DICT, Hyderabad v. M/s Coromandel Bio-tech Industries(India)Ltd.,, Hyderabad

ITA 287/HYD/2007 | 2001-2002
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 28722514 RSA 2007
Assessee PAN GEDIN1997T
Bench Hyderabad
Appeal Number ITA 287/HYD/2007
Duration Of Justice 5 year(s) 1 month(s) 9 day(s)
Appellant DICT, Hyderabad
Respondent M/s Coromandel Bio-tech Industries(India)Ltd.,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-03-2012
Date Of Final Hearing 19-09-2011
Next Hearing Date 19-09-2011
Assessment Year 2001-2002
Appeal Filed On 19-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH HYDERABAD BEFORE CHANDRA POOJARI ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER ITA NO.287/HYD/2007 ASSESSMENT YEAR : 2001-2 002 ITA NO.288/HYD/2007 ASSESSMENT YEAR : 2002-2 003 ITA NO.289/HYD/2007 ASSESSMENT YEAR : 2003-2 004 ITA NO.1512/HYD/2008 ASSESSMENT YEAR : 2004- 2005 THE DY. CIT CIRCLE 1(2) HYDERABAD VS M/S COROMANDAL BIO TECH INDUSTRIES (I) LIMITED HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SMT. NIVEDITA BISWAS RESPONDENT BY : SHRI MURALI MOHAN RAO DATE OF HEARING : 6.2.2012 DATE OF PRONOUNCEMENT : 30.3.2012 ORDER PER ASHA VIJAYARAGHAVAN JM . THESE APPEALS PREFERRED BY THE REVENUE ARE DIRECTE D AGAINST THE DIFFERENT ORDERS PASSED BY THE CIT(A)-I I HYDERABAD DATED 20.11.2006 & 31.7.2008 AND THEY ARE PERTAININ G TO THE ASSESSMENT YEARS 2001-02 2002-03 2003-04 & 2004-0 5. SINCE ISSUES INVOLVED IN THESE APPEALS ARE COMMON IN NATU RE THEY ARE CLUBBED TOGETHER HEARD AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY WAS INCORPORATED ON 12.3.1992 TO CARRY ON THE BUSINESS OF AQUA FARMS AND SHRIMP FARMING. THE NAME HAS BEEN SUBSEQ UENTLY CHANGED IN 1997 TO COROMANDAL BIO TECH INDUSTRIES P LTD. AND THE ASSESSEE ENTERED THE BUSINESS OF HANDLING TRANS PORTATION. ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 2 3. FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 TH E ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS AT RS.34 17 304/- AND RS.42 13 847 RESPECTIVELY. THE RETURNS OF INCOME FILED BY THE ASSESSEE WERE ASSESSED U/S 143( 1). LATER IT WAS FOUND THAT THE ASSESSEE HAD CLAIMED DEPRECIATIO N ON PONDS AND PLANT & MACHINERY WHICH BUSINESS IS DISCONTINUE D LONG BACK. ACCORDINGLY AS PER THE ASSESSING OFFICER T HE CLAIM OF DEPRECIATION WAS NOT PROPER AND THE ASSESSMENT WAS REOPENED U/S 147 OF THE IT ACT 1961. IN THE REASSESSMENT THE ASSESSING OFFICER DISALLOWED AND ADDED BACK THE DEPRECIATION ON PONDS AND PLANT & MACHINERY AMOUNTING TO RS.36 38 015/- A ND RS.31 01 242/- FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03 RESPECTIVELY AND THE UNABSORBED DEPRECIATION WHICH WAS CLAIMED AT RS.40 33 722/- AND RS.34 52 037/- HAS BEEN RESTR ICTED TO RS.3 95 707/- AND RS.3 50 795/- RESPECTIVELY FOR TH E ABOVE MENTIONED ASSESSMENT YEARS. WHILE DISALLOWING THE DEPRECIATION THE ASSESSING OFFICER HAD OBSERVED TH AT FOR CLAIMING DEPRECIATION THE ASSESSEE SHOULD NOT ONLY OWN THE ASSETS BUT ALSO THE ASSETS SHOULD BE PUT TO USE IN THE RELEVANT ASSESSMENT YEAR. 4. SIMILARLY FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 ON THE GROUNDS THE BUSINESS OF PRAWN AND SHRIMP FAR MING HAD BEEN APPARENTLY DISCONTINUED THE ASSESSING OFFICER HELD THAT THE ASSETS WERE NOT PUT TO USE AND THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION ON PONDS AND PLANT & MACHINERY. 5. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 6. IN THE GROUND OF APPEAL THE ASSESSEE HAS STATE D THAT IT HAD CLAIMED DEPRECIATION ON PONDS AND PLANT & MACHI NERY AS ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 3 PER SECTION 43(6)( C) (B) AS PER WHICH THE WRITTEN DOWN VALUE OF ALL ASSETS FALLING WITHIN THAT BLOCK OF ASSETS AT T HE BEGINNING OF THE PREVIOUS YEAR AS REDUCED BY MONEY PAYABLE IN RE SPECT OF ANY ASSET FALLING WITHIN THAT BLOCK WHICH IS SOLD OR D ISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR T OGETHER WITH THE AMOUNT OF SCRAP VALUE IF ANY SO HOWEVER THAT THE AMOUNT OF SUCH REDUCTION DOES NOT EXCEED THE WRITTEN DOWN VAL UE. IT IS THE ASSESSEES CONTENTION THAT SINCE NO MONEY HAS BECOM E PAYABLE IN RESPECT OF SUCH ASSET THEY CONTINUE TO FORM PART OF THE BLOCK OF ASSETS. IN THE CASE OF THE ASSESSEE THE ASSET S FORM THE BLOCK OF ASSETS AND ONCE THE ASSETS ENTER INTO THE BLOCK OF ASSETS DEPRECIATION ON THE BLOCK SHOULD BE ALLOWED. 7. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: 1. PACKWELL PRINTERS VS ACIT (59 ITD 340) (JABALPU R) 2. ITO VS. ASIAN STEEL YARD ITAT MUMBAI (SNC) (ITA NO.188 OF 1991) 3. INDUCTOTHERM INDIA LIMITED VS DCIT (2000) 73 ITD 329 ) AHMADABAD 4. JCIT VS. CITY CORN OVERSEAS SOFTWARE LIMITED (20 04) 85 TTJ 87 MUMBAI ITAT 5. PARIKH ENGINEERING & BODY BUILDING VS. ACIT (199 9) 69 ITD 207 PATNA. 8. IN ADDITION TO THE ABOVE DECISION THE ASSESSEE HAS ALSO RELIED ON THE CBDT CIRCULAR NO.469 DATED 23.9.1986 AND THE BUDGET SPEECH OF 1986-87 OF THE FINANCE MINISTER WH ILE EXPLAINING THE PROVISIONS OF DEPRECIATION. ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 4 9. THE CIT(A) HELD THAT THE ISSUE FOR ALL THE FOUR YEARS ARE IDENTICAL AND HENCE ALLOWED THE ASSESSEES APPEAL F OR ALL THE FOUR YEARS FOLLOWING THE DECISION OF TRIBUNAL HYDERABAD IN THE CASE OF NATCO EXPORTS VS. DCIT AND THE CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON PONDS AND PLANT AN D MACHINERY FORMING PART OF BLOCK OF ASSETS AND AS PER THE PROV ISIONS OF INCOME TAX ACT AND RULES. FOR THE ASSESSMENT YEAR 2 001`-02 AND 2002-03 THE CIT(A) HAS NOT GIVEN ANY FINDING WI TH RESPECT TO REOPENING U/S 147 AND HAS DECIDED THE ISSUE ON MERI TS. THE ASSESSEE HAS NOT COME ON APPEAL AGAINST THE REOPENI NG. WITH RESPECT TO ASSESSMENT YEAR 2003-04 & 2004-05 THE A SSESSMENT HAS BEEN COMPLETED ONLY UNDER SECTION 143(3) OF THE IT ACT. 10. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US AND AND THE ONLY EFFECTIVE GROUND IN ALL THE FOUR YEARS 2001- 02 TO 2004-05 IS THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON PONDS AND ON PLANT & M ACHINERY EVEN THOUGH THEY WERE NOT PUT TO USE DURING THE YEA R UNDER CONSIDERATION. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI P. M URALI MOHAN RAO SUBMITTED THAT AFTER INSERTION OF BLOCK SYSTEM FOR ALLOWING DEPRECIATION THE DEPRECIATION IS ALLOWABLE ON ENTI RE BLOCK EVEN IF SOME OF THE ASSETS OF BLOCK HAVE NOT BEEN USED. TH E AR DREW OUR ATTENTION ON CBDT CIRCULAR NO.469 DATED 23 RD SEPT. 1986 WHICH HAS BEEN ISSUED BY THE CBDT AT THE TIME OF IN SERTION OF BLOCK SYSTEM OF DEPRECIATION BY THE TAXATION LAWS ( AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT 1986. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI P. MURALI MOHAN RAO FURTHER SUBMITTED THAT BY NEW SCHEME FOR ALLOWING ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 5 DEPRECIATION FROM ASSESSMENT YEAR 1989-90 SECTION 43(6) HAS BEEN INSERTED WHICH PROVIDES THAT DEPRECIATION SHAL L BE WORKED OUT ON WDV AS PER THE ABOVE SECTION. THE AR FURTHE R SUBMITTED THAT THE WORD USED APPEARING IN SECTION 32 MEANS THE USE OF BLOCK AS A WHOLE NOT AN INDIVIDUAL ASSET. BEFORE U S IN SUPPORT OF THIS CONTENTION THE AR HAS RELIED UPON THE FOLL OWING DECISIONS: PACKWELL PRINTERS VS. ASST CIT (59 ITD 340) (JAB.) DY.CIT VS. FINOLEX CABLES LTD. (114 TTJ (PUNE) 785 UNITEX PRODUCTS LTD. VS. ITO (22 SOT 429) (MUM) NATHANI STEELS LTD. VS. DY.DCIT 57 ITD 584) (BOM.) SOUTH EASTERN COALFIELDS LTD. VS. JCIT (85 ITD 608) INDUCTOTHEM INDIA LTD. VS. DY.CIT (73 ITD 329 (AHD. ) NATCO EXPORTS VS. DY.CIT (86 ITD 445) (HYD.) ASST. CIT VS. SRF LTD. (21 SOT 122) GOETZE (INDIA) DY.CIT 25 SOT 171 (DELHI) SWATI SYNTHETICS LTD. VS. ITO (2010-TIOL-78-ITAT-MU M) 13. THE LEARNED DR ON THE OTHER HAND RELIED UPON T HE ORDER CIT(A) AND SUBMITTED THAT WORDS INTENSITY OF USE ETC. MENTIONED IN THE CIRCULAR NO.469 MEANS THERE MUST BE SOME US E AND THAT DOES NOT MEAN THAT ASSETS NOT IN USE AT ALL ARE ELI GIBLE FOR DEPRECIATION. THE DR FURTHER SUBMITTED THAT SECTI ON 43(6) PROVIDES METHODOLOGY OF CALCULATION OF DEPRECIATION WHEREAS THE BASIC REQUIREMENT OF SECTION 32 IS THAT THE ASSET M UST BE USED FOR THE PURPOSE OF BUSINESS. THE DR SUBMITTED THAT INTERPRETING THE STATUTE REQUIRES RATIONAL CONSTRUCTION TO ACHIE VE THE INTENTION OF THE LEGISLATION. STRICTLY LITERAL CON STRUCTION LEADS TO ABSURD RESULTS WHICH IS NOT INTENDED TO BE SUB-SER VED BY THE OBJECT OF THE LEGISLATION. THE DR SUBMITTED THAT I T WAS NEVER THE ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 6 INTENTION OF LEGISLATURE THAT IF THE ASSETS ARE NOT USED FOR THE PURPOSE OF BUSINESS STILL DEPRECIATION IS TO BE AL LOWED. 14. THE DR RELIED UPON THE FOLLOWING DECISIONS FOR HIS CONTENTIONS: - CIT VS. JH GOTLA 156 ITR 323 WHEREIN THE APEX COURT LAID DOWN THE RULE OF INTERPRETATION OF A STATUTORY PROV ISION. - CIT VS. UDAIPUR MINERAL DEVELOPMENT SYNDICATE P LTD . 269 ITR 263 (RAJ.) WHEREIN IT WAS HELD THAT WHEN MACHINERY IN QUESTION WAS NOT PUT TO USE IN YEAR UNDER CONSIDERA TION I.E. ASSESSMENT YEAR 1984-85 EVEN FOR A DAY AND BUS INESS REMAINED CLOSED DEPRECIATION WAS NOT ALLOWABLE. - CIT VS. MAPS TOURS & TRAVELS (260 ITR 655) (MAD.) WHERE U/S SECTION 32 OF THE IT ACT 1961 DEPRECIATION ALLO WANCE WAS NOT ALLOWABLE TO THE ASSESSEE WHERE ASSESSEE B OUGHT CARS ON LAST DAY OF ACCOUNTING YEAR AND HAD NOT REG ISTERED SAME FOR BEING BROUGHT ON ROADS AND THERE BEING NO EVIDENCE OF ASSESSEE HAVING USED SAID CARS BEFORE E ND OF ACCOUNTING YEAR. - DINESH KUMAR GULABCHAND AGARWAL VS. CIT (267 ITR 76 8) (BOM.) WHEREIN IT WAS HELD THAT VEHICLE KEPT READY FOR U SE BUT NOT ACTUALLY USED IS NOT ENTITLED TO DEPRECIATI ON SECTION 32 OF IT ACT - DEPRECIATION. 15. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. THE TRIBUNAL SPECIAL BENCH CHANDIGARH IN THE CASE OF GULATI SAREE VS. ACIT 71 ITD 73 HELD THAT. ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 7 EVEN AFTER INTRODUCTION OF THE CONCEPT OF BLOCK OF ASSETS THE PROVISIONS OF SECTION 38(2) WOULD CONTINUE TO A PPLY AND THE AO IS EMPOWERED TO RESTRICT DEPRECIATION TO A F AIR PROPORTIONATE PART THEREOF HAVING REGARD TO THE US E OF THE BUILDING MACHINERY PLANT OR FURNITURE FOR THE PU RPOSES OF BUSINESS OR PROFESSION. IN THAT CASE OF THE ASSESS EE WDV OF VEHICLES WAS SEPARATELY WORKED OUT AND DETAILS O F VEHICLES WERE ALSO GIVEN. THUS IT WAS HELD THAT T HE PROVISIONS OF SECTION 38(2) HAD BEEN RIGHTLY INVOKE D BY THE CIT(A) AND HE WAS RIGHT IN SUSTAINING THE DISALLOW ANCE OUT OF DEPRECIATION AS MADE BY THE AO. 16. THE CONDITION/REQUIREMENT OF SECTION OF WORD USED FOR THE PURPOSE OF BUSINESS AS PROVIDED IN SECTION 32(1) O F THE ACT FOR THE CONCEPT OF DEPRECIATION ON BLOCK OF ASSETS CAN BE SUMMARISED THAT USE OF INDIVIDUAL ASSET FOR THE PU RPOSE OF BUSINESS CAN BE EXAMINED ONLY IN THE FIRST YEAR THE ASSET IS PURCHASED. IN SUBSEQUENT YEARS WHEN USE OF BLOCK O F ASSETS IS TO BE EXAMINED EXISTENCE OF INDIVIDUAL ASSET IN BL OCK OF ASSETS ITSELF AMOUNTS TO USE FOR THE PURPOSE OF BUSINESS. THIS VIEW IS FULLY SUPPORTED BY VARIOUS PROVISIONS OF THE ACT WH ICH WERE AMENDED CONSEQUENT TO THE SCHEME OF DEPRECIATION ON BLOCK OF ASSETS INCLUDING TO THE PROVISO TO SECTION 32 OF TH E ACT. THE SAID PROVISO TO SECTION 32 REQUIRES THAT WHERE AN ASSET IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHT DAYS IN THAT PREVIOUS YEAR THE D EDUCTION UNDER THIS SUB SECTION IN RESPECT OF SUCH ASSET SHA LL BE RESTRICTED TO FIFTY PERCENT OF THE AMOUNT CALCULATE D AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA) AS THE CASE MAY BE. WHEN AN ASSET PURCHASED HAS ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 8 SATISFIED THE ABOVE CONDITION IN THE YEAR OF PURCHA SE THAT ASSET WILL BE INCLUDED IN THE RESPECTIVE BLOCK OF ASSET DEPRECIATION FOR THAT YEAR WILL BE CALCULATED ON WRITTEN DOWN VALUE IN ACCORDANCE WITH SECTION 43(6) OF THE ACT BY THE INCREASING OPE NING WDV BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BL OCK ACQUIRED DURING THE PREVIOUS YEAR. ONCE AN ASSET IS INCLUDE D IN THE BLOCK OF ASSETS IT REMAINS IN BLOCK FOR ITS ENTIRE LIFE. THERE ARE FOLLOWING THREE SITUATIONS PROVIDED IN THE STATUTES WHEN AN INDIVIDUAL ASSET OF THE BLOCK GOES OUT OF BLOCK: 1. AN ASSET IS SOLD OR DISCARDED OR DEMOLISHED OR D ESTROYED DURING THAT PREVIOUS YEARS AS PROVIDED IN SECTION 4 3(6) ( C) (I) (B) AND 32(1)(III) OF THE ACT. 2. AN ASSET NOT EXCLUSIVELY USED FOR THE PURPOSES OF THE BUSINESS R PROFESSION BUT USED OTHER THAN BUSINESS PURPOSES AS PROVIDED IN SECTION 38(2) OF THE ACT. 3. WHERE ANY BLOCK OF ASSETS DOES NOT CEASE TO EXIS T BUT THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE DEPRECIABLE ASSETS BY THE ASSESSEE DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGATE OF THE AMOUNTS STATED IN SECTION 50 OF THE ACT AND WHERE ANY BLOCK OF ASSETS CEASES TO EXIST FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK AR E TRANSFERRED DURING THE PREVIOUS YEAR. 17. FURTHERMORE THE COORDINATE BENCH OF THE TRIBU NAL IN THE CASE OF NATCO EXPORTS VS. DY.CIT (86 ITD 445) (HYD.) HAS HELD AS FOLLOWS: ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 9 FROM THE ABOVE IT IS CLEAR THAT AS LONG AS AN ASS ET FORMS PART OF THE BLOCK OF ASSETS AND THE BLOCK CONTINUES TO EXIST PROVISIONS OF S.50 DO NOT COME INTO PLAY AND DEPREC IATION HAS TO BE ALLOWED ON THAT PORTION OF THE WDV OF THE ASSETS WHICH HAVE BEEN SCRAPPED AFTER REDUCING THE SCRAP VALUE FROM THE BLOCK OF ASSETS. THIS VIEW IS FORTIFIED BY THE JUDGMENTS OF JABALPUR BENCH OF THE TRIBUNAL IN THE CASE OF PACKWELL PRINTERS (SUPRA) THEN JUDGEMENT OF THE AHM EDABAD BENCH OF THE TRIBUNAL IN THE CASE OF INDUCTOTHERM ( INDIA) LTD. (SUPRA) AND THE JUDGEMENT OF THE PATNA BENCH O F THE TRIBUNAL IN THE CASE OF PARIKH ENGG. & BODY BUILDIN G CO. LTD. (SUPRA). THEREFORE IN VIEW OF THE DECISIONS AND INTERPRETATION OF THE CONCEPT OF BLOCK ASSETS DEP RECIATION ON PONDS AND PLANT & MACHINERY WHICH ARE FORMING PA RT OF THE BLOCK OF ASSETS HAS TO BE ALLOWED AS DEDUCTION EVEN THOUGH THESE PONDS AND PLANT & MACHINERY WERE DISCA RDED AND NOT USED AND NOT OWNED BY IT DURING THE ASSESSM ENT YEARS IN QUESTION AS THE ASSESSEE WAS NOT ENTITLED TO PAY SCRAP VALUE WHATSOEVER CONSEQUENT TO DISCARDING 18. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL WE DISMISS THE AP PEALS OF THE REVENUE. 19. IN THE RESULT THE APPEALS FILED BY THE REVENU E ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON: 30.3..2012 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 30 TH MARCH 2012 ITA NO.287 288 289 & 1512/H/2007 COROMONDAL BIO TECH. INDUSTRIES I LTD. HYD 10 COPY FORWARDED TO: 1. THE DCIT CIRCLE 1 (2) 4 TH FLOOR HYDERABAD 2. M/S COROMANDAL BIO TECH INDUSTRIES INDIA LTD. 6-3- 713 3 RD FLOOR BLOCK 3 TOPAZ BUILDING PANJAGUTTA HYDERA BAD 3. THE CIT(A)-II HYDERABAD 4. THE CIT HYDERABAD 5. THE DR ITAT HYDERABAD NP/