Kerala State Warehousing Corporation, Cochin v. Deputy Commissioner of Income Tax, Ernakulam

ITA 215/COCH/2009 | 2004-2005
Pronouncement Date: 11-01-2011

Appeal Details

RSA Number 21521914 RSA 2009
Assessee PAN AABCK1583G
Bench Cochin
Appeal Number ITA 215/COCH/2009
Duration Of Justice 1 year(s) 8 month(s) 17 day(s)
Appellant Kerala State Warehousing Corporation, Cochin
Respondent Deputy Commissioner of Income Tax, Ernakulam
Appeal Type Income Tax Appeal
Pronouncement Date 11-01-2011
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 11-01-2011
Assessment Year 2004-2005
Appeal Filed On 24-04-2009
Judgment Text
IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN JM AND SANJAY AR ORA AM I.T.A. NO.215/COCH/09 ASSESSMENT YEAR : 2004-05 KERALA STATE WAREHOUSING CORPORATION 39/1304 WAREHOUSING CORPORATION ROAD KOCHI -16 [PAN : AABCK 1583G] VS. THE DY. COMMISSIONER OF INCOME- TAX CIRCLE-1(1) ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI VIVEK C.GOVIND CA REVENUE BY DR. BABU JOSEPH SR.DR O R D E R PER SANJAY ARORA AM: THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME TAX KOCHI (CIT FOR SHORT) PASSED U/S. 263 OF THE INCOME-TAX ACT 1961 ('THE ACT' HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y) 2 004-05. 2. THE ONLY ISSUE ARISING IN APPEAL IS THE DIREC TION BY THE LD. CIT AS THE COMPETENT AUTHORITY TO THE ASSESSING OFFICER (AO) TO COMPUTE THE DEPRECIATION ALLOWANCE EXIGIBLE U/S. 32(1) ON THE GODOWN(S) OF THE ASSESSEE BY THE AMOUNT OF SUBSIDY RECEIVED BY IT IN EARLIER YEARS TOWARD THE SAME IN VIEW OF S. 43(6)(B ) R/W EXPLANATION 10 TO S. 43(1) OF THE INCOME-TAX ACT 1961 (`THE ACT HEREINAFTER). 3. THE FACTS OF THE CASE ARE NOT IN DISPUTE. T HE ASSESSEE A DEEMED COMPANY UNDER THE COMPANIES ACT 1956 IS A JOINT VENTURE OF THE GOVE RNMENT OF KERALA AND CENTRAL WAREHOUSING CORPORATION OF INDIA. IT RECEIVED SUBSI DY TITLED `RURAL GODOWN SUBSIDY TOWARD STRENGTHENING THE STORAGE INFRASTRUCTURE IN RURAL AREAS AGGREGATING TO RS. 1.62 CRORES DURING THE YEARS 1986-87 TO 1996-97. THE SAM E WAS UTILIZED AS STATED I.T.A.NO. 215/COCH/2009 2 2 SUBSTANTIALLY DURING THE SAID YEARS FOR THE CONSTRU CTION OF THE GODOWNS IN RURAL AREAS. HOWEVER THE COST OF THE SAME FOR THE PURPOSE OF R ECKONING DEPRECIATION WAS NOT REDUCED BY THE AMOUNT OF THE SAID SUBSIDY. EXPLANATION 10 STOOD INSERTED W.E.F. 1/4/1999 TO S. 43(1) OF THE ACT DEFINING `ACTUAL COST REQ UIRING ALL SUCH CREDITS OR ASSISTANCE THAT GOES TO MEET DIRECTLY OR INDIRECTLY THE COST OF A N ASSET TO THE ASSESSEE WOULD STAND TO BE REDUCED FROM THE COST THEREOF TO THE ASSESSEE FOR T HE PURPOSE OF ITS COST U/S. 43(1). THE `WRITTEN DOWN VALUE (WDV) OF AN ASSET FOR ANY YEAR ON WHICH DEPRECIATION IS ELIGIBLE IS DEFINED U/S. 43(6) AS THE COST OF THE ASSET AS REDU CED BY THE DEPRECIATION ALLOWED THEREON UNDER THE ACT. THE DEPRECIATION HOWEVER HAD BEEN CLAIMED BY AND ALLOWED TO THE ASSESSEE FOR THE EARLIER YEARS DE HORS THE AMOUNT OF SUBSIDY I.E. WITHOUT CONSIDERING OR DISTURBING THE COST OR WDV ON ACCOUNT OF THE SUBSI DY RECEIVED. THE WDV FOR THE CURRENT YEAR U/S. 43(6)(B) WOULD NECESSITATE REDUCT ION OF THE SUBSIDY AMOUNT FOR ASCERTAINMENT OF THE COST AND CONSEQUENTLY THE WD V OF THE RELEVANT ASSET/S AS CLARIFIED BY THE HONBLE APEX COURT IN THE CASE OF CALCUTTA ELECTRIC SUPPLY CORPORATION LTD. V. CIT 194 ITR 296 (SC). THE LD. CIT THEREFORE DIRECTED THE AO FOR THE SAME. THE ASSESSEE OBJECTED ON THE GROUND THAT THE SUBSIDY WAS NOT MEA NT TO MEET THE COST OF THE GODOWNS AS SUCH BUT ONLY TO STRENGTHEN THE STORAGE INFRASTRUC TURE IN RURAL AREAS. SECONDLY THE SUBSIDY AMOUNT STOOD SPENT ON THE CONSTRUCTION OF T HE GODOWNS DURING THE YEARS OF THE RECEIPT OF THE SUBSIDY AND IN ANY CASE PRIOR TO T HE YEAR OF THE INSERTION OF EXPLANATION 10 TO S. 43(1) I.E. THE PREVIOUS YEAR 1998-99. AS S UCH NO PART OF THE SUBSIDY WOULD GO TO REDUCE THE COST AND CONSEQUENTLY THE WDV OF THE G ODOWN(S) FOR ANY ASSESSMENT YEAR ON OR AFTER 1/4/1999. 4. BEFORE US LIKE SUBMISSIONS STOOD RAISED BY EITHER SIDE WITH THE ASSESSEE RELYING ON THE FACT THAT THE CHANGE IN LAW REQUIRING REDUCTION OF THE COST AND CONSEQUENTLY WDV OF THE RELEVANT BLOCK OF ASSETS BEING GODOWNS IS BY FINANCE ACT 1999 W.E.F. 1/4/1999 OR FROM AY 1999-00 ONWARDS. RELIANCE STANDS ALSO PLAC ED ON THE DECISION IN THE CASE OF CIT V . P.J. CHEMICALS 210 ITR 830 (SC). I.T.A.NO. 215/COCH/2009 3 3 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL ON RECORD. FOR THE REASONS DISCUSSED HEREINAFTER WE FIND NO MERIT IN THE ASSE SSEES CASE. 5.1 TO BEGIN WITH THE ASPECT UNDER REFERENCE ADM ITTEDLY DID NOT FIND CONSIDERATION AND HENCE ADJUDICATION BY THE AO DURING THE ASSESSMENT STAGE. AS SUCH THE IMPUGNED ORDER RAISING THE ISSUE AND AN INQUIRY IN THE MATTER WHI CH STANDS OMITTED IN ASSESSMENT IS VALID AS THE ASSESSMENT IS TO THAT EXTENT ERRONEOU S INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE (REFER INTER ALIA GEE VEE ENTERPRISES V. ADDL. CIT 99 ITR 375 (DEL.); DUGGAL & CO. V. CIT 220 ITR 456 (DEL.); MALABAR INDUSTRIAL CO. LTD. V. CIT 243 ITR 83 (SC)). 5.2 FURTHER ON THE REVISION ORDER NOT DIRECTING THE ASSESSING AUTHORITY TO CONSIDER THE MATTER ON MERITS BUT GIVING A SPECIFIC DIRECTION T O HIM ON A CONSIDERATION OF THE MATTER BY THE REVISIONARY AUTHORITY WE ARE OBLIGED TO EXA MINE THE SAME ON ITS MERITS AS WELL. TOWARD THIS WE FIND THE ASSESSEES CASE AS BEING P RIMARILY AS TO THE NON-RETROSPECTIVITY OF EXPLANATION 10 TO S. 43(1); THE SUBSIDY UNDER CONSIDERATION HAVIN G BEEN ALREADY UTILIZED PRIOR TO THE YEARS RELEVANT TO A.Y. 1999-0 0 FROM WHICH YEAR THE SAID EXPLANATION STANDS CO-OPTED ON THE STATUTE. THE ARGUMENT OF THE ASSISTANCE (SUBSIDY) BEING OF GENERAL NATURE I.E. FOR THE UPGRADATION OF THE STORAGE IN FRASTRUCTURE IN RURAL AREAS AND NOT TOWARD COST OF THE GODOWNS IN PARTICULAR IS ITSELF CONTRA DICTORY AS WHAT DOES STRENGTHENING THE STORAGE INFRASTRUCTURE IN RURAL AREAS IMPLY IF NOT AUGMENTING STORAGE CAPACITY THEREAT BY INTER ALIA BUILDING GODOWNS. ALSO THE SAME IS OF NO MOMENT IN VIEW OF THE ADMITTED UTILIZATION OF THE SUBSIDY UNDER REFERENCE FOR THE CREATION OF THE RELEVANT ASSETS AND FURTHER ONLY IN TERMS OF ITS GRANT AND EXPLANATION 10 TO S. 43(1) WHICH READS AS UNDER: EXPLANATION 10 WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVE RNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED) T HEN SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE: I.T.A.NO. 215/COCH/2009 4 4 PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT IS OF SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIR ED SO MUCH OF THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO W HICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED SHALL NOT BE INCLUDE D IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. THAT THE COST OF THE GODOWNS IS HIT BY EXPLANATION 10 IS APPARENT FROM ITS PLAIN READING. IN FACT THE ASSESSEE ALSO DOES NOT DISPUTE THE SAM E BUT ARGUES OF ITS NON-APPLICABILITY ALL THE SAME WITH REFERENCE TO THE YEARS FOR WHICH THE SUBSIDY WAS RECEIVED AND SPENT AND WHICH IS ONLY A TACIT ADMISSION OF IT BEING OTHERWI SE APPLICABLE; FOR ELSE THE ARGUMENT IS OF NO CONSEQUENCE I.E. DEVOID OF ANY MEANING. 5.3 COMING TO THE ARGUMENT AFORESAID WITHOUT DO UBT THE EXPLANATION IS NOT RETROSPECTIVE. HOWEVER THE AO IS NOT GIVING A RETR OSPECTIVE APPLICATION TO THE SAID PROVISION BUT ONLY APPLYING THE LAW AS IT STANDS F OR THE RELEVANT YEAR. THAT IN DOING SO CERTAIN FACTS PERTAINING TO THE YEARS PRIOR TO THE YEAR UNDER REFERENCE I.E. OF SUBSIDY RECEIVED TOWARD GODOWNS AND WHICH STANDS ACTUALLY SO UTILIZED ARE USED OR TAKEN INTO ACCOUNT IS AN ALTOGETHER DIFFERENT MATTER. CONSIDE RATION OR UTILIZATION OF ANTECEDENT FACTS IN APPLYING THE LAW AS IT STANDS (FOR THE RELEVANT YEAR) DOES NOT MAKE THE LAW BEING APPLIED AS RETROSPECTIVE. THE LAW CAN ONLY BE APPLI ED ON OR QUA A PARTICULAR SET OF FACTS WHICH MAY OR MAY NOT HAVE THEIR ORIGIN IN THE YEAR FOR WHICH THE LAW IS BEING APPLIED. WHAT IS IMPORTANT AND OF SIGNIFICANCE IS THAT THE F ACTS ARE RELEVANT SO THAT THE QUESTION TO BE ADDRESSED IS WHETHER THE FACT/S BEING CONSIDERED OR TAKEN INTO ACCOUNT FOR THE PURPOSE IS RELEVANT OR NOT? SURELY IT CANNOT BE THE ASSESSEES CASE THAT EVEN THOUGH THE FACT/S BEING CONSIDERED IS RELEVANT FOR THE APPLICATION OF THE SECTION/PROVISION AS IT STANDS FOR THE CURRENT YEAR YET THE SAME BE IGNORED AND THE LAW A PPLIED DE HORS THE SAME. THE AO IS NEITHER DISTURBING THE COST NOR THE WDV OF THE RELE VANT BLOCK OF ASSETS FOR THE EARLIER YEARS WHICH WOULD IN FACT IMPLY DISTURBING OR RESU LT IN DISTURBING THE DEPRECIATION ALLOWANCE FOR THE EARLIER YEARS AS WELL AND WHICH HE IS EVEN OTHERWISE INCOMPETENT TO DO WHILE UNDERTAKING THE ASSESSMENT FOR THE CURRENT YE AR. HE IS ONLY ASCERTAINING THE WDV OF THE RELEVANT BLOCK OF ASSETS IN TERMS OF THE CH ANGED LAW WHICH OBLIGES HIM TO TAKE I.T.A.NO. 215/COCH/2009 5 5 COGNIZANCE OF CERTAIN FACTS IN CONTRADISTINCTION T O THE EARLIER LAW WHICH PRESUMABLY DID NOT. IF THE LAW FOR THE RELEVANT YEAR REQUIRES THE COST (OF THE DEPRECIABLE ASSET OR BLOCK OF ASSETS) AND CONSEQUENTLY ITS WDV TO BE DETERMIN ED IN A PARTICULAR MANNER SO BE IT. THAT THE FACTS RELEVANT OR INCIDENTAL TO THE PURPOS E STAND OCCURRED EARLIER TO THE SAID YEAR IS OF LITTLE MOMENT. THE MATTER STANDS IN FACT ANS WERED AS POINTED BY THE LD. CIT BY THE HONBLE APEX COURT IN THE CASE OF CALCUTTA ELECTRIC SUPPLY CORPORATION LTD. V. CIT (SUPRA) SETTLING THE ISSUE HOLDING INTER ALIA AS: THE FIRST STEP STATUTORILY PRESCRIBED FOR THE DE TERMINATION OF THE WRITTEN DOWN VALUE OF ANY ASSET FOR ANY YEAR IS FOR THE ASSESSING OFFICE R TO DETERMINE ITS ACTUAL COST. THIS IS A MANDATORY STEP WHICH THE OFFICER CANNOT BE PREVENTE D FROM TAKING MERELY BECAUSE THE ACTUAL COST OF THE ASSET HAD ALREADY BEEN DETERMINE D IN ONE OR MORE EARLIER YEARS. THE DEFINITION OF WRITTEN DOWN VALUE IN SECTION 4 3(6) OF THE INCOME-TAX ACT 1961 ENVISAGES THE COMPUTATION OF THE ACTUAL COST OF EAC H ASSET FOR EVERY ASSESSMENT YEAR NOT ONLY IN RESPECT OF ASSETS ACQUIRED DURING THE PREVI OUS YEAR BUT ALSO IN RESPECT OF ASSETS ACQUIRED BEFORE THE PREVIOUS YEAR. THIS NATURALLY HAS TO BE DONE WITH REFERENCE TO THE FACTUAL OR LEGAL POSITION THAT MIGHT PREVAIL DURING THE RELEVANT PREVIOUS YEAR AND COULD BE TAKEN INTO ACCOUNT FOR THE RELEVANT ASSESSMENT Y EAR. THE SECTION DOES NOT SAY THAT THE COMPUTATION OF THE ACTUAL COST OF THE ASSET HAS TO BE BASED ONLY ON THE FACTS OR LAW AS THEY STOOD AT THE TIME OF ACQUISITION OF THE ASSET AND AS COULD HAVE BEEN TAKEN INTO ACCOUNT FOR THE ASSESSMENT YEAR RELEVANT TO THE PRE VIOUS YEAR OF ACQUISITION. WHERE SUBSEQUENT INFORMATION FACTUAL OR LEGAL REVEALS T HAT THE ACTUAL COST DETERMINED ORIGINALLY WAS WRONG THERE CAN BE NO DOUBT THAT TH E ORIGINAL FIGURE OF ACTUAL COST HAS TO BE ALTERED IF NEED BE AND IF POSSIBLE BY RE-OPE NING THE EARLIER ASSESSMENTS AND IF THAT BE NOT POSSIBLE AT LEAST FOR THE FUTURE. THE ASSESSEE WE ALSO OBSERVE HAS NOT REBUTTED OR MET THE SAID RELIANCE IN ANY MANNER. THE MATTER STANDS ALSO DELIBERATED EXTENSIVELY TO THE SAME RESULT BY THE TRIBUNAL IN THE CASE OF SANTOSH KHEJRIWAL V. (ASST.) CIT 89 ITD 172 (KOL.). . 5.4 THE RELIANCE BY THE ASSESSEE ON THE DECIS ION IN THE CASE OF CIT V. P. J. CHEMICALS (SUPRA) IS MISCONCEIVED. THE SAID DECISION ONLY PRO VIDES FOR THE EXCLUSION OF THE SUBSIDIES OR OTHER LIKE ASSISTANCES (IN CALCULATING THE COST OF AN ASSET UNDER THE ACT) WHICH ARE GIVEN TO ENCOURAGE THE MOVEMENT OF INDUSTRY TO BACKWARD AREAS (OR INTENDED TO I.T.A.NO. 215/COCH/2009 6 6 PROMOTE SUCH OTHER SOCIO-ECONOMIC FACTORS) IN KEEPI NG WITH THE AVOWED OBJECTIVE OF THE GRANT/S WHILE THE SUBSIDY IN THE INSTANT CASE STAN DS GIVEN WITH THE CLEAR AND EXPRESS PURPOSE OF STRENGTHENING THE STORAGE (WAREHOUSING) CAPACITY THE PROVISION OF WHICH CONSTITUTES THE ASSESSEES BUSINESS OR PRINCIPAL AC TIVITY - IN THE RURAL SECTOR BY SUBSIDIZING OR PART MEETING ITS COST. FURTHER THE SAID DECISI ON STANDS RENDERED PRIOR TO THE INSERTION OF EXPLANATION 10 TO S. 43(1) WHICH LEAVES NO SCOPE FOR ANY SUCH AR GUMENT I.E. BASED ON THE SAID DECISION AND NEITHER IS IT THE ASSESSEES CASE THAT IT IS SO; RATHER ONLY THE NON- RESTROSPECTIVITY OF THE SAID PROVISION AND WHICH S TANDS DISCUSSED AT PARA 5.3 SUPRA. 5.5 IN VIEW OF THE FOREGOING IN OUR CONSIDERED VIEW THE ACTION OF THE LD. CIT WARRANTS BEING UPHELD AND IS HEREBY DIRECTED AS AND THE AP PEAL BY THE ASSESSEE FAILS. 6. IN THE RESULT THE APPEAL BY THE ASSESSEE IS DISMIS SED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 11TH JANUARY 2011 GJ COPY TO: 1. KERALA STATE WAREHOUSING CORPORATION 39/1304 W AREHOUSING CORPORATION ROAD KOCHI 682 016. 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1( 1) RANGE-1 ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX 4. D.R. I.T.A.T. COCHIN BENCH COCHIN. 5. GUARD FILE. B Y ORDER (ASSISTANT REGIST RAR)