The DCIT, Circle -1(1), Baroda v. Deepak Nitrite Ltd., Baroda

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON'BLE SH RI A.N. PAHUJA A.M.) I.T.A. NO. 3117/AHD./2009 ASSESSMENT YEAR : 2001-2002 DEEPAK NITRITE LTD. BARODA -VS.- DEPUTY COMMISSIONER OF INCOME TAX (PAN : AAACD 7468 A) CIRCLE-1(1) BARO DA (APPELLANT) (RESPONDENT) & I.T.A. NO. 3292/AHD./2009 ASSESSMENT YEAR : 2001-2002 DEPUTY COMMISSIONER OF INCOME TAX -VS.- DEEPAK NITRITE LIMITED BARODA CIRCLE-1(1) BARODA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.P. BAPAT DEPARTMENT BY : SMT. NEETA SHAH SR. D.R . O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 25 .09.2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I BARODA FOR THE ASSESSMENT YE AR 2001-02. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER :- 1) THE LEARNED A.O. HAS FURTHER ERRED IN ASSESSING A SUM OF RS.15 45 060/- AS DEEMED DIVIDEND. 2) THE LEARNED A.O. HAS FURTHER ERRED IN THE PROC ESS OF COMPUTING BOOK PROFITS UNDER SECTION 115JA(2) OF THE ACT IN ADDIN G DEEMED DIVIDEND OF RS.15 45 060/-. 3. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI D.P. BAPAT APPEARED AND PRODUCED A COPY OF DECISION DATED 29.01.2010 OF ITA T AHMEDABAD BENCH AHMEDABAD CAMP AT VADODARA IN ASSESSEES OWN CASE IN ITA NO. 2614/ AHD/2008 FOR THE ASSESSMENT YEAR 2004-05 AND ITA NO. 3240/AHD/2008 FOR THE ASSESSMENT YEAR 2 000-01 AND CONTENDED THAT THE CONTROVERSY INVOLVED IN BOTH THE GROUNDS OF APPEAL IS SQUARELY COVERED IN FAOVUR OF THE ASSESSEE. THE RELEVANT DISCUSSION IS CONTAINED IN PARA 4 ON PAGE 3 OF THE DECISION DATED 29.01.2010 OF ITAT 2 ITA NOS . 3117/AHD/2009 & 3292/AHD/2009 AHMEDABAD BENCH AHMEDABAD CAMP AT VADODARA FOR TH E ASSESSMENT YEAR 2004-05 & 2000-01 (SUPRA). THE LD. COUNSEL OF THE ASSESSEE FURTHER EX PLAINED THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE A DDITION MADE BY THE ASSESSING OFFICER AS DEEMED DIVIDEND UNDER SECTION 2(22)(A) OF THE ACT B Y FOLLOWING HIS ORDER FOR THE ASSESSMENT YEAR 2004-05 AND 2000-01. SINCE IN BOTH THE ASSESSMENT Y EARS THE ITAT AHMEDABAD BENCH AHMEDABAD CAMP AT VADODARA DELETED THE ADDITION VI DE ORDER DATED 29.01.2010 (SUPRA) THEREFORE FOLLOWING THE SAID ORDER FOR THIS YEAR ALSO THE ADDITION OF RS.15 45 060/- MADE BY THE ASSESSING OFFICER AS DEEMED DIVIDEND BE DELETED. 4. ON THE OTHER HAND SMT. NEETA SHAH SR. D.R. APP EARING ON BEHALF OF THE REVENUE COULD NOT CONTROVERT THE AFORESAID SUBMISSION MADE BY THE LD. COUNSEL OF THE ASSESSEE. 5. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE LEARNED COM MISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER CONFIRMED THE ADDITION OF RS.15 45 0 60/- AS DEEMED DIVIDEND FOLLOWING HIS ORDER FOR THE ASSESSMENT YEAR 2004-05 AND 2000-01. THE ITAT AHMEDABAD BENCH AHMEDABAD CAMP AT VADODARA VIDE ORDER DATED 29.01.2010 (SUPRA ) FOR BOTH THE ASSESSMENT YEARS DELETED THE ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 4.4 ON PAGES 7 TO 8 WHICH READS AS UNDER :- 4.4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE PROVISIONS OF SECTION 2(22)(A) HAS BEEN EXTRACTED B Y CIT(A.) IN PARAGRAPH 6.6 OF HIS ORDER. BY READING THE AFORESAI D DEFINITION IT IS CLEAR THAT DIVIDEND WILL INCLUDE UNDER CLAUSE (A) ONLY WH EN IT AMOUNTS TO DISTRIBUTION BY A COMPANY OUT OF ACCUMULATED PROFIT S COUPLED WITH RELEASE OF ANY PART OF THE ASSETS OF THE COMPANY. T HEREFORE TO ATTRACT SECTION 2(22)(A) THE DIVIDEND CAN BE TAXED ONLY WH EN THERE IS DISTRIBUTION OUT OF ACCUMULATED PROFITS BY WAY OF R ELEASE OF ANY PART OF THE ASSETS. IN THE PRESENT CASE IT IS SEEN THAT WH EN THE ASSESSEE ACQUIRED THE SHARES IT ALSO ACQUIRED THE OCCUPANCY RIGHT IN THE PREMISES. SUCH RIGHTS WERE ACQUIRED DURING FY RELEVANT TO ASSESSME NT YEARS 1997-98. THERE IS NO AMENDMENT TO THE ARTICLES AFTER THE SHA RES ARE ACQUIRED BY THE ASSESSEE. THUS THERE IS NO RELEASE OF ANY ASSE TS BY YIPL TO THE ASSESSEE WHO IS A SHAREHOLDER THEREIN. THERE IS ALS O NO FINDINGS THAT THE DISTRIBUTION IS OUT OF ACCUMULATED PROFITS. WHAT IS BROUGHT TO TAX IS THE ANNUAL VALUE OF THE PROPERTY AND NOT PROPERTY ITSEL F. SINCE THERE IS NO RELEASE BY THE COMPANY TO THE ASSESSEE OF ANY ASSET S AND THAT TOO OUT OF ACCUMULATED PROFITS DURING THE YEAR IN APPEAL THE ADDITION U/S. 2(22)(A) IS NOT CALLED FOR. WE THEREFORE DELETE ADDITION M ADE U/S. 2(22)(A) OF THE ACT. 3 ITA NOS . 3117/AHD/2009 & 3292/AHD/2009 6. WE FOLLOWING THE DECISION DATED 29.01.2010 OF I TAT AHMEDABAD BENCH AHMEDABAD CAMP AT VADODARA IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2004-05 & 2000-01 (SUPRA) DELETE THE ADDITION MADE BY THE ASSESSING OFFICER O F RS.15 45 060/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(A) OF THE INCOME TAX ACT. CONSEQUENTL Y THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE ALLOWED. 7. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(APPEALS) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS.28 85 804/- MADE BY THE ASSESSING OFFICER. 8. AT THE TIME OF HEARING BEFORE US BOTH THE SIDES ADMITTED THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION FOLLOWING THE DECISION DATED 04.04.2008 OF ITAT A BENCH AHMEDABAD IN A SSESSEES OWN CASE IN ITA NO. 07/AHD/2007 FOR THE ASSESSMENT YEAR 2003-04. 9. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUT HORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISA LLOWED THE DEPRECIATION IN RESPECT OF OCCUPANCY RIGHT FOLLOWING THE DECISION DATED 04.04. 2008 OF ITAT A BENCH AHMEDABAD IN ASSESSEES OWN CASE IN ITA NO. 07/AHD/2007 FOR THE ASSESSMENT YEAR 2003-04. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ORDER OF A.O. THE ITAT A BENCH AHMEDABAD VIDE ORDER DATED 04.04.2008 (SUPR A) IN ITA NO. 07/AHD/2007 FOR THE ASSESSMENT YEAR 2003-04 BY FOLLOWING ITS ORDER IN I TA NO. 2552/AHD/2006 FILED BY THE ASSESSEE FOR THE SAME ASSESSMENT YEAR CONFIRMED THE DELETION OF DISALLOWANCE OF DEPRECIATION AND REJECTED THE GROUND OF APPEAL OF REVENUE FOR THE DETAILED RE ASONS GIVEN IN PARA 28 ON PAGES 15 TO 16 WHICH READS AS UNDER :- 28. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE SOLE REASON FOR THE IMPUGNED DISALLOWANCE IS THE NO N-USER OF THE RELEVANT PLANT AND MACHINERY FOR THE PURPOSES OF ITS BUSINES S BY THE ASSESSEE DURING THE RELEVANT YEAR WHILE THE REVENUE CLAIMS AND NOT INCORRECTLY THAT THE SAME BEING IDLE FOR LONG IS INCAPABLE OF BEING PUT TO USE. IN FACT THE STATUS OF THE SAME AS DISCARDED MACHINERY IS NO T IN DISPUTE AS WOULD BE APPARENT FROM THE GROUND TAKEN BY THE ASSESSEE I N ITS APPEAL. THE CONDITION OF THE USER OF THE RELEVANT ASSETS OWNED BY THE ASSESSEE FOR THE 4 ITA NOS . 3117/AHD/2009 & 3292/AHD/2009 PURPOSES OF ITS BUSINESS OR PROFESSION STANDS NOT DILUTED OR WAIVED AFTER THE INTRODUCTION OF THE CONCEPT OF BLOCK OF ASSETS UNDER THE ACT WHEREBY THE ASSETS ARE GROUPED TOGETHER UNDER CERTAIN HOMOG ENEOUS CATEGORIZATIONS AND THE DEPRECIATION ALLOWED WITH REFERENCE TO THE VALUE OF THE BLOCK OF THE ASSETS. AS SUCH THIS CONDITION BEING NOT SATISFIED WE DO NOT FIND THE ORDERS OF THE AUTHORITIES BELOW AS INFIRM SO AS TO DISTURB THE SAME. IN FACT WE FIND THAT THE MATTER STANDS C OVERED BY THE DECISION OF THE TRIBUNAL (AHMEDABAD BENCH A) IN THE ASSESSEE S CASE (ITA NO. 1320/AHD/2006 AND ITA 1451/AHD/2006 DATED 09.04.200 7 FOR A.Y. 2002- 03) COPY OF WHICH IS PLACED ON RECORD AND WHEREIN THE TRIBUNAL FOLLOWING THE DECISION FOR AY 1999-00 OF EVEN DATE UPHELD THE DISALLOWANCE OF THE ASSESSEES CLAIM FOR DEPRECIATI ON ON ITS DISCARDED PLANT & MACHINERY. WE ARE IN FULL AGREEMENT WITH TH E SAID DECISION AND UPHOLD THE DISALLOWANCE AS EFFECTED. 10. WE FOLLOWING THE DECISION DATED 04.04.2008 OF ITAT A BENCH AHMEDABAD IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 CONFIRM THE DISALLOWANCE OF DEPRECIATION MADE BY THE ASSESSING OFFICER OF RS.28 85 804/-. CO NSEQUENTLY THE GROUND OF APPEAL TAKEN BY THE REVENUE IS REJECTED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 10.05.201 0 SD/- SD/- (A.N. PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10 / 05 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.