DCIT,Circle-1, Kolkata, Kolkata V. M/s Kamarhatty Co. Ltd., Kolkata

ITA 947/KOL/2012

• Counselvise Citation: 94723514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KUMAR MAITRA
• Assessee Lawyers: SAJJAN KUMAR TULSIYAN ASSES
• Keywords: Depreciation; Additional depreciation; Commercial expediency
• Section: 43B

Judgement Text

I.T.A. NO.: 947/KOL./201 2 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 6 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT ME MBER) I.T.A. NO.: 947/KOL./ 2012 ASSESSMENT YEAR : 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,,................ ..RESPONDENT CIRCLE-1, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. KAMARHATTY CO. LIMITED, 16A, BRABOURNE ROAD, KOLKATA-700 001 [PAN : AABCK 2916 K] APPEARANCES BY: SHRI AMIT KUMAR MAITRA, JCIT, SR. D.R, FOR THE DEPA RTMENT SHRI SAJJAN KUMAR TULSIYAN, ADVOCATE, FOR THE ASSES SEE DATE OF CONCLUDING THE HEARING : JANUARY 28, 2014 DATE OF PRONOUNCING THE ORDER : 05.02.2014 CORRIGENDUM ORDER PER ABRAHAM P. GEROGE : 1. IN THIS APPEAL FILED BY THE REVENUE, DIRECTED AG AINST AN ORDER DATED 30.03.2012 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-I, KOLKATA, IT HAS STRESSED FIVE GROUNDS, OF WHICH GROUND NO. 5 IS GEN ERAL, NEEDS NO ADJUDICATION. 2. VIDE ITS GROUNDS 1 & 2, REVENUE ASSAILS THE DELE TION OF AN ADDITION OF RS.5,45,980/- MADE BY THE ASSESSING OFFICER FOR A CLAIM OF ADDITIONAL DEPRECIATION ON PLANT & MACHINERY. 3. FACTS APROPOS ARE THAT ASSESSEE, A MANUFACTURER OF JUTE AND PAPER RELATED GOODS, HAD DURING THE RELEVANT PREVIOUS YEA R CLAIMED ADDITIONAL DEPRECIATION ON PLANT & MACHINERY NEWLY INSTALLED B Y IT, WHICH, INTER ALIA, I.T.A. NO.: 947/KOL./201 2 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 6 2 INCLUDED CERTAIN ELECTRICAL INSTALLATION. ASSESSING OFFICER WAS OF THE OPINION THAT ADDITIONAL DEPRECIATION COULD NOT BE G IVEN ON ELECTRICAL INSTALLATION. ACCORDING TO HIM ONLY PLANT AND MACHI NERY WAS ELIGIBLE FOR SUCH ADDITIONAL DEPRECIATION. THE DISALLOWANCE CAME TO RS.5,45,980/-. 4. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT ELECTRICAL INSTALLATION WAS A PART OF THE PLAN T & MACHINERY NEWLY INSTALLED. ACCORDING TO THE ASSESSEE, SECTION 32(1) (II)(A) OF THE ACT SPECIFICALLY MENTIONED THOSE ITEMS OF PLANT AND MAC HINERY ON WHICH ADDITIONAL DEPRECIATION COULD NOT BE CLAIMED. AS PE R ASSESSEE ELECTRICAL INSTALLATION WAS NOT A PROHIBITED ITEM. LD. CIT(APP EALS) WAS APPRECIATIVE OF THIS CONTENTION. HE HELD THAT ELECTRICAL INSTALL ATION WHICH FORMED A PART OF PLANT AND MACHINERY WAS ALSO ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION. 5. NOW BEFORE US, LD. D.R. SUBMITTED THAT PLANT AND MACHINERY BY ITS VERY NATURE DID NOT INCLUDE ELECTRICAL INSTALLATION . THEREFORE, ACCORDING TO HIM, ADDITIONAL DEPRECIATION COULD NOT BE ALLOWED O N PLANT AND MACHINERY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ELIGIBILITY FOR CLAIMING OF AD DITIONAL DEPRECIATION IS SET OUT UNDER PROVISO TO SECTION 32(1)(IIA) OF THE ACT, WHICH IS REPRODUCED HEREUNDER:- (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND IN STALLED AFTER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING [OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER], FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II): PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATI ON BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE IND IA BY ANY OTHER PERSON; OR I.T.A. NO.: 947/KOL./201 2 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 6 3 (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; O R (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COS T OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION OF ANY ONE PREVIOUS YEAR. THERE IS NO DISPUTE THAT ASSESSEE WAS ENGAGED IN MA NUFACTURE OF JUTE AND PAPER RELATED GOODS. ITEMS ON WHICH DEPRECIATION IS NOT ALLOWABLE HAVE BEEN SPECIFICALLY SET OUT IN THE PROVISO. ELECTRICA L INSTALLATION DOES NOT FALL WITHIN ANY OF THE PROVISOS. FURTHER DEFINITION OF PLANT GIVEN IN SECTION 43(3) OF THE ACT IS INCLUSIVE AND EVEN SHIP S, VEHICLES, AND BOOKS ARE CONSIDERED AS PLANT. IF THAT BE SO, ELECTRICAL INSTALLATION IS DEFINITELY PART OF A PLANT. IN OUR OPINION, LD. CIT(APPEALS) W AS JUSTIFIED IN ALLOWING THIS CLAIM OF ASSESSEE. GROUNDS NO. 1 & 2 OF THE RE VENUE STAND DISMISSED. 7. VIDE ITS GROUND NO. 3, GRIEVANCE OF THE REVENUE IS THAT LD.CIT(APPEALS) DELETED THE ADDITION MADE BY THE AS SESSING OFFICER FOR BELATED PAYMENTS OF EMPLOYEES CONTRIBUTION TO PROV IDENT FUND AND ESI. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.-VIJAY SHREE LTD. [ITA NO. 245 OF 2011 DATED 16.09.2011] HAD HELD THAT AMENDMENT TO SECOND PROVISO TO SECTION 43B OF THE ACT, AS INTRODUCED BY FINANCE ACT, 2003 WAS CURATIVE AND RETROSPECTIVELY APPLIED FROM 1 ST APRIL, 1988, RELYING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS.- ALOM EX TRUSIONS LIMITED [390 ITR 306]. THEIR LORDSHIPS HELD THAT EMPLOYEES CONT RIBUTION PAID BEYOND DUE DATE PRESCRIBED UNDER PROVIDENT FUND ACT AND RU LES WERE ALSO DEDUCTIBLE IF THE AMOUNTS WERE REMITTED PRIOR TO TH E DUE DATE OF FILING OF THE RETURN. I.T.A. NO.: 947/KOL./201 2 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 6 4 9. WE FIND THAT THE AFORESAID ISSUE IS COVERED BY T HE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. THERE IS NO DISP UTE THAT THE PAYMENTS WERE AFFECTED BY THE ASSESSEE BEFORE THE DUE DATE O F FILING THE RETURN. GROUND NO. 3, THEREFORE, STANDS DISMISSED. 10. VIDE ITS GROUND NO. 4, GRIEVANCE OF THE REVENU E IS THAT INTEREST OF RS.19,63,017/- ADDED BY THE ASSESSING OFFICER WAS D ELETED BY LD. CIT(APPEALS). 11. FACTS APROPOS ARE THAT ASSESSEE HAD GIVEN A SUM OF RS.2.91 CRORES TO ONE OF ITS SUBSIDIARY COMPANY CALLED KAMARTHATTY PO WER LTD. ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE SOURCE OF LOANS GIVEN. ASSESSEE THEREUPON SUBMITTED THAT THE LOANS GIVEN T O THE SUBSIDIARY COMPANY CAME TO RS.1,27,68,000/- AS ON 31.03.2007, WHICH INCREASED TO RS.2,91,26,483/- BY THE END OF THE RELEVANT PREVIOU S YEAR. ADDITIONAL LOAN RS.1,63,58,483/- WAS, AS PER THE ASSESSEE, GIVEN OU T OF THE CASH PROFITS EARNED BY IT. ASSESSEE POINTED OUT THAT IT HAD PROF ITS OF RS.3,57,63,728/- BEFORE TAX. IT HAD A DEPRECIATION CLAIM OF RS.1,55, 41,935/- AS WELL. ASSESSEE ALSO SUBMITTED COPIES OF ITS BANK ACCOUNT WITH M/S. ALLAHABAD BANK WHICH GAVE DETAILS OF PAYMENTS TO KAMARTHATTY POWER LTD. AS PER THE ASSESSEE, CASH CREDIT AMOUNT HAD REDUCED FROM R S.2,99,79,485/- TO RS.2,30,20,326/- BY THE END OF THE RELEVANT PREVIOU S YEAR. HENCE, NO INTEREST BEARING FUNDS WERE USED FOR GIVING THE ADV ANCE TO THE SUBSIDIARY COMPANY. 12. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED. A CCORDING TO HIM, ADVANCE GIVEN TO THE SUBSIDIARY ORIGINATED FROM THE CASH CREDIT ACCOUNT. WHEN CHEQUES WERE ISSUED BY ASSESSEE TO THE SUBSIDI ARY COMPANY, BANK ACCOUNT WAS IN DEBIT BALANCE AND SUCH DEBIT BALANCE HAD GONE UP ON ACCOUNT OF THE CHEQUE CLEARED BY THE SUBSIDIARY. HE NCE, AS PER THE ASSESSING OFFICER, THE AMOUNTS WERE GIVEN OUT OF BO RROWED FUNDS ONLY. HE, THEREFORE, APPLIED A RATE OF 12% ON THE ADDITIO NAL LOAN OF I.T.A. NO.: 947/KOL./201 2 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 6 5 RS.1,63,58,483/- GIVEN DURING THE RELEVANT PREVIOUS YEAR AND MADE AN ADDITION OF RS.19,63,070/-. 13. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ASSESSEE PRIMARILY RELYING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS LTD. VS.- CIT [288 ITR 1] SUBMITTED THAT THE AMOUNTS WER E GIVEN TO THE SUBSIDIARY BASED ON COMMERCIAL EXPEDIENCY. AS PER T HE ASSESSEE, SOURCES OF FUNDS WERE EXPLAINED. RELIANCE WAS ALSO PLACED O N THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MADHAB PRASAD JAT IA -VS.- CIT [118 ITR 200]. 14. LD. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONT ENTIONS. ACCORDING TO HIM, ASSESSEE HAD SUFFICIENT INTEREST-FREE FUND AVAILABLE WITH IT AND ASSESSING OFFICER COULD NOT ESTABLISH THE NEXUS BET WEEN BORROWED FUND AND THE AMOUNT GIVEN AS ADVANCE TO THE SUBSIDIARY. HE, THEREFORE, DELETED THE ADDITION MADE. 15. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE OR DER OF LD. CIT(APPEALS) SUBMITTED THAT THE MONEY WAS GIVEN OUT OF ASSESSEES CASH CREDIT ACCOUNT WITH ALLAHABAD BANK. EACH TIME THE C HEQUE WAS CLEARED, THE DUES TO THE BANK INCREASED. THEREFORE, ACCORDIN G TO HIM, ONE TO ONE NEXUS WAS ESTABLISHED. ASSESSING OFFICER WAS, THERE FORE, JUSTIFIED IN CONSIDERING THE ADVANCE OF MONEY AS GOING OUT OF IN TEREST BEARING FUNDS AND MAKING THE DISALLOWANCE 16. PER CONTRA, LD. AR SUPPORTED THE ORDER OF LD. C IT(APPEALS). 17. WE HAVE HEARD THE RIVAL SUBMISSIONS. WHENEVER A CHEQUE ISSUED BY A PARTY IS CLEARED THROUGH A BANK LOAN ACCOUNT, THE DUES TO THE BANK WILL INCREASE. IF THE CHEQUE IS CLEARED OUT OF A DEPOSIT ACCOUNT, THE DUES FROM THE BANK WILL BE DECREASED. THIS ARITHMETICS BY ITS ELF WILL NOT SHOW THAT MONEY HAD GONE OUT OF INTEREST BEARING FUNDS. ASSES SEE HAS CLEARLY POINTED OUT THAT THE CASH CREDIT BALANCE HAD GONE D OWN OVER THE RELEVANT I.T.A. NO.: 947/KOL./201 2 ASSESSMENT YEAR : 2008-200 9 PAGE 1 TO 6 6 PREVIOUS YEAR. IN OTHER WORDS, THE CASH CREDIT ACCO UNT STOOD REPLENISHED BY MORE THAN WHAT WAS GIVEN OUT AS ADVANCE, THROUGH DEPOSITS MADE BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. ASS ESSEE HAD SUBSTANTIAL PROFITS DURING THE RELEVANT PREVIOUS YEAR AND, THER EFORE, THERE IS MUCH STRENGTH IN ITS ARGUMENTS THAT LOANS DID NOT GO OUT OF ANY INTEREST BEARING FUNDS. IN ANY CASE, THE LOANS WERE GIVEN ONLY TO A SUBSIDIARY OF THE ASSESSEE AND ASSESSING OFFICER HAS NOT DOUBTED THE COMMERCIAL EXPEDIENCY OF SUCH LOANS. WE ARE, THEREFORE, OF THE OPINION THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING THIS ADDITIO N. GROUND NO. 4 OF THE REVENUE STANDS DISMISSED. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 5 TH DAY OF FEBRUARY, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.