DCIT, New Delhi v. M/s. Indian Vaccines Corporation Ltd., New Delhi

ITA 4990/DEL/2013 | 2010-2011
Pronouncement Date: 04-04-2014 | Result: Dismissed

Appeal Details

RSA Number 499020114 RSA 2013
Bench Delhi
Appeal Number ITA 4990/DEL/2013
Duration Of Justice 7 month(s) 5 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Indian Vaccines Corporation Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 04-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 04-04-2014
Assessment Year 2010-2011
Appeal Filed On 29-08-2013
Judgment Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI G. D. AGARWAL HONBLE VICE PRESIDENT AND SHRI A. T. VARKEY JUDICIAL MEMBER ITA NO. 4990 /DEL/ 2013 (ASSESSMENT YEAR: 2010 - 11 ) DCIT CIRCLE - 11(1) ROOM NO. 312 C. R. BUILDING NEW DELHI VS. INDIAN VACCINES CORPORATION LTD. B - 413 ANSAL CHAMBER - 1 BHIKAJI CAMA PLACE NEW DELHI 110015 PAN: AACI0836K (APPELLANT) (RESPONDENT) APPELLANT BY : SATPAL SINGH SR. DR RESPONDENT BY: GAUTAM JAIN FCA O R D E R PER A. T. VARKEY JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - X V NEW DELHI DATED 27.06.2013 FOR THE ASSESSMENT YEAR 2010 - 11 . 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 89 72 244/ - MADE OUT OF DEPRECIATION CLAIMED ON LEASED PLANT& MACHINERY. 2. ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAD ERRED IN RESTRICTING THE ADDITION OF RS. 21 97 918/ - TO THE EXTENT OF RS. 11 69 091/ - MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES NOT ESSENTIAL FOR THE BUSINESS. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS. THE ASSESSEE COMPANY IS A GOVT. COMPANY. THE ASSESSEE COMPANY COULD NOT CARRY OUT ANY BUSINESS IN THE YEAR UNDER CONSIDERATION AND HA S ONLY RECEIVED RENTAL AND INTEREST RECEIPTS. THE ASSESSE M/S. INDIAN VACCINE CORPORATION LIMITED (HEREINAFTER REFERRED TO AS IVCOL) WAS INCORPORATED AS A COMPANY ON 27.03.1989 TO DO THE BUSINESS OF TRADING AND MANUFA CTURING OF VACCINES. A ND DURING THE EARLIER YEARS CARRIED OUT TRADING OF VACCINE AND EARNED COMMISSION WHICH WAS RETURNED AS INCOME. DURING THE YEAR UNDER CONSIDERATION A LEASE AGREEMENT WAS SIGNED BETWEEN THE COMPANY AND RELIANCE INDUSTRIES LTD. AND RELIANCE LIFE SCIENCES LTD. ON 31.10.2008 . AS PER THE TERMS OF THE SAID LEASE AGREEMENT LEASE RENT OF RS. 2 00 40 000/ - WAS RECEIVED BY THE COMPANY PAGE NO. 2 DURING THE PERIOD FROM 01.04.2009 TO 31.03.2010. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31.09.2010 SHOWING THE TOTAL INCOME OF RS. 77 48 918/ - AFTER ADJUSTMENT OF INCOME FROM HOUSE PROPERTY OF RS. 8 49 319/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE INCOME TAX ACT 1961 (HEREINAFTER THE A CT ) WAS ISSUED AND SERVED ON THE ASSESSEE ON 25.08.2011. THE ASSESSEE COMPANY WAS ASKED TO EXPLAIN AS TO WHY THE INCOME FROM INTEREST ON FIXED DEPOSIT WITH THE BANKS AND RENT FROM THE LEASING OUT OF FACTORY AMOUNTING TO RS. 248.02 LAKHS SHOULD NOT BE ASSE SSED AND CHARGED TO TAX AS INCOME FROM OTHER SOURCES. PURSUANT TO THE SHOW - CAUSE THE ASSESSEE REITERATED AND CLAIMED DEPRECIATION OF RS. 89 72 224/ - U/S 57 OF THE ACT. DISSATISFIED WITH THE JUSTIFICATION OF THE ASSESSEE THE ASSESSING OFFICER DISALLOWED THE CLAIM. 4. AGGRIEVED BY THE SAID DECISION OF THE ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO WAS PLEASED TO DELETE THE DISALLOWANCE TO THE TUNE OF RS. 89 52 989/ - . AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE REVEN UE IS BEFORE US. 5. THE LD DR RELIED ON THE ASSESSMENT ORDER AND CONTENDED THAT THE LESSEE COMPANY HAS NOT USED THE PLANT AND MACHINERY OF THE ASSESSEE COMPANY FOR THE PURPOSE OF BUSINESS IN THE RELEVANT ASSESSMENT YEAR. THEREFORE THE LD DR CONTENDED THAT THE ASSESSING OFFICER RIGHTLY DISALLOWED THE EXPENDITURE OF RS. 89 72 224 / - AND HE PRAYS THAT THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 6. ON THE OTHER HAND THE LD AR MR. GAUTAM JAIN CONTENDED THAT THE ASSESSING OFFICER OU GH T TO HAVE ALLOWED THE DEPRECIATION IN VIEW OF THE EXPLICIT PROVISION OF SECTION 56(II) READ WITH SECTION 57(II) AND SECTION 32 OF THE ACT. ACCORDING TO MR. GAUTAM JAIN THE ASSESSING OFFICER HAS FA CTUALLY ERRED IN HOLDING THAT PLANT AND MACHINERY HAS BEEN DISPOSED OFF AND NOT USED BY THE LESSEE COMPANY WHILE INTERESTINGLY HE (AO) HAS HIMSELF ASSESSED THE RENTAL INCOME FROM PLANT AND MACHINERY AT RS. 77 56 804/ - . THE LD AR BROUGHT TO OUR NOTICE T HE CONCLUSION ARRIVED BY THE ASSESSING OFFICER AND HIS OBSERVATION LESSEE HAD TAKEN HUGE LAND FOR USE AND PLANT MACHINERY ARE NOT IN GOOD CONDITION AND STATED THAT THE SAID FINDING ARE A FIGMENT OF IMAGINATION AND HE HAS NOT EVEN CARED TO LOOK INTO THE RENTAL AGREEMENT ENTERED BY THE ASSESSEE COMPANY WITH M/S RELIANCE INDUSTRIES LTD. AND M/S. RELIANCE LIFE SCIENCES LTD. THEREFORE ACCORDING TO THE LD AR THE CONCLUSION OF THE ASSESSING OFFICER IN THIS RESPECT IS NOT BASED ON ANY MATE RIAL WHATSOEVER ON RECORD AND ASSESSING OFFICER SERIOUSLY ERRED IN DOING SO. THE LD AR RELIED ON THE DECISION OF HONBLE DELHI HIGH PAGE NO. 3 COURT DECISION IN THE CASE OF THE CIT VS. GENESIS COMMET (P) LTD. 163 TAXMAN 482 (DEL) . THE LD AR STATED THAT THE FINDING RE CORDED BY THE ASSESSING OFFICER THAT IN THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION THERE WAS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE ALSO WAS NOT FACTUALLY CORRECT. THE LD AR STATED THAT THE ASSESSEE HAD SIGNED A LEASE AGREEMENT DATED 31.10. 2008 WITH M/S. RELIANCE INDUSTRIES LTD AND M/S. RELIANCE LIFE SCIENCES LTD ; AND THE AGREEMENT CAME INTO FORCE W.E.F. 01.01.2009 ; AND ACCORDINGLY PROPORTIONATE LEASE RENT OF RS. 2 00 40 000/ - WAS RECEIVED BY THE ASSESSEE COMPANY FOR A PERIOD FROM 01.01.2009 TO 31.03.2009. ACCORDING TO THE LD AR THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM FOR DEPRECIATION OF THE LEASED PLANT AND MACHINERY CURIOUSLY BY HOLDING THAT THE SAME WAS NOT ALLOWABLE SINCE PLANT AND MACHINERY HAS NOT BEEN USED BY THE LESSEE COMPANY AND IT IS NOT BEEN USED FOR THE PURP OSE OF BUSINESS OF ASSESSEE. THIS ERRONEOUS REASONING OF THE ASSESSING OFFICER WAS LATER RECTIFIED BY THE LD CIT(A) IN THE APPELLATE PROCEEDINGS SO ACCORDING TO LD AR THE IMPUGN ED ORDER SHOULD NOT INTERFERED WITH. 7. WE HAVE HEARD BOTH THE SIDES AND HAVE PERUSED THE RECORDS AND HAVE GONE THROUGH THE CASE LA WS BROUGHT TO OUR NOTICE. BEFORE WE PROCEED FURTHER WE WOULD LIKE TO GO THROUGH RELEVANT SECTION 56 AND 57. LET US LOOK INT O THE SECTION 56 AND 57: - INCOME FROM OTHER SOURCES. 56(1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD INCOME FROM OTHER SOURCES IF IT IS NOT CHARGEABLE TO INCOME - TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 ITEMS A TO E. (2) IN PARTICULAR AND WITHOUT PREJUDICE TO THE GENERALITY TO THE PROVISIONS OF SUB - SECTION (1) THE FOLLOWING INCOMES SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD INCOME FROM O THER SOURCES NAMELY (I) DIVIDENDS; (IA) .. (IB) . (IC) (ID) .. (II) INCOME FROM MACHINERY PLANT OR FURNITURE BELONGING TO THE ASSESSEE AND LET ON HIRE IF THE INCOME IS NOT CHARGEABLE TO INCOME - TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OF PROFESSION. DEDUCTIONS. 57. THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS NAMELY: - (I) .. (IA) . PAGE NO. 4 (II) IN THE CASE OF INCOME OF THE NATURE REFERRED TO IN CLAUSES (II) AND (III) OF SUB - SECTION (2) OF SECTION 56 DEDUCTIONS SO FAR AS MAY BE IN ACCORDANCE WITH THE PROVISIONS OF SUB - CLAUSE (II) OF CLAUSE (A) AND CLAUSE (C) OF SECTION 30 SECTION 31 AND (SUB - SECTION (1) A ND (2) OF SECTION 32 AND SUBJECT TO THE PROVISIONS OF SECTION 38. 8. A PERUSAL OF THE OF THE ABOVE PROVISIONS MAKES IT EXPLICITLY CLEAR THAT WHEN THE INCOME WAS RECEIVED FROM LEASING OUT OF PLANT AND MACHINERY ; ON THE SAID RENTAL INCOME THE ASSESSEE SHALL BE ELIGIBLE INTER - ALIA TO CLAIM DEDUCTIONS U/S 32(1) OF THE ACT. IN THE LIGHT OF THE ABOVE EXPRESS PROVISIONS OF THE ACT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON PLANT AND MACHINERY . SINCE THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE OWNS THE ASSET AND HAD RENTED OUT THE SAID ASSETS I.E. PLANT AND MACHINERY AND THE RENTAL INCOME HAS BEEN DULY BROUGHT TO TAX BY THE ASSESSEE THE ASSESSE IS ENTITLED TO DEPRECIATION. IN THE LIGHT OF EXPRESS PROVISION OF LAW DISALLOWANCE MA DE OF RS. 89 52 989/ - REPRESENTING DEPRECIATION ON PLANT AND MACHINERY HAS BEEN RIGHTLY DELETED BY THE LD CIT(A) AND THE IMPUGNED ORDER IS VALID IN THE EYES OF LAW AND WE CONFIRM THE SAME . THIS GROUND OF THE REVENUE IS THEREFORE DISMISSED. 9. APROPOS GROUND NO. 2 IN RESPECT OF RESTRICTING THE ADDITION OF RS. 21 97 918/ - TO THE EXTENT OF RS. 11 69 091/ - MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES NOT ESSENTIAL FOR THE BUSINESS. 10. THE LD DR CONTENDED THAT THE ASSESSEE COMPANY HAD MADE OUT A TO TAL EXPENDITURE INCURRED OF RS. 43 95 836/ - AND THE ASSESSING OFFICER HAD ALREADY ALLOWED 50% OF EXPENDITURE AND DISALLOWED THE REMAINING EXPENSES ON THE GROUND THAT THERE WA S NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE COMPANY FOR THE YEAR UNDER CONS IDERATION AND THEREFORE THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED 50% OF THE SAID EXPENSE AND THEREFORE THE LD CIT(A) ERRED IN LAW BY ALLOWING FURTHER EXPENDITURE TO THE TUNE OF RS. 10 28 827/ - AND THEREFORE THE ORDER OF THE LD CIT(A) MAY BE SET ASIDE A ND THE ORDER OF THE ASSESSING OFFICER RESTORED. ON THE OTHER HAND THE LD AR SUBMITTED THAT THE EXPENSES INCURRED WAS FOR MAINTAIN ING THE ESTABLISHMENT AND EXPENSES WAS INCURRED FOR COMPLYING CERTAIN MANDATORY STATUTORY OBLIGATION AND THE EXPENSES INCURRED FOR THE SAME AMOUNTED TO RS. 43 95 836/ - HOWEVER THE ASSESSING OFFICER MADE AD - HOC DISALLOWANCE OF RS. 21 97 918/ - WITHOUT ANY VALID REASON. THE LD AR BROUGHT IT TO OUR NOTICE THAT FOR THE PREVIOUS YEARS FROM THE ASSESSMENT YEA R 2002 - 03 TO 2008 - 09 EXPENSES WERE ALLOWED THOUGH THE COMPANY WAS NOT ENGAGED IN BUSINESS AND BROUGHT TO OU R NOTICE THE DECISION OF THE CO - ORDINATE BENCH FOR ASSESSMENT YEAR 2002 - 03 2005 - 06 2008 - 09 AND 2007 - 08 IN WHICH THE HONBLE VICE PRESIDENT WAS A MEMBER WHEREIN IT WAS FOUND THAT THE LD CIT(A) AFTER CAREFUL SCRUTINY HAS ALLOWED PAGE NO. 5 CERTAIN EXPENSES AND DISALLOWED THE SAME EXPENSES ON VALID REASONS. THIS ORDER OF THE LD CIT(A) WAS CONFIRMED BY THE TRIBUNAL FOR THE AFORESAID ASSESSMENT YEAR S AND THEREFO RE IT WAS PLEADED BY THE LD AR THAT THE ORDER OF THE LD CIT(A) MAY NOT BE DISTURBED. 11. WE HAVE HEA R D BOTH THE PARTIES AND PERUSED THE MATERIAL S PLACED BEFORE US; IT IS OBSERVED THAT IDENTICAL ISSUE WAS RAISED IN THE REVENUES APPEAL IN ASSESSEES OWN CASE IN ITA NO.382/DEL/2012 WHEREIN THE CO - ORDINATE BENCH FOR THE ASSESSMENT YEAR 2007 - 08 WHICH WAS DECIDED ON 30.03.2012. WHEREIN THE CO - ORDINATE BENCH HAVE REJECTED THE SAME GROUND RAISED BY THE REVENUE AND WE RESPECTFULLY FOLLOW THE SAME. IN OUR V IEW THE FACTUAL POSITION INDICATED THEREIN DOES NOT SOLICIT ANY INTERFERENCE AND WE DECLINE TO INTERFERE IN THE IMPUGNED ORDER AND THE SAME IS CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 0 4 . 04 .2014. - S D / - - S D / - ( G. D. AGARWAL) (A. T. VARKEY) HONBLE VICE PRESIDENT JUDICIAL MEMBER DATED : 0 4 / 04 /2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI