Diamond Digital Solutions Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 963/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1358 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P PATEL
• Keywords: Depreciation; Share purchase agreement; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER . / ITA NO. 963 /AHD/201 3 / ASSESSMENT YEAR : 2008 - 09 DIAMOND DIGITAL SOLUTIONS PVT LTD, 102, SUMEL - II, NR. GURUDWARA, SG HIGHWAY, AHMEDABAD PAN : AACCD 3327 Q VS DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 1, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI SUNIL TALATI , AR REVENUE BY : SHRI N.P. PATEL, SR DR / DATE OF HEARING : 10 / 0 6 /201 6 / DATE OF PRONOUNCEMENT: 20 / 06 /201 6 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME - TAX (APPEALS) - 6, AHMEDABAD DATED 22 . 08 .201 2 FOR ASSESSMENT YEAR 2008 - 09. 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TO THE EFFECT THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT GRANTING ADDITIONAL DEPRECIATION OF RS.3,67,394/ - UNDER SECTION 32(10(IIA) OF THE I.T. ACT. 3. THE APPEAL IS DELAYED BY 159 DAYS . A CONDONATION APPLICATION IS FILED BY WAY OF AN AFFIDAVIT CONTENDING THAT THE APPEAL PAPERS WERE HANDED OVER TO SHRI PARESH J. SHAH, CHARTERED ACCOUNTANT, WHO DID NOT FILE THE APP EAL IN TIME. SUBSEQUENTLY, THE FACT OF NON - FILING OF APPEAL WAS DETECTED AND THE APPEAL WAS PROMPTLY FILED. SINCE THE DELAY IS CAUSED DUE TO THE MISTAKE OF COUNSEL, THE ASSESSEE WAS PREVENTED BY SUFFICIENT REASONS IN BELATED FILING OF THIS APPEAL. RELIAN CE IS PLACED ON HONBLE SUPREME COURT JUDGMENT IN THE CASE OF COLLECTOR, LAND ACQUISITION, ANANTNAG & ANR. VS. MST. KATIJI & ORS. (1987) 167 ITR 471 (SC) , FOR THE PROPOSITION THAT WHEN THE CAUSE OF SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PERPE TRATE D EACH OTHER, CAUSE OF SUBSTANTIAL JUSTICE SHOULD BE PREFERRED . SMC - ITA NO. 963/AHD/ 2013 DIAMOND DIGITAL SOLUTIONS PVT LTD VS. DCIT AY : 2008 - 09 2 4. LD. DEPARTMENTAL REPRESENTATIVE IS HEARD. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN MY CONSIDERED VIEW , THE DELAY IN FILING OF THE APPEAL HAVING BEEN CAUSED BY THE CHARTERED ACCOUNTANT, THE ASSESSEE CANNOT BE PENALIZED FOR HIS FAULT. IN VIEW THEREOF THE DELAY IS CONDONED. 6 . BRIEF FACTS ARE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRINTING AND CLAIMED THE ABOVE AMOUNT OF ADDITIONAL DEPRECIATION WHICH WAS DISALLOWED BY THE AO HOLDING THAT ( I ) THE ASSESSEE WAS NOT PRODUCING ANY NEW ARTICLE OR THING ; ( II ) BEFORE EXCISE AUTHORITIES THE ASSESSEE HAS GIVEN IN WRITING THAT IT WAS NOT LIABLE FOR EXCISE DUTY AS NO MANUFACTURING ACTIVITY WAS UNDERTAKING; ( III ) THE PRODUCTION OF DATA WITH THE HELP OF COMPUTER CANNOT BE HELD AS PRODUCTION OF ARTICLE OR THING. 7 . AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHERE THE LD. CIT(A) CONFIRMED THE ORDER OF AO BY FOLLOWING OBSERVATIONS: - APART FROM THE ABOVE, APPELLANT PURCHASE MOST OF THE MACHINES DURING THE YEAR WHICH WERE PREVIOUSLY USED AND THEREFORE ADDITIONAL DEPRECATION FOR SECOND HAND MACHINES ARE ALSO NOT AVAILABLE AS PER SECTION. IN VIEW OF THIS ALSO, APPELLANT IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE CONFIRMED. 8 . AGGRIEVED, THE ASSESSEE IS BEFORE US. 9 . LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, CONTENDS THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 408/AHD/2011 FOR AY 2007 - 08, WHEREIN IT WAS HELD AS UNDER: - 10. SO FAR AS THESE GRIEVANCES OF THE ASSESSEE ARE CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICED THAT WHILE ASSESSEE HAS NOT PRODUCED ANY NEW SMC - ITA NO. 963/AHD/ 2013 DIAMOND DIGITAL SOLUTIONS PVT LTD VS. DCIT AY : 2008 - 09 3 ARTICLE OF THING, THE ASSESSEE I S NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION OF MACHINES USED FOR PRINTING. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS ONLY PRINTING ON AN EXISTING OBJECT, AND NO NEW PRODUCT COMES INTO EXISTENCE. IT WAS IN THIS BACKDROP AND RELYING ON JUDICI AL PRECEDENTS IN THE CASES OF CIT VS. R. SHROFF CONSULTANTS [(1999) 238 ITR 1018 (BOM)] AND CIT VS. B N B ENTERPRISES [(2000) 242 ITR 439 (MAD)] THAT THE ASSESSING OFFICER DECLINED ADDITIONAL DEPRECIATION CLAIM. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) REJECTED THIS CLAIM AND, WHILE DOING SO, OBSERVED AS FOLLOWS: 8.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER DISALLOWED ADDITIONA L DEPRECIATION ON THE MACHINES PURCHASED ON THE GROUND THAT APPELLANT IS NOT MANUFACTURING ARTICLES OR THINGS. ASSESSING OFFICER RELIED UPON SEVERAL DECISIONS AS PER WHICH PRINTING ACTIVITY ARE NOT CONSIDERED AS MANUFACTURING ARTICLES OR THINGS. CONSIDERIN G THESE DECISIONS I AGREE WITH THE ASSESSING OFFICER THAT APPELLANT IS NOT ELIGIBLE TO CLAIM ADDITIONAL DEPRECIATION ON MACHINERY PURCHASED DURING THE YEAR SINCE IT IS NOT MANUFACTURING ARTICLES OR THINGS. APPELLANT RELIED UPON SEVERAL DECISIONS IN WHICH P RINTING WAS TREATED AS PRODUCTION HOWEVER FOR THE PURPOSE OF THIS SECTION, THERE IS NO DECISION HOLDING THAT PRINTING ACTIVITY WHICH IS GENERALLY DONE AS JOB WORK WILL QUALIFY AS MANUFACTURING ARTICLES OR THINGS. IF AN ASSESSEE FULFILS ENTIRE ACTIVITY FROM SCRATCH AND SELL THE FINISHED PRODUCT IN THE MARKET, IN THAT SITUATION PRINTING MAY QUALIFY AS MANUFACTURING OF ARTICLE OR THING. OTHERWISE PRINTING ACTIVITY PER SE IS NOT MANUFACTURING SINCE NO NEW PRODUCT COMES INTO EXISTENCE. IN VIEW OF THIS APPELLANT IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. APART FROM THE ABOVE, APPELLANT PURCHASED MOST OF THE MACHINES DURING THE YEAR WHICH WERE PREVIOUSLY USED AND THEREFORE ADDITIONAL DEPRECIATION FOR SECOND HAND MACHINES ARE ALSO NOT AVAILABLE AS PER SECTION. I N VIEW OF THIS ALSO, APPELLANT IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. THE ADDITION MADE BY THE ASSESSING OFFICER IS THEREFORE CONFIRMED. 11. THE ASSESSEE IS AGGRIEVED OF THE STAND TAKEN BY THE CIT(A) AS WELL, AND IS IN FURTHER APPEAL BEFORE US. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 13. AS TO THE QUESTION AS TO WHETHER THE ASSESSEE CAN BE TREATED AS MANUFACTURER OR NOT, WE FIND THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SMC - ITA NO. 963/AHD/ 2013 DIAMOND DIGITAL SOLUTIONS PVT LTD VS. DCIT AY : 2008 - 09 4 CIT VS. AJAY PRINTERS PVT. LTD., 58 ITR 811 WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: - CONSIDERING THE CONSISTENT VIEW THAT HAS BEEN ADOPTED BY THE VARIOUS HIGH COURTS WHILE DEDUCING THE MEANING OF THE WORD MANUFACTURE OR MANUFACTURER AND THE OBJECT WITH WHICH EXPLAN ATION 2 HAS BEEN INSERTED IN SECTION 23A OF THE ACT, WE ARE OF THE VIEW THAT THE BUSINESS CARRIED ON BY THE RESPONDENT - COMPANY OF PRINTING BALANCE - SHEET, PROFIT AND LOSS ACCOUNTS, DIVIDEND WARRANTS, PAMPHLETS, SHARE CERTIFICATE, ETC., REQUIRED BY THE TEXTI LE MILLS REFERRED TO IN THE STATEMENT OF THE CASE AND OTHER TEXTILE MILLS WOULD BE A BUSINESS WHICH CONSISTS WHOLLY OF MANUFACTURE AND, THEREFORE, CLAUSE (II) OF EXPLANATION 2 TO SECTION 23A WOULD APPLY IN THE PRESENT CASE. THE CALCUTTA CASE IN SATI PRASAN NA V. MD. FAZAL HAD A DIFFERENT PROBLEM AND CANNOT APPLY. IN OUR VIEW THE CONSTRUCTION PLACED UPON CLAUSE(II) OF EXPLANATION 2 BY THE TRIBUNAL WAS CORRECT. 14. WHEN THIS WAS PUT TO THE LD. DEPARTMENTAL REPRESENTATIVE, HE DID NOT HAVE MUCH TO SAY EXCEPT PLACING HIS RELIANCE ON THE STAND OF THE AUTHORITIES BELOW. IN THIS VIEW OF THE MATTER, WE SEE NO MERITS IN LD. CIT(A)S OBJECTION TO THE EFFECT THAT THE ASSESSEE CANNOT BE GRANTED DEPRECATION BECAUSE IT CANNOT BE TREATED AS MANUFACTURER AND ONLY JOB WORK IS CLAIMED BY THE ASSESSEE. 15. COMING TO THE QUESTION AS TO WHETHER THE ASSESSEE HAD USED SECOND - HAND MACHINERY, WE FIND THAT THE OBSERVATION OF THE LD. CIT(A) ARE VAGUE INASMUCH AS HE STATED THAT MOST OF THE MACHINES ARE USED MACHINES. THIS KIND OF S WEEPING GENERALISATION IS NOT SUPPORTED FROM THE MATERIAL ON RECORD. QUITE TO THE CONTRARY, THE ASSESSEE HAS INVITED OUR ATTENTION TO THE CERTIFICATE GIVEN BY THE MANUFACTURER WHICH INTER ALIA STATES AS FOLLOWS: - TO WHOMSOEVER IT MAY CONCERN THIS IS TO CERTIFY THAT FOLLOWING TWO MACHINES WHICH WE HAVE SOLD TO DIAMOND DIGITAL SOLUTIONS PVT. LTD. ARE COMPLETELY NEW & UNUSED MACHINES. SR. NO. MACHIANE NAME BILL NO. AMOUNT DATE OF SALE 1. MACHINE VUTEK3360 - FC (DIGITAL PRINTING SYSTEM) T/001 1,56,00,000/ - 29/04/2006 2. MACHINE VUTEK PRESS UV 320/400 (SR NO:320035) 015 2,24,00,000/ - 19/05/2006 WHATEVER STATED ABOVE IS ABSOLUTELY TRUE AND CORRECT TO THE BEST OF OUR KNOWLEDGE SMC - ITA NO. 963/AHD/ 2013 DIAMOND DIGITAL SOLUTIONS PVT LTD VS. DCIT AY : 2008 - 09 5 16. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO CONTROVERT THE ABOVE CERTIFICATE FROM THE MANUFACTURER. AS A MATTER OF FACT, THIS STAND OF THE AUTHORITIES BELOW TO THE EFFECT THAT MACHINES ARE USED MACHINES IS NOT SUPPORTED BY ANY MATERIAL AND IS BASED ON SURMISES AND CONJECTURES. IN THIS VIEW OF THE MATTER, WE DO NOT SEE ANY LEGALLY SUSTAINABLE MERIT IN THE LD. CIT(A)S STAND OR TO DECLINE THE ADDITIONAL DEPRECIATION IN QUESTION. WE, THEREFORE, DELETE THE DISALLOWANCE. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. GROUND NO.2 IS THUS ALLOWED. 1 0 . LD. DEPARTMENTAL REPRESE NTATIVE IS HEARD. 1 1 . I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. SINCE THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE IN ITA NO.408/AHD/2011 FOR AY 2007 - 08 (SUPRA), WHICH COVERS THE ISSUE ABOUT THE ASSESSEES ACTIVITY BEING MANUFACTURING AND THE MACHINERY BEING NOT SECOND - HAND, THE CLAIM OF ADDITIONAL DEPRECIATION IS ALLOWED. 1 2 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 2 0 T H JUNE , 201 6 AT AHMEDABAD. SD/ - R.P. TOLANI ( JUDICIAL MEMBER ) AHMEDABAD; DATED 2 0 / 0 6 /201 6 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, T RUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD