I.T.O Wd - 8(2),kolkata, Kolkata v. M/s Calcutta Medical Imaging Institute Ltd., Kolkata

ITA 2259/KOL/2013 | 2005-2006
Pronouncement Date: 21-10-2016 | Result: Dismissed

Appeal Details

RSA Number 225923514 RSA 2013
Assessee PAN AABCC1739L
Bench Kolkata
Appeal Number ITA 2259/KOL/2013
Duration Of Justice 3 year(s) 2 month(s) 7 day(s)
Appellant I.T.O Wd - 8(2),kolkata, Kolkata
Respondent M/s Calcutta Medical Imaging Institute Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-10-2016
Date Of Final Hearing 26-09-2016
Next Hearing Date 26-09-2016
Assessment Year 2005-2006
Appeal Filed On 14-08-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI WASEEM AHMED ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI JUDICIAL MEMBER ITA NO.2259/KOL/2013 ASSESSMENT YEARS:2005-06 ITO WARD-8(2) P-7 CHOWRINGHEE SQUARE AAYAKAR BHAWAN 5 TH FLOOR ROOM-11 KOLKATA-69 / V/S . M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. 54 JAWAHARLAL NEHRU ROAD KOLKTA-71 [ PAN NO.AABCC 1739 L ] /APPELLANT .. /RESPONDENT /BY APPELLANT MD. GHAYAS UDDIN JCIT-SR-DR /BY RESPONDENT SHRI ASHOK KUMAR TULSYAN FCA /DATE OF HEARING 26-09-2016 /DATE OF PRONOUNCEMENT 21-10-2016 /O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXIV KOLKATA DATED 28.03.2013. ASSES SMENT WAS FRAMED BY ITO WARD-8(2) KOLKATA U/S 154/143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 17.12.2007 FO R ASSESSMENT YEAR 2005-06. MD. GHYAS UDDIN LD. SENIOR DEPARTMENTAL REPRESENTA TIVE APPEARED ON BEHALF OF REVENUE AND SHRI ASHOK KUMAR TULSYAN LD. AUTHORIZE D REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 2 2. AT THE THRESHOLD IT IS NOTED THAT THERE IS A DEL AY OF 59 DAYS IN FILING THE APPEAL BY THE REVENUE. THE REVENUE HAS FILED CONDONATION P ETITION IN THIS REGARD STATING THE REASONS THAT THE DELAY IS OCCURRED DUE TO UNAVOIDAB LE CIRCUMSTANCES. LD. AR FOR THE ASSESSEE RAISED NO OBJECTION FOR THE CONDONATION OF DELAY. THIS IN OUR CONSIDERED OPINION AFTER CONSIDERING THE FACTS AND CIRCUMSTANC ES OF THE CASE CONDONATION PETITION DESERVES TO BE CONSIDERED AND SAME IS CONDONED AND THE HEARING PROCEEDED WITH. 3. FIRST INTER-CONNECTED ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY ASSESSIN G OFFICER FOR 32 38 637 ON ACCOUNT OF DEPRECIATION. FOR THIS REVENUE HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL:- THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS IN FAC T IN DELETING THE DISALLOWANCE OF CLAIM OF THE ASSESSEE FOR DEPRECIAT ION TO THE TUNE OF RS.32 38 637/- FOR F.Y 2004-05 WITHOUT CONSIDERING THE FACT THAT THE MACHINERY WAS FIRST PUT TO USE BY THE ASSESSEE IN THE MONTH O F MAY 2005 I.E. BEYOND THE F.Y 2004-05. THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS IN FACT IN DELETING THE DISALLOWANCE OF CLAIM OF THE ASSESSEE FOR DEPRECIATION TO THE TU NE OF RS.32 38 637/- FOR F.Y 2004-05 WITHOUT CONSIDERING THE FACT THAT THE ASSES SEE CONSTANTLY TRIED TO ESTABLISH ITS FALSE CLAIM BY FURNISHING DIFFERENT D ATES AS THE DATE OF INSTALLATION (SUCH AS 12/03/2005 AND 14/03/2005). 4. FACTS IN BRIEF AS CULLED OUT FROM THE ORDER OF A UTHORITIES BELOW ARE THAT THE ASSESSEE A LIMITED COMPANY IS ENGAGED IN PROVIDING DIAGNOSTIC SERVICES. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS F ILED ITS RETURN OF INCOME AT RS. (-) 6 99 410/- DATED 26.10.2005. SUBSEQUENTLY THE C ASE WAS SELECTED FOR SCRUTINY UNDER CASS MODULE AND ACCORDINGLY NOTICES U/S 143(2) & 14 2(1) WERE ISSUED UPON ASSESSEE. THE ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT AT A TOTAL INCOME OF 34 15 988/- AFTER MAKING CERTAIN ADDITIONS / DISALL OWANCES WHICH ARE DISCUSSED HEREIN BELOW. THE ASSESSEE DURING THE YEAR HAS PURCHASED FIXED ASSETS (MACHINES) ALONG WITH ITS ACCESSORIES FOR 1 67 00 895/- AND CLAIMED DEPRECIATION THEREON FOR 32 38 637/-. THE ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 3 ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDING OBSERVED THAT THE INSTALLATION PROCESS FOR THE MACHINE WAS COMPLETED ON 14.03.2005 BUT IT FUNCTIONALLY STARTED ON 03.05.2005. SUCH OBSERVATION OF THE AO W AS BASED ON THE HANDING/ TAKING OVER REPORT GIVEN BY THE MACHINE SUPPLIER. THE AO F URTHER OBSERVED THAT WARRANTY PERIOD OF THE SAID MACHINE STARTED WITH EFFECT FROM 03.05.2005. ON QUESTION BY THE AO FOR DISALLOWING THE AFORESAID SUM ON THE GROUND OF NOT PUTTING THE MACHINE INTO USE IN THE YEAR UNDER CONSIDERATION THE ASSESSEE C OULD NOT MAKE ANY SATISFACTORY REPLY. ACCORDINGLY THE AO OPINED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE DEPRECIATION ALLOWANCE IN THE YEAR UNDER CONSIDERAT ION AND ACCORDINGLY DISALLOWED THE AFORESAID ALLOWANCE AND ADDED BACK TO THE TOTAL INC OME OF ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT ASSESSEE HAS PURCHASED T HE MACHINERIES WITH ACCESSORIES VIDE BILL DATED 24/12/2004 AND 25/12/2004 RESPECTIV ELY. THE ASSESSEE FURTHER SUBMITTED THAT THE INSTALLATION COMPLETION AND AC CEPTANCE REPORT WHICH HAS BEEN REFERRED TO HAS BEEN SIGNED ON 03-05-06 AND ON THE BASIS OF THAT THE AO ARRIVED AT THE CONCLUSION THAT THE MACHINE WAS COMMERCIALLY PUT TO USE ON AND FROM THAT DATE. HOWEVER IN MAKING SUCH A CONCLUSION HE IGNORED TH E REMARKS PUT BY THE AUTHORIZED SIGNATORY IN THE SAME REPORT WHICH READS AS UNDER: - AS INSTALLATION SCHEDULE WAS FOR 07 TH MARCH 05 WE HAVE LOST FULL 7 DAYS WORKING REVENUE LOSS. AS THERE WERE DELAY IN NOT HA ND OVER OF CAMERA FOR PATIENT TRIALS.. THIS REMARK WAS NOT GIVEN COGNIZA NCE. AGAIN IN THE SAME REPORT IT HAS BEEN WRITTEN THAT INSTALLATION START ED ON 26-02-05 AND THE DATE OF INSTALLATION OF MACHINE WAS 14-03-05. WE ALSO ENCLO SED HEREWITH THE COPY OF THE SAID INSTALLATION REPORT FOR YOUR KIND PERUSAL. AGAIN A LETTER FROM WIPRO GE HEALTH CARE DT. 17-12 -07 IS ALSO ENCLOSED HEREWITH WHICH MENTIONED THAT THE UNIT WAS COMPLETE LY INSTALLED IN ALL RESPECTS ON 14-03-05. DURING THE COURSE OF ASSESSMENT THE ASSESSEE ALSO F ILED A LETTER DT. 17-12-07 EXPLAINING WHY DEPRECIATION ON THE GAMMA CAMERA SHO ULD BE ALLOWED. THE COPY OF THE LETTER IS ENCLOSED. THE AO ALSO DID NOT MAKE ANY COMMENT ON THE BILLS R ECEIVED AS PAYMENT FOR CUSTOMERS AND MADE A REMARK THAT NO TEST CAN BE CA RRIED OUT FOR COMMERCIAL PURPOSE BY ACCEPTING FEES FROM CUSTOMERS WITH AN E QUIPMENT UNDER TRIAL. ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 4 SUCH COMMENT IS UNCALLED FOR AND REVEALS THE BIASED OF THE AO IN DISALLOWING THE CLAIM OF DEPRECIATION. CONSIDERING THE FACTS AND CIRCUMSTANCES LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND ALSO THE SUBMISSION OF THE LD. A/R. IN THE PRESENT CASE THE APPELLANT COMPANY HAS PURCHASED GAMMA CAMERA FO R RS.1 64 27 449/- ALONG WITH ACCESSORIES FOR RS.2 73 446/- M/S WIPRO GE MEDICAL SYSTEMS PVT. LTD. HAS CONFIRMED VIDE ITS LETTER DATED 17.12.2007 THAT THE INSTALLATION OF THE UNIT WAS COMPLETED ON 14.03.2005 AND HANDED OVER TO THE APPELLANT FOR NORMAL PATIENT SCANS. HOWEVER THE AO IS OF THE VIEW THAT THE INSTALLATION OF THE UNIT WAS COMPLETED ON 03.05.2006 AS THE INSTALLATION COM PLETION AND ACCEPTANCE REPORT WAS SIGNED ON 05.05.2005 AND THE WARRANTY FO R THE UNIT EXPIRED ON 03.05.2006. ACCORDINGLY THE AO DID NOT ALLOW THE D EPRECIATION ON THE SAID UNIT. THE LD. A/R EXPLAINED THAT IN THE SAID INSTAL LATION COMPLETION AND ACCEPTANCE REPORT THE APPELLANT HAS MADE THE FOLLO WING REMARK:- AS INSTALLATION SCHEDULE WAS FOR 7 TH MARCH 05 WE HAVE LOST FULL 7 DAYS WORKING REVENUE LOSS. AS THERE WERE DELAY IN H AND OVER OF CAMERA FOR PATIENT TRIALS. THE LD. A/R HAS ALSO EXPLAINED THAT AS PER THE SAID REPORT THE INSTALLATION STARTED ON 26.02.2005 AND COMPLETED ON 14.03.2005. THE LD. A/R HAS ALSO CLARIFIED THAT THE MACHINE WAS PUT TO USE DURING TH E F.Y 2004-05. THE LD. A/R HAS ALSO RELIED ON THE DECISION OF THE HON'BLE DELH I HIGH COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION VS. CIT ITR NO. 43-44/1998 (DATE OF DECISION ; 15/10/2012) WHEREIN IT HAS BEEN HELD THA T THE MACHINES KEPT READY FOR USE THOUGH NOT USED WOULD BE ELIGIBLE FOR DEPR ECIATION. CONSIDERING THE FACTS I AM OF THE OPINION THAT THE INSTALLATION OF THE UNIT WAS COMPLETED ON 14/03/2005 AND IT WAS ALSO PUT TO USE DURING F.Y 20 04-05. ACCORDINGLY THE AO IS DIRECTED TO ALLOW DEPRECIATION ON THE SAID UNIT. THIS GROUND OF APPEAL IS ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 6. LD. DR BEFORE US SUBMITTED THAT AS PER SERVICE R EPORT THE MACHINE WAS HANDED OVER FOR ITS COMMERCIAL USE ON 03.03.2005 AND BESID ES THE WARRANTY OF MACHINE BEGAN FROM THE SAME DATE. THEREFORE THE DEPRECIATION SHOU LD NOT BE ALLOWED. IN THIS CONNECTION HE RELIED IN THE FOLLOWING JUDGMENTS:- 1) SPONGE IRON INDIA LTD. V. DCIT (2010) 40 SOT 139 (HYD) ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 5 2) ORIENT COSMETICS LTD. V. DCIT (2000) 74 ITD 135 (MAD) 3) CIT VS. SURAMA TUBES (P) LTD. (1993) 201 ITR 124 (CAL) ON THE OTHER HAND LD. AR BEFORE US FILED PAPER BOO K COMPRISING PAGES FROM 1 TO 21 AND SUBMITTED THE TRIAL PROCESS OF THE MACHINES STA RTED WITH EFFECT FROM 15.03.2004. THE ASSESSEE IN SUPPORT OF ITS CLAIM HAS SUBMITTED THE TEST REPORT FOR USING MACHINE WHICH IS PLACED ON PAGE 7 OF THE PAPER BOOK. LD. AR FURTHER SUBMITTED THE MACHINE WAS READY TO USE FOR COMMERCIAL PRODUCTION AFTER TH E AFORESAID TRIAL RUN. HE ALSO RELIED ON THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID F ACTS WE FIND THAT AO HAS DISALLOWED THE DEPRECIATION CLAIMED BY ASSESSEE ON THE GROUND THAT MACHINE HAS NOT BEEN PUT TO USE IN THE YEAR UNDER CONSIDERATION. HO WEVER FROM THE SUBMISSION WE FIND THAT MACHINE WAS READY TO USE IN THE YEAR UNDE R CONSIDERATION ON 15.03.2004 AS EVIDENT FROM THE TESTING REPORT WHICH IS PLACED ON PAGE 7 OF THE PAPER BOOK. IN SIMILAR FACTS AND CIRCUMSTANCES SEVERAL COURTS HAVE DECIDE D THIS ISSUE IN FAVOUR OF ASSESSEE. IN HOLDING SO WE FIND SUPPORT FROM THE JUDGMENT OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. UNION CARBIDE (I) LTD. 254 ITR 0488. THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED BELOW. DEPRECIATION/INVESTMENT ALLOWANCEUSER FOR BUSINESS TRIAL PRODUCTION ONCE IT IS SHOWN THAT THE ASSESSEE HAS PUT THE MACH INERY TO USE FOR THE PURPOSE OF ITS BUSINESS FURTHER ENQUIRY ABOUT THE DEGREE O R TYPE OF USE IS NOT PERMITTED BY THE LANGUAGE OF S. 32ONCE THE ASSESSEE CAN ESTA BLISH BONA FIDE USE OF MACHINERY FOR THE PURPOSE OF ITS BUSINESS THE ASSE SSEE ESTABLISHES ITS RIGHT TO CLAIM DEPRECIATIONAS REGARDS INVESTMENT ALLOWANCE S. 32A INTER ALIA REQUIRES THAT THE MACHINERY OR PLANT IN QUESTION 'I S WHOLLY USED FOR THE PURPOSES OF THE BUSINESS'IT WAS WITH THE PURPOSE O F ITS BUSINESS THAT THE ASSESSEE USED THE MACHINERY FOR TRIAL PRODUCTIONTH US TRIAL PRODUCTION WAS QUITE SUFFICIENT TO CLAIM BOTH DEPRECIATION AND INV ESTMENT ALLOWANCE WE ALSO FIND THAT IN COURSE OF ARGUMENT LD. DR CITE D TWO CASE LAW OUT OF WHICH ONE OF HONBLE TRIBUNALS AND OTHER IS JUDGMENT OF THE H ONBLE JURISDICTIONAL HIGH COURT WHICH WAS BASED ON INVESTMENT ALLOWANCES U/S 32A AN D ADDITIONAL DEPRECIATION U/S 32 ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 6 OF THE ACT AND AGAIN IT WAS DECIDED IN FAVOUR OF AS SESSEE. IN VIEW OF THE AFORESAID FACTS AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICI AL PRECEDENTS RELIED UPON HEREINABOVE WE FIND NO INFIRMITY IN THE ORDER PASS ED BY THE LD. CIT(A) IN THIS REGARD AND ACCORDINGLY THE INTER-CONNECTED ISSUES RAISED BY REVENUE IS DISMISSED. 8. THE SECOND ISSUE RAISED BY REVENUE IN THIS APPEA L IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER FOR 2 89 436/- AND RS. 30 375/- ON ACCOUNT OF INTERESTED ON THE BORROWED FUND AND MANAGEMENT FEES. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - THAT THE CIT(A) HAD ERRED IN LAW AS WELL AS IN FACT IN DELETING THE DISALLOWANCE OF INTEREST ON BORROWED CAPITAL TO THE TUNE OF RS.2 89 436/- AND MANAGEMENT FEES TO THE TUNE OF RS.30 375/- WITHOUT CONSIDERING THE FACT THAT THE MACHINERY PURCHASED OUT OF THAT BORROWED FUND WAS NOT PUT TO USE DURING THE F.Y 2004- 05. THAT THE CIT(A) HAD ERRED IN LAW AS WELL AS IN FACT IN DELETING THE DISALLOWANCE OF INTEREST ON BORROWED CAPITAL TO THE TUNE OF RS.2 89 436/- AND MANAGEMENT FEES TO THE TUNE OF RS.30 375/- WITHOUT CONSIDERING THE STATUTORY PROVISION OF SEC. 36(1)(III) OF THE IT ACT 1961 WHEREIN IT HAS BEEN CLEARLY MENTIONED THAT INTEREST PAID ON BORROWED CAPITAL SHALL NOT BE ALLO WED FOR ANY PERIOD FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUIRIN G ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE. THE ASSESSEE PURCHASED MACHINERIES OUT OF BORROWED FUND AND CLAIMED INTEREST EXPENSE FOR 2 89 436/- ON THE BORROWED CAPITAL BY DEBITING THE PROFIT AND LOSS A/C. SIMILARLY ASSESSEE HAS INCURRED A SUM OF 30 375/- AS MANAGEMENT CONSULTATION FEES IN THE CONNECTION OF AFORESAID MACHINE BY DEBITING PROFIT AND LOSS A/C. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDING OBSERVED THAT THE INSTALLATION PROCESS FOR THE MACHINE WAS COMPLETED ON 14.03.2005 BUT IT FUNCTIONALLY STARTED ON 03.05.2005. SUCH OBSERVATION OF THE AO WAS BASED ON THE HANDING/ TAKING OVER REPORT GIVEN BY THE MACHINE SUPPLIER. THE AO FURTHER OBSER VED THAT WARRANTY PERIOD OF THE SAID MACHINES STARTED WITH EFFECT FROM 03.05.2005. ON QUESTION BY THE AO FOR DISALLOWING THE AFORESAID SUM ON THE GROUND OF NOT PUTTING THE MACHINE INTO USE IN THE YEAR UNDER CONSIDERATION THE ASSESSEE COULD NOT MA KE ANY SATISFACTORY REPLY. ACCORDINGLY THE AO OPINED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE INTEREST AND ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 7 MANAGEMENT CONSULTATION FEES IN THE YEAR UNDER CONS IDERATION AND ACCORDINGLY DISALLOWED THE AFORESAID EXPENSE AND ADDED BACK TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). IT WAS SUBMITTED BY ASSESSEE BEFORE THE LD. CIT(A) THAT THE DISALLOW ANCE WAS BASED ON THE SUSPICION THAT THE GAMMA CAMERA AND THE ACCESSORIES WERE NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION. FROM THE DOCUMENTS SUBMITTED UNDER G R. NO.1 IT IS APPARENT THAT THE SAID EQUIPMENT WAS UNDOUBTEDLY PUT TO USE ON AND FR OM 14.03.2005. THE SUSPICION OF THE AO THAT THE MACHINES WERE UNDER TRIAL IS UNFOUN DED AND IN CONTRADICTION TO THE DOCUMENTARY EVIDENCE IN RESPECT OF THE SAID INSTALL ATION. THE ACCEPTANCE REPORT AND THE CONFIRMATION ON BEHALF OF THE SELLER SPEAKS UNE QUIVOCALLY THAT THE MACHINE WAS IN WORKABLE CONDITION FROM 14.3.2005 AND UNDER NO CIRC UMSTANCES IT MAY BE SAID THAT IT WAS UNDER TRIAL. THIS IS BECAUSE OF THE SIMPLE REAS ON THAT NO CUSTOMER WOULD ACCEPT THE REPORT FROM UNDER TRIAL MACHINE AT REASONABLY H IGH COST. SUCH REPORT MAY BE FAULTY AND UNACCEPTABLE. SO WHATEVER THE AO CONCLUDED WAS NOT BASED ON FACT BUT WAS ON THE BASIS OF HIS SURMISE AND CONJECTURE. IT IS THER EFORE PRAYED THAT THE ADDITION OF RS.3 19 8111/- (INTEREST RS.2 89 436 + RS.30 375) M AY KINDLY BE DELETED. CONSIDERING THE FACTS AND CIRCUMSTANCES LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 3.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER IN THE AM ORDER AND ALSO THE SUBMISSION OF THE LD. A/R. AT PARA 2.3 IT HAS BEEN HELD THAT THE SAID UNIT WAS INSTALLED WITHIN 14.03.2005 AND ALSO PUT TO USE DURING FY 2004-05. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITION ON ACCOUNT OF 9I) INTEREST OF RS.2 89 436/- AND (II) MANAGEMENT F EES OF RS.330 375/- IN RESPECT TO THE SAID UNIT. THIS GROUND OF APPEAL IS ALLOWED . BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. LD. DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AS WE HAVE ALREADY D ECIDED THE FIRST GROUND OF APPEAL OF THE REVENUE IN FAVOUR OF ASSESSEE BY OBSERVING T HAT THE IMPUGNED MACHINERIES ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 8 WERE ENTITLED FOR THE DEPRECIATION IN THE YEAR UNDE R CONSIDERATION. FOLLOWING THE SAME ANALOGY WE DO NOT FIND ANY REASON TO INTERFERE IN T HE ORDER OF LD. CIT(A) AND ACCORDINGLY THE INTER-CONNECTED ISSUES RAISED BY R EVENUE IS DISMISSED. 11. NEXT ISSUE RAISED BY REVENUE IN ITS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR 5 56 950/- ON ACCOUNT OF EXPENSE INCURRED ON REPAI R AND MAINTENANCE. FOR THIS REVENUE HAS RAISED FOLLO WING GROUNDS:- THAT THE CIT(A) HAD ERRED IN LAW AS WELL AS IN FAC T IN DELETING THE DISALLOWANCE OF CLAIM OF THE ASSESSEE FOR REPAIR AN D MAINTENANCE TO THE TUNE OF RS.5 56 950/- WITHOUT CONSIDERING THE FACT THAT SUC H EXPENSES WAS IN RELATION TO INSTALLATION OF A CAPITAL ASSET AND WOULD FETCH LON G TERM ENDURING BENEFIT TO THE ASSESSEE HENCE SHOULD BE TREATED AS CAPITAL EXPENS ES. 12. THE ASSESSEE HAS INCURRED REPAIR EXPENSE ON THE BUILDING FOR 5 56 950/- WHICH WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT OF ASSES SEE. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE REPAIR EXPENS E HAS BEEN INCURRED IN THIS CONNECTION BUILDING / ROOM WHERE THE NEW MACHINERY HAS TO BE INSTALLED. THEREFORE THE AO TREATED THE SAME AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 13. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE REPAIR EXPENSE HAS BEEN INCURRED ON A RENTAL PREMISES AND THEREFORE SUCH EXPENSE CANNOT FETCH AN Y LONG TERM ENDURING BENEFIT. THE MOMENT ASSESSEE WILL VACATE THE PREMISE AND ALL TH E EXPENSES WILL HAVE NO BENEFIT TO ASSESSEE. THE LD. CIT(A) CONSIDERING THE SAME DELE TED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND ALSO THE SUBMISSION OF THE LD. A/R. THE LD. A/R HAS EXPLAINED THAT THE AO DID NOT TAKE IN COGNIZANCE OF THE FACT THAT THE PREMISES USED BY THE APPELLANT IS A RENTED PREMISES AND AS S UCH REPAIRING PANELING CANNOT FETCH ANY LONG TERM ENDURING BENEFIT TO THE APPELLANT. THE LD. A/R HAS ALSO RELIED ON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. J.K. INDUSTRIES PVT. LTD. [1980] 125 ITR 21 8 (CAL) WHEREIN IT HAS BEEN HELD THAT WOODEN PANELING IS NOT AN ENDURING ASSET. THE LD. A/R HAS ALSO RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. HI ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 9 LINE PINS (P) LTD (2008) 306 ITR 182 WHEREIN IT HAS BEEN HELD THAT EXPENDITURE ON REPAIRS AND RENOVATION OF RENTED PREMISES WOULD FALL WITHIN THE EXPRESSION REPAIRS TO THE PREMISES AS APPEARING IN SECTION 30(A0(I). CONSIDERING THE FACTS OF THE CASE THE A.O IS DIRECTED TO TREAT THE AMOUNT OF RS.5 56 950/- AS REPAIRS U/S. 30(A)(IA) INSTEAD OF TREATING IT CAPIT AL EXPENDITURE. THIS GROUND OF APPEAL IS ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 14. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. AT THE OUTSET WE FIND THAT ASS ESSEE WAS ADMITTEDLY RUNNING ITS BUSINESS FROM RENTED PREMISES AND REPAIR EXPENSES W ERE INCURRED IN THE RENTED PREMISES ONLY. IN SUCH CIRCUMSTANCES VARIOUS COURT S HAVE DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE. IN HOLDING SO WE FIND SUPPORT FROM THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DEWARS GARAGE (I) PVT. LTD. 204 ITR 763(CAL). THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED BELOW. BUSINESS EXPENDITURECAPITAL VIS--VIS REVENUE EXP ENDITURE EXPENDITURE INCURRED IN REPAIR OF RENTED PREMISES TO WARD OFF DEMOLITION NOTICEALLOWABLE AS REVENUE EXPENDITURE EVEN IF LAR GE IN VIEW OF THE AFORESAID FACTS AND RESPECTFULLY FOL LOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE WE FIND NO INFI RMITY IN THE ORDER PASSED BY THE LD. CIT(A) IN THIS REGARD AND ACCORDINGLY THE ISSU E RAISED BY REVENUE IS DISMISSED. 15. THE LAST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE UNABSORBED DEPRECIATI ON FOR THE AY 1996-97 TO BE CARRIED FORWARD THOUGH IT WAS LAWFULLY ALLOWED TILL AY 2004-05. FOR THIS REVENUE HAS RAISED FOLLOWING GROUNDS:- THAT THE CIT(A) HAD ERRED IN LAW AS WELL AS IN FAC T IN DIRECTING TO ALLOW THE UNABSORBED DEPRECIATION LOSS FOR THE AY 1996-97 WIT HOUT CONSIDERING THE FACT THAT THE SAME WAS SUPPOSED TO BE CARRIED FORWARD FO R EIGHT YEARS IMMEDIATELY SUCCEEDING THE AY 3004-05. SO THE CLAIM TO SET OFF LOSS FOR A.Y 1996-97 IN A.Y 2005-06 WAS NOT TENABLE. THE AO DID NOT ALLOW THE UNABSORBED DEPRECIATION PE RTAINING TO THE AY 1996-97 TO BE CARRIED FORWARD IN THE YEAR UNDER CONSIDERATION ON THE GROUND THAT THE UNABSORBED ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 10 DEPRECIATION CAN BE CARRIED FORWARD ONLY UPTO 8 AYS WHICH HAVE BEEN LAPSED IN THE ASSESSMENT YEAR 2004-05. 16. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT UNABSORBED DEPRECI ATION CAN BE SET OFF AGAINST ANY INCOME OF THE SUBSEQUENT YEARS. THE LD. CIT(A) CALL ED FOR THE REMAND REPORT FROM THE AO ON THE SUBMISSION OF THE ASSESSEE BUT THE AO FAI LED TO COMPLY THE DIRECTION OF THE LD. CIT(A). ACCORDINGLY THE LD. CIT(A) GRANTED THE RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER:- 6.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD A/R. THE COPIES OF THE APPELLANTS SUBMISSION AND THE ADDITIONAL GROUN D OF APPEAL WERE FORWARDED TO THE AO VIDE LETTER NO. CIT(A)-XXIV/37( 3)/A.NO.92/12-13/1338 DATED 21.12.2012. THE AO HAS INFORMED VIDE HIS LETT ER NO. ITO/WD- 8(2)/KOL/2012-13/APPEAL/111 DATED 04.01.2013 THAT H E WOULD SUBMIT A REPORT WITHIN 15 DAYS. HOWEVER HE HAS NOT SUBMITTED ANY R EPORT TILL TODAY. IN THE CASE OF JUTE CORPORATION OF INDIA LTD. REPORTED IN 187 ITR 688 THE HON'BLE SUPREME COURT HAS HELD THAT THE APPELLATE AUTHORITY HAS ALL THE PLENARY POWER WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MAT TER. THERE IS NO GOOD REASON TO JUSTIFY THE CURTAILMENT OF THE POWERS OF THE APPELLATE AUTHORITY IN ENTERTAINING THE ADDITIONAL GROUNDS OF APPEAL. THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE APPELLANT FOR SETTING OFF THE UNABSORB ED DEPRECIATIONS OF RS.60 59 142/- AND RS.30 32 349/- FOR AY 1996-97 AN D AY 2004-05 RESPECTIVELY AFTER VERIFYING THE CORRECTNESS OF THE CLAIMS FROM THE RETURNS OF INCOME AS WELL AS THE ASSESSMENT RECORDS IN ACCORDANCE WITH THE P ROVISION OF SECTION 32. FOR STATISTICAL PURPOSE THIS GROUND OF APPEAL IS ALLOW ED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 17. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. AT THE OUTSET WE FIND THAT ASS ESSEE ISSUE OF THE ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F HONBLE HIGH COURT OF GUJARAT IN THE CASE GENERAL MOTORS INDIA (P) LTD. VS. DCIT 354 ITR 244. THE RELEVANT OPERATIVE PORTION OF THE SAID JUDGMENT IS REPRODUCED BELOW:- DEPRECIATIONCARRY FORWARD AND SETTING OFF OF UNAB SORBED DEPRECIATION EFFECT OF AMENDMENT OF SECTION 32 BY FINANCE ACT 20 01ISSUE WAS WHETHER UNABSORBED DEPRECIATION PERTAINING TO A.Y. 199798 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY FINANCE ACT 20 01HELD CIRCULAR ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 11 NO.14 OF 2001 CLARIFIED THAT RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH UNABSORBED DEPRECIATION FROM A.Y.199798 CAN BE CARRIED FORWAR D AND SET OFF AGAINST INCOME OF A.Y. 200607ASSESSEES APPEAL ALLOWED. ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSE E ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT 2001 AND NOT BY TH E PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD TH E INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPRECIATI ON ALLOWANCE WORKED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMEN T YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY FINANCE ACT 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER IT DOES NOT CONT AIN ANY SUCH PROVISION. THEREFORE THE PROVISIONS OF SECTION 32(2) AS AMEND ED BY FINANCE ACT 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE A VAILABLE IN THE A.Y. 1997-98 1999-2000 2000-01 AND 2001-02 TO BE CARRI ED FORWARD TO THE SUCCEEDING YEARS AND IF ANY UNABSORBED DEPRECIATIO N OR PART THEREOF COULD NOT BE SET OFF TILL THE A.Y. 2002-03 THEN IT WOULD BE C ARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. CURRENT DEPRECIATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS THEN SUCH EXCESS COMES FOR ABSORPTIO N FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS IF ANY CARRIE D ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER THAT BECOMES DEDUC TIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INC OME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER IT IS TO B E TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR A ND IS DEEMED AS PART THEREOF. IF HOWEVER THERE IS NO CURRENT DEPRECIAT ION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATIO N ALLOWANCE FOR SUCH SUCCEEDING YEAR. THUS ANY UNABSORBED DEPRECIATION A VAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEA LT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINAN CE ACT 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTI ON OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO THE A .Y.2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME P ART THEREOF IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMEN DED BY FINANCE ACT 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AG AINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. UNABSORBED DEPRECIATION FROM A.Y.1997-98 CAN BE CAR RIED FORWARD AND SET OFF AGAINST INCOME OF A.Y. 2006-07 ITA NO.2259/KOL/2013 A.Y.2005-06 ITO WD-8(2) KOL. VS. M/S CALCUTTA MEDICAL IMAGING INSTITUTE LTD. PAGE 12 IN VIEW OF THE AFORESAID FACTS AND RESPECTFULLY FOL LOWING THE VARIOUS JUDICIAL PRECEDENTS DELINEATED HEREINABOVE WE FIND NO INFIR MITY IN THE ORDER PASSED BY THE LD. CIT(A) IN THIS REGARD AND ACCORDINGLY THE INTER-CO NNECTED ISSUES RAISED BY REVENUE IS DISMISSED. 18. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21/10/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP SR.P.S ! - 21/10/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-8(2) P-7 CHOWRINGHEE SQUARE AAYAKAR BHAWAN 5 TH FLOOR ROOM-11 KOLKATA-71 2. /RESPONDENT-M/SCALCUTTA MEDICAL IMAGING INSTITUTELT D. 54 J.N.ROAD KOL-71 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# '# / DR ITAT KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ /TRUE COPY/ / '#