HIMSON TEXTILE ENGINEERING IND.LTD., Surat V. THE ACIT.,CIRCLE-1(1), Surat

MA 124/AHD/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6499 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 31-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: R N VEPARI
• Keywords: Depreciation
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 24/06/2011 DRAFTED ON: 2 4/06/2011 MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) ASSESSMENT YEAR : 2003-04 HIMSON TEXTILE ENGG.IND LTD. HIRAL COLONY ASHWANIKUMAR ROAD SURAT VS. THE ACIT CIRCLE-1(1) SURAT PAN/GIR NO. : AAACH 5825 K ( APPLICANT ) .. ( RESPONDENT ) APPLICANT BY : SHRI R.N. VEPARI RESPONDENT BY: SHRI B.L. YADAV, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THROUGH THIS MISCELLANEOUS APPLICATION FILED ON 3 1/05/2010, IT IS PLEADED THAT THE TRIBUNAL HAS ERRED IN RECORDING A FINDING THAT SINCE THE ASSESSEE HAS RECEIVED THE SUBSIDY IN THE CURRENT YE AR, THEREFORE, SQUARELY COVERED BY THE AMENDED PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE I.T.ACT, 1961. RELEVANT PORTION OF THE PETITIO N IS REPRODUCED BELOW. (1) THE ABOVE MISC. APPLICATION IS FILED IN RES PECT OF GROUND RELATING TO REDUCTION IN SUBSIDY OF ACTUAL COST. T HE DISPUTE WAS IN RESPECT OF AMOUNT OF RS.6,94,500/- BEING DEP RECIATION AT 25% ON SUBSIDY OF RS.27,78,000/-. MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) HIMSON TEXTILE ENGG.INDS.LTD. VS. ACIT ASST.YEAR - 2003-04 - 2 - (2) THE ASSESSING OFFICER HAD DISALLOWED DEPRECIATION O N THE GROUND THAT IN VIEW OF EXPLANATION 10 TO SECTION 43 (1) SUBSIDY RECEIVED WAS TO BE DEDUCTED FROM THE ACTUAL COST FO R THE PURPOSE OF DEPRECIATION. THE ASSESSEE HAD CONTENDE D THAT IN VIEW OF THE JUDGEMENT OF SUPREME COURT IN CASE OF P .J. CHEMICALS [210-ITR-830] NO AMOUNT WAS DEDUCTIBLE. AS PER THE FACTS ON RECORD FOLLOWING EMERGES:- SUBSIDY GRANTED TO PALOD MACHINES LTD. AS PER ELIGIBILITY CERTIFICATE BY THE 20.02.1991 JOINT COMMISSIONER OF INDUSTRIES ON THE BASIS OF COMMENCEMENT OF PRODUCTION ON 05.12.1990 ON THE MERGER OF PALOD MACHINES LTD. WITH THE ASSESSEE THE ASSESSEE APPROACHED THE INDUSTRIES COMMISSIONER THE SANCTIONED 10.08.1998 SUBSIDY MAY BE GRANTED TO IT EXPLANATION 10 OF SECTION 43(1) INSERTED W.E.F. 01.04.1999 SUBSIDY RECEIVED DURING THE YEAR ENDING 31.03.2003 (3) THE HON. TRIBUNAL ON PAGE 8 OF ITS ORDER DID NOT AP PLY THE JUDGEMENT OF SUPREME COURT IN CASE OF P.J. CHEMICAL S (210 ITR 830) ON THE ONLY GROUND THAT THE SUBSIDY WAS RE CEIVED IN THE CURRENT YEAR. SINCE THE SUBSIDY WAS SANCTIONED LONG BACK AND WAS NOT GRANTED TO MEET THE COST OF ASSETS DIRE CTLY OR INDIRECTLY BUT GRANTED OTHERWISE AS INCENTIVE TO ME ET THE DISADVANTAGE OF VENTURING INTO BACKWARD AREA, THE H ON. TRIBUNAL MADE A MISTAKE IN NOT GRANTED THE BENEFIT TO THE ASSESSEE. 2. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES IN THE LIGHT OF THE ORDERS REFERRED BEFORE US. WHILE DEALING WITH THI S ISSUE, THE RESPECTED CO-ORDINATE BENCH VIDE PARAGRAPH NO.10 HAS OBSERVED AS FOLLOWS:- MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) HIMSON TEXTILE ENGG.INDS.LTD. VS. ACIT ASST.YEAR - 2003-04 - 3 - 10. WE HAVE HEARD BOTH THE PARTIES, AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT WHIL E DEALING WITH ISSUE THE CIT(A) HAS GRANTED THE RELIEF OF RS.1,52, 700/- ON THE GROUND THAT THE ASSESSEE HAS GIVEN THE DEPRECIATIO N OF DIFFERENT ASSETS AS PER THE SUBMISSIONS OF THE ASSESSEE WHICH AS UNDER: ASSET RS.IN LAKHS 25% SUBSIDY RATE OF DEPRECIATION AMOUNT OF DEPRECIATION LAND 0.49 12,000 - - BUILDING 31.10 7,78,000 10% 77,800 P AND M 73.23 18,31,000 25% 4,57,750 ELECTRIFICATION PROJECT RELATED 0.99 25,000 25% 6,250 INFRASTRUCTURE 5.29 1,32,000 - - 111.10 27,78,000 5,41,800 THE CIT(A) HAS HELD THAT THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V/S. KCA LTD. IS NOT APPLICABLE TO ITS CASE BECAUSE IN THE CASE IF KCA LTD. THE ASSESSMENT YEAR INVOLVE D WAS 1980-81 AND HENCE THAT WAS COVERED BY THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF PJ CHEMICALS LTD. 210 ITR 830. HOWEVER, IN THE PRESENT CASE THE ASSESSEE HAS RECEI VED THE SUBSIDY IN THE CURRENT YEAR AND ITS CASE IS SQUARELY COVERE D BY THE AMENDED PROVISIONS OF EXPLANATION 10 OF SECTION 43( 1) WHICH HAVE BEEN INSERTED W.E.F. 1.4.1999. THE SUBSIDIARY HAS TO BE REDUCED FROM THE COST OF THE ASSETS. THE CIT(A) HAS CALCUL ATED THE DEDUCTION AS PER LIST GIVEN BY THE ASSESSEE AND HE HAS RECOMPUTED AS PER ABOVE MENTIONED TABLE. THEREFORE, OUR INTER FERENCE IS NOT REQUIRED. 3. IT IS WORTH TO COMMENT THAT THE ASSESSEE HAS REC EIVED SUBSIDY OF RS.27,28,000/-. THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) HIMSON TEXTILE ENGG.INDS.LTD. VS. ACIT ASST.YEAR - 2003-04 - 4 - EXPLANATION-10 TO SECTION 43(1) OF THE I.T.ACT AND HELD THAT SUBSIDY IS TO BE REDUCED FROM THE COST OF THE ASSET. ACCORDINGLY , THE EXCESSIVE DEPRECIATION WAS DISALLOWED. WHILE DEALING THIS IS SUE, THE TRIBUNAL HAS TAKEN THE DUE COGNIZANCE THAT EXPLANATION-10 WAS IN SERTED WITH EFFECT FROM 01/04/1999. IN THIS CONTEXT, IT WAS, THEREF ORE, HELD THAT AFTER THE SAID AMENDMENT SUBSIDY RECEIVED THEREAFTER WOULD NO T BE COVERED BY THE JUDGEMENT OF THE HON'BLE SUPREME COURT PRONOUNCED I N THE CASE OF P.J. CHEMICALS (210 ITR 830) [SUPREME COURT]. THE TRIB UNAL HAS ALSO RECORDED A FACTUAL FINDING THAT THE SUBSIDY WAS GRA NTED TO PALOD MACHINES LTD. AS PER THE ELIGIBILITY CERTIFICATE IS SUED BY THE JOINT COMMISSIONER OF INDUSTRIES DATED 20/02/1991 ON THE BASIS OF THE COMMENCEMENT OF PRODUCTION FROM 05/12/1990. IT HAS ALSO BEEN NOTED THAT THE ASSESSEE-COMPANY HAS TAKEN OVER THE SAID P ALOD MACHINES LTD. WHICH WAS DECLARED AS A SICK COMPANY BY BIFR. ON A CCOUNT OF THE SAID TAKE OVER, THE ASSESSEE HAS CLAIMED DEPRECIATION. THIS FACT HAS ALSO BEEN NOTED BY THE TRIBUNAL THAT ON ACQUISITION THE SAID SICK COMPANY THE ASSESSEE HAS APPROACHED THE INDUSTRIES COMMISSIONER VIDE A LETTER DATED 10/08/1998 AND ASKED TO GRANT THE SUBSIDY OF RS.30 LACS WHICH WAS SANCTIONED IN THE NAME OF THE ERSTWHILE PALOD MACHI NES LTD., ACQUIRED BY THE ASSESSEE-COMPANY. BASED UPON THE SAID PETITION , THE AMOUNT OF SUBSIDY WAS RECEIVED DURING THE ASSESSMENT YEAR 200 3-04, THE YEAR UNDER APPEAL. VIDE PARAGRAPH NO.8, THE TRIBUNAL HAS RECORDED THE ARGUMENT OF LEARNED AUTHORISED REPRESENTATIVE THAT SINCE THE SUBSIDY WAS GRANTED MUCH BEFORE THE INSERTION OF EXPLANATIO N-10 TO SECTION 43(1) OF THE I.T.ACT, THEREFORE THE IMPUGNED SUBSIDY AMOU NT WAS NOT REQUIRED TO BE REDUCED FROM THE COST OF THE FIXED ASSET. HO WEVER, THE TRIBUNAL MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) HIMSON TEXTILE ENGG.INDS.LTD. VS. ACIT ASST.YEAR - 2003-04 - 5 - WAS NOT CONVINCED AS IS APPARENT FROM THE RELEVANT PARAGRAPH REPRODUCED HEREINABOVE. 4. HAVING EXAMINED THE PROVISIONS OF THE I.T.ACT AS ALSO THE ORDER OF THE HON'BLE SUPREME COURT PRONOUNCED IN THE CASE OF P.J. CHEMICALS LTD. REPORTED AT 210 ITR 830, WE ARE OF THE VIEW TH AT CONSIDERING THE LANGUAGE OF EXPLANATION-10 TO SECTION 43(1), IT IS APPARENT THAT THE COST OF AN ASSET MUST BE DIRECTLY OR INDIRECTLY MET BY THE SUBSIDY AMOUNT. FOR READY REFERENCE, EXPLANATION 10 TO SECTION 43(1) OF THE I.T.ACT IS HEREINBELOW REPRODUCED: EXPLANATION 10 - WHERE A PORTION OF THE COST OF A N ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY E STABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON, IN THE FORM O F A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), S O MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR RE IMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE: 5. IN THE LIGHT OF THE DISCUSSION MADE HEREINABOVE , IT IS EVIDENT THAT THE ISSUE OF THE APPLICABILITY OF THE PROVISIONS OF SECTION 43(1) READ ALONGWITH THE EXPLANATION-10 ANNEXED THEREIN, IT WA S HELD THAT THE SUBSIDY SO RECEIVED BY THE ASSESSEE WAS TO BE REDUC ED FROM THE COST OF THE ASSET. THE TRIBUNAL HAS CONSIDERED BOTH THE AS PECTS WHICH PERTAINED TO THE APPROVAL OF THE SUBSIDY AS ALSO THE SANCTION ING OF THE GRANT. NO FACT WAS OVERLOOKED BY THE TRIBUNAL. THE TRIBUNAL WAS ALSO AWARE ABOUT THE FACT THAT THE ASSESSEE-COMPANY HAS TAKEN OVER T HE ASSET OF AN ANOTHER COMPANY. BASED UPON THOSE APPRECIATION OF FACTS AND THE LAW APPLICABLE, MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) HIMSON TEXTILE ENGG.INDS.LTD. VS. ACIT ASST.YEAR - 2003-04 - 6 - A CONSCIOUS VIEW WAS TAKEN NOT TO ALLOW THE CLAIM. AT THIS STAGE, IT IS NOT PROPER FOR US TO DEAL THAT ASPECT AFRESH ON WHICH A CONSCIOUS JUDICIAL DECISION HAS BEEN TAKEN. IF WE ACCEPT THE ARGUMENT S OF LEARNED AUTHORISED REPRESENTATIVE, THEN IT SHALL TANTAMOUNT TO REVIEW OF THE ORDER WHICH IS NOT PERMISSIBLE UNDER THE PROVISIONS OF SE CTION 254(2) OF THE I.T.ACT. IN VIEW OF THIS, MISCELLANEOUS APPLICATI ON IS HEREBY DISMISSED. 6. IN THE RESULT, MISCELLANEOUS APPLICATION IS DIS MISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 22 ND JULY, 2011. SD/- SD/- ( A.N.PAHUJA ) ( M UKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 22 ND JULY, 2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD MA NO.124/AHD/2010 (ARISING OUT OF ITA NO.2463/AHD/2006) HIMSON TEXTILE ENGG.INDS.LTD. VS. ACIT ASST.YEAR - 2003-04 - 7 - 1. DATE OF DICTATION..24.6.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 24.6.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR 5. PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S22.7.11 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.7.11 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER