EURO PRATIK ISPAT PVT. LTD., MUMBAI v. ACIT CIRCLE 8(1), MUMBAI

ITA 1682/MUM/2011 | 2006-2007
Pronouncement Date: 02-04-2014 | Result: Allowed

Appeal Details

RSA Number 168219914 RSA 2011
Assessee PAN AABCE3210A
Bench Mumbai
Appeal Number ITA 1682/MUM/2011
Duration Of Justice 3 year(s) 1 month(s) 1 day(s)
Appellant EURO PRATIK ISPAT PVT. LTD., MUMBAI
Respondent ACIT CIRCLE 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 02-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 02-04-2014
Date Of Final Hearing 25-03-2014
Next Hearing Date 25-03-2014
Assessment Year 2006-2007
Appeal Filed On 01-03-2011
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - H BENCH. . !'#$ '%&'( &' )* BEFORE S/SH.D.MANMOHAN VICE-PRESIDEN T & RAJENDRA ACCOUNTANT MEMBER /. ITA NO.1682/MUM/2011 ' ' ' ' + + + + / ASSESSMENT YEAR-2006-07 EURO PRATIK ISPAT PVT. LTD. B/101 UNIVERSAL PARADISE 1 ST FLOOR NANDA PATKAR ROAD VILE PARLE (E) MUMBAI-400057 ' V/S. ACIT CIRCL E 8(1) AAYAKAR BHAVAN 2 ND FLOOR M.K.ROAD MUMBAI-400020 PAN: AABCE3210A ( ' - / APPELLANT) ( ./ - / RESPONDENT) '01 '01 '01 '01 2 2 2 2 & && & / ASSESSEE BY : SHRI I.P.RATHI '%* 3 2 & / REVENUE BY : SHRI K.C.PATNAIK & P.K.SINGH ' ' ' ' 3 33 3 1' 1' 1' 1' / DATE OF HEARING : 25-03-2014 4+ ' 3 1' / DATE OF PRONOUNCEMENT : 02-04-2014 1961 3 33 3 '' '' '' '' 254 )1( & && & '151 '151 '151 '151 )&6 )&6 )&6 )&6 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA AM &' &' &' &' )* )* )* )* '%&'( '%&'( '%&'( '%&'( & && & ' ' ' ' : CHALLENGING THE ORDER DT.02.12.2010 OF THE CIT(A)-1 6 MUMBAI ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THAT THE EARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ADDITIONAL DEPRECIATION CLAIM OF RS 1 27 23 267/-. 2. YOUR APPELLANT CRAVES TO CONSIDER EACH OF THE AB OVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD TO ALTER TO AMEND O R TO FURNISH FRESH AND /OR DETAILED GROUNDS OF APPEAL ON OR BEFORE THE HEARING. DURING THE COURSE OF HEARING BEFORE US AUTHORISED R EPRESENTATIVE(AR)OF THE ASSESSEE FILED AN APPLICATION FOR ADMITTING ADDITIONAL EVIDENCES.IN T HE APPLICATION IT WAS MENTIONED THAT THE DOCUMENTS WERE NOT PART OF ASSESSMENT RECORDS OF TH E YEAR UNDER CONSIDERATION BUT WERE SUBMITT - ED DURING THE ASSESSMENT PROCEEDING OF THE PRECEDIN G YEAR THAT THE SAME RELATED TO THAT YEAR THAT THE ASSESSING OFFICER(AO)HAD ACCEPTED THE FIGURES A ND CONTENTS OF THE DOCUMENTS FOR ALLOWING DEPRECIATION FOR THE YEAR UNDER CONSIDERATION THAT THE DOCUMENTS WOULD HAVE BEARING ON THE GROUND UNDER APPEAL.DOCUMENT SUBMITTED BY THE ASSES SEE CONSISTED OF A).LEDGER ACCOUNT OF CAPITAL WORK IN PROGRESS FOR T HE YEAR ENDED ON 31-03 -2005 B).LEDGER ACCOUNT OF FABRICATION OF PLANT AND MACHI NERY FOR THE YEAR ENDED ON 31-03-2005 (AT YEAR END TRANSFERRED TO CAPITAL WORK IN PROGRESS -P LANT AND MACHINERY) C).LEDGER ACCOUNT OF ELECTRIC INSTALLATION FOR THE YEAR ENDED ON 31-03-2005. AFTER CONSIDERING THE CONTENTS OF THE APPLICATION O F THE ASSESSEE WE ARE OF THE OPINION THAT DOCUMENTS SUBMITTED BY IT SHOULD BE TAKEN ON RECORD AS SAME WERE AVAILABLE ON THE RECORD OF THE AO AND HE HAD CONSIDERED THE SAME WHILE PASSING THE ASSESSMENT ORDER FOR THE EARLIER YEAR. 2. ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF MANUFAC TURING OF SPONGE IRON FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING LOSS OF RS.2.44 CROR ES.ON 29.12.2008 ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ORDER U/S.143(3) OF THE AC T DETERMINING THE TOTAL INCOME AT RS.(-)1 16 92 881/-. 2.1. EFFECTIVE GROUND OF APPEAL PERTAINS TO DENIAL OF CL AIM MADE BY THE ASSESSEE UNDER THE HEAD ADDITIONAL DEPRECIATION (AD).DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD CLAIMED AD OF RS.1 27 23 266/-.VIDE ORDER SHEET NOT ING DATED 17.11.2008 THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY AD CLAIMED ON THE ASSET S ACQUIRED ON OR BEFORE 3L.03.2005 SHOULD NOT 2 ITA NO.1682/MUM/2011 EURO PRATIK ISPAT PVT. LTD. BE DISALLOWED.AFTER CONSIDERING THE REPLY OF THE AS SESSEE AO HELD THAT AS PER THE PROVISION 32(IIA)OF THE ACT DEDUCTION WOULD BE ALLOWED ONLY I F THE ASSESSEE HAD ACQUIRED/INSTALLED THE MACHINERY AFTER 31.03. 2005 THAT THE ASSESSEE HAD ACQUIRED THE NEW PLANT A ND MACHINERY WORTH RS.12 72 32 563/-ON OR BEFORE 31.03.2005 THAT THE B ALANCE SHEET OF THE ASSESSEE REVEALED THAT IT HAD SHOWN ASSETS ACQUIRED AS ON 31.3.2005 IN THE GR OSS BLOCK UNDER THE HEAD FIXED ASSETS THAT THE ASSESSEE HAD ACQUIRED THE PLANT AND MACHINERY I N THE FINANCIAL YEAR 2004-05 THAT SAME WERE NOT PUT TO USE FOR THE PURPOSE OF BUSINESS IN THAT FINANCIAL YEAR THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE AD FOR THE SAID AMOUNT. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT IT HAD CLAIMED AD OF RS.L 27 23 266 THAT THE REQUIREME NT OF SECTION 32(1)(IIA)WERE THE ACQUISITION OF NEW MACHINERY OR PLANT AND THE INSTALLATION OF SAME AFTER 31.03.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY AR TICLE OF THING THAT THE REQUIREMENTS OF THE PROVISION OF THE ACT WERE DISTINCT AND SEPARATE FRO M EACH OTHER BUT WERE CUMULATIVE IN NATURE THAT THE INTENTION OF THE LEGISLATURE WAS SIMPLE THAT AD WAS MADE AVAILABLE TO THOSE ASSESSEES WHO HAD ACQUIRED AND INSTALLED NEW MACHINERY AFTER 31/3 /2005 THAT THE ASSESSEE HAD ACQUIRED THE PLANT AND MACHINERY BY TRANSFERRING THE CAPITAL WORK IN P ROGRESS(WIP)AS ON1/4/2005(RS.9 55 68 648/- )TO PLANT & MACHINERY(P&M)ACCOUNT THAT THE OTHER P& M WAS ACQUIRED DURING THE PREVIOUS YEAR RELEVANT TO AY 2006-07 AMOUNTED TO RS.3 16 64 015/- THAT THE P&M WAS NEITHER ACQUIRED NOR INSTALLED AFTER 31/3/2005 THAT IT HAD RESORTED TO C LAIM AD U/S.32(1)(IIA) BY TRANSFERRING THE CAPITAL WORK IN PROGRESS TO THE BLOCK OF ASSETS THAT WHATEV ER HAD BEEN INVESTED BY THE ASSESSEE AFTER 31/3/2005 WERE THE ACCESSORIES WHICH WERE REQUIRED BY IT EITHER TO OPERATIONALISE THE P&M WHICH WAS ACQUIRED PRIOR TO 31/3/2005 OR TO KEEP ACCESSOR IES FOR FUTURE REPLACEMENT OF THE ITEMS AS AND WHEN REQUIRED THAT THE COMMERCIAL PRODUCTION STARTE D W.E.F. 1/1/2006 AND NOT EARLIER ALSO CLEARLY PROVED THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM AD U/S.32(1)(IIA) FOR THE SIMPLE REASON THAT IT WAS NOT ENGAGED IN THE MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING PRIOR TO THE ACQUISITION OF THIS PLANT AND MACHINERY AS REQUIRED BY THE PROV ISIONS OF SECTION. HE FURTHER HELD THAT THE TERM NEW USED IN THE SECTI ON MEANT RECENTLY COME INTO BEING/RECENTLY DISCOVERED THAT NEW ACQUISITION MEANT AN ESTATE NOT ORIGINATING FROM DISTANT PAST THAT P&M ACQU - IRED BEFORE 31.03.2005 WAS NOT NEW ASSETS AS REQUIR ED BY THE PROVISIONS OF SEC.32(1)(IIA)OF THE ACT THAT THE IMPORTANT INGREDIENT OF THE SECTION WA S THAT THE MACHINERY SHOULD HAVE BEEN INSTALL - ED THAT THE WORD INSTALLED HAD NOT BEEN DEFINED I N THE ACT.REFERRING TO THE MATTER OF MIR MOHD. MIR DELIVERED BY THE HONBLE APEX COURT HELD THAT T HE EXPRESSION INSTALLED DID NOT NECESSARY MEAN FIXED IN POSITION BUT ALSO USED IN THE SENSE O F INTENDED OR INTRODUCED THAT WORD INSTALLED MEANT TO PLACE AN OPERATORS IN SERVICE OR USE THAT P &M WAS INSTALLED AT THE PREMISES OF THE ASSESSEE PRIOR TO 31/3/2005 THAT IT TREATED P &M AS WIP AND SAME WAS READY TO BE EXPLOITED FOR THE PURPOSES OF COMMERCIAL PRODUCTION THAT THE ASSE SSEE HAD NOT ONLY PURCHASED THE MACHINERY BUT ALSO PLACED IT AT ITS BUSINESS PREMISES READY F OR SERVICE OR USE THAT THE MACHINERY WAS INSTALLED PRIOR TO 31/3/2005 THAT THE SECOND IMPORTANT INGRED IENT OF THE SECTION 32(1)(IIA) WAS THAT THE MACHINERY SHOULD HAVE BEEN ACQUIRED THAT THE WORD ACQUIRED HAD NOT BEEN DEFINED IN THE ACT THAT THE WORD ACQUIRED SIGNIFIED TRANSFER OF TI TLE AS A RESULT OF POSITIVE ACT DONE BY THE ACQUIR - ER AND WOULD NOT APPLY TO A CASE WHERE ON ACCOUNT O F DEATH THE RIGHT DEVOLVES UPON THE HEIR OF THE DECEASED THAT THE MACHINERY WAS ACQUIRED PRIOR TO 31/3/2005 THAT AFTER THAT ONLY AUXILIARY MACHINERY WAS ACQUIRED THAT WAS PURCHASED EITHER FO R THE PURPOSES OF OPERATIONALISATION OF MAIN MACHINERY OR FOR REPLACING THE PARTS IN FUTURE THAT THE PURCHASE AFTER 31/3/2005 DID NOT QUALIFY FOR CLAIMING THE RELIEF THAT THE ASSESSEE HAD TO COMPLY THE CUMULATIVE CONDITION THAT THE ASSET SHOULD BE ACQUIRED AND INSTALLED AFTER 31.3.2005 THAT THE CASES RELIED UPON BY THE ASSESSEE WERE DIFFERENT AND DISTINGUISHABLE AND HENCE NOT APPLICABLE.FINALL Y CONFIRMING THE ORDER OF THE AO HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 2.2. BEFORE US AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT P&M THEIR PARTS AMOUNTING TO RS.9 55 68 648 WERE ACQUIRED DURING THE PREVIOUS YEAR EN DED 31/3/ 2006 THAT THE CAPITAL WORK IN 3 ITA NO.1682/MUM/2011 EURO PRATIK ISPAT PVT. LTD. PROGRESS WAS IN ACCORDANCE WITH ACCOUNTING PRINCIPL ES THAT THE MACHINERY HAD NOT COMPLETED AND TAKEN ITS FINAL FORM THAT THE COMPLETION OF INSTALL ATION AND ERECTION OF P&M AS WELL AS THE COMM - ERCIAL PRODUCTION COMMENCED ON 1/1/2006 THAT THE CA PITAL WORK IN PROGRESS WAS TRANSFERRED TO P&M ACCOUNT IN THE YEAR UNDER APPEAL THAT THE P&M U NDER THE HEAD FIXED ASSET WERE ACQUIRED / INSTALLED AND ERECTED DURING THE PREVIOUS YEAR ENDE D ON 31/3/2006.HE REFERRED TO PAGES 1-13 71- 86 OF THE PAPER BOOK.DEPARTMENTAL REPRESENTATIVE (D R) SUBMITTED THAT P & M WORTH RS.9.55 CRORES WAS ACQUIRED PRIOR TO 01.04.2005 NOTHING WAS ACQUIRED OR INSTALLED AFTER THAT DATE THAT ASSESSEE HAD NOT FULFILLED BOTH THE CONDITIONS REQU IRED BY THE PROVISIONS OF THE ACT. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.EARLIER THE ADDITIONAL DEPRECIATION WAS ALLOWED IN THE CASE OF A NEW INDUS TRIAL UNDERTAKING DURING ANY PREVIOUS YEAR IN WHICH IT WOULD START MANUFACTURING OR PRODUCING ANY ARTICLE OR THING ON OR AFTER THE 01.04.2002 OR TO ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THAT DATE IF IT ACHIEVED SUBSTANTIAL EXPANSION DURING THE PREVIOUS YEAR BY WAY OF INCREASE IN ITS INSTALL ED CAPACITY BY NOT LESS THAN TEN PER CENT. HOWEVER IN ORDER TO ENCOURAGE INVESTMENT BY INSERTI NG A NEW SECTION AD WAS ALLOWED TO THE INDUSTRY ON THE CONDITION THAT THE ASSETS SHOULD HA VE BEEN ACQUIRED AND INSTALLED AFTER 31.3.2005. IN OUR OPINION PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT DO NOT REQUIRES THAT THE P&M HAS TO BE PUT INTO USE IN THE YEAR IN WHICH IT IS ACQUIRED FO R THE PURPOSE OF CLAIMING AD.FROM THE READING THE EXPLANATORY NOTES;WITH REGARD TO INTRODUCTION O F THE SECTION IN THE RELEVANT YEAR;IT IS EVIDENT THAT WHAT IS IMPORTANT AND MATERIAL IS THE YEAR OF ACQUISITION IN THE CASE OF SHIPS OR AIRCRAFT AND TH E YEAR OF INSTALLATION IN THE CASE OF MACHINERY OR PL ANT.IF THE INSTALLATION OF A PLANT IS SPREAD OVER MORE THAN A YEAR THE RELEVANT YEAR FOR THE GRANT OF ALLOWANCE WOULD BE THE YEAR IN WHICH THE INSTALLATION IS COMPLETED.AS IN THE CASE OF INVESTM ENT ALLOWANCE SO ALSO IN THE CASE OF AD THE MATERIAL DATE IS THE DATE OF INSTALLATION AND NOT T HE YEAR OF ACQUISITION.OUR VIEWS ARE BASED ON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT DELIVER ED IN THE CASE OF SURAMA TUBES(P.)LTD. (201ITR124).IN THE CASE UNDER CONSIDERATION AD HAS BEEN DISALLOWED BY THE FAA ON THE GROUND THAT P&M WERE ACQUIRED BEFORE 31.03.2008.IN OUR OPI NION MACHINERY WAS INSTALLED IN THE AY.UNDER APPEAL THOUGH ACQUISITION OF THE P&M HAD STARTED IN THE EARLIER AY.TILL A MACHINE IS NOT ASSEMBLED IN A MANNER THAT IT COULD BE USED TO MANUFACTURE IT CANNOT BE HELD THAT IT HAD BEEN INSTALLED.MERE PURCHASING OR SHIFTING IT TO FACTORY PREMISES IS NOT ENOUGH.ASSESSEE HAD CLAIMED AD @10% AS THE P &M HAD WORKED FOR A PERIOD LESS TH AN ONE YEAR.IT IS A COMMON PHENOMENON THAT IN BIG PROJECTS INSTALLATION OF MACHINERY TAKE S VERY LONG TIME BECAUSE OF THE SHEER VOLUME OF THE WORK TO BE CARRIED OUT.IF AN ASSESSEE IS NOT SU CCESSFUL IN INSTALLING P&M IN ONE YEAR AND CARRIES FORWARD THE INSTALLATION WORK IN SUBSEQUENT YEAR/YEARS IT CANNOT BE DENIED ANY BENEFIT ON THE GROUND THAT IT HAD ACQUIRED THE P &M IN EARLIER YEAR.THE INTENT OF THE LEGISLATURE WAS TO ATTRACT INVESTMENT SO IN OUR OPINION THE SECTION CAN BE TER MED AS BENEVOLENT PROVISION.IN THE CASE UNDER CONSIDERATION PRODUCTION STARTED FROM 01.01.2006.BE FORE THAT FABRICATION AND COMPLETION OF P&M WAS GOING ON.TREATMENT GIVEN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS TO THE P&M WAS IN ACCORDANCE WITH THE ACCOUNTING STANDARDS (AS)AND TH E AO/FAA HAS NOT DENIED THE FACT THAT THE ASSESSEE WAS FOLLOWING AS.THEREFORE IN OUR OPINION ASSESSEE WAS ENTITLED TO CLAIM AD @OF 10%.REVERSING THE ORDER OF THE FAA WE DECIDE THE EF FECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS ALL OWED. 718 '01 9'' )': %; 3 %'1 < . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND APRIL 2014 . )&6 3 4+ ' & ''' = >) ' 2 .< 201 4 3 5 ? SD/- SD/- ( . / D.MANMOHAN) ( '%&'( '%&'( '%&'( '%&'( / RAJENDRA) !'#$ / VICE PRESIDENT &' &' &' &' )* )* )* )* /ACCOUNTANT MEMBER 4 ITA NO.1682/MUM/2011 EURO PRATIK ISPAT PVT. LTD. / MUMBAI >) ' /DATE: 02.04.2014. SK )&6 )&6 )&6 )&6 3 33 3 .1@ .1@ .1@ .1@ A&@+1 A&@+1 A&@+1 A&@+1 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ' - 2. RESPONDENT / ./ - 3. THE CONCERNED CIT(A)/ B C 4. THE CONCERNED CIT / B C 5. DR H BENCH ITAT MUMBAI / @D'5 .1 . . ''' . 6. GUARD FILE/ 5' 7' /'@1 /'@1 /'@1 /'@1 .1 .1.1 .1 //TRUE COPY// )&6' ' / BY ORDER ! / ' %' DY./ASST. REGISTRAR /ITAT MUMBAI