DCIT, Cir. 3(2),, Ahmedabad v. M/s. Indo German Tool Room,, Ahmedabad

ITA 2267/AHD/2017 | 2014-2015
Pronouncement Date: 14-11-2019 | Result: Dismissed

Appeal Details

RSA Number 226720514 RSA 2017
Assessee PAN LROOM5003T
Bench Ahmedabad
Appeal Number ITA 2267/AHD/2017
Duration Of Justice 2 year(s) 1 month(s) 3 day(s)
Appellant DCIT, Cir. 3(2),, Ahmedabad
Respondent M/s. Indo German Tool Room,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2019
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 14-11-2019
Date Of Final Hearing 16-10-2019
Next Hearing Date 16-10-2019
Last Hearing Date 11-07-2019
First Hearing Date 11-07-2019
Assessment Year 2014-2015
Appeal Filed On 11-10-2017
Judgment Text
C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD JUDICIAL MEMBER ./ I.T.A. NO. 2267/AHD/2017 ( ASSESSMENT YEAR : 2014-15) DCIT CIRCLE 3(2) AHMEDABAD / VS. M/S. INDO GERMAN TOOL ROOM 5003 TO 5009 GIDC VATVA PHASE IV AHMEDABAD 382445 ./ ./ PAN/GIR NO. : AAAJI0033P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LALIT P. JAIN SR. D.R. / RESPONDENT BY : SHRI CHIRAG R. SHAH A.R. DATE OF HEARING 16/10/2019 !'# / DATE OF PRONOUNCEMENT 14/11/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3 AHMEDABAD (CIT(A) IN SHORT) DATED 08.08.2017 ARIS ING IN THE ASSESSMENT ORDER DATED 26.08.2016 PASSED BY THE ASSESSING OFFI CER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT 1961 (THE ACT) CONCER NING AY 2014-15. ITA NO.2267/AHD/17 [DCIT VS. M/S. INDO GERMAN TOOL ROOM] A.Y. 2014-15 - 2 - 2. AS PER ITS GROUNDS OF APPEAL THE REVENUE HAS AS SAILED THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIA TION OF RS.2 88 35 952/- ON MACHINERIES. 3. WHEN THE MATTER WAS CALLED FOR HEARING THE LE ARNED DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO. 4. THE LEARNED AR FOR THE ASSESSEE ON THE OTHER HA ND RELIED UPON THE ORDER OF THE CIT(A). IT WAS FURTHER POINTED OUT TH AT IDENTICAL ISSUE HAS BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE IN EARLI ER ASSESSMENT YEAR VIDE CO-ORDINATE BENCH OF TRIBUNAL IN ITA NOS. 78 & 79/AHD/2014 ORDER DATED 01.05.2017 AND ITA NOS. 3335 & 3336/AHD/2015 ORDER DATED 21.02.2018. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE SOLITARY ISSUE CONCERNS ELIG IBILITY OF DEPRECIATION OF VARIOUS ASSETS AMOUNTING TO RS. 2 88 35 952/-. THE CLAIM OF DEPRECIATION WAS DISALLOWED BY THE AO ON THE PREMISE THAT THE AS SESSEE IS RECEIVING GRANTS FROM THE GOVERNMENT OF INDIA STATE GOVERNME NT AND THE GERMAN GOVERNMENT FOR THE PURPOSES OF PURCHASE OF LAND BU ILDING INFRASTRUCTURE AND RECURRING COSTS. IT IS THE CASE OF THE AO THAT IN VIEW OF GRANTS RECEIVED NO COST HAS BEEN INCURRED BY THE ASSESSEE FOR ITS ACQUISITION AND CONSEQUENTLY ACQUISITION COST IS NIL AND THUS QUE STION OF DEPRECIATION DOES NOT ARISE. THE ASSESSEE ON THE OTHER HAND CLAIMS T HAT IT IS A SOCIETY AND ITS PROMOTERS ARE GOVERNMENT OF INDIA GERMAN GOVERNMEN T AND GOVERNMENT OF INDIA. THE OBJECTIVE OF THE SOCIETY IS TO PROVI DE THE NECESSARY BASIC INFRASTRUCTURE TO THE SMALL AND MEDIUM PURCHASE ON NO PROFIT/LOSS BASIS AND TRAINING BASIS TO STUDENTS THROUGH SELF-EMPLOYMENT COURSES. THE RESPECTIVE GOVERNMENTS IN THEIR CAPACITY AS PROMOTERS HAVE CON TRIBUTED THE CAPITAL OF HIS SOCIETY. FIXED ASSETS WERE PURCHASED OUT OF CA PITAL SO CONTRIBUTED. APPLYING COMMON BUSINESS PERSPECTIVE AND TO ARRIVE AT A TRUE PICTURE OF THE BUSINESS IT IS NECESSARY THAT THE ASSESSEE HAS TWO ACCOUNTS FOR ALL THE RECEIPTS INCLUDING REVENUE CONTRIBUTION BY THE PROM OTERS IN THE INCOME OF THE SOCIETY AND SIMULTANEOUSLY DEDUCT ALL INCIDENTA L EXPENSES INCURRED BY THE SOCIETY INCLUDING DEPRECIATION ALLOWANCE ELIGIB LE TO IT TO ARRIVE AT ITA NO.2267/AHD/17 [DCIT VS. M/S. INDO GERMAN TOOL ROOM] A.Y. 2014-15 - 3 - SURPLUS/DEFICIT FOR THE YEAR ON SUCH BROAD FACTS. THE CIT(A) HAS ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE IN FOLLOWING TERMS: 3.2 DECISION: AFTER CAREFULLY CONSIDERING THE ASSESSMENT ORDER & THE SUBMISSION OF THE APPELLANT I FIND THAT THE FACTS O F THE CASE ARE IDENTICAL TO ITS SISTER UNIT AT INDORE. THE THREE INDO GERMAN TOOL ROOMS WERE SET UP IN M.P. MAHARASHTRA AND GUJARAT WITH IDENTICAL MEM ORANDUM OF ASSOCIATION AND IDENTICAL RULES AND REGULATIONS. FO R THE PURPOSE OF IT. ACT THEY ARE INDEPENDENT DISTINGUISHABLE ENTITIES HOWEVER THEIR OPERATIONS ARE IDENTICAL. THE DECISION OF HON'BLE I TAT INDORE BENCH IN THE CASE OF INDO GERMAN TOOL ROOM INDORE IS ON IDE NTICAL FACTS AND I DO NOT AGREE WITH THE CONTENTIONS OF THE A.O. THAT IN THE CASE OF INDORE UNIT THE ASSETS HAVE BEEN ACQUIRED BY UTILIZING GOVERNME NT FUNDS AS WELL AS OWN FUNDS WHEREAS IN THE CASE OF THE APPELLANT THE FACTS ARE DIFFERENT. THE CONTRIBUTIONS FOR VARIOUS ASSETS ARE BEING MADE TO CERTAIN EXTENT BY THE VARIOUS PROMOTING PARTIES I.E. GOVERNMENT OF INDIA GOVERNMENT OF GERMANY AND GOVT. OF GUJARAT. IN ADDITION THE APPE LLANT IS ALSO EARNING BY WAY OF FEES RECEIVED FROM THE STUDENTS. THE MEMO RANDUM OF ASSOCIATION IN CLAUSE-49 DEALS WITH FUNDING OF THE SOCIETY WHICH INCLUDES GRANTS MADE BY THE RESPECTIVE GOVERNMENTS DONATION S LOANS AND GRANTS INCOME FROM INVESTMENTS AND SAVINGS RECEIPT FROM T RAINEES AND FROM VARIOUS OTHER SERVICES ETC. I AGREE WITH THE CONTENTIONS OF THE APPELLANT THAT WHAT HAS BEEN PROVIDED BY THE VARIOUS GOVERNMENTS ARE IN THE NATU RE OF PROMOTERS CONTRIBUTION AND HAVE BEEN DULY REFLECTED SO IN THE BALANCE SHEET OF THE APPELLANT. APPLICABILITY OF EXPLANATION-10 TO SEC.4 3 WILL COME INTO PICTURE ONLY WHEN THE RECEIPTS ARE IN THE FORM OF SUBSIDY. THE HON'BLE IT AT WHILE DEALING WITH THE CASE OF IN DO GERMAN TOOL ROOM INDORE ON IDENTICAL FACTS HAS DELETED THE DISA LLOWANCE OF DEPRECIATION CLAIM MADE BY THE A 0. BY INVOKING EXP LANATION-10 OF SEC.43 OF THE I.T. ACT. THE HON'BLE BENCH OBSERVED AS UNDE R :- WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND DELIBERATED ON THE CASE LAWS CITED BY THE LD. AUTHO RIZED REPRESENTATIVE IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. IN THE I NSTANT CASE THE ASSESSEE BEING A SOCIETY SET UP BY THE GOVERNMENT OF INDIA FOR CARRYING ON ACTIVITY OF PROVIDING TECHNICAL AND CONSULTANCY SERVICES FOR SMALL SCALE UNITS. IT GOT GOVERNMENT GRANT TOWARDS CAPITAL FUNDS. BY UTIL IZING THESE FUNDS AND ITS OWN CAPITA/ IT ACQUIRED PLANT AND MACHINERY AN D BUILDING. WHILE ALLOWING ASSESSESS CLAIM FOR DEPRECIATION ON SUCH PLANT AND MACHINERY AND BUILDING THE AO. REDUCED THE ACTUAL COST BY TH E AMOUNT OF GRANT AFTER APPLYING EXPLANATION 10 TO SECTION 43. HON'BLE SUPR EME COURT IN THE CASE OF P.J. CHEMICALS (SUPRA) HAS ELABORATELY DEALT WIT H SUCH A SITUATION AND OBSERVED THAT WHERE GOVERNMENT SUBSIDY IS INTENDED AS AN INCENTIVE TO ENCOURAGE ENTREPRENEURS THE SAME IS NOT A PAYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL COST. THE EXPRESS ION 'ACTUAL COST' IN SECTION 43(1) OF THE INCOME-TAX ACT. 1961 IS TO BE INTERPRETED LIBERALLY. ACCORDINGLY SUCH SUBSIDY DOES NOT PAR-TAKE ALL THE INCIDENTS WHICH ATTRACTS THE CONDITION FOR ITS DEDUCIBILITY FROM '' ACTUAL COST'. IT WAS THEREFORE HELD THAT AMOUNT OF SUBSIDY IS NOT LIABL E FOR TO BE DEDUCTED FROM THE ACTUAL COST U/S 43(1) FOR THE PURPOSE OF C ALCULATION OF ITA NO.2267/AHD/17 [DCIT VS. M/S. INDO GERMAN TOOL ROOM] A.Y. 2014-15 - 4 - DEPRECIATION RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW AS LAID DOWN BY THE HON'BLE SUPREME COURT AND THEREAFTER BY VARIOUS COURTS AS NARRATED ABOVE WE DO NOT FIND ANY MERIT IN THE ACTION OF TH E LOWER AUTHORITIES FOR REDUCING THE AMOUNT OF GOVERNMENT GRANT FROM THE AC TUAL COST OF PLANT AND MACHINERY AND BUILDING FOR THE PURPOSE OF ALLOW ING ASSESSEE'S CLAIM FOR DEPRECIATION. ACCORDINGLY WE REVERSE THE ORDER OF LOWER AUTHORITIES AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE.' APART FROM ABOVE MOST IMPORTANTLY RECENTLY AHMEDABA D TRIBUNAL IN APPELLANTS OWN CASE HAS DISMISSED THE DEPARTMENT AP PEAL FOR A.Y 2007-08 & 2008-09 ON THE VERY SAME DEPRECIATION ISSUE BY OB SERVING AS UNDER: 8. WITH THE ASSISTANCE OF THE ID. OR WE HAVE GONE THROUGH THE RECORD CAREFULLY. SHORT CONTROVERSY INVOLVED IN THE SE APPEALS IS WHETHER THE CONTRIBUTIONS MADE BY THREE GOVERNMENTS VIZ. GOVT. OF INDIA GOVT. OF GUJARAT AND GERMAN GOVERNMENT WAS TO BE TREATED AS A CONTRIBUTION ON BEHALF OF THE PROMOTERS OR IT WAS TO BE TREATED AS A SUBSIDY BY THE GOVERNMENT. ACCORDING TO THE AO LAND ETC. WERE GRANTED BY THE GOVT. OF GUJARAT IS TO BE TREAT ED AS SUBSIDY. WHICH DOES NOT CARRY ANY COST TO THE ASSESSES END THEREFORE IT COULD NOT CLAIM DEPRECIATION. ON THE OTHER HAND TH E ID. CIT(A) POINTED OUT THAT IT WAS ROT SUBSIDY RATHER THESE T HREE GOVERNMENTS HAVE PARTICIPATED FOR CONSTITUTING A SOCIETY AND TH EY HAVE PROVIDED CONTRIBUTION IN THE FORM OF ASSETS/KINDS. THE AO OU GHT TO HAVE APPRECIATED STATUS OF THREE GOVERNMENTS AS OF PROMO TERS AND IN THAT VIEW IT COULD NOT BE CONSTRUED THAT THESE GOVE RNMENTS HAVE GIVEN GRANT TO THE ASSESSEE AS A SUBSIDY. IN OUR OP INION THE LD.AO HAS MISCONSTRUED WHOLE CONSTITUTION OF THE SOCIETY. HE WAS NOT JUSTIFIED TO ASSUME THAT THREE GOVERNMENTS WHO ARE PROMOTERS OF THE SOCIETY HAVE GIVEN SUBSIDY INSTEAD OF CONTRIBUTION FOR ORATION OF THE SOCIETY. HERE THE GOVERNMENTS ARE DOING BUSINESS TH EMSELVES BY CONSTITUTING THE SOCIETY IT IS NOT A BENEFIT GIVEN BY THE GOVERNMENT FOR ANY PARTICULAR ASSESSEE OR CLASS OF ASSESSEES B Y EXERCISING ITS LEGISLATIVE POWERS THE LD.CIT(A) HAS CONSIDERED THI S ASPECT AND THEREFORE ALLOWED THE CLAIM OF THE ASSESSEE. AFTER GOING THROUGH THE ORDER OF THE ID. CIT(A. WE DO NOT FIND ANY ERROR IN IT. IT IS CONFIRMED. APPEALS OF THE REVENUE STAND DISMISSED. 9. IN THE RESULT THE APPEALS OF THE REVENUE ARE DI SMISSED.' FURTHER IT IS WORTHWHILE TO MENTION THAT THE UNDERS IGNED ON THE SIMILAR ISSUE IN APPELLANT'S OWN CASE ON THE BASIS OF ABOVE FINDINGS HAS ALLOWED THE CLAIM OF DEPRECIATION FOR A.Y. 2006-07 A.Y. 2012-13 & 2013- 14. ALSO BY THE COMMISSIONER OF INCOME TAX (APPEALS )-XI IN APPELLANT'S OWN CASE SAME GROUND OF DEPRECIATION DISALLOWANCE H AS BEEN FULLY ALLOWED FOR THE A.Y.2007-08 & 2008-09. FOR A.Y. 200 9-10 2010-11 & 2011-12 ASSESSMENT WAS DONE U/S 143(1). THE FACTS OF THE CASE OF THE APPELLANT BEING IDENTI CAL RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE ITAT INDORE BENCH HONORABLE ITAT AHMEDABAD BENCH AND AFTER CONSIDERING THE DECISION OF C.I.T(A)-XI FOR THE A.Y.2007-08 & 2008-09 AND UNDERSIGNED FOR THE A ..Y. 2006-07 2012- 13 & 2013-14 THE A.O. IS DIRECTED TO DELETE THE DIS ALLOWANCE OF THE CLAIM OF DEPRECIATION MADE IN THE CASE OF THE APPELLANT. THE DISALLOWANCE OF ITA NO.2267/AHD/17 [DCIT VS. M/S. INDO GERMAN TOOL ROOM] A.Y. 2014-15 - 5 - RS.2 88 35 952/- IS HEREBY DELETED. THE SECOND GROU ND OF APPEAL IS ALLOWED . AS CAN BE NOTICED THE CIT(A) HAS APPLIED THE RATIO OF DECISION RENDERED BY CO-ORDINATE BENCH OF ITAT IN ITS OWN CASE CONCERNIN G EARLIER ASSESSMENT YEARS. WE THUS SEE NO PERCEPTIBLE REASON TO RE-VIS IT THE ISSUE ALREADY CONCLUDED. HENCE WE DECLINE TO INTERFERE. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 14/11/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ / CONCERNED CIT 4. - / CIT (A) /. 012 33*+4 *+#4 56) / DR ITAT AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 14/11/2 019