ACIT Cir.-1,, Aurangabad v. Siddheshwar SSK Ltd.,, Aurangabad

ITA 1297/PUN/2009 | 2005-2006
Pronouncement Date: 01-03-2011 | Result: Dismissed

Appeal Details

RSA Number 129724514 RSA 2009
Bench Pune
Appeal Number ITA 1297/PUN/2009
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant ACIT Cir.-1,, Aurangabad
Respondent Siddheshwar SSK Ltd.,, Aurangabad
Appeal Type Income Tax Appeal
Pronouncement Date 01-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 01-03-2011
Date Of Final Hearing 02-02-2011
Next Hearing Date 02-02-2011
Assessment Year 2005-2006
Appeal Filed On 12-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER. I.T.A. NO. 1297/PN/2009 ASS ESSMENT YEAR : 2005-06. ASSTT. COMMISSIONER OF INCOME-TAX S IDDHESHWAR SAHAKARI SAKHAR CIRCLE-1 AURANGABAD. VS. KARKHANA LTD. MANIKNAGAR TQ. SILOD. DIST. AURANGABAD. APPELLANT. RESPONDENT APPELLANT BY : SHRI ABHAY DAMLE. RESPONDENT BY : SHRI S.P. JOSHI. O R D E R PER D. KARUNAKARA RAO A.M. AT THE VERY OUTSET THE LEARNED COUNSEL FOR THE AS SESSEE SHRI S.P. JOSHI FILED A COPY OF THE ORDER OF THE HONBLE HIG H COURT OF BOMBAY IN THE CASE OF CIT VS. G.R. SHIPPING LTD. VIDE INCOME TAX APPEAL NO. 598 OF 2009 DATED 28 TH JULY 2009 AND MENTIONED THAT THE HONBLE COURT AP PROVED THE SETTLED ISSUE OF ALLOWING DEPRECIATION U/S 32 OF THE INCOME-TAX ACT IN RESPECT OF THE ASSETS FOUND PLACED IN THE BLOCK OF ASSETS BASING ON THE PRINCIPLES OF PASSIVE USE. IN THE PROCESS THE HON BLE HIGH COURT RELIED UPON THE JUDGMENT OF THE SAME COURT IN THE CASE OF WHIT TLE ANDERSON LTD. VS. CIT 79 ITR 613 AND CIT VS. G.N. AGRAWAL (INDIVIDUA L) 217 ITR 250. FURTHER THE COUNSEL READ OUT RELEVANT PORTION FROM THE ORDER OF THE ITA NO. 1297/PN/2009 SIDDESHWAR SAHKARI SAKHAR KARKHNA LTD. 2 CIT(APPEALS) AT PAGE 3/4 AND MENTIONED THAT THE O RDER OF THE CIT(APPEALS) DOES NOT CALL FOR ANY INTERFERENCE AS THE SAID DECISION OF THE CIT(APPEALS) WAS TAKEN BASED ON BOMBAY HIGH COURT J UDGMENT IN THE CASE OF MACHINERY MANUFACTURERS CORPORATION LTD. VS. CIT 31 ITR 203 AND MANY OTHERS. 2. ON THE OTHER HAND THE LEARNED DR FOR THE REVENU E RELIED ON THE ORDER OF THE AO AND ALSO ON THE ARGUMENTED GROUNDS RAIS ED IN THE APPEAL. 3. WE HEARD THE PARTIES AND PERUSED THE ORDER OF TH E CIT(APPEALS) AND THE AO. AS SEEN FROM THE GROUNDS IT IS EVIDENT THAT THE ASSESSEE HAD PIPELINES FOR SUPPLYING WATER. THE ASSESSEE ALSO HA D OTHER ANCILLARY ASSETS TO THE PLANT AND MACHINERY. THE ASSESSEE CLAIMED DEPRE CIATION ON THESE ASSETS AND THE PRINCIPLE OF PASSIVE USE OF THE ASSETS. WE HAVE ALSO PERUSED THE BINDING JURISDICTIONAL HIGH COURT JUDGMENT ON THE I SSUE OF ALLOWING DEPRECIATION ON CERTAIN ASSETS WHICH FORMED PART OF THE BLOCK ASSETS. THERE IS NO DISPUTE ON THE FACT THAT THE SAID ASSETS WERE US ED IN THE PAST. IT IS FOR VARIOUS REASONS THAT THE IMPUGNED ASSETS WERE NOT P UT TO USE IN THE YEAR UNDER CONSIDERATION. ON IDENTICAL FACTS MANY HIGH COURTS INCLUDING THAT OF THE JURISDICTIONAL HIGH COURT HAS HELD THAT THE ASS ESSEE IS ENTITLED TO DEPRECIATION ON THE PRINCIPLE OF PASSIVE USE OF ASS ETS. WE PERUSED THE RELEVANT PARTS OF THE IMPUGNED ORDER RELATING TO TH IS GROUND AND FOR THE SAKE OF COMPLETENESS THE SAID RELEVANT PART READS AS UN DER : GROUND NO.2 IS AGAINST AOS ACTION OF DISALLOWING AND ADDING BACK RS.15 31 794/- IN RESPECT OF DEPRECIATION CLAIMED O N WATER SUPPLY PIPELINE AND OTHER ANCILLARY ASSETS. THE RELEVANT P ORTION OF AOS ORDER IN THIS REGARD IS AS UNDER ITA NO. 1297/PN/2009 SIDDESHWAR SAHKARI SAKHAR KARKHNA LTD. 3 IT IS OBSERVED THAT THE ASSESSEE HAS NOT USED THE PLANT AND MACHINERY FOR THE PURPOSE OF BUSINESS DURING TH E YEAR UNDER CONSIDERATION. IT IS POINTED OUT TO THE A.R. OF THE ASSESSEE THAT THE CRUSHING SEASON FOR A.Y. 2005-06 HAS NOT B EEN OPERATED. THE PLANT AND MACHINERY HAS REMAINED IDLE . HOWEVER THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE SAME. IN RESPONSE IT IS ARGUED BY THE A.R. OF THE ASSESS EE THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON PLANT AND MACHINERY. THE SAID DEPRECIATION IS CLAIMED ON THE PIPE LINES AND OTHER ANCILLARY ASSETS TO THE PLANT AND MACHINE RY. THE SUBMISSION MADE Y THE ASSESSEE IS NOT ACCEPTABL E. IT IS SEEN THAT THE TOTAL DEPRECIATION CLAIMED BY THE ASSESSEE AS PER THE DEPRECIATION CHART ON PLANT AND MACHINERY INCLU DING PLANT AND MACHINERY FOR DISTILLERY UNIT IS RS.15 31 794/- . THE ASSESSEE HAS NOT MENTIONED THAT IF NO MANUFACTURING ACTIVITY HAS BEEN TAKEN DURING THE YEAR THEN WHY THE WATER USED. IT IS COMMON THING TO UNDERSTAND THAT IF THE MANUFACTURING ACTIV ITY HAS NOT BEEN TAKEN PLACE THE USE OF PIPE LINES FOR WATER S UPPLY AND ANCILLARY ASSETS TO THE PLANT AND MACHINERY WILL NE VER BE USED. HENCE THE DEPRECIATION OF RS.15 31 794/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2005-06. THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. A CT ARE INITIATED SEPARATELY WITH A SPECIFIC CHARGE THAT TH E ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) BY NOT OFFERING RS.15 31 794/- TO THE TAX FOR A.Y. 2005-06. DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS CONTENDED BY THE AR OF THE APPELLANT THAT THOUGH THE MANUFACTURI NG ACTIVITY WAS DISRUPTED THE WATER SUPPLY PIPELINE WAS USED BY TH E APPELLANT FACTORY FOR SUPPLYING WATER TO THE WORKERS WHO CONTINUED TO LIVE IN THE QUARTERS. ALTERNATIVELY IT WAS ALSO CLAIMED THAT FA CTORY WAS MAINTAINED IN READY TO USE STAGE AND PRINCIPLE OF PASSIVE USER OF ASSETS HAS BEEN WELL RECOGNIZED BY THE COURTS FOR THE PURPOSE OF AL LOWING DEPRECIATION. ITA NO. 1297/PN/2009 SIDDESHWAR SAHKARI SAKHAR KARKHNA LTD. 4 ON PERUSAL OF FACTS OF APPELLANTS CASE I FOUND FO RCE IN THE APPELLANTS SUBMISSION THAT ASSETS ARE ENTITLED FOR DEPRECIATION IN SPITE OF THE FACT THAT MANUFACTURING PROCESS WAS DISCONTI NUED DURING THE YEAR IN QUESTION. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MACHINERY MANUFACTURERS CORPORATION LIMITED VS. CIT (1957) 31 ITR 203 HAS HELD THAT THE EXPRESSION USE HAS TO BE G IVEN A WIDER MEANING. THE EXPRESSION INCLUDES PASSIVE AS WELL AS ACTIVE USER. THE SIMILAR VIEW WAS TAKEN BY THE HONBLE KERALA HI GH COURT IN THE CASE OF CIT VS. GEOTECH CONSTRUCTION CORPORATION ( 2000) 244 ITR 452 WHEREIN IT IS HELD THAT THE USE INCLUDES PASSI VE USER WHEN THE ASSET WAS KEPT READY FOR OPERATION. SIMILAR VIEW WA S ALSO TAKEN BY THE HONBLE PATNA HIGH COURT AND BOMBAY HIGH COURT IN T HE CASES OF CIT VS. DALMIYA CEMENT LIMITED (1945) 13 ITR 415 AN D CIT VS. VISHWANATH BAHSKAR SATHE (1937) 5 ITR 62 RESPECTIVE LY. IN VIEW OF THE ABOVE I DELETE THE ADDITION OF RS.1 5 31 794/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION CLAIMED O N WATER PIPELINE AND ANCILLARY ASSETS. 4. FROM THE ABOVE IT IS EVIDENT THAT THE CIT(APPEAL S) HAS FOLLOWED THE BOMBAY HIGH COURT JUDGMENT IN PRINCIPLE. IT IS ALSO A FACT THAT THE SAID PRINCIPLE IS AFFIRMED BY BOMBAY HIGH COURT IN THE C ASE OF G.N AGRAWAL (SUPRA) AND G.R. SHIPPING LTD. (SUPRA). CONSIDERING THE ABOVE SETTLEMENT OF THE ISSUE IN OUR OPINION THE IMPUGNED ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE. THEREFORE WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS). 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DAY OF MARCH 2011. SD/- SD/- (I.C. SUDHIR) ( D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED THE 1 ST MARCH 2011 WAKODE ITA NO. 1297/PN/2009 SIDDESHWAR SAHKARI SAKHAR KARKHNA LTD. 5 COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ACIT CIRCLE-1 AURANGABAD. 3. CIT-AURANGABAD. 4. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE