ACIT, Alwar v. M/S GILLETE INDIA LTD., Alwar

ITA 1037/JPR/2011 | 2002-2003
Pronouncement Date: 28-11-2014 | Result: Dismissed

Appeal Details

RSA Number 103723114 RSA 2011
Assessee PAN AAACI3924J
Bench Jaipur
Appeal Number ITA 1037/JPR/2011
Duration Of Justice 2 year(s) 11 month(s) 28 day(s)
Appellant ACIT, Alwar
Respondent M/S GILLETE INDIA LTD., Alwar
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-11-2014
Assessment Year 2002-2003
Appeal Filed On 30-11-2011
Judgment Text
IN THE INCOME TAX APPELALTE TRIBUNAL: JAIPUR BENCH JAIPUR BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI B. C. MEENA ACCOUNTANT MEMBER. ITA.NO. 1037/JP/2011 (ASSESSMENT YEAR: 2002-03) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2 ALWAR APPELLANT VS. M/S. GILLETTE INDIA LTD. 65-A INDUSTRIAL AREA BHIWADI DISTT-ALWAR RESPONDENT & C.O. NO.2/JP/2012 (ASSESSMENT YEAR:2002-03) M/S. GILLETTE INDIA LTD. 65-A INDUSTRIAL AREA BHIWADI DISTT-ALWAR APPELLANT VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2 ALWAR RESPONDENT I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 2 PAN: AAACI3924J / BY REVENUE :KALIKA SINGH D.R. / BY ASSESSEE : SHRI P. C. PARWAL A.R. /DATE OF HEARING :27.11.2014 /DATE OF PRONOUNCEMENT : 28 .11.2014 ORDER PER SHAILENDRA KUMAR YADAV J.M: BOTH THESE APPEAL AND CROSS OBJECTION ARE ARISING O UT FROM THE ORDER OF COMMISSIONER OF INCOME TAX (APPEA LS) ALWAR DATED 16.09.2011 FOR A.Y. 2002-03. SO THEY ARE BEING DISPOSED OF BY WAY OF COMMON ORDER FOR SAKE OF CONV ENIENCE. 2. IN ITA NO. 1037/JP/2011 REVENUE HAS FILED APPEA L ON THE FOLLOWING GROUNDS: 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AS WELL ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.1 78 50 935/- MADE ON A/C OF WRONG CLAIM OF DEPRECIATION. 2. THAT THE LD.CIT(A) HAS ERRED IN LAW AS WELL ON T HE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.16 49 45 140/- MADE ON A/C OF THE CLAIM OF INVENTORIES WRITTEN OFF. I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 3 2.1 IN CROSS OBJECTION NO. 2/JP/2012 ASSESSEE HAS FILED APPEAL ON THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF ORDER PASSED U/S148. 3. FIRST ISSUE IN REVENUES APPEAL IS WITH REGARDS TO ADDITION OF RS.1 78 50 935/- MADE ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION. ASSESSING OFFICER MADE DISALLOWANCE CLAIM OF DEPRECIATION OF RS.1 78 50 935/-IN RESPECT OF FIXED ASSETS PERTAINING TO DURACELL INDIA LTD. WHICH AMALGAMATED WITH ASSESSEE IN EARLIER YEARS. ASSESSING OFFICER OBSER VED THAT AUDITOR HAD CLARIFIED THAT ASSESSEE HAS DISCONTINUE D THE MANUFACTURING OPERATION AT DURACELL BATTERIES PLANT AS PER SECTION 72A UNABSORBED DEPRECIATION AND BUSINESS LO SSES OF DURACELL INDIA LTD. HAS BEEN REVERSED. IN SUBSEQUE NT YEAR I.E. A.Y. 2003-04 IT WAS FOUND THAT ASSETS PERTAINING T O THE ERSTWHILE DURACELL INDIA LTD. WERE ACTUALLY NOT PUT TO USE AS ASSESSEE HAD STOPPED USING SAME AND ASSETS WERE ULT IMATELY DISPOSED OFF IN TWO PARTS. THE FINDINGS OF ASSESSI NG OFFICER IN THIS REGARD HAVE BEEN CONFIRMED BY CIT(A) VIDE APPE LLATE ORDER DATED 28.11.2006. IN VIEW OF THESE FACTS ASSESSIN G OFFICER DISALLOWED DEPRECIATION ON THESE ASSETS FOR 9 MONTH S AMOUNTING TO RS.1 78 50 935/-. 3.1 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY WHEREIN FOLLOWING DECISION OF ITAT JAIPUR IN ASSES SEES OWN CASE FOR A.Y. 03-04 HAS BEEN DECIDED THE ISSUE IN FAVOUR OF I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 4 ASSESSEE. SAME HAS BEEN OPPOSED BEFORE US ON BEHAL F OF REVENUE. LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER WHILE LD. AUTHORIZED REP RESENTATIVE SUPPORTED THE ORDER OF CIT(A). 3.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD WE FIND THAT IN A.Y. 2003-04 ITAT HAS DECI DED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: AFTER CONSIDERING THE RELEVANT MATERIAL ALONG WITH WRITTEN SUBMISSION AND VARIOUS CASE LAWS WE FIND T HAT THE ASSESSEE DESERVES TO SUCCEED. IT IS A FACT ON RECO RD THAT M/S. DURACELL BATTERIES INDIA LTD. AMALGAMATED WITH THE ASSESSEE COMPANY IN AY 2000-01. ON AMALGAMATION IT S PLANT & MACHINERY WAS INCLUDED IN THE BLOCK OF THE PLANT & MACHINERY OF THE ASSESSEE COMPANY. THIS BLOCK WAS USED FOR THE PURPOSE OF BUSINESS IN AY 2000-01 & 2001-02 . IN AY 2002-03 THE ASSESSEE DID NOT FUL FILL THE CONDIT ION LAID DOWN U/S 72A AND THEREFORE THE UNABSORBED LOSSES AN D DEPRECIATION OF THE AMALGAMATING COMPANY M/S. DURAC ELL BATTERIES INDIA LTD. WHICH WAS SET OFF IN AY 2000-0 1 AND 2001-02 WAS WITHDRAWN AND OFFERED IN INCOME IN AY 2 002- 03. HOWEVER THE FACT REMAIN IS THAT PLANT & MACHIN ERY OF DURACELL BATTERY INDIA LTD. MERGED IN THE BLOCK OF ASSETS OF THE ASSESSEE COMPANY ON ITS AMALGAMATION AND ON SUC H BLOCK DEPRECIATION FOR AY 2000-01 AND 2001-02 WAS ALLOWED. UNDER THE BLOCK CONCEPT OF DEPRECIATION O NCE AN ASSET HAS FORMED PART OF THE BLOCK IT CANNOT BE RED UCED EXCEPT BY MONIES PAYABLE IN RESPECT OF ANY ASSETS F ALLING IN THAT BLOCK WHICH IS SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED AS PER SECTION 43(6) OF THE INCOME TAX AC T. THE MONEY BECOMES PAYABLE IN AY 2004-05 WHEN SUCH PLANT & MACHINERY WERE SOLD FOR RS.29 98 65 810/- IN AY 200 4-05 AND RS.1 26 23 967/- IN AY 2005-06 WHEN SUCH AMOUNT WAS REDUCED FROM THE BLOCK OF PLANT & MACHINERY. T HE EXAMPLES GIVEN BY LD. AR IN HIS WRITTEN NOTE AMPLY ILLUSTRATE THE MECHANISM OF ALLOWANCE OF DEPRECIATI ON U/S 32 AFTER THE BLOCK CONCEPT OF ASSET. THEREFORE TH E NATIONAL I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 5 DISALLOWANCE OF DEPRECIATION IN RESPECT OF PLANT & MACHINERY OF DURACELL BATTERIES WHICH FORMED PART OF THE BLOC K OF ASSETS OF THE ASSESSEE IS NOT PERMITTED IN LAW. IN VIEW OF THIS ORDER OF ITAT CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF DEPRECIATION OF RS.1 78 50 935/-. NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLEDGE IN THIS REGARD. FACTS BEING SIMILAR SO F OLLOWING THE SAME REASONING WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHICH IS BASED ON THE DECISION OF ITAT J AIPUR IN ASSESSEES OWN CASE FOR A.Y. 2003-04. SAME IS UPHE LD. 4. NEXT ISSUE IS WITH REGARDS TO ADDITION OF RS.16 49 45 140/- MADE ON ACCOUNT OF CLAIM OF INVEN TORIES WRITTEN OFF. ASSESSING OFFICER OBSERVED THAT ASSES SEE HAS CLAIMED INVENTORIES WRITTEN OFF AT RS.16 49 45 140/ -. THE INVENTORY INCLUDES FINISHED GOODS RAW MATERIAL OF MATELLIC NATURE WHICH ARE SALEABLE IN OPEN MARKET AT CERTAIN VALUE. THE FACTS IN THIS REGARD CAME TO THE LIGHT DURING ASSES SMENT PROCEEDINGS IN THE SUBSEQUENT YEAR I.E. A.Y. 2003-0 4 AND AN ADDITION TO EXTENT OF RS.12 58 26 957/- WAS MADE WH ICH WAS CONFIRMED BY CIT(A). ASSESSING OFFICER FURTHER OBS ERVED THAT THERE WAS NO PROVISION IN INCOME TAX ACT 1961 UNDE R WHICH WRITTEN OFF INVENTORIES IS PERMISSIBLE. ASSESSEE C OULD NOT PROVE THAT WHICH PARTICULAR ITEMS HAVE BEEN DESTROYED. A SSESSEE ONLY PRODUCED SOME PHOTOGRAPHS AND A CD FOR FEW ITE MS IS BEING DESTROYED FREQUENTLY WHICH ALSO NOT RELATED TO A.Y. 2002- 03. THEREFORE CLAIM OF WRITTEN OFF INVENTORY ITEM IS DISALLOWED. I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 6 4.1 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY WHEREIN REMAND REPORT WAS CALLED AND ORDER OF ITAT JAIPUR IN ASSESSEES OWN CASE FOR A.Y. 2003-04 WAS PERUSED. DURING COURSE OF ASSESSMENT PROCEEDING ASSESSEE FILED DET AILS OF INVENTORIES WRITTEN OFF AND INVENTORY REPORT AS NO SALEABLE VALUE AS THEY WERE NOT SOLD BUT DESTROYED COMPLETEL Y. TRIBUNAL HAS REVERSED THE FINDING OF CIT(A) BY DETAILED REAS ONING AS UNDER: AS REGARD TO THE DISALLOWANCE OF RS.8 37 10 704/- IN RESPECT OF DAMAGED GOODS RETAIL AND RS.3 64 71 703/ - IN RESPECT OF PROVISION FOR OBSOLESCENCE MADE BY THE A O FOR WANT OF ITEM-WISE DETAIL AND THE PROCEDURE THEREOF THE LD. CIT(A) AFTER CONSIDERING THE ITEM WISE DETAIL AND C ONSIDERING THE PROCEDURE THEREOF ADOPTED FOR DISPOSAL AND DEST RUCTION OF SUCH STOCK COPY OF WHICH IS PLACED IN THE PAPER BOOK HAS RIGHTLY DELETED THE DISALLOWANCE OF RS.8 37 10 704/ - BUT AT THE SAME TIME HE DID NOT ALLOW THE CLAIM OF RS.3 64 71 703/- ON THE GROUND THAT IT IS ONLY A PR OVISION AND NOT ACTUALLY DESTROYED. WE FIND THAT IN RESPEC T OF BOTH THESE AMOUNTS ITEM WISE DETAIL IS FILED. THE PROCE DURE ADOPTED AND THE RECOMMENDATION OF APPROPRIATE AUTHO RITIES IS PLACED ON RECORD. THE DISALLOWANCE OF RS.3 64 7 1 703/- CONFIRMED BY THE LD. CIT(A) ONLY FOR THE REASON THA T THESE ITEMS ARE NOT ACTUALLY DESTROYED AND IS ONLY A PROV ISION CANNOT BE UPHELD FOR THE REASON THAT ITEM WISE DETA ILS OF THE SAME IS FILED THESE ARE IDENTIFIED ITEMS AND HAVE BEEN SUBSEQUENTLY DESTROYED AS PER THE REGULAR PROCEDURE FOLLOWED. THE WRIT OFF FOR OBSOLESCENCE OF SUCH ID ENTIFIED ITEMS IS ALLOWABLE DEDUCTION AS PER THE CASE LAWS R ELIED BY THE LD. A.R. IN FACT NO PROVISION IS CREATED IN BO OKS OF ACCOUNTS BUT ONLY THE NOMENCLATURE OF PROVISION FOR OBSOLESCENCE IS USED. IN THE BALANCE SHEET ALSO NO SUCH PROVISION IS APPEARING EITHER IN THE LIABILITIES SI DE OR AS REDUCTION FROM ASSET SIDE NOR THE LD. D.R. COULD PO INT OUT ANY SUCH PROVISION IN THE BALANCE SHEET. THEREFORE THE I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 7 DISALLOWANCE OF RS.3 64 71 703/- CONFIRMED BY THE L D. CIT(A) IS DELETED. 4.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE IN THIS REGARD. FACTS BEING SIMILAR SO FOLLOWING THE SAME REASONING WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS ALLOWED THE CLAIM OF INVENTORY WRIT TEN OFF AND RIGHTLY DELETED THE ADDITION MADE BY ASSESSING OFFI CER OF RS. 16 49 45 140/-. SAME IS UPHELD. 5. NOW WE TAKE CROSS OBJECTION NO. 2/JP/2012 FILED BY ASSESSEE. 5.1 CROSS OBJECTION FILED BY ASSESSEE WHEREIN HE H AS OPPOSED THE VALIDITY OF REOPENING. SINCE WE HAVE UPHELD T HE ORDER OF CIT(A) WHO HAS GRANTED RELIEF ON MERIT OF BOTH ACCO UNTS AND TECHNICAL ISSUE OF REOPENING GOES ACADEMIC. SO SA ME IS DISMISSED BEING ACADEMIC. HOWEVER ASSESSEE IS AT LIBERTY TO RAISE THE SAME IF NECESSITY ARISES FOR THE SAME. 6. AS A RESULT CROSS OBJECTION FILED BY ASSESSEE IS DISMISSED AS INDICATED ABOVE. I.T.A. NOS. 1037/JP/11 & C.O. NO. 2/JP/12 A.Y. 2002-03 (ACIT VS. M/S GILLETTE INDIA LTD.) PAGE 8 7. IN RESULT REVENUES APPEAL AND CROSS OBJECTION FILED BY ASSESSEE BOTH ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF NOVEMBER 2014. SD/- SD/- (B. C. MEENA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R TRUE COPY S.K.SINHA COPY FORWARDED TO: 1. THE APPELLANT- ACIT 2. THE RESPONDENT- M/S GILLETTE INDIA LTD. 3. THE CIT 4. CIT(APPEALS) 5. THE DR 6. GUARD FILE (ITA NO. 1037/JP/2011 & C.O. NO. 2/JP /2012) BY ORDER A.R. JAIPUR.