asst.Year – 2000-01 - 3 - 3. This is an appeal filed by the Revenue arising out of the order of ld.CIT(A)-III, Ahmedabad dated 10/12/2003 passed for A.Y. 2000-01 and the grounds raised are reproduced below :- 1. The Ld.CIT(A) has erred in law and on facts in directing to allow the claim of depreciation of rs.47,72,41,150/-. 2. The Ld.CIT(A) has erred in law and on facts in directing to allow interest expenses of Rs.15,31,17,938/-. 3. The Ld.CIT(A) has erred in law and on facts in giving the benefit of Rs.1,04,25,626/-, being modvat credit in the opening stock even though the assessee is in appeal before the ITAT against the above addition in the A.Y. 1999-2000. 4. Apropos to Ground No.1, facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the IT Act dated 31.3.2003were that the assessee-company is manufacturing chemicals. It was noted by the AO that in the past the claim of the depreciation was rejected because the installation could not be proved by the assessee. According to AO, the WDV was disturbed, hence in view of the stand taken in earlier years the depreciation is to be worked out separately. In the result, a disallowance of Rs.47,72,41,150/- was made. When the matter was carried before the ld.CIT(A), it was argued that the major portion of the disallowance of depreciation was on account of consequential effect of earlier assessment years, however, the issue of depreciation was decided in favour of assessee. The ld.CIT(A) has considered those facts and noted that while passing the orders for A.Ys. 1997-98 to 1999-2000, it was held, quote “I have carefully considered the ITA No.855/Ahd/2004 ACIT/DCIT vs. M/s.Mardia Chemicals Ltd. Asst.Year – 2000-01 - 4 - facts of the case, discussion made in the assessment order, the submissions and evidences given by the appellant and discussion made by the appellant during the appeal hearing, While passing the appeal orders for A.Y. 1997-98 to A.Y. 1999-2000 on identical issue, I have held that in the Fixed Assets Schedule appended to the Balance Sheet, the details of additions to the fixed assets have been given, and further, the appellant has filed Depreciation chart as per the income-tax act duly certified by the Tax Auditors alongwith the Return of Income, and therefore, in view of these two major facts, the appellant can’t be penalized by taking the shelter of assessment orders for earlier orders when facts of earlier years A.Y. 97-98 to A.Y. 98-99 viz. inability to produce the vouchers for additions to the fixed assets on account of the fire accident, is entirely different during these two assessment years A.Y. 99-2000 to A.Y. 2000-01. From the year under consideration, the provisions for Tax Audit u/s.44AB were made more stringent and now the Tax Auditors are also required to certify the eligible amount of depreciation. The tax auditors have certified the eligible amount of depreciation after putting up the explanatory notes.” unquote. Finally, ld.CIT(A) has issued certain directions to the AO to verify the details of the addition made towards fixed assets and thereupon allowed the depreciation. 5. We have heard ld.DR who has simply placed reliance on the order of the AO. Prima-facie the issue of disallowance of depreciation was nothing but a consequential effect of the past years. The first appellate authority had taken the cognizance of the correct position of the depreciation as emerged from the appellate orders of the past years. ITA No.855/Ahd/2004 ACIT/DCIT vs. M/s.Mardia Chemicals Ltd. Asst.Year – 2000-01 - 5 - Thereafter, ld.CIT(A) had restored the issue to AO to verify the correct position of the depreciation in the light of the additions made by assessee towards fixed assets so as to allow the depreciation accordingly as per law. We find no fallacy in the said directions of ld.CIT(A). In the result, this ground of the Revenue has no force, therefore dismissed. 6. In respect of the ground No.2, it was noted by the AO that interest was capitalized but claimed as Revenue expenses. The assessee had claimed the expenditure u/s.36(iii) by relying upon Hon’ble Gujarat High Court decision reported in 103 ITR 715(Guj.). However, the assessee had suo motu disallowed the claim by invoking the provisions of section 43B of the IT Act. Although, the AO had rejected the stand of the assessee but also mentioned that no separate addition was required to be made as the claim had not passed through the books of accounts. When the matter was carried before the first appellate authority, the said issue was decided in favour of the assessee following earlier assessment years 1997-98 to 1999-2000. Ld.CIT(A) has also relied upon DCIT vs. Core Healthcare Ltd. 251 ITR 61 (Guj.). The only submission before ld.CIT(A) was that the claim of interest be directed to be allowed only on payment basis. It was duly considered by ld.CIT(A) and he had finally directed the AO to allow the said expenditure u/s.43B in the year as and when paid. On hearing the submissions, from the side of the Revenue, we are also of the opinion that there was no fallacy in the said direction of the ld.CIT(A). We, therefore, hold that this ground of the Revenue has no force, therefore hereby dismissed. ITA No.855/Ahd/2004 ACIT/DCIT vs. M/s.Mardia Chemicals Ltd. Asst.Year – 2000-01 - 6 - 7. Apropos to Ground No.3, we have noted that ld.CIT(A) has followed an earlier appellate order and in consequent thereupon decided the issue in favour of the assessee in the following manner:- “9. The fifth Ground of Appeal is regarding the Assessing Officer’s non-action of giving credit of opening balance of unutilized modvat credit of Rs.1,04,25,626/- which was disallowed during the assessment year A.Y. 1999-2000. 9.1. While passing the appeal order for the assessment year A.Y. 1999-2000, I had uphold the action of the Assessing Officer of adding the amount of Rs.1,04,25,626/- being the unutilized modvat credit, and therefore, I find merits in the claim of the appellant to reduce the opening balance of unutilized modvat credit which has been taxed last year. Following my earlier order for the A.Y. 1997-98 and to avoid the double taxation, I accordingly, direct the A.O. to reduce from the income the opening balance of unutilized modvat credit of Rs.1,04,25,626/-.” 8. Under the totality of the facts and circumstances of the case, we are of the view that the position of the unutilized modvat credit ought to have been ascertained year-after-year as per the accounts of the assessee. Although we find no defect in the order of ld.CIT(A), but a minor modification is required that the figures of unutilized modvat credit were required to be verified by AO and if they are systematically reflected in the books of accounts year-after-year which were found to be the opening balance for the year under consideration, then the consequential relief ITA No.855/Ahd/2004 ACIT/DCIT vs. M/s.Mardia Chemicals Ltd. Asst.Year – 2000-01 - 7 - should be given to the assessee by the AO. With these directions, this ground of the Revenue is party allowed. 9. In the result, Revenue’s appeal is partly allowed. Sd/- Sd/- (ट .आर.मीणा) (मुकु ल कु मार ौावत) लेखा सदःय याियक सदःय ( T.R. MEENA ) ( MUKUL Kr. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 11 / 1 /2013 ट .सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश क/ ूितिल4प अमे4षत आदेश क/ ूितिल4प अमे4षतआदेश क/ ूितिल4प अमे4षत आदेश क/ ूितिल4प अमे4षत/Copy of the Order forwarded to : 1. अपीलाथ+ / The Appellant 2. ू-यथ+ / The Respondent. 3. संबंिधत आयकर आयु6 / Concerned CIT 4. आयकर आयु6(अपील) / The CIT(A)-III, Ahmedabad 5. 4वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / Learned Departmental Representative, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार/ BY ORDER, स-या4पत ूित //True Copy// उप उपउप उप/ // /सहायक पंजीकार सहायक पंजीकारसहायक पंजीकार सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, , , , अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad 1. Date of direct dictation on computer dated 3.1.2013 2. Date on which the typed draft is placed before the Dictating Member 4.1.2013.................. Other Member..................... 3. Date on which the approved draft comes to the Sr.P.S./P.S................. 4. Date on which the fair order is placed before the Dictating Member for pronouncement...... 5. Date on which the fair order comes back to the Sr.P.S./P.S.........11/1/13 6. Date on which the file goes to the Bench Clerk..................... 11/1/13 7. Date on which the file goes to the Head Clerk.................................. 8. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 9. Date of Despatch of the Order..................