M/s Andhra Farm Chemicals Corpn Ltd,, Kovvur v. The ACIT, Circle-1., Eluru

ITA 24/VIZ/2007 | 1997-1998
Pronouncement Date: 19-01-2010 | Result: Dismissed

Appeal Details

RSA Number 2425314 RSA 2007
Assessee PAN AACFT1038M
Bench Visakhapatnam
Appeal Number ITA 24/VIZ/2007
Duration Of Justice 2 year(s) 11 month(s) 28 day(s)
Appellant M/s Andhra Farm Chemicals Corpn Ltd,, Kovvur
Respondent The ACIT, Circle-1., Eluru
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 19-01-2010
Assessment Year 1997-1998
Appeal Filed On 22-01-2007
Judgment Text
PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 24/VIZAG/2007 ASSESSMENT YEAR: 1997-98 ANDHRA FARM CHEMICALS CORPN. LTD. KOVVURU VS. ACIT CIRCLE-1 ELURU (APPELLANT) (RESPONDENT) PAN NO. AACFT 1038 M APPELLANT BY: SHRI C.V.K. PRASAD ADVOCATE RESPONDENT BY: SHRI SUBRATA SARKAR DR ORDER PER SHRI B R BASKARAN ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14.11.2006 PASSED BY THE LD CIT (A) RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 1997-98. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE GIV ES RISE TO A SINGLE ISSUE VIZ. WHETHER THE NEW BOILER COSTING RS.52.19 LAKHS HAS BEEN PUT TO USE OR NOT BEFORE THE END OF THE YEAR UNDER CONSIDERATION I.E . 31.3.1997. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE PURCHASED FLUID PAC BOILER FROM M/S THERMAX LTD. PUNE VIDE I TS INVOICE DATED 3.7.1996. THE BOILER IS HUSK FIRED MODEL. THE ASSESSEE CLAIM ED THAT THE SAID BOILER WAS PUT TO USE BEFORE 31.3.97 AND ACCORDINGLY CLAIMED DEPRE CIATION @ 100%. HOWEVER THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INCURRED A SUM OF RS.2 16 391/- TOWARDS BOILER SPARE AND ERECTION WOR KS IN THE MONTH OF MARCH 1997. BESIDES THAT THE AO ALSO NOTICED THAT THE MA CHINERY WHICH LOADS THE HUSK INTO THE BOILER VIZ. REDLER CONVEYOR AND VIBRATIN G SCREEN WAS NOT COMMISSIONED BY 20.3.1997. ACCORDING TO THE AO THE ASSESSEE CO ULD NOT PRODUCE ANY EVIDENCE TO SHOW THAT THE HUSK HANDLING CONVEYOR WA S STARTED ANY TIME BETWEEN PAGE 2 OF 7 20.3.97 AND 31.3.97. HENCE THE AO CAME TO THE CONC LUSION THAT THE SAID BOILER COULD NOT HAVE BEEN PUT TO USE ON OR BEFORE 31.3.19 97 AND ACCORDINGLY DISALLOWED THE CLAIM OF DEPRECIATION. THE ASSESSEE GOT RELIEF BEFORE THE LD CIT (A) IN THE FIRST ROUND OF LITIGATION. IN THE APPEA L PREFERRED BY THE REVENUE THE ITAT VISAKHAPATNAM WAS OF THE OPINION THAT THE LD C IT(A) HAS GRANTED RELIEF ON THE BASIS OF HALF HEARTED ENQUIRIES AND ACCORDINGLY SET ASIDE THE MATTER TO THE FILE OF THE LD CIT (A) WITH A DIRECTION TO DECIDE THE IS SUE AFTER VERIFYING THE RECORD ON THE ACTUAL USAGE OF THE BOILER. ACCORDINGLY THE LD CIT (A) RECONSIDERED THE ISSUE AND VIDE HIS ORDER DATED 14.11.2006 CAME TO THE CON CLUSION THAT THE FLUID PAC BOILER WAS NOT PUT TO USE BEFORE THE END OF THE PRE VIOUS YEAR AND HENCE DEPRECIATION IS NOT ALLOWABLE ON IT DURING THE RELE VANT YEAR. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD COUNSEL FOR THE ASSESSEE CARRIED US THROU GH THE VARIOUS PROCEEDINGS OF THE DIRECTOR OF BOILERS PARTICULARL Y PLACED RELIANCE ON THE PROVISIONAL ORDER DATED 27.09.1996 PASSED BY DY. CH IEF INSPECTOR OF BOILERS GRANTING PERMISSION TO USE THE WATER TUBE BOILER T O CONTEND THAT THE IMPUGNED BOILER WAS PUT TO USE DURING THE YEAR UNDER CONSIDE RATION. ON THE OTHER HAND THE LD DR INVITED OUR ATTENTION TO PAGE 7 OF THE ASSESS EE PAPER BOOK WHEREIN A COPY OF THE ORDER DATED 13.02.1997 PASSED BY THE DIRECTO R OF BOILERS HAS BEEN PLACED AND CONTENDED THAT THE DIRECTOR OF BOILERS HAS GRAN TED BOILER REGISTRATION NUMBER ONLY IN FEBRUARY 1997 AND ON THAT DATE THE STEAM TEST WAS NOT CONDUCTED AND HENCE THIS FACT CLEARLY SUGGEST THAT THE BOILER HAS NOT BEEN PUT TO USE BY THAT DATE. LD DR FURTHER SUBMITTED THAT A CO MPANY NAMED M/S DECCAN ENGINEERS WHICH IS IN CHARGE OF SUPPLYING AND ERECT ION OF REDLER CONVEYOR AND VIBRATING SCREEN HAS VIDE HIS LETTER DATED 20.03.1 997 HAS WRITTEN TO THE COMPANY THAT IT COULD NOT UNDERTAKE THE TRIAL RUN O F THE CONVEYOR SYSTEM DUE TO NON AVAILABILITY OF V. PULLEYS AND SPROCKET WHEELS. LD DR FURTHER SUBMITTED THAT THE REDLER CONVEYOR AND VIBRATING SCREEN IS VERY MU CH NECESSARY FOR COMMISSIONING OF THE IMPUGNED BOILER AS THE HUSK WH ICH IS THE MAIN RAW MATERIAL FOR CARRYING OUT BURNING ACTIVITY IN THE B OILER COULD BE TRANSPORTED ONLY THROUGH THIS CONVEYOR SYSTEM. ACCORDINGLY LD DR CO NTENDED THAT SINCE THE HUSK HANDLING CONVEYOR SYSTEM WAS NOT READY BY 20.03.199 7 THE CLAIM OF THE PAGE 3 OF 7 ASSESSEE THAT THE BOILER WAS READY BY SEPTEMBER 19 96 IS PROVED TO BE WRONG. ON THE OTHER HAND THE LD AR CONTENDED THAT THE BOIL ER AT THAT POINT OF TIME WAS OPERATED BY LOADING THE HUSK MANUALLY INTO THE BOIL ER. LD AR ALSO PLACED A COPY OF MANUAL ISSUED BY THE SUPPLIER M/S THERMAX WHICH GIVES THE DETAILS REGARDING THE REGISTRATION OF BOILER. ACCORDING TO PARAGRAPH D.5 OF THE SAID MANUAL THE STEAM TEST COULD BE CONDUCTED ONLY AFTER THE INSTAL LATION OF THE BOILER AND AFTER GETTING THE REGISTRATION NUMBER. ACCORDINGLY LD AR CONTENDED THAT THE IMPUGNED BOILER WAS INSTALLED BEFORE 31.3.1997. 5. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. WE NOTICE THAT THE LD CIT (A) HAS VERIFIED THE FACTUAL MATRIX OF THE ISSUE AND HIS OBSERVATIONS IN THIS REGARD ARE EXTRACTED BELOW: 5. AFTER HEARING THE LEARNED AUTHORIZED REPRESENTA TIVE AND ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCE S RELATING TO THE ISSUE AND THE ALLEGED EVIDENCE THE FOLLOWING OBSERVATIONS MADE AND DECISIONS TAKEN:- I) ADMITTEDLY 100% DEPRECIATION HAD BEEN CLAIMED FOR AN AMOUNT OF RS.55 90 843 COMPRISING OF THE COST OF FL UID P.A.C. BOILER COST OF HUSK HANDLING REDLER CONVEYO R AND VIBRATING SCREEN AND OTHER BROILER SPARES AND EREC TION CHARGES ON THE PLEA OF HAVING INCURRED SUCH EXPENDI TURE BEFORE THE END OF SEPTEMBER 1996. HOWEVER DURING THE FACT FINDING PROCESS IN THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER GAVE A FINDING T HAT THE ASSESSEE HAD INDICATED AN AMOUNT OF RS.2 16 391/- A S REPRESENTING EXPENSES FOR PURCHASES OF BOILER SPARE S AND ERECTION WORKS FOR THE MONTH OF MARCH 1997 AND AL SO THAT M/S DECON ENGINEERS WHO HAD BEEN ASSIGNED THE TASK OF INSTALLATION OF HUSK HANDLING REDLER CONVEYOR AND V IBRATING SCREEN VIDE THEIR LETTER DATED 20-03-1997 ADDRESSE D TO THE ASSESSEE COMPANY HAD COMMUNICATED THAT EVEN THOUGH THEY HAD DULY ERECTED HUSK HANDLING REDLER CONVEYOR AND VIBRATING SCREEN STILL THEY COULD NOT MAKE TRIAL RUNS OF THE SYSTEM SINCE V-PULLEYS AND SPROCK ET WHEELS COULD NOT BE MADE AVAILABLE TO US THEREBY CLEARLY INDICATING THAT THE SAID EXPENDITURES IN CONNECTION WITH THE PURCHASE OF OTHER SPARE PARTS AND ERECTION EXPENSES HAD NOT BEEN INCURRED TILL MARCH 1997. THIS FINDING IT SELF EXPOSED THE WRONGFUL AND ILLEGITIMATE CLAIM OF 100% DEPRECIATION IN RESPECT OF THE COST OF THE MACHINER Y AS WELL AS THE COST OF SPARE PARTS PURCHASED AND ERECTION EXPENSES INCURRED THEREON LONG AFTER THE EXPIRY OF PAGE 4 OF 7 SEPTEMBER 1996 IN AS MUCH AS PRIMA FACIE THERE W AS NO SCOPE FOR FULL DEPRECIATION ON THE ENTIRE EXPENSES CLAIMED. THE THEN LEARNED CIT (APPEALS) RAJAHMUNDRY WHILE ADJUDICATING ON THE ISSUE ALSO CONFIRMED ON THE BA SIS OF ADMISSION ON BEHALF OF THE ASSESSEE THAT HUSK HANDL ING REDLER CONVEYOR AND VIBRATING SCREEN COMMENCED OPERATION ONLY AFTER THE END OF THE RELEVANT PREVIO US YEAR UNDER CONSIDERATION THE FINDING OF THE ASSESSING O FFICER THAT THE HUSK HANDLING REDLER CONVEYOR AND VIBRATIN G SCREEN HAD NOT BEEN INSTALLED DURING THE RELEVANT P REVIOUS YEAR AND THEREFORE LIMITED THE CLAIM OF DEPRECIA TION TO THE VALUE OF ONLY THE BOILER AND NOT THE ALLIED MAC HINERIES ETC. THEREFORE TO BEGIN WITH THE PERCENTAGE OF DEPRECIATION CLAIMED BY THE APPELLANT WAS ILLEGITIM ATELY EXCESSIVE 5.1 IT IS TO BE NOTED HERE THAT THE ASSESSEE PRO DUCED A REGISTER BEFORE THE LD CIT (A) WHICH IS CLAIMED TO BE A RECORD OF GENERAT ION OF ELECTRICAL POWER FROM THE OPERATION OF THE IMPUGNED BOILER. HOWEVER THE LD CIT (A) REFUSED TO ADMIT THE SAME FOR THE REASON THAT THE ASSESSEE DID NOT D EMONSTRATE BEFORE HIM THE MITIGATING CIRCUMSTANCES AND SUFFICIENT CAUSES THAT PREVENTED THE ASSESSEE FROM PRODUCING THE SAME BEFORE THE AO. THE LD CIT (A) AL SO DOUBTED THE VERACITY OF THE SAID REGISTER AND THE RELEVANT OBSERVATIONS OF THE CIT (A) WHICH ARE EXTRACTED BELOW: IN ANY CASE A CAREFUL EXAMINATION OF THE ALLEGED REGISTER INDICATED THE FOLLOWING INFIRMITIES:- A) THE NAME AND DESIGNATION OF THE ALLEGED PERSON RECO RDING THE DATA HAD NOT BEEN MENTIONED B) THE ENTIRE RECORD APPEARS TO HAVE BEEN MADE AT ONE SITTING WITH THE IMPRESSION OF NO CHANGE IN THE COL OUR OF THE INK FOR RECORDING THE ALLEGED ENTRIES. C) THE NOTE BOOK GIVES THE IMPRESSION OF A RECENTLY MANUFACTURED ONE WITH FRESH CRISP PAPERS THEREIN AN D NOT INDICATING ANY ELEMENT OF INHERENT ANTIQUITY. HOWEV ER THE RELEVANT PAGES APPEAR TO HAVE BEEN DUST SMEARED IN ORDER TO PROJECT AN ANTIQUATED LOOK. THEREFORE AS REGARDS THE CREDIBILITY OR LACK OF IT OF THE ALLEGED EVIDENCE IT MAY BE STATED THAT THERE ARE TELL-TALE SIGNS OF MANIPULATION CONCOCTION AND FABRICATION OF AN ALLE GED EVIDENCE WITH THE SOLE INTENTION TO MISLEAD AN APPELLATE AUT HORITY INTO ACCEPTING THE ILLEGITIMATE CLAIM OF DEPRECIATION BY THE APPELLANT. PAGE 5 OF 7 5.2 FINALLY LD CIT(A) HAS CONCLUDED AS UNDER:- THE NATURE OF THE MACHINERY BEING THE HUSK FIRED F LUID PAC BOILER IS SUCH THAT IT IS A HIGH RISK VENTURE IF NOT IMPOSSIBLE TASK TO MAKE IT OPERATIONAL BY USING MAN UAL LABOUR FOR FEEDING THE HUSK AT ITS MOUTH POINT . UPON BEING FED WITH HUSK THE TEMPERATURE AT THE MOUTH POINT N ORMALLY 1000 DEGREES CENTIGRADE WITH FLARES COMING OUT MAKING THE CONTINUOUS MANUAL FEEDING OPERATION ABSOLUTELY RISK Y. IN VIEW OF SUCH REALITY IT IS HIGHLY IMPROBABLE THAT MANUAL L ABOURERS KEPT FEEDING THE BOILER AT ITS MOUTH POINT WITH EXTREME PULL TO THEIR LIVES WITH CERTAIN BURN INJURIES TO THE FACE AND UP PER PARTS OF THE BODY. IT IS PRECISELY FOR THIS REASON THAT SUCH HUS K FIRED BOILERS ARE AIDED BY THE HUSK HANDLING REDLER CONVEYOR AND VIBRATING SCREEN FOR FEEDING HUSK IN A CONTROLLED MANNER AGAI NST EXTREMELY HIGH HEAT CONDITIONS PREVAILING AT THE MOUTH OF THE BOILER. IN PRACTICE IT HAS BEEN OBSERVED THAT EVEN IN MANUFAC TURING UNITS DEPLOYING NOT VERY SOPHISTICATED TECHNOLOGY WOULD HESITATE TO OPERATE SIMILAR BOILERS WITH MANUAL LABOUR WITHOUT THE HUSK HANDLING REDLER CONVEYOR AND VIBRATING SCREEN FOR A PPREHENSION OF FACING HEAVY CASUALITIES AND LOSS OF HUMAN LIVES . EVEN OTHERWISE ALSO THE LABOUR UNIONS WOULD VEHEMENTLY O PPOSE TO ANY PROPOSAL FOR FIRING THE BOILER BY MANUAL FEEDING OF THE HUSK. THEREFORE AS PER THE DOCTRINE OF PREPONDERANCE OF THE PROBABILITIES IN THE BACKGROUND OF THE HIGH RISK IN VOLVED IN MANUAL FEEDING THE CONTENTION OF THE APPELLANT THAT THE B OILER HAD BEEN MADE OPERATIONAL EVEN BEFORE THE HUSK HANDLING REDL ER CONVEYOR AND VIBRATING SCREEN WAS MADE OPERATIONAL EVOKES SH EER SKEPTICISM AND DISBELIEF. 5.3 BEFORE US THE ASSESSEE DID NOT PLACE RELIA NCE UPON THE ELECTRICITY GENERATION REGISTER NOR DID THE ASSESSEE CONTEND T HE OBSERVATIONS OF LD CIT(A) ON THE VERACITY OF THE SAID REGISTER. THE ASSESSEE COULD NOT PRODUCE ANY OTHER EVIDENCE TO PROVE THAT THE BOILER WAS OPERATED MANU ALLY WHICH IS OTHERWISE A VERY MUCH DIFFICULT TASK AS PER THE OBSERVATIONS OF LD CIT(A). 5.4 THE ASSESSEE ALSO RELIED UPON THE FOLLOWING CAS E LAW TO MAKE AN ALTERNATIVE CONTENTION THAT THE DEPRECIATION CAN BE ALLOWED ON MACHINERY EVEN IF IT IS KEPT READY FOR USE AND IT IS NOT NECESSARY TH AT THE MACHINERY SHOULD HAVE BEEN PUT TO USE. I) CIT VS. GEO TECH CONSTRUCTION CORPORATION ( 244 ITR 452 (KER)) II) CIT VS. REFRIGERATORS & ALLIED INDUSTRIES LTD ( 2001) (247 ITR 12 (DEL.) PAGE 6 OF 7 III) SKYLINE ENGINEERING CONTRACTORS VS. DY.CIT-94 TTJ 2 01 (DEL) ITAT DELHI D BENCH (FOLLOWED CIT REFREGERATIONS & ALLIED INDUSTRIES) IV) CIT (A) VS. PREMIER INDUSTRIES INDO LTD. - 170 TAX MAN 407 (MP) V) CIT VS. SOUTHERN PETRO CHEMICALS INDUSTRIES LTD. (2 007) (292 ITR 362 (MAD)-(2008) 301 ITR 225 (MAD) VI) CIT VS. VISWANATH BHASKAR SATHE (1937) (5 ITR 621 ( BOM). VII) CIT VS. VYITHRI PLANTATIONS LTD. (128 ITR 675) (MAD ) HOWEVER THE ALTERNATIVE CONTENTION WAS NOT RAISED BEFORE THE LD CIT(A). IN OUR OPINION THE CASE OF THE DEPARTMENT IS THAT THE MAC HINERY WAS NOT READY FOR OPERATION BEFORE THE END OF THE RELEVANT PREVIOUS Y EAR. WE FIND MERIT IN THE CONTENTION OF THE DEPARTMENT. FROM THE MANUAL SUPP LIED BY M/S THERMAX THE PURPOSE OF STEAM TEST IS STATED AS UNDER:- A STEAM IS PRIMARILY INTENDED FOR THE PURPOSE OF A SCERTAINING BY ACTUAL TEST WHETHER THE SAFETY VALVES ARE SUFFICIEN T TO RELIEVE BOILERS EFFECTIVELY OF EXCESS STEAM AND WHETHER THEY OPERAT E AT THE TIME WHEN THE MAXIMUM WORKING PRESSURE IS REACHED. HENCE THE STEAM TEST IS A FUNCTIONAL TEST CONDUCTED TO TEST THE OPERATIONAL STRENGTH OF THE BOILER. AS PER THE LETTER DATED 13. 2.1997 OF THE DIRECTOR OF BOILERS THE STEAM TEST WAS NOT CONDUCTED BY THAT D ATE AND THE REGISTRATION NUMBER WAS ALSO GRANTED WITH THAT LETTER ONLY. AS PER PARAGRAPH D-7 OF THE MANUAL THE BOILER CANNOT BE USED INTER ALIA UNLE SS THE SAME HAS BEEN REGISTERED IN ACCORDANCE WITH THE PROVISIONS OF THE BOILER ACT. HENCE IT IS CLEAR THAT THE BOILER WAS NOT PUT TO USE AT LEAST UNTIL 1 3.2.1997. THE DETAILS OF ACTUAL TESTING OF STEAM TEST WERE NOT AVAILABLE ON RECORD. HENCE THE VARIOUS PROCEEDINGS OF DIRECTOR OF BOILER ONLY SHOW THAT TH E IMPUGNED BOILER WAS SUBJECTED TO VARIOUS TEST BEFORE MAKE IT READY FOR COMMENCEMENT. THE VARIOUS CASE LAW RELIED UPON BY THE ASSESSEE ARE APPLICABLE ONLY IF THE ASSESSEE IS ABLE TO SHOW THAT THE IMPUGNED BOILER WAS READY FOR COMMENC EMENT BY 31.3.1997. IN OUR OPINION SINCE THE ASSESSEE HAS FAILED TO DEMON STRATE SO THE QUESTION OF CONSIDERING WHETHER THE IMPUGNED BOILER WAS KEPT RE ADY FOR USE DOES NOT ARISE. PAGE 7 OF 7 IN VIEW OF THE FOREGOING WE DO NOT FIND ANY NECESSI TY TO INTERFERE WITH THE DECISION OF THE LD CIT (A). 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19-01-2010 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM 19 TH JANUARY 2010. COPY TO 1 M/S ANDHRA FARM CHEMICALS CORPORATION LTD. KOVVU RU 534 350 WEST GODAVARI DISTRICT. 2 THE ACIT CIRCLE-1 ELURU 3 THE CIT RAJAHMUNDRY 4 THE CIT(A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM