THE DCIT CIR 3(1), MUMBAI v. M/S. DWARIKESH SUGAR INDUSTRIES LTD, MUMBAI

ITA 4513/MUM/2007 | 1998-1999
Pronouncement Date: 07-01-2010 | Result: Dismissed

Appeal Details

RSA Number 451319914 RSA 2007
Bench Mumbai
Appeal Number ITA 4513/MUM/2007
Duration Of Justice 2 year(s) 6 month(s) 24 day(s)
Appellant THE DCIT CIR 3(1), MUMBAI
Respondent M/S. DWARIKESH SUGAR INDUSTRIES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 07-01-2010
Date Of Final Hearing 05-01-2010
Next Hearing Date 05-01-2010
Assessment Year 1998-1999
Appeal Filed On 13-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI. BEFORE SHRI R.V.EASWAR SR.VP AND SHRI P.M. JAGTAP AM I.T.A. NO.4513/MUM/2007 (ASSESSMENT YEAR : 1998-99) THE DEPUTY COMMISSIONER OF INCOME TAX CIR.3(1) R.NO.607 AAYAKAR BHAVAN MUMBAI-400 020. VS. DWARIKESH SUGAR INDUSTRIES LTD. MAKER CHAMBERS-V 221 NARIMAN POINT MUMBAI-400 021. PAN:AABCD8192N (APPELLANT) (RESPONDENT) APPELLANT BY : MR. ARUN BHARAT DR RESPONDENT BY : MR. NITESH JOSHI O R D E R PER R.V.EASWAR SENIOR VICE PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE DEPARTMENT IN THIS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDI NG THAT THE PROVISION TO EXPLANATION 10 TO SECTION 43 OF I.T.ACT 1961 HAVE BEEN INSERTED FROM 1.4.1999 AND ARE THEREFORE EFFECTIVE FROM ASSESSMENT YEAR 1999- 2000 AND HENCE ACCORDING TO HIM IT IS NOT APPLICABL E FOR ASSESSMENT YEAR 1998-99 AND THEREBY DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER FROM THE ALLOWABLE DEPRECIATION. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE APPEAL RELATES TO THE ASSESSMENT YEAR 1998-9 9. WHILE FRAMING THE REASSESSMENT ORDER PASSED ON 14.3.2006 UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT THE ASSESSING OFFICER NOTICED THAT AN AMOUNT OF RS.5 77 30 910/- WAS UTILIZED FOR REPAYMENT OF THE LOAN BORROWED FOR PURCHASE OF FIXED ASSETS. THE ASSESSING OFFICER TOOK THE VIEW T HAT THIS INCENTIVE AMOUNT SHOULD BE DEDUCTED FROM THE CAPITA L COST OF ITA NO.4513/MUM/07 2 THE FIXED ASSETS PURCHASED OUT OF THE BORROWED FUND S AS PER EXPLANATION 10 BELOW SECTION 43(1) OF THE ACT. THE ASSESSEES SUBMISSION WAS THAT THE SECURED LOANS WERE UTILIZED FOR THE PURPOSE OF EXPANSION OF THE SUGAR UNIT AND WERE NOT ATTRIBUTABLE TO THE ACQUISITION OF ANY SPECIFIC ASS ET. ALTERNATIVELY IT WAS SUBMITTED THAT THE AFORESAID STATUTORY PROVISION WHICH WAS INVOKED BY THE ASSESSING OFFIC ER WAS APPLICABLE ONLY FROM THE ASSESSMENT YEAR 1999-2000 AND NOT FOR THE YEAR UNDER APPEAL. THIS ALTERNATIVE SUBMISSION WAS REJECTED BY THE ASSESSING OFFICER WHO OBSERVED THAT THE LEGI SLATIVE INTENT HAS ALWAYS BEEN THAT ANY PART OF THE COST OF THE AS SETS ACQUIRED BY THE ASSESSEE WHICH WAS MET DIRECTLY OR INDIRECTL Y BY THE GOVERNMENT HAS TO BE REDUCED FROM THE COST AND DEPR ECIATION SHOULD BE ALLOWED ONLY ON THE BALANCE. IN OTHER WO RDS IT WAS HIS VIEW THAT THE EXPLANATION WAS MERELY CLARIFICAT ORY IN NATURE. IN THIS VIEW HE REDUCED THE WRITTEN DOWN VALUE OF THE PLANT AND MACHINERY BY RS.5 77 30 910/- WHICH RESULTED IN TH E DISALLOWANCE OF DEPRECIATION OF RS.1 44 32 727/-. F OR THE SAKE OF COMPLETENESS WE MAY REPRODUCE THE ABOVE EXPLANAT ION:- WHERE A PORTION OF COST OF AN ASSET ACQUIRED BY A ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVT. OR STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR ANY PERSON IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED) THE THEN SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASS ET TO THE ASSESSEE. 3. ON APPEAL THE CIT(A) ACCEPTED THE ASSESSEES A LTERNATIVE CONTENTION THAT EXPLANATION 10 BELOW SECTION 43(1) INTRODUCED BY FINANCE (NO.2) ACT 1998 WAS APPLICABLE ONLY FRO M THE ASSESSMENT YEAR 1999-2000 AND NOT FROM THE ASSESSME NT YEAR 1998-99. HE REFERRED TO PARAGRAPH 22.3 OF THE CBDT CIRCULAR NO.772 DATED 23.12.1998 (238 ITR ST 35) IN WHICH IT WAS STATED THAT THE EXPLANATION WILL TAKE EFFECT FROM THE ASSE SSMENT YEAR ITA NO.4513/MUM/07 3 1999-2000. HE ACCORDINGLY DIRECTED THE ASSESSING OF FICER NOT TO REDUCE THE COST OF THE ASSET BY THE INCENTIVE AMOU NT OF RS.5 77 30 910/- FOR THE PURPOSE OF CALCULATING DEP RECIATION. 4. THE REVENUE IS IN APPEAL AGAINST THE ABOVE DECIS ION OF THE CIT(A). AT THE TIME OF THE HEARING THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF A.P.SHRIMP SEED PRODUCTION SUPPLY & RESEARCH CENTRE VS. DCIT. (2000) 69 TTJ 226 DATED 12 TH JULY 2000. A COPY OF THE SAID ORDER WAS FILED IN WHICH I T HAS BEEN HELD THAT EXPLANATION 10 TO SECTION 43(1) TAKES EFF ECT ONLY FROM THE ASSESSMENT YEAR 1999-2000 AND PRIOR TO THE SAID ASSESSMENT YEAR THE QUESTION WHETHER THE INCENTIVE CAN BE REDUCED FROM THE COST OF THE ASSETS IS GOVERNED BY THE JUDGEMENT OF THE SUPREME COURT IN CIT VS. P.J.CHEMI CALS (1994) 210 ITR 830 IN WHICH IT WAS HELD THAT THE IN CENTIVE CANNOT BE DEDUCTED WHILE CALCULATING THE COST OR WR ITTEN DOWN VALUE OF THE ASSETS FOR THE PURPOSE OF CALCULATING DEPRECIATION. WE FIND THAT THE PRESENT CASE IS FULLY COVERED BY T HE AFORESAID ORDER OF THE TRIBUNAL SINCE THE CONTROVERSY IS THE SAME. THEREFORE RESPECTFULLY FOLLOWING THE SAID ORDER WE CONFIRM THE DECISION OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON THIS 7 TH DAY OF JANUARY 2010. SD/- ( P.M. JAGTAP ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI DATED 7 TH JANUARY 2010. SOMU ITA NO.4513/MUM/07 4 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-3 MUMBAI. 4. THE CIT(A)-XXVIII MUMBAI 5. THE DR D BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI