SPAC Tapioca Products (I) Ltd., CHENNAI V. ACIT, Erode

ITA 894/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5780 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 12-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO. 894/MDS/2017 / ASSESSMENT YEAR : 2009-2010 M/S. SPAC TAPIOCA PRODUCTS (I) LTD, NOW KNOWN AS SPAC STARCH PRODUCTS (INDIA) LTD. P & C TOWERS, 2 ND FLOOR, 140, PERUNDURAI ROAD, ERODE 638 011. [PAN AACCS 7137B] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, ERODE ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SMT. S. VIJAYAPRABHA, IRS, JCIT. /DATE OF HEARING : 09-11-2017 ! /DATE OF PRONOUNCEMENT : 27-11-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER GROUNDS TAKEN BY THE ASSESSEE IN THIS APPEAL, WH ICH IS AGAINST AN ORDER DATED 27.02.2017 OF LD. COMMISSION ER OF INCOME TAX (APPEALS)-3, COIMBATORE READ AS UNDER:- ITA NO. 894/MDS/2017 :- 2 -: 1 . THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3, COIMBATORE DATED 27.02.2017 IN I.T.A . NO.112/2016-17 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN T HE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN CONFIRMING THE RE- ASSESSMENT AS VALIDLY INITIATED AND COMPLETED AS PE R THE FINDINGS IN PARA 5 OF THE IMPUGNED ORDER WITHOU T ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ORDER OF RE-ASSESSMENT UNDER CONSIDERATION WAS PASSED OUT OF TIME, INVALID, PASSED WITHOUT JURISDICTION AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE ADDITI ON OF RS.23,80,2517-QUANTIFIED AS EXCESS DEPRECIATION ON CERTAIN PLANT & MACHINERY EQUATING THE SAME AS BUILDING WHICH RESULTED IN REWORKING OF THE DEPRECIATION IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE SPLITTING UP OF THE ITEMS AS PLANT & MACHINERY AND BUILDING SO AS TO ADOPT DIFFERENT RATES OF DEPRECIA TION WAS WHOLLY UNJUSTIFIED AND OUGHT TO HAVE APPRECIATE D THAT THE PLANT & MACHINERY UNDER CONSIDERATION SHOULD BE TAKEN INTO CONSIDERATION AS A WHOLE THEREBY VITIATING THE DECISION RENDERED IN PARA 7 O F THE IMPUGNED ORDER. 6. THE CIT (APPEALS) ERRED IN NOT CONSIDERING THE GROUND NO.6 OF STATUTORY FORM NO.35 WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATIO N OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 8. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS/ARGUMENTS AT THE TIME OF HEARING. ITA NO. 894/MDS/2017 :- 3 -: 2. ONE OF THE GROUNDS RAISED BY THE ASSESSEE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD CONFIRMED THE REASSESSMENT WITHOUT GIVING A PROPER REASON OR JUS TIFICATION. 3. FACTS APROPOS ARE THAT ASSESSEE IN FOOD PROCESSING INDUSTRY HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASS ESSMENT YEAR DISCLOSING INCOME OF RS.1.58,10,870/- AND ASSESSMEN T U/S.143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS COMPLETED ON 16.12.2011 ACCEPTING THE SAID INCOME. ASSESSEE HA D CLAIMED 100% DEPRECIATION ON FIXED ASSETS RELATING TO WHAT IS K NOWN TECHNICALLY AS UPFLOW ANAEROBIC SLUDGE BLANKET REACTOR (IN SHO RT UASBR). THE SAID UASBR IS A FORM OF ANAEROBIC DIGESTOR SYSTEM WHICH IS USED FOR REMOVAL OF ORGANIC POLLUTANTS FROM WASTE WATERS AND IS MAINLY USED IN FOUNDRY INDUSTRY AND CHEMICAL INDUSTRY. ASS ESSEE HAD CLAIMED 100% DEPRECIATION CONSIDERING THE UASBR AS A WASTE WATER TREATMENT EQUIPMENT AND THIS WAS ALLOWED IN THE ORIGINAL ASS ESSMENT. 4. THE ASSESSMENT WAS THEREAFTER REOPENED FOR A REASO N THAT COST OF CONSTRUCTION OF GAS STORAGE TANK, MILK STO RAGE TANK ETC, PRESUMABLY A PART OF THE UASBR WAS NOT ELIGIBLE F OR 100% DEPRECIATION. ASSESSEE HAD SHOWN FIXED ASSETS OF RS.2,01,12,628/- IN ITS BOOKS OF ACCOUNTS AS ADDITION TO BUILDINGS WHER EAS WHILE COMPUTING THE TOTAL INCOME FOR TAX PURPOSES, DEPRECIATION, TH E ADDITION ON ITA NO. 894/MDS/2017 :- 4 -: ACCOUNT OF BUILDINGS WAS SHOWN AS RS.1,18,55,187/- ONLY AND 100% DEPRECIATION WAS CLAIMED ON RS.83,29,562/-. LD. ASSESSING OFFICER THEREAFTER COMPLETED THE REASSESSMENT BY EXCLUDING FROM THE DEPRECATION, ITEMS WHICH IN THE OPINION OF THE LD . ASSESSING OFFICER, WERE PART OF CIVIL WORKS NAMELY STRUCTURAL, FRB ROO M, BLOWER ROOM AND POWER ROOM OF UASBR. THIS RESULTED IN A DISALLOWANC E OF RS.23,80,251/-. 5. AGGRIEVED, THE ASSESSEE MOVED IN APPEAL BEFORE TH E LD. COMMISSIONER OF INCOME TAX (APPEALS). THE CASE WAS POSTED FOR HEARING BY THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) ON 17.01.2017 WHEN THE ASSESSEE REQUESTED FOR ADJOURN MENT. THEREAFTER THE CASE WAS POSTED FOR FINAL HEARING ON 10.02.2017. AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) N ONE APPEARED ON THAT DATE. LD. COMMISSIONER OF INCOME TAX (APPEALS ) CONFIRMED THE ADDITION MADE BY THE LD. ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS. 6. THE ASSESSING OFFICER HAS REWORKED THE ELIGIBLE DEPRECIATION IN THE FOLLOWING MANNER:- THE ASSESSEE HAS SHOWN FIXED ASSETS OF RS.2,01,12,628/- AS ADDITION TO BUILDINGS DURING TH E YEAR. WHILE IN DEPRECATION STATEMENT THE ADDITION TO BUIL DING SHOWN IS RS./1,18,55,187/-. ON SCRUTINY IT IS NOTI CED THAT THE STRUCTURE USED FOR METHANE RECOVERY ANAEROBIC DIGESTER SYSTEM, ASSESSEE HAD CLAIMED AT THE RATE OF ITA NO. 894/MDS/2017 :- 5 -: 100% SINCE THE ASSET WAS PUT TO USE LESS THAN 180 D AYS THE DEPRECATION WAS RESTRICTED ACCORDINGLY. METHANE RECOVERY ANAEROBIC DIGESTER SYSTEM IS AN IT EM WHICH IS ELIGIBLE FOR 100% DEPRECATION. ASSESSEE HAS SHOWN SOME ITEMS WHICH ARE PART OF CIVIL WORK. EVE N IN THE FINANCIAL STATEMENT PREPARED UNDER THE COMPANY S ACT THESE ITEMS HAVE BEEN CONSIDERED UNDER THE HEAD BUILDING. DEPRECIATION RATE ON BUILDING IS 10% AND AS ASSESSEE HAS USED THE ASSET FOR LESS THAN 180 DAYS SHE IS ENTITLED TO 50% OF THE AMOUNT. BELOW ARE THE AS SETS WHICH FALL IN THE CATEGORY OF BUILDING : ITEM DEPRECIATION CLAIMED UASBR STRUCUTRALS 21,64,958 UASBR FRB DOOM 24,26,593 UASBR BLOWER ROOM 3,58,290 UASBR POWER ROOM 3,39,606 -------------- 52,89,446 ------------- THE ELIGIBLE DEPRECATION WORKS OUT TO RS.2,64,472/- AS AGAINST RS.26,44,723/- CLAIMED. THE EXCESS DEPRECA TION CLAIMED OF RS.23,80,251/- IS THEREFORE DISALLOWED A ND ADDED TO THE TOTAL INCOME. 7. THE ASSESSEE HAS NOT CONTRIVED THE FINDINGS OF THE ASSESSING OFFICER WITH THE FACT THAT DEPRECATION ON BUILDINGS IS 10% AND THE OTHER ASSETS ARE PUT TO US E FOR LESS THAN 180 DAYS AND THEREFORE ENTITLED FOR 50% O F THE AMOUNT FOR DEPRECATION. IN VIEW OF THE SAME, THE E XCESS DEPRECATION CLAIMED OF RS.23,80,251/- AS DETERMINED BY THE ASSESSING OFFICER IS CONFIRMED IN THE HANDS OF THE APPELLANT. 6. NOW BEFORE US, THE LD. AUTHORISED REPRESENTATIVE SU BMITTED THAT LD.CIT(A) DID NOT CONSIDER THE DETAILS SUBMITTED BY THE ASSESSEE. ACCORDING TO HIM, LD.CIT(A) DID NOT GIVE REASONS W HY STRUCTURAL ROOM, ITA NO. 894/MDS/2017 :- 6 -: FRB ROOM, BLOWER ROOM AND POWER ROOM COULD NOT BE C ONSIDERED AS PART OF UASBR. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS BEEN REPRODUCED AT PARA 5 ABOVE. GROUNDS RAISED BY THE ASSESSEE NOT ONLY ASSAILED THE REO PENING BUT ALSO ASSAILED FINDINGS OF THE LD. ASSESSING OFFICER THAT CIVIL WORK ASSOCIATED WITH RECOVERY SYSTEMS WERE NOT ELIGIBLE FOR DEPRE CATION AT THE RATE OF 100%. WE FIND THAT ASSESSEE WAS NOT REPRESENTED B EFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). LD. COMMISSI ONER OF INCOME TAX (APPEALS) HAD NOT DEALT WITH THE MERITS OF THE ISSUE RAISED BY THE ASSESSEE, VIZ WHETHER BUILDINGS USED IN UASBR SYSTE M COULD BE CONSIDERED AS PLANT OR NOT. IN THE FACTS AND CIRCUM STANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ISSUE REQUIRES A FRE SH LOOK BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND REMIT THE CASE BACK TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) FOR ITA NO. 894/MDS/2017 :- 7 -: CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSE. 10. ORDER PRONOUNCED ON MONDAY, THE 27TH DAY OF NOVEMB ER, 2017, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 27TH NOVEMBER, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF