M/s. Priyanka Developers Pvt.Ltd.,, Surat v. The Dy.CIT.,Circle-1,, Surat

ITA 258/AHD/2010 | 2006-2007
Pronouncement Date: 11-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 25820514 RSA 2010
Assessee PAN AAACP0054A
Bench Ahmedabad
Appeal Number ITA 258/AHD/2010
Duration Of Justice 1 year(s) 9 month(s) 14 day(s)
Appellant M/s. Priyanka Developers Pvt.Ltd.,, Surat
Respondent The Dy.CIT.,Circle-1,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 11-11-2011
Assessment Year 2006-2007
Appeal Filed On 28-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD .'# '# $% $ & BEFORE SHRI MUKUL KR.SHRAWAT JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ./ I.T.A. NO.258/AHD/2010 ( # ( # ( # ( # ( / / / / ASSESSMENT YEAR : 2006-07) M/S.PRIYANKA DEVELOPERS PVT.LTD. B/H.PARAS PETROFILS LTD. VILLAGE PALSANA DIST.SURAT # # # # / VS. THE INCOME TAX OFFICER DCIT CIRCLE-1 SURAT ) $% ./*+ ./ PAN/GIR NO. :AAACP 0054 A ( ) / // / APPELLANT ) .. ( -.) / RESPONDENT ) ) / $/ APPELLANT BY : SHRI RASESH SHAH A.R. -.) 0 / $ / RESPONDENT BY : SHRI B.L. YADAV D.R. #1 0 %/ // / DATE OF HEARING : 03.11.2011 2'( 0 % / DATE OF PRONOUNCEMENT : 11.11.11 $3/ O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I SURAT DATED 19/11/2009. THE ASSESSEE HAS RAISED FOLLOWING MAIN TWO GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN NOT CONDONING THE DELAY IN FILING APPEAL A ND THEREBY ERRED IN DISMISSING THE APPEAL BY NOT ADMITTING THE DELAY ED FILING OF APPEAL. ITA NO .258/AHD/2010 M/S.PRIYANKA DEVELOPERS PVT.LTD. VS. ITO ASST.YEAR - 2006-07 - 2 - 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT THE ASSESSING OFFICER HAS ERRED IN DISALLO WING DEPRECIATION OF RS.5 00 214/- ON ACCOUNT OF REVERSAL OF MODVAT C REDIT CAPITALIZED ON PLANT AND MACHINERY. 2. AS FAR AS GROUND NO.1 IS CONCERNED LD.AR HAS ST ATED THAT VIDE A PETITION DATED 23/02/2009 THE APPELLANT HAD SOUGHT CONDONATION OF DELAY OF ABOUT TWO MONTHS ASSIGNING AS WELL THE REASON OF THE DELAY BUT THAT PETITION WAS NOT CONSIDERED BY THE LEARNED CIT(APPE ALS). IT HAS ALSO BEEN PLEADED THAT THE IMPUGNED ORDER OF LEARNED CIT (APPEALS) HAS DISCUSSED THE MERITS OF THE CASE AND THE APPEAL WAS NOT MERELY DISMISSED IN LIMINE ON THE GROUND OF BELATED APPEAL. 3. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES WE DEEM IT PROPER TO SET THE PROCEEDINGS AT REST. SINCE THE LEARNED C IT(APPEALS) HAS DISCUSSED THE ISSUE ON ITS MERITS THEREFORE INSTEA D OF RESTORING THIS APPEAL WITH THE DIRECTION TO FIRST CONDONE THE DELAY AND T HEN DECIDE THE ISSUE ON MERITS WE HEREINBELOW PROCEED TO DECIDE THE NEXT G ROUND. THOUGH FROM THE SIDE OF THE REVENUE A PLEA IN THIS REGARD WAS R AISED BUT ACCORDING TO US NO PURPOSE SHALL BE SERVED TO ACCEPT SUCH A PLEA OF THE REVENUE. WITH THESE OBSERVATIONS THIS GROUND OF THE ASSESSEE IS THEREFORE DISMISSED. 4. AS FAR AS GROUND NO.2 IS CONCERNED THE DISALLOW ANCE OF DEPRECIATION ON ACCOUNT OF REVERSAL OF MODVAT CREDI T WHICH WAS CAPITALIZED WHILE DETERMINING THE COST OF PLANT & MACHINERY THE SAME NOW STOOD SETTLED IN THE IMMEDIATE PRECEDING ASSESS MENT YEAR I.E. A.Y. 2005-06 BY ITAT AHMEDABAD D BENCH IN ASSESSEES OWN CASE ITA NO .258/AHD/2010 M/S.PRIYANKA DEVELOPERS PVT.LTD. VS. ITO ASST.YEAR - 2006-07 - 3 - BEARING ITA NO.3825/AHD/2008 ORDER DATED 3 RD JULY-2009 AND THE RELEVANT PARAGRAPH IS REPRODUCED BELOW:- 10. AT THE OUTSET IT IS NOTICED FROM THE ARGUMENT S OF BOTH THE SIDES THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE BY THE DECISION OF THIS TRIBUNAL IN THE CAS E OF ACIT V. NAFFAR CHANDRA JUTE MILLS LTD. (2004) 90 TTJ 934 (KOL) WH EREIN THE TRIBUNAL HAS HELD:- AS PER THE SCHEME OF MODVAT THE BENEFIT OF EXCISE DUTY RELIEF AVAILABLE TO THE ASSESSEE WAS TO THE EXTENT OF THE CREDIT AVAILABLE TO THE ASSESSEE AND THE ASSESSEE WOULD NOT BE REQUIRED TO PAY ANY DUTY TO THAT EXTENT. AFTER THE NOTIFICATION THE ASSESSE E IS ENTITLED TO TOTAL EXEMPTION. SO STRICTLY SPEAKING THE ASSESSEE CANNO T BE SAID TO HAVE LOST THE BENEFIT FROM THE PAYMENT OF EXCISE DUTY BY TOTAL EXEMPTION GRANTED AS AGAINST PARTIAL EXEMPTION. HOWEVER IN T HE INTERESTS OF JUSTICE IT WOULD NOT BE PROPER TO LOSE SIGHT OF TH E CONSEQUENCES OF ACCOUNTING ENTRIES MADE BY THE ASSESSEE IN THE PREC EDING YEARS BY STRICTLY FOLLOWING THE GUIDELINES ISSUED BY THE INS TITUTE OF CHARTERED ACCOUNTANTS FOR TREATMENT OF MODVAT. IF THE ASSESSE E HAD FOLLOWED A SYSTEM OF ACCOUNTING BY VIRTUE OF WHICH THE TOTAL COST OF INPUTS INCLUDING THE EXCISE DUTY PAID B THE ASSESSEE HAD B EEN DEBITED TO THE ACCOUNTS A DEDUCTION TO THE EXTENT OF ENTIRE PURCH ASES INCLUDING THE COMPONENT OF DUTY WOULD HAVE BEEN ALLOWABLE TO THE ASSESSEE NOTWITHSTANDING THE FAT THAT ON THE MANUFACTURED GO ODS THE ASSESSEE WOULD BE ENTITLED TO SET OFF OF THE DUTY PAID ON IN PUTS. AS AND WHEN THE ADVANTAGE OF THE MODVAT CREDIT RECEIVABLE WAS T AKEN BY THE ASSESSEE BY NOT PAYING DUTY ON THE MANUFACTURED GOO DS TO THE EXTENT OF THE CREDIT AVAILABLE THE ASSESSEE WOULD HAVE CR EDITED THE AMOUNT IN THE BOOKS OF ACCOUNT OR REDUCE THE LIABILITY ON ACCOUNT OF EXCISE DUTY. IN THIS MANNER THE UTILIZED MODVAT CREDIT WOU LD NOT HAVE BEEN OFFERED FOR TAXATION IN THE YEAR THE ASSESSEE HAD B ECOME ENTITLED TO SUCH CREDIT. THE ASSESSEE HAS FOLLOWED A METHOD OF ACCOUNTING BY VIRTUE OF WHICH THE DEBIT ON ACCOUNT OF INPUTS / CA PITAL GOODS IS REDUCED IMMEDIATELY ON ASSESSEE BECOMING ENTITLED T O CREDIT NOTWITHSTANDING THE FACT THAT THE AMOUNT WOULD BE S ET OFF ONLY ON THE ASSESSEE BECOMING LIABLE TO PAY DUTY ON THE MANUFAC TURE OF GOODS. BY FOLLOWING THE METHOD OF ACCOUNTING ADOPTED BY TH E ASSESSEE A LESSER DEDUCTION IS CLAIMED IN RESPECT OF INPUTS TO THE EXTENT OF MODVAT CREDIT AVAILABLE TO THE ASSESSEE. SIMILARLY IN RESPECT OF CAPITAL GOODS WHEN THE COST OF GOODS IS REDUCED T HE CLAIM OF DEPRECIATION IS ALSO AUTOMATICALLY REDUCED. IN RES PECT OF INPUTS UTILIZED IN THE PRECEDING YEAR(S) THE ASSESSEE IN ALL PROBABILITY WOULD HAVE TAKEN ADVANTAGE OF THE MODVAT CREDIT TO THE EX TENT OF DUTY PAYABLE IN RESPECT OF THE MANUFACTURED GOODS SOLD I N THAT YEAR. THE UNUTILISED MODVAT CREDIT IN RESPECT OF INPUTS WOULD THEREFORE BE OF UNSOLD GOODS IN THE PRECEDING YEAR. IF THE ASSESSE E HAD DEBITED THE COST OF INPUTS INCLUDING THE MODVAT CREDIT SUCH DU TY WOULD BE ITA NO .258/AHD/2010 M/S.PRIYANKA DEVELOPERS PVT.LTD. VS. ITO ASST.YEAR - 2006-07 - 4 - INCLUDIBLE IN THE VALUE OF THE CLOSING STOCK OF THE PRECEDING YEAR. THERE WOULD BE A NEUTRALIZING EFFECT ON THE FINAL R ESULTS OF THE PRECEDING YEAR BY SUCH METHOD OF ACCOUNTING AS THE VALUE OF CLOSING STOCK WOULD HAVE ALSO INCREASED TO THE EXTENT OF DU TY PAID. HOWEVER IN THE YEAR UNDER APPEAL THE CLOSING STOCK OF INPU TS WOULD HAVE BEEN CARRIED FORWARD AT A VALUE INCLUDING DUTY PAID BY T HE ASSESSEE. THUS THE ASSESSEE WOULD AUTOMATICALLY GET A DEDUCTION ON ACCOUNT OF THE ELEMENT OF EXCISE DUTY IN RESPECT OF WHICH MODVAT C REDIT HAD NOT BEEN CLAIMED IN THE PRECEDING YEAR FOR THE REASON O F NON-UTILIZATION OF THE INPUTS IN THAT YEAR. SINCE THE ASSESSEE IS NOT ENTITLED TO THE MODVAT CREDIT AS PER THE SCHEME IN RESPECT OF THE G OODS WHICH ARE EXEMPT TO TAX THE COST OF UNUTILIZED INPUTS OF THE PRECEDING YEAR SHOULD BE ALLOWED TO BE ENHANCED BY THE AMOUNT OF M ODVAT CREDIT ATTRIBUTABLE TO SUCH INPUTS CARRIED FORWARD FROM TH E PRECEDING YEAR. FROM THE STATEMENT OF ACCOUNTS AVAILABLE IT IS OBS ERVED THAT OUT OF RS.8 34 147 OF MODVAT CREDIT THE DUTY ATTRIBUTABLE TO INPUTS IS RS.2 29 496. THEREFORE THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF RS.2 29 496 ON ACCOUNT OF THE DUTY ATTRIBUTABLE TO THE INPUTS CARRIED FORWARD FROM THE PRECEDING YEAR. THE VALUE OF THE O PENING TOCK WILL THUS BE ENHANCED BY RS.2 29 496. IN REGARD TO THE R EMAINING AMOUNT OF RS.6 04 651 THE MODVAT CREDIT IS ON ACCOUNT OF PURCHASE OF CAPITAL GOODS VALUE OF WHICH WAS REDUCED TO THAT E XTENT. SINCE THERE IS NO LIABILITY OF THE ASSESSEE TO PAY EXCISE DUTY ON FINISHED GOODS THE MODVAT CREDIT BENEFIT CANNOT BE AVAILED OF BY THE A SSESSEE. IN THE LIGHT OF PECULIAR FACTS OF THIS CASE IT WILL BE JU ST AND REASONABLE TO ALLOW THE ASSESSEE TO ENHANCE THE VALUE OF THE MACH INERY BY THE AMOUNT OF RS.6 04 651 BEING THE EXCISE DUTY COMPONE NT PAID EARLIER BY THE ASSESSEE ON THE PURCHASE OF SUCH MACHINERY. THE DEPRECIATION IN RESPECT OF THE MACHINERY BE ALLOWED TO THE ASSESSEE AFTER THE ENHANCEMENT OF THE COST. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASS ESSMENT YEAR 2004-05 IT HAD PAID MORE DUTY ON THE FINISHED GOODS ON ACCOUNT OF VALUE ADDITION AND THEREFORE THERE WAS REASONABLE CERTAINTY THAT EXCI SE DUTY PAID ON CAPITAL GOODS COULD BE ADJUSTED AGAINST THE PAYMENT OF DUTY ON THE FINISHED GOODS. HOWEVER IN ASSESSMENT YEAR 2005-06 DUTY STRUCTURES WAS CHANGED AND THE ASSESSEE WAS CERTAIN THAT MODVAT ON THE CAPITAL GOO DS COULD NOT BE UTILIZED. THE ASSESSEE-COMPANY WAS REASONABLY CERTA IN THAT IT CANNOT BE UTILIZED THE AMOUNT OF MODVAT AVAILABLE ON ACCOUNT OF DUTY PAID ON THE FIXED ASSETS DUE TO THE CHANGE IN THE EXCISE DUTY S TRUCTURE AND IN VIEW OF GUIDANCE NOTE OF INSTITUTE WHICH IS IN TUNE WITH EX PLANATION 9 OF SECTION 43(1) THE ASSESSEE HAS REVERSED THE EXCESS AMOUNT OF MODV AT IN FIXED ASSETS. WE FIND IN VIEW OF THE ABOVE FACTS THAT THE ISSUE I S SQUARELY COVERED BY THE TRIBUNALS DECISION IN THE CASE OF NAFFAR CHANDRA J UTE MILLS LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME WE ALLOW THE CLAM OF THE ASSESSEE. ITA NO .258/AHD/2010 M/S.PRIYANKA DEVELOPERS PVT.LTD. VS. ITO ASST.YEAR - 2006-07 - 5 - 5. SINCE A VIEW HAS ALREADY BEEN TAKEN BY RESPECTED CO-ORDINATE BENCH IN ASSESSEES OWN CASE AND THEREIN IT WAS HEL D THAT THE ISSUE IS COVERED BY AN ANOTHER DECISION IN THE CASE OF ACIT VS. NAFFAR CHANDRA JUTE MILLS LTD.(2004) 90 TTJ 934 (KOL.) AND THAT TH E VALUE OF THE MACHINERY IS TO BE ENHANCED BY THE EXCISE DUTY COMP ONENT PAID EARLIER AT THE TIME OF PURCHASE OF MACHINERY. THEREFORE WE ARE OF THE VIEW THAT FOR THE YEAR UNDER CONSIDERATION THE WDV AUTOMATICA LLY GETS AFFECTED BY THE AFOREMENTIONED VIEW HENCE IN A WAY THE YEAR UN DER CONSIDERATION IS MERELY CONSEQUENTIAL IN NATURE. THE ASSESSING OFFI CER IS THEREFORE DIRECTED TO RE-WORK OUT THE CALCULATION OF DEPRECIA TION IN CONSEQUENCE THEREOF AND GRANT ADEQUATE RELIEF AS PER LAW. THIS GROUND IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. SD/- SD/- (A. MOHAN ALANKAMONY) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 11/ 11 /2011 4..# .#../ T.C. NAIR SR. PS $3 0 -5 6$5( $3 0 -5 6$5( $3 0 -5 6$5( $3 0 -5 6$5(/ COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT 2. -.) / THE RESPONDENT. 3. 7 / CONCERNED CIT 4. 7() / THE CIT(A)-I SURAT 5. 5:; -# / DR ITAT AHMEDABAD 6. ; <1 / GUARD FILE. $3# $3# $3# $3# / BY ORDER .5 - //TRUE COPY// = == =/ // / * * * * ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD