DCIT,Circle-1, Kolkata, Kolkata V. M/s Amrit Bottlers Pvt. Ltd., Howrah

ITA 964/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75066 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 09-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: ASHIM CHOWDHURY
• Keywords: Depreciation; Difference of opinion; Change of opinion
• Section: 143(3); 148

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NOS. 963 & 964/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEARS: 2004-05 & 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. AMRIT BOTTLERS PVT. LTD. CIRCLE-1, KOLKATA. (PAN: AACCA4794J) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 13.02.2014 DATE OF PRONOUNCEMENT: 13.02.2014 FOR THE APPELLANT: SHRI P. K. CHAKRABORTY, JCIT, SR . DR FOR THE RESPONDENT: SHRI ASHIM CHOWDHURY, ADVOCA TE $0 / ORDER PER SHRI MAHAVIR SINGH, JM: BOTH THESE APPEALS BY REVENUE ARE ARISING OUT OF SE PARATE ORDERS OF CIT(A)-I, KOLKATA IN APPEAL NO.577/CIT(A)-1/C-1/09-10 AND APPEAL NO. 200 /CIT(A)-1/C-1/10-11 BOTH DATED 27.03.2012. SEPARATE ASSESSMENTS WERE FRAMED BY DC IT, CIRCLE-1, KOLKATA U/S. 147/251/143(3) OF THE INCOME-TAX ACT, 1961 (HEREINA FTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2004-05 VIDE HIS ORDER DATED 31.12 .2009 AND U/S. 143(4) OF THE ACT FOR AY 2008-09 VIDE ORDER DATED 29.12.2010. SINCE GROUNDS ARE COMMON AND FACTS ARE IDENTICAL IN BOTH THE APPEALS, WE DISPOSE OF THE SAME BY THIS CO NSOLIDATED ORDER BY TAKING THE FACTS AND GROUNDS IN ITA NO. 963/K/2012. 2. THE ONLY COMMON ISSUE IN THESE APPEALS OF REVENU E IS AGAINST THE ORDER OF CIT(A) IN ALLOWING DEPRECIATION ON PLASTIC SHELLS @ 50% INSTE AD OF 25% AS CALCULATED BY THE AO. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.15,73,135/-ON ACCOUNT O F DEPRECIATION ON PLASTIC SHELLS. 2. THAT ON THE FACTS AND IN THE CIREUMSTANCES OF TH E CASE LD CIT (A) HAS ERRED IN DIRECTING THE AO TO ALLOW DEPRECIATION ON PLASTIC S HELLS @ 50% INSTEAD OF 25% AS CALCULATED BY THE AO. 2 ITA NO.963 & 964/K/2012 AMRIT BOTTLERS (P) LTD. , AY:2004-05 & 2008-09 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND DISTRIBUTION OF SOFT DRINKS I.E. CO-CACOLA, THUMPS UP ETC. THES E PLASTIC CRATES AND PALLETS ARE USED IN THE COURSE OF MOVEMENT AND TRANSPORTATION OF SOFT DRINK S BOTTLES MADE OF GLASS/PLASTIC. THESE BOTTLES, PLASTIC CRATES AND PALLETS ARE, THEREFORE, TOOLS OF THE BUSINESS OF THE ASSESSEE AND, THEREFORE, ENTITLED TO DEPRECIATION. THE ASSESSEE COMPANY CLAIMED DEPRECIATION ON THESE PLASTIC CRATES/PALLETS @ 50% AND HAS ALSO ON EMPTY GLASS BO TTLES. ASSESSEE CLAIMED THE DEPRECIATION BEING QUALIFIED AS PLANT AND MACHINERY. THE AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS ALLOWED 50% ON GLASS BOTTLES AND 25% ON PLASTIC SHE LLS BY OBSERVING AS UNDER: AS PER IT RULE CONTAINERS MADE OF GLASS OR PLASTIC USED AS RE-FILLS BEING PLANT ARE ELIGIBLE FOR DEPRECIATION @ 50% FOR THE ASSESSMENT YEAR 2003-04. LN THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE CARRIED ON THE BUSINESS OF MANUFACTURNG SOFT DRINKS AND IN THAT PROCESS, THE BOTTLING WAS REQUIRED TO BE DONE, THE GLASS BOTTLES WERE CONTAINERS FOR STORING LIQUID. THEY ARE ARTICLES NECESSARY FOR THE PURPOSE OF BENG USED AS CONTAINERS FOR LIQUIDS AND THE OWNERSHIP OVER THE BOTTLES WAS RETA INED AND THEY WERE USED ONLY FOR DELVERING THEIR CONTAINS TO BE TAKEN BACK FOR REPE ATED USE IN THE ASSESSEES BUSINESS. WHEN THE SOFT DNNKS WERE SUPPLIED TO THE PURCHASERS WHO WERE REQURED TO RETURN THEM TO THE ASSESSEE AND THE ASSESSEE AGAIN RE-USED FOR BOT TLING SOFT DRINKS. OBVIOUSLY THE BOTTLES WERE USED AS TOOLS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE WHO CONTINUED THE OWNER OF SUCH BOTTLES EVEN AFTER THE SUPPLY OF THE GOODS TO THE PURCHASER. WITHOUT THE USE OF THE BOTTLES, T WOULD BE VIRTUALLY IMPOSSIBLE TO CARRY ON THE BUSINESS OF RNANUFACTURING SOFT DRINKS BECAUSE BOTTLING SOFT DRINKS WAS AN ESS ENTIAL PART OF THE PROCESS HAVING REGARD TO THE NATURE OF THE BUSINESS. ACCORDINGLY, DEPRECI ATION @ 50% IS ALLOWE ON GLASS BOTTLES USED FOR FILLING AND REFILLING. 1T IS A FACT THAT THE WORD RE-FILLIN IS NOT DEFNE D IN THE ACT/RULE. LT S TO BE UNDERSTOOD WITHN ITS LITERAL MEANING AND COMMON UNDERSTANDING . A CONTAINER MAY CONTAN SOLID, LQUID EVEN GAS. WHEN SOMETHING IS PUT INSIDE A CON TAINER, IT IS SAID TO HAVE BEEN FILLED UP WITH THAT SUBSTANCE. THE NATURE AND STATE OF THE SU BSTANCE BY WHCH A CONTAINER S FILLED UP WOULD NOT BE A DECISIVE FACTOR TO DETERMINE AND ASCERTAN THE USE OF A CONTAINER FOR THE PURPOSE OF FILLING AND OR REFILLING. THE TEST O F FUNCTIONAL INTEGRALITY WOULD DETERMINE WHETHER ASSETS WOULD BE TREATED AS CONTAINERS FOR R EFILLNG TO QUALIFY FOR 50% DEPRECIATON. THE SHELLS WERE NOT USED FOR REFILLIN G OF LIQUID SOFT DRINKS AS THESE WERE SIMPLY USED FOR KEOPNG THE SOFT DRINK BOTTLES FOR HANDLING AND TRANSPORTATION. THESE REMAINED OPEN ALL ALONG AFTER KEEPING THE BOTTLES I NSIDE BUT SOFT DRINK BOTTLES ARE CLOSED BY METAT LIDS AND CORKS AFTER FILLING / RE-FILLING. PLASTIC SHELLS WERE USED BY THE ASSESSEE AS TOOLS FOR HANDLING AND CARRYING FILLED UP GTASS BOT TTES AND ALSO TO MINMIZE BREAKAGE. TT CAN NOT BE CATEGORIZED AS CONTAINERS FOR RE-FIILING AND ARE NOT FATLING UNDER THE SAID CATEGORY TO BE ELIGIBLE FOR DEPRECIATION @ 50%. ACC ORDINGLY, IT IS HELD THAT THIS ASSET IS FALLING THE GENERAT CATEGORY OF PLANT & MACHNERY T O BE QUALFIED FOR DEPRECIATION @ 25%. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: AFTER CAREFUL CONSIDERATION OF THE ASSESSMENT ORDE R AND THE WRITTEN SUBMSSION IT IS NOTICED THAT ASSESSEE IS ENGAGED N MANUFACTURING O F DIFFERENT SOFT DRINKS ASSESSING OFFICER THE DSALLOWED THE CLAIM OF 50% DEPRECIATIO N ON PLASTIC SHELLS AND ONLY ALLOWED 3 ITA NO.963 & 964/K/2012 AMRIT BOTTLERS (P) LTD. , AY:2004-05 & 2008-09 THE NORMAL DEPRECIATION @ 25% ON THESE PLASTIC SHEL LS. THESES SHELLS WERE USED FOR IN HOUSE HANDLING AND CARRYING THE GLASS BOTTLES FOR D ISTRIBUTION. THE GLASS BOTTLES ARE PLACED INSIDE THESE PLASTIC SHELIS FOR THE PURPOSE OF DISTRIBUTION. THE ASSESSING OFFICER ALLOWED THE CLAIM OF EMPTY GLASS BOTTLES @ 50%. AS PER OLD APPENDIX (I) TO THE IT RULES L 962 CLAUSE (4) UNDER THE HEAD OF PLANT AND MACHIN ERY WHICH COVERS CONTAINERS MADE OF GLASS OR PLASTIC USED AS REFILLS WHICH IS ENTITLED TO DEPRECIATION @50%. THEREFORE, ASSESSEE IS ENTITLED TO DEPRECATION @50% ON PIASTI C SHELLS SINCE THESE WERE USED AS REFILLS OF GLASS BOTTLES BY THE ASSESSEE. THEREFORE , GROUND NO. 2 IS ALLOWED. IN THIS CASE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 28. L.2006 ALLOWING THE DEPRECATION OF PLASTIC CRATES @ 50% AND SUBSEQUENTLY THE CASE WAS REOPENED BY ISSUING A NOTICE U/S. 148 ON 26.03.2009. IT IS CONTENDED BY A/R THAT THE CASE WAS REOPENED MERELY ON THE BASIS OF CHANGE OF OPINION SINCE ASSESSEE HAD DISCL OSED ALL PRIMARY FACTS BEFORE THE ASSESSING OFFICER IN THE PROCEEDINGS U/S. 143(3). KEEPING IN THE VIEW THESE FACTS AND CIRCUMSTANCES THE ASSESSEE IS ENTITLED TO RELIEF ON GROUND NO.1 ALSO. AGGRIEVED, REVENUE IS NOW IN APPEALS BEFORE US. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SHRI ASH IM CHOWDHURY, ADVOCATE ARGUED THAT THE AO HAS REDUCED THE CLAIM OF DEPRECIATION FROM 5 0% TO 25% AS APPLICABLE TO NORMAL PLANT AND MACHINERY SIMPLY BY HOLDING THAT THE PLASTIC CR ATES AND PALLETS DID NOT FALL UNDER THE CATEGORY OF CONTAINERS MADE OF GLASS OR PLASTIC USE D AS REFILLS. THE LD. COUNSEL DREW OUR ATTENTION TO NEW APPENDIX 1 OF I. T. RULES, 1962, I TEM NO.3 OF MACHINERY AND PLANT UNDER CLAUSE 4, WHEREIN THE RATE OF DEPRECIATION FOR ALLO WANCE FOR CONTAINERS MADE OF PLASTIC OR GLASS USES AS REFILLS IS AT 50%. LD. COUNSEL FURTHER STA TED THAT THESE CONTAINERS ARE MADE OF GLASS OR PLASTIC AND ARE ALSO USED AS REFILLS. IN ASSESSEE S CONTEXT THE PLASTIC CRATES ARE CAGE TYPE CONTAINERS WHICH ARE FILLED WITH SOFT DRINKS BOTTLE S AND THESE CRATES ARE RETURNED BACK TO THE COMPANY WITH EMPTY BOTTLES AND THE SAME ARE AGAIN U SED FOR THE NEXT PHASE BEING FILLED UP WITH READY BOTTLES AND PROCESS GOES ON LIKE WISE. WE HA VE GONE THROUGH THE OLD APPENDIX APPLICABLE FOR AY 2003-04 TO 2005-06 (AS PROVIDED U NDER RULE 5 OF I. T. RULES, 1962) TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE AND IN PA RT A UNDER THE HEADING III MACHINERY AND PLANT CLAUSE (4) CLEARLY STATES THE RATE AT WHICH DEPRECIATION IS ADMISSIBLE AND THE RELEVANT PORTION READS AS UNDER: (4) CONTAINERS MADE OF GLASS OR PLASTIC USED AS R EFILLS 50% FROM THE ABOVE TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE IS CLEAR THAT THE CONTAINERS MADE OF GLASS/PLASTIC USED AS REFILLS ARE ELIGIBLE FOR DEPRECIATION @ 50% AND NOT 25%. THE PROVISION UNDER THE INCOME-TAX RULES IS VERY CLEAR AND THERE IS NO AMBIGUITY WHATSOEVER. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A ) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE AND WE CONFIRM THE SAME. THIS COMMON GROUND OF BOT H THE APPEALS OF REVENUE IS DISMISSED. 4 ITA NO.963 & 964/K/2012 AMRIT BOTTLERS (P) LTD. , AY:2004-05 & 2008-09 5. GROUND NO.3 IN APPEAL FOR AY 2004-05 IS AGAINST THE ORDER OF CIT(A) IN HOLDING THAT AO CANNOT REOPEN THE CASE AND MAKE THE ORDER U/S. 1 47/251/143(3)/115JB OF THE ACT WHEN ASSESSEE HAD DISCLOSED ALL PRIMARY FACTS BEFORE THE AO IN ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3: 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) HAS ERRED IN HOLDING HIS DECISION THAT THE AO CANNOT REOPEN THE CASE AND MAKE THE ORDER U/S. 147/251/143(3)/115JB OF THE ACT WHEN THE ASSESSEE H AD DISCLOSED ALL PRIMARY FACTS BEFORE THE AO IN THE ORIGINAL ASSESSMENT U/S. 143(3 ) OF THE ACT. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. ON THE ISSUE OF REOPENING, WE ARE OF THE VIEW THAT EVEN ON MERITS THE ASSESSEE HAS A VERY CLEAR CASE ON THE FACTS AS WELL AS THE PROVISIONS OF I. T . RULE 5 AND HENCE, THE REOPENING IS ALSO BAD BECAUSE ALL THE MATERIAL FACTS WERE AVAILABLE BEFOR E THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND ASSESSMENT WAS FRAMED U/ S. 143(3) OF THE ACT. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 7. GROUND NO.3 IN APPEAL FOR AY 2008-09 IS AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.7,15,356/- ON ACCOUNT OF EXCISE DUTY ON CLOSING STOCK OF INVENTORY. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3: 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.7,15,356/- ON ACCOUNT OF EXCISE DUTY ON CLOSING STOCK OF INVENTORY. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE COMPANY HAS VALUED ITS ST OCK OF FINISHED GOODS AT TARIFF VALUE EXCLUDING EXCISE DUTY. THE ASSESSEE IS FOLLOWING T HIS SYSTEM OF ACCOUNTING YEAR AFTER YEAR. THE ELEMENT OF EXCISE DUTY IS EXCLUDED FROM THE VAL UE OF CLOSING STOCK FOR THE REASON THAT LIABILITY OF EXCISE DUTY DOES NOT GET MATURED/LEVIE D UNTIL THE GOODS ARE REMOVED FROM FACTORY PREMISES AND AS PER ACCEPTED ACCOUNTING PRINCIPLES NO PROVISION FOR SUCH IMMATURE LIABILITY IS REQUIRED TO BE MADE. THIS ISSUE IS FULLY COVERED B Y THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ACIT VS. NARMADA CHEMATUR PETROCHEMI CALS LTD. (2010) 194 TAXMAN 103 (GUJ), WHEREIN HONBLE HIGH COURT HELD AS UNDER: UNDER EXCISE LAW, AN ASSESSEE INCURS LIABILITY TO PAY EXCISE DUTY ONLY UPON BOTH EVENTS TAKING PLACE, NAMELY, MANUFACTURE OF EXCISABLE GOOD S AND REMOVAL OF EXCISABLE GOODS AND FOR THE PURPOSE OF INCOME TAX ACT, POSITION IN LAW IS NOT DIFFERENT. 5 ITA NO.963 & 964/K/2012 AMRIT BOTTLERS (P) LTD. , AY:2004-05 & 2008-09 WE FIND THAT CIT(A) ALSO RELYING ON THE DECISION OF NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERV ING AS UNDER: AFTER CAREFUL CONSIDERATION OF THE ASSESSMENT ORDE R AND THE WRITTEN SUBMISSION IT IS NOTICED THAT ASSESSEE IS ENGAGED IN MANUFACTURING O F DIFFERENT SOFT DRINKS ASSESSING OFFICER DISALLOWED RS.7,15,356/- ON ACCOUNT OF EXCISE DUTY IN THE VALUATION OF CLOSING STOCK @ 16% U/S. 145A OF THE I. T. ACT. THE A/R RELIED UPO N THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF ACIT VS. NCP LTD. REPORTED IN 194 TA XMAN (103 WHERE THE HONBLE COURT HELD THAT EXCISE DUTY ON GOODS IS LEVIABLE ON REMOV AL OF EXCISABLE GOODS AND NO ACTUAL DUTY WAS PAID BY THE ASSESSEE AND ACCORDINGLY SEC. 145A IS NOT APPLICABLE. THEREFORE, GROUND NO1 IS ALLOWED. IN VIEW OF THE ABOVE POSITION, WE UPHOLD THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. 10. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-1, KOLKATA. 2 ./,- / RESPONDENT M/S. AMRIT BOTTLERS (P) LTD., P-18, DOBSON LANE, 7 TH FLOOR, HOWRAH-711101. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .