DOORS & DOORS SYSTEMS (I) P. LTD, MUMBAI V. DCIT CIR 9(1), MUMBAI

ITA 8737/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3693 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJENDRA KUMAR
• Assessee Lawyers: M A GOHEL
• Keywords: Depreciation; Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI .. , ! '#$ % % % % &. '.'.. %( ) '#$ '* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM './ I.T.A. NO. 8737/MUM/2010 ( )( , %-, )( , %-, )( , %-, )( , %-, / / / / ASSESSMENT YEAR : 2007-08) DOORS & DOORS SYSTEMS (INDIA) PVT. LTD., 602, ASCOT CENTRE, NEXT TO LE ROYAL MERIDIAN HOTEL, SAHAR AIRPORT ROAD, ANDHERI (EAST), MUMBAI 400 099. ( ( ( ( / VS. DY. COMMISSIONER OF INCOME TAX- CIR. (9)(1), AAYAKAR BHAVAN, M. KARVE MARG, MUMBAI 400 020. $. ! './ PAN : AAACD8599 G ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ' / APPELLANT BY : SHRI M.A. GOHEL 01./ 2 3 ' / RESPONDENT BY : DR. RAJENDRA KUMAR '(% 2 ! / // / DATE OF HEARING : 02-05-2013 45- 2 ! / DATE OF PRONOUNCEMENT : 08-05-2013 # 6 / O R D E R PER P.M. JAGTAP, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) -19 MUMBAI DTD. 15-9-2010 WHEREBY HE CONFIRM ED THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF DEPRECIATION AMOUNTI NG TO RS. 2,71,463/- AND ON ACCOUNT OF INTEREST AMOUNTING TO RS. 50,353/ -. ITA 8737/MUM/2010 2 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF IMPORTING, CUSTOMIZING AND INSTALLING V ARIOUS PRODUCTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 30-10-2007 DECLARING TOTAL INCOME OF RS. 85,08,005/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS IMPORTED ONE WELDING MACHINE FROM GERMANY IN THE MO NTH OF FEBRUARY, 2007 AND DEPRECIATION THEREON HAS BEEN CLAIMED AMOUNTING TO RS. 2,71,463/-. ALTHOUGH THE SAID MACHINE WAS NOT ACTUALLY PUT TO U SE, THE CASE OF THE ASSESSEE WAS THAT THE SAME WAS READY TO USE IN THE MONTH OF MARCH, 2007 MAKING IT ENTITLED FOR DEPRECIATION. ACCORDING TO THE A.O., THE ASSESSEE, HOWEVER, COULD NOT ESTABLISH SATISFACTORILY THAT TH E MACHINE WAS READY FOR USE IN THE MONTH OF MARCH, 2007 BY PRODUCING THE EVIDEN CE TO SHOW THAT THE REQUIRED TRAINING FOR USE OF THE SAID MACHINE WAS A LREADY GIVEN BY THE SUPPLIER. HE, THEREFORE, DISALLOWED THE CLAIM OF TH E ASSESSEE FOR DEPRECIATION ON THE SAID MACHINE. HE ALSO FOUND THAT LOAN WAS AV AILED BY THE ASSESSEE FROM BANK FOR THE PURCHASE OF THE SAID MACHINE AND THE INTEREST PAID THEREON AS ATTRIBUTABLE TO THE USE OF THE MACHINE NOT USED IN THE YEAR UNDER CONSIDERATION AS WORKED OUT AT RS. 50,353/- WAS DIS ALLOWED BY HIM TREATING THE SAME AS CAPITAL EXPENDITURE RELATING TO ACQUISI TION OF THE MACHINE. 3. ON APPEAL, THE LD.CIT(A) CONFIRMED THE DISALLOWA NCE MADE BY THE A.O. ON ACCOUNT OF DEPRECIATION AND INTEREST FOR THE FOL LOWING REASONS GIVEN IN PARA NO. 5:- ITA 8737/MUM/2010 3 5. I HAVE CONSIDERED THE FACTS OF THE CASE, THE FI NDINGS OF THE A.O. AND THE SUBMISSIONS OF THE APPELLANT. A NEW AND MOD ERN MACHINE WITH NEW TECHNOLOGY, WAS IMPORTED FROM GERMANY IN THE MO NTH OF FEBRUARY 2007. THE MACHINE WAS ALSO NEW IN THE SENSE THAT TH E STAFF OF THE APPELLANT COMPANY WERE ALSO NOT CONVERSANT WITH THE TECHNICAL INPUTS REQUIRED TO USE THE MACHINE. IT IS STATED THAT TRAI NING WAS IMPARTED TO THE STAFF SO AS TO ENABLE THEM TO MAKE USE OF THE M ACHINERY AND HENCE IT SHOULD BE CONSIDERED AS HAVING BEEN PUT TO USE. IT IS CONTENDED THAT THE MACHINE WAS NOT ACTUALLY WORKED OR EXPLOITED CO MMERCIALLY IN THE APPELLANTS BUSINESS DURING THE YEAR. CERTAINLY, CO URTS HAVE INTERPRETED WORDS PUT TO USE, TO ALSO TAKE WITHIN ITS SWEEP P ASSIVE USE OF THE MACHINERY, WHEREBY IT IS KEPT IN A STATE OF READINE SS TO USE. BUT WHETHER THERE IS PASSIVE USE OF THE MACHINE OR NOT IS VERY MUCH DEPENDENT ON THE FACTS OF EACH CASE. IN THE CASE OF GEO TECK CONSTRUCTION CORPORATION RELIED ON BY THE APPELLANT , IT WAS A CASE OF WHETHER TIPPER LORRIES HAD BEEN PUT TO USE. IN THE SAID CASE, THERE WAS A FINDING OF FACT THAT THE SAID TIPPERS HAD BEEN, T AKEN TO THE WORKSITE AND HENCE IT WAS STATED THAT IT WAS KEPT IN A STATE OF READINESS. IN THE CASE OF THE APPELLANT, THE CONTENTION IS THAT SINCE STAFF WERE TRAINED TO USE THE MACHINE, IT OUGHT TO BE PERCEIVED AS PASSIV E USE. I AM UNABLE TO AGREE TO THIS CONTENTION. BY TRAINING, INSTRUCTI ON IS IMPARTED ON THE TECHNIQUES OF WORKING THE MACHINERY. THIS CANNOT TA NTAMOUNT TO KEEPING THE MACHINERY IN A STATE OF READINESS. EVEN AFTER THE FIRST ROUND OF TRAINING, HOW WELL THE STAFF ARE EQUIPPED TO RUN THE MACHINERY IS ANOTHER MATTER. ALSO, IT IS A FACT THAT NO TRIAL RUN WAS CONDUCTED DURING THE YEAR. TO BE ELIGIBLE FOR DEPRECIATION AN ASSET HAS TO OWNED AND IT SHOULD ALSO BE USED FOR THE PURPOSE OF BUSI NESS. IN THE INSTANT CASE, IT IS UNDISPUTED THAT THERE WAS NO ACTIVE USE OF THE MACHINERY FOR THE PURPOSE OF BUSINESS. WHAT REMAINS TO BE EXAMINE D IS WHETHER THERE WAS PASSIVE USE OF THE MACHINERY. THE FACTS I NDICATE THAT THE APPELLANT COULD NOT ESTABLISH THAT THE MACHINE WAS KEPT IN A STATE OF READINESS SO AS TO CLAIM PASSIVE USER OF THE EQUIPM ENT. NO TRIAL RUN OF THE EQUIPMENT WAS CONDUCTED DURING THE YEAR. THE LE VELS OF THE TRAINING IMPARTED ARE NOT FREE FROM DOUBT. IT IS NOT CLEAR W HETHER IT WAS HANDS- ON-TRAINING ON THE EQUIPMENT OR OTHERWISE. IN FACT, NO EVIDENCE IS AVAILABLE EVEN WITH REGARD TO PASSIVE USE. AS SUCH APPELLANT IS NOT ELIGIBLE TO CLAIM DEPRECIATION THIS YEAR. THE ASSET WAS NOT ACTIVELY USED. EVEN THE KEPT READY THEORY IS NOT AVAILABLE TO TH E APPELLANT FOR CLAIMING DEPRECIATION. THUS, WHEN THE MACHINE IS NO T USED, S. 32 IS NOT APPLICABLE AS HELD BY THE KARNATAKA HC IN DCIT V. Y ELLAMMA DASAPPA HOSPITAL (2007) 207 CTR 523. THEREFORE, IT IS HELD THAT ON THE FACTS OF THE CASE THE A.O. IS JUSTIFIED IN NOT ALLOWING DEPR ECIATION CLAIMED OF RS. 2,71,463/-. RESULTANTLY, THE DISALLOWANCE OF INTERE ST EXPENSES OF RS. 50,353/- IS ALSO CONFIRMED . ITA 8737/MUM/2010 4 AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL OR THE ASSESSEE SUBMITTED THAT AFTER TRAINING AND TRIAL RUN, THE MA CHINE WAS DECLARED FIT FOR USING THE SAME FOR PRODUCTION AS PER INSPECTION REP ORT GIVEN BY THE SUPPLIER OF THE MACHINE. HE INVITED OUR ATTENTION TO THE CO PIES OF THE SAID REPORTS PLACED AT PAGE NO. 16 & 17 OF THE ASSESSEES PAPER BOOK. HE HAS SUBMITTED THAT THE EVIDENCE TO SHOW THAT THE MACHINE WAS READ Y FOR USE IN THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE BEFOR E THE A.O. AS WELL AS BEFORE THE LD. CIT(A) AND THE SAME HAS NOT BEEN CON SIDERED BY THEM. A PERUSAL OF THE SAID REPORTS SHOWS THAT THE SAME ARE GIVEN BY THE SUPPLIER OF THE MACHINE IN THE MONTH FEBRUARY, 2007 ITSELF. HO WEVER, ONE SUCH REPORT DTD. 15-2-2007 PLACED AT PAGE NO. 17 OF THE ASSESSE ES PAPER BOOK IS IN DUTCH LANGUAGE AND THE ASSESSEE HAS NOT FILED THE ENGLISH TRANSLATED VERSION THEREOF TO APPRECIATE THE CONTENTS OF THE SAID DOCUMENT. IN OUR OPINION, THIS DOCUMENTARY EVIDENCE IN THE FORM OF INSPECTION REPO RTS PLACED AT PAGE 16 & 17 OF THE ASSESSEES PAPER BOOK, HOWEVER, IS A RELE VANT EVIDENCE TO DECIDE THE ISSUE INVOLVED IN THE ASSESSEES CASE AND SINCE THE SAME HAS NOT BEEN CONSIDERED EITHER BY THE A.O. OR BY THE LD. CIT(A), THE MATTER SHOULD GO BACK TO THE A.O. IN ORDER TO DECIDE THE MATTER AFRESH AF TER VERIFYING THE SAID EVIDENCE. WE THEREFORE RESTORE THE MATTER TO THE F ILE OF THE A.O. WITH A ITA 8737/MUM/2010 5 DIRECTION TO DECIDE THE SAME AFRESH AFTER VERIFYING THE DOCUMENTARY EVIDENCE PLACED AT PAGE NO. 16 & 17 OF THE ASSESSEES PAPER BOOK IN THE FORM OF INSPECTION REPORT WHICH IS FOUND TO BE RELEVANT. T HE ASSESSEE IS ALSO DIRECTED TO FURNISH THE ENGLISH TRANSLATED VERSION OF THE IN SPECTION REPORT PLACED AT PAGE NO. 17 BEFORE THE A.O. FOR HIS VERIFICATION. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 7 8 )( ,7 2 '92 :; < = $% > 2 ?@ ORDER PRONOUNCED IN THE OPEN COURT ON 08-05-2013. . # 6 2 45- ! A#(8 08-05-2013 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) '#$ JUDICIAL MEMBER ! '#$ / ACCOUNTANT MEMBER MUMBAI ; A#( DATED 8-5-2013. %.)(.'./ RK , SR. PS # 6 2 0)=B C B- # 6 2 0)=B C B- # 6 2 0)=B C B- # 6 2 0)=B C B-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. D () / THE CIT(A)19, MUMBAI. 4. D / CIT V, MUMBAI 5. B%G 0))( , , / DR, ITAT, MUMBAI D BENCH 6. , H / GUARD FILE. # 6(' # 6(' # 6(' # 6(' / BY ORDER, '1B 0) //TRUE COPY// : : : :/ // /'? '? '? '? ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI