M/S Joshi Technologies International Ind, Ahmedabad v. The Ito Wd-1(2), Ahmedabad

ITA 2114/AHD/2002 | 1996-1997
Pronouncement Date: 08-01-2010 | Result: Allowed

Appeal Details

RSA Number 211420514 RSA 2002
Bench Ahmedabad
Appeal Number ITA 2114/AHD/2002
Duration Of Justice 7 year(s) 6 month(s) 24 day(s)
Appellant M/S Joshi Technologies International Ind, Ahmedabad
Respondent The Ito Wd-1(2), Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 06-06-2008
Date Of Final Hearing 05-01-2010
Next Hearing Date 05-01-2010
Assessment Year 1996-1997
Appeal Filed On 14-06-2002
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND D.C.AGRAWAL AM JOSHI TECHNOLOGIES INTERNATIONAL INC. KARAKA BUILDING NO.2 ASHRAM ROAD AHMEDABAD. V/S . INCOME-TAX OFFICER WARD 1(2) AHMEDABAD. PAN NO.25-J/SR-2 (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. N. SOPARKAR AR RESPONDENT BY:- SHRI P. ORAM SR.DR O R D E R PER BHAVNESH SAINI JUDICIAL MEMBER . BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST DIFFERENT ORDERS OF LD. CIT(A) VIII AHMEDABAD DTD.20.03.200 2 FOR ASSESSMENT YEARS 1996-97 & 1997-98. 2. THESE APPEALS WERE FILED ON SEVERAL GROUNDS OF A PPEAL AND BOTH THE APPEALS OF THE ASSESSEE WERE DISPOSED OF BY THE ITA T AHMEDABAD VIDE ORDER DATED 6 TH JUNE 2008. THE ASSESSEE PREFERRED MISC. APPLICATI ON NOS.7 & 8 OF 2009 AGAINST THE ORDER OF THE TRIBUNAL . THE MISC. APPLICATIONS WERE DISPOSED OF VIDE ORDER DATED 21 ST AUGUST 2009. IT IS NOTED IN THE ABOVE ORDER ON THE MISC. APPLICATIONS THAT THE ORDER OF THE TRIBUNAL IS TO BE RECALLED FOR THE PURPOSE OF DECID ING ASSESSEES ALTERNATE ITA NOS.2114 & 2115/AHD/2002 ASST. YEARS : 1996-97 & 97-98 2 CLAIM OF DEPRECIATION IN BOTH THE APPEALS. IT IS AL SO NOTED THAT IN ITA NO.2114 OF 2002 GROUND NO.2 WITH REGARD TO DISALLOW ANCE FOR PAYMENT OF APPLICATION FEES FOR MINING LEASE IS NOT ADJUDICATE D UPON THEREFORE ON THE ABOVE POINTS EARLIER ORDER OF THE TRIBUNAL WAS RECALLED. THE REGISTRY HAS ACCORDINGLY FIXED BOTH THE APPEALS FOR THE PURP OSE OF DISPOSAL OF THE ISSUES WHICH WERE RECALLED BY THE TRIBUNAL AFTER AL LOWING THE MISC. APPLICATIONS VIDE ORDER DATED 21 ST AUGUST 2009. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES ON THE ABOVE POINTS/ISSUES WHICH HAVE BEEN RECALLED BY THE TRIBUNAL AS NOTED ABOVE. 4. THE FIRST ISSUE WITH REGARD TO ALTERNATE CLAIM O F ASSESSEE FOR DEPRECIATION IS ARISING IN BOTH THE APPEALS. IN ASS ESSMENT YEAR 1996-97 SUCH ISSUE IS ARISING IN GROUND NO.1.3 AND IN ASSES SMENT YEAR 1997-98 SAME GROUND IS ARISING IN GROUND NO.1.2. IT IS STAT ED IN THE ASSESSMENT ORDERS THAT ASSESSEE IS A FOREIGN COMPANY NRI AND HAS BEEN WORKING IN JOINT VENTURE AGREEMENT WITH LARSEN & TOUBRO LTD. F OR EXTRACTION OF OIL WELLS AT DHOLKA AND WAVEL OILFIELDS IN GUJARAT. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.93 58 100/- UNDER THE HEAD SIGNATUR E/PRODUCTION BONUS ON ACCOUNT OF PAYMENT MADE TO ONGC. THE ASSESSING O FFICER TREATED THE SAME TO BE CAPITAL EXPENDITURE. THE FINDINGS OF THE ASSESSING OFFICER WERE CONFIRMED BY THE CIT(A). THE TRIBUNAL CONSIDER ING THE SAME ISSUE CONFIRMED THE ORDERS OF THE AUTHORITIES BELOW AND U PHELD THE ORDERS OF THE CIT(A) THAT THE EXPENDITURE INCURRED BY THE ASSESSE E WAS OF CAPITAL NATURE. COMING TO THE ASSESSEES ALTERNATE CLAIM OF DEPRECIATION IT WAS OPINED THAT THE ASSESSEE HAVING NOT ACQUIRED ANY TA NGIBLE ASSET THE CLAIM OF DEPRECIATION WAS ALSO REJECTED. WHILE CONSIDERIN G THE MISC. 3 APPLICATIONS RECALLED SUCH FINDINGS FOR THE PURPOSE OF DECIDING ASSESSEES ALTERNATE CLAIM OF DEPRECIATION. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSE SSEE IS IN THE MINING BUSINESS FOR EXTRACTION OF OIL WELL IN GUJAR AT. OIL WELLS WERE ORIGINALLY HELD BY SOMEBODY ELSE AND THE ASSESSEE A CQUIRED THE SAME BY MAKING PAYMENTS BY WAY OF SIGNATURE/PRODUCTION EXPE NSES (BONUS). HE HAS SUBMITTED THAT SIGNATURE BONUS WAS PAID ACCORDI NGLY FOR ACQUIRING THE WELLS WHICH IS ULTIMATELY HELD TO BE CAPITAL EXPEND ITURE. LD. COUNSEL FOR THE ASSESSEE REFERRED TO PARA 4.4 OF THE LD. CIT(A) S ORDER IN WHICH LD. CIT(A) HAS HELD AS UNDER :- 4.4 HAVING HELD THAT THE EXPENDITURE IS OF CAPITAL NATURE THE APPELLANT TOOK THE ALTERNATIVE PLEA FOR ALLOWING DEPRECIATION . FOR THE PURPOSE OF WORKING OUT DEPRECIATION THE APPELLANT SUBMITTED A CHART ALLOCATING THE COST TO VARIOUS ASSETS MENTIONED IN ANNEXURE-1 OF T HE AGREEMENT OF OCTOBER 1995. IT IS SEEN THAT THE APPELLANT ALSO AC QUIRED ASSETS FOR CONSIDERATION AS PER ANNEXURE-2 OF THE AGREEMENT. T HE A.O. IS DIRECTED TO ALLOW DEPRECIATION ON THE ASSETS ACQUIRED AS PER AN NEXURE-1 EXCEPT WELLS OF THE VALUE OF RS.91.08 LACS AT THE RATE APPLICABL E AND TAKING GUIDANCE FROM CLAIM OF DEPRECIATION ON THE ASSETS ACQUIRED A S PER ANNEXURE-2 MADE BY APPELLANT IN THE RETURN. IN MY OPINION COS T ALLOCATED TO WELLS AND CLAIM OF DEPRECIATION THEREON @ 100% IS MISLEAD ING. IN FACT THIS IS THE COST OF ACQUIRING OF MINING LEASE RIGHT AND EXP LOITATION RIGHT OF THE FIELD DEVELOPED BY ONGC. THEREFORE COST ATTRIBUTAB LE TO THE WELLS IS INCORRECT. FURTHER EVEN IF ANY COST IS ATTRIBUTED TO WELLS NO DEPRECIATION IS ALLOWABLE UNDER THE I.T. ACT. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) ALLOWED ALTERNATE CLAIM OF DEPRECIATION OF THE ASSESSEE PAR TLY BUT THE DEPRECIATION WAS NOT ALLOWED ON THE COST OF THE WELLS AMOUNTING TO RS.91.08 LACS IN ASSESSMENT YEAR 1996-97 ON WHICH GROUND NO.1.3 WAS RAISED AND SIMILARLY THE SAME CLAIM WAS NOT ALLOWED IN ASSESSM ENT YEAR 1997-98 ON WHICH GROUND NO.1.2 WAS RAISED. LD. COUNSEL FOR THE ASSESSEE REFERRED TO 4 PB 127 WHICH IS THE LETTER OF ENERGY & PETROCHEMICA LS DEPARTMENT REGARDING GRANT OF EXPLORATION LICENCE AND MINING L EASE AND ALSO REFERRED TO PB 4 WHICH IS THE AGREEMENT BETWEEN THE GOVERNME NT OF INDIA AND LARSEN & TOUBRO LTD. AND THE ASSESSEE THROUGH WHIC H WELLS HAVE BEEN ACQUIRED BY THE ASSESSEE. HE HAS REFERRED TO PB 121 WHICH IS THE AGREEMENT OF HANDING OVER DHOLKA FIELD TO THE ASSES SEE THROUGH WHICH ASSESSEE ACQUIRED THE WELLS. HE HAS ALSO REFERRED P B 123 WHICH IS ANNEXURE-1 TO THE AGREEMENT TO SHOW THAT ASSESSEE A CQUIRED WELLS. HE HAS ALSO REFERRED TO PB-II 27 WHICH IS ANNEXURE TO THE BALANCE SHEET TO SHOW ASSETS IN DHOLKA FIELD TO PROVE THAT ASSESSEE ACQUIRED THE WELLS AS AN ASSET FOR WHICH ASSESSEE HAS SPENT RS.93 48 266/ -. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE ACQUIRED TANGIBLE ASSETS IN THE FORM OF THE WELLS AS SHOWN THE SAME AS ASSETS IN T HE BOOKS OF ACCOUNTS THEREFORE THE ALTERNATE CLAIM OF ASSESSEE SHOULD H AVE BEEN ALLOWED FOR DEPRECIATION BECAUSE THE SAME EXPENDITURE WAS TREAT ED AS CAPITAL IN NATURE BY THE AUTHORITIES BELOW AND NOW CONFIRMED BY THE T RIBUNAL AS WELL. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE INCOM E-TAX RULES IN WHICH IN THE NOTES IT IS PROVIDED THAT THE BUILDINGS INCLUDE WELLS TUBE-WELLS ALSO. LD. COUNSEL FOR THE ASSESSEE THEREFORE SUBMITTED T HAT THE DEPRECIATION TO THE ASSESSEE ON TANGIBLE ASSETS AS PER RULES ON THE BUILDING MAY BE ALLOWED. 6. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATI VE RELIED ON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT ASSE SSEE IS NOT ENTITLED FOR THE DEPRECIATION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE AS SESSEE PAID THIS AMOUNT IN THE SHAPE OF SIGNATURE BONUS FOR ACQUIRING THE WELL S. THE SAME AMOUNT AS 5 PAID BY THE ASSESSEE WAS TREATED AS CAPITAL EXPENDI TURE. THE FINDINGS OF THE AUTHORITIES BELOW TO THAT EXTENT HAVE ALSO BEEN CONFIRMED BY THE TRIBUNAL IN THE EARLIER ORDER DATED 6 TH JUNE 2008. LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON THE ASSE TS ACQUIRED AS PER ANNEXURE 1 (PB 123) EXCEPT THE WELLS OF THE VALUE O F RS.91.08 LACS. THE LD. CIT(A) NOTED IN THE IMPUGNED ORDER THAT IN FACT THIS IS NOT THE COST OF ACQUIRING MINING LEASE RENT AND EXPLOITATION RIGHT OF THE FIELD DEVELOPED BY THE ONGC. THE TRIBUNAL EARLIER DID NOT ACCEPT TH E CLAIM OF THE ASSESSEE BECAUSE ASSESSEE HAS NOT ACQUIRED ANY TANG IBLE ASSET. THE COPY OF THE LETTER OF THE PETROLEUM MINISTRY AGREEMENT WITH THE ASSESSEE AND AGREEMENT OF HANDING OVER DHOLKA FIELD ALONG WITH A NNEXURE AND BALANCE SHEET OF THE ASSESSEE CLEARLY PROVE THAT AS SESSEE ACQUIRED THE WELLS AS ASSET THROUGH THE VALID AGREEMENT FOR WHIC H ASSESSEE HAS PAID THE AMOUNTS IN QUESTION. SECTION 32(1) OF THE IT ACT PR OVIDES ALLOWING OF THE DEPRECIATION IN RESPECT OF BUILDING ETC. BEING TANG IBLE ASSETS IF THE SAME ARE OWNED AND USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESSION. INCOME-TAX RULES APPENDIX 1 PROVIDES TH E DEFINITION OF TANGIBLE ASSETS BEING BUILDING AND THE NOTES TO THE SAME FURTHER PROVIDES THAT BUILDING INCLUDES WELLS AND TUBE-WELLS. SINCE UNDER THE INCOME-TAX ACT AND THE INCOME-TAX RULES BUILDING IS CONSIDERED AS TANGIBLE ASSET AND WELLS ARE PART OF THE BUILDING THEREFORE THE AUTH ORITIES BELOW SHOULD HAVE CONSIDERED THE CASE OF THE ASSESSEE FROM THAT ANGLE INSTEAD OF REFUSING DEPRECIATION TO THE ASSESSEE. LD. CIT(A) FAILED TO NOTE THAT ASSESSEE PAID FOR THE COST OF ACQUIRING THE WELLS IN QUESTION ON WHICH LD. CIT(A) TREATED THE SAME TO BE CAPITAL EXPENDITURE FOR ACQUIRING CA PITAL ASSET. LD. CIT(A) HAS ALSO FAILED TO CONSIDER THE AGREEMENT EXECUTED WITH THE ASSESSEE AND THE BALANCE SHEET OF THE ASSESSEE AS ARE REFERRED T O IN THIS ORDER. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE WE ARE OF THE VIEW THAT LD. CIT(A) WAS NOT JUSTIFIED IN REFUSING THE G RANT OF DEPRECIATION TO 6 THE ASSESSEE ON THE COST OF THE WELLS. SINCE THE AB OVE DOCUMENTS AND THE MATERIAL IS NOT CONSIDERED BY THE LD. CIT(A) FOR TH E PURPOSE OF DECIDING THE ALTERNATE CLAIM OF ASSESSEE FOR GRANT OF DEPREC IATION WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT TH E LEVEL OF LD. CIT(A). WE ACCORDINGLY SET ASIDE BOTH THE ORDERS OF LD. CIT (A) ON THE ISSUE OF ALTERNATE CLAIM OF DEPRECIATION OF WELLS AND RESTOR E THIS ISSUE TO THE FILE OF LD. CIT(A). WE DIRECT TO REDECIDE THE ALTERNATE CLA IM OF ASSESSEE IN THE LIGHT OF THE MATERIAL AND EVIDENCES AVAILABLE ON RE CORD AND IN THE LIGHT OF THE OBSERVATIONS GIVEN IN THIS ORDER BY GIVING REAS ONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. AS A RESULT BOTH THE APPEALS OF ASSESSEE ON THI S ALTERNATE CLAIM OF DEPRECIATION ARE ALLOWED FOR STATISTICAL PURPOSES. 9. THE OTHER ISSUE RECALLED BY THE TRIBUNAL IS IN A SSESSMENT YEAR 1996-97 ON GROUND NO.2 IN WHICH ASSESSEE CHALLENGED THE UPHOLDING OF THE DISALLOWANCE FOR PAYMENT OF APPLICATION FEES FO R MINING LEASE BY TREATING THE SAME AS CAPITAL EXPENDITURE. IN ALTERN ATE CLAIM ASSESSEE CLAIMED DEPRECIATION ON THE APPLICATION FEES WHICH IS TREATED AS CAPITAL EXPENDITURE. LD. CIT(A) IN PARA 5 OF THE IMPUGNED O RDER NOTED THAT THE ABOVE PAYMENT IS MADE BY WAY OF APPLICATION FEES TO ENERGY AND PETROCHEMICAL DEPARTMENT BEING STATUTORY PAYMENT FO R TRANSFERRING MINING RIGHTS RELINQUISHED BY ONGC. ON THE SAME REA SONS WITH REGARD TO CLAIM OF PRODUCTION BONUS THE APPLICATION FEES WAS ALSO HELD AS PAYMENTS TOWARDS ACQUIRING OF RIGHT OF EXPLOITATION GIVING B ENEFIT OF ENDURING NATURE. THE DEPRECIATION WAS NOT ALLOWED AS THERE B EING NO TANGIBLE ASSETS ACQUIRED BY THE ASSESSEE. 7 10. LD. COUNSEL FOR THE ASSESSEE IN VIEW OF THE FIN DINGS OF THE TRIBUNAL ON SIGNATURE/PRODUCTION BONUS TREATING TO BE CAPITA L EXPENDITURE DID NOT PRESS THE MAIN GROUND OF APPEAL CLAIMING IT TO BE R EVENUE NATURE. LD. COUNSEL FOR THE ASSESSEE HOWEVER SUBMITTED THAT AL TERNATE CLAIM OF THE ASSESSEE MAY BE ALLOWED FOR DEPRECIATION. HE HAS RE FERRED TO PB II 28 WHICH IS LETTER OF ENERGY AND PETROCHEMICAL DEPARTM ENT FOR GRANT OF MINING LEASE FOR DHOLKA AREA AND SUBMITTED THAT ON SUCH ACQUIRING OF RIGHTS THE ASSESSEE ACQUIRED TANGIBLE ASSETS. HE HA S RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SC IENTIFIC ENGINEERING HOUSE P. LTD. VS. CIT (1986) 157 ITR 86 (SC) IN WH ICH IT WAS HELD THE CAPITAL ASSET ACQUIRED BY THE APPELLANT VIZ. THE TECHNICAL KNOW-HOW IN THE SHAPE OF DRAWINGS DESIGNS CHARTS PLANS PROCESSING DATA A ND OTHER LITERATURE FELL WITHIN THE DEFINITION OF PLANT AND WAS THEREFORE A DEPRECI ABLE ASSET. 11. ON THE OTHER HAND LD. DEPARTMENTAL REPRESENTATI VE RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 12. CONSIDERING THE ABOVE FACTS WE ARE OF THE VIEW THAT ALTERNATE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE APPLICATION FEES TO ENERGY & PETROCHEMICAL DEPARTMENT IS LIABLE TO BE RESTORED T O THE FILE OF LD. CIT(A) BECAUSE LD. CIT(A) HAS NOT GIVEN ANY SPECIFIC FINDI NG ON THIS ISSUE. LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR TREATING THE SAME EXPENDITURE TO BE REVENUE EXPENDITURE THEREFORE GROUND NO.2.0 OF THE APPEAL OF ASSESSEE IS DISMISSED. HOWEVER GROUND NO.2.1 ON WH ICH ALTERNATE CLAIM IS RAISED FOR DEPRECIATION ON THIS ISSUE IS RESTORE D TO THE FILE OF LD. CIT(A) BY SETTING ASIDE HIS FINDINGS. LD. CIT(A) IS DIRECT ED TO REDECIDE THIS ISSUE BY GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS A RESULT PART OF THIS GROUND OF APPEA L OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8 13. AS A RESULT BOTH THE APPEALS OF THE ASSESSEE O N THE ABOVE RECALLED ISSUES/POINTS ARE ALLOWED FOR STATISTICAL PURPOSES. 14. NO OTHER POINT IS ARGUED OR PRESSED BY BOTH THE PARTIES. SD/- SD/- (D.C.AGRAWAL) (BHAVNESH SAINI) (ACCOUNTANT MEMBER) JU DICIAL MEMBER AHMEDABAD DATED : 08/01/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 08/01/2010