M/s. Siddharth Coporation,, Daman v. The ACIT., Vapi Circle,, Vapi

ITA 866/AHD/2007 | 2003-2004
Pronouncement Date: 26-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 86620514 RSA 2007
Assessee PAN AAOFS1257R
Bench Ahmedabad
Appeal Number ITA 866/AHD/2007
Duration Of Justice 3 year(s) 1 month(s)
Appellant M/s. Siddharth Coporation,, Daman
Respondent The ACIT., Vapi Circle,, Vapi
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 26-03-2010
Date Of Final Hearing 17-03-2010
Next Hearing Date 17-03-2010
Assessment Year 2003-2004
Appeal Filed On 26-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD BBENCH BEFORE SHRI G.D. AGARWAL VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.866/AHD/2007 [ASSTT.YEAR 2003-04] M/S. SIDDHARTH CORPORATION VS ASSTT. COMMISSIONER O F PLOT NO.27 HINGRAJ INDUSTRIAL INCOME TAX VAPI CI RCLE ESTATE DABHEL DAMAN VAPI PAN NO.AAOFS1257R ITA NO.867/AHD/2007 [ASSTT.YEAR 2003-04] M/S. GAUTAM ENTERPRISES VS. ASSTT. COMMISSIONER O F PLOT NO.10 HINGRAJ INDUSTRIAL INCOME TAX VAPI CI RCLE ESTATE DABHEL DAMAN VAPI PAN NO.AADFG2704J (APPELLANT) (RESPONDENT) REVENUE BY : SMT. NEETA SHAH SR-DR ASSESSEE BY : SHRI BANDISH SOPARKAR AR ORDER RESERVED FOR PRONOUNCEM ENT ON 17/03/10 O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE TWO APPEALS BY DIFFERENT ASSESSEE ARE ARISIN G OUT OF DIFFERENT ORDERS OF COMMISSIONER OF INCOME-TAX (APP EALS)-VALSAD IN APPEAL NO. CIT(A)/ VLS/258-259/05-06 OF EVEN DATE 3 1-10-2006. THE ASSESSMENTS WERE FRAMED BY THE ACIT VAPI CIRCLE U/ S.143(3) OF THE ITA NO.866-867/AHD/2007 A.Y.2003-04 M/S SIDDHARTH ENTERPRISE & M/S GAUTAM ENTERPRISE V. ACIT VAPI CIR. PAGE 2 INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDERS DATED 28-1-2005 FOR THE SAME ASSESSMENT YEAR I.E. 2 003-04. 2. THE FIRST COMMON ISSUE IN THESE TWO APPEALS OF T HE ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) IN CONFIRMING THE AC TION OF ASSESSING OFFICER IN DISALLOWING THE CLAIM OF DEPRECIATION. THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL IN BOTH THE CAS ES HENCE WE WILL DECIDE THE COMMON ISSUE BY TAKING THE FACTS FROM ITA NO.866/AHD/2007 IN THE CASE OF M/S. SIDDHARTH CORPORATION. THE GROU ND REGARDING THIS ISSUE READS AS UNDER:- (1) THE AO HAS ERRED IN MAKING DISALLOWANCE OF RS. 10 59 964 OUT OF DEPRECIATION CLAIM OF RS.16 42 863 IN THE RETURN OF INCOME AND WHILE MAKING THE DISALLOWANCE THE ASSESSING OFFICER HAS ERRED IN WORKING OUT WDV OF DEPRECIABLE ASSETS AT THE BEGINN ING OF THE YEAR ON THE BASIS AS IF DEPRECIATION WAS ACTUALLY A LLOWED DURING THE ASSESSMENT YEAR 1999-00 TO 2001-02 EVEN THOUGH THE APPLICANT- FIRM OPTED NOT TO CLAIM DEPRECIATION FOR A.Y. 1999- 00 TO 2001-02. 3. THE BRIEF FACTS LEADING TO THE ABOVE COMMON ISSU E ARE THAT THE ASSESSEE IS A MANUFACTURING UNIT LOCATED IN THE UNI ON TERRITORY OF DAMAN WHICH IS A BACKWARD AREA AS SPECIFIED IN VIII TH SCHEDULE OF THE ACT. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80 -IB OF THE ACT FOR INCOME DERIVED FROM MANUFACTURING UNITS @ 100% FOR FIVE YEARS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTICED THAT THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION F OR THE YEAR UNDER CONSIDERATION AT RS.16 42 863/- AS CALCULATED BY TH E AO AT RS.5 82 899/- . THE AO GAVE REASONS THAT THE ASSESSEE HAS NOT CLA IMED DEPRECIATION ON THE FIXED ASSETS FROM ASSESSMENT YEARS 1999-00 T O 2001-02 ON THE MANUFACTURING UNIT AND CARRIED FORWARD THE SAME WDV AS ON 31-03-2002 AND ON THE SAME WDV AS ON 31-03-2003 THE ASSESSEE CLAIMED DEPRECIATION. THE AO COMPUTED THE REVISED WDV BY T REATING THE ITA NO.866-867/AHD/2007 A.Y.2003-04 M/S SIDDHARTH ENTERPRISE & M/S GAUTAM ENTERPRISE V. ACIT VAPI CIR. PAGE 3 DEPRECIATION AS HAVE BEEN ALLOWED UP TO ASSESSMENT YEAR 2001-02 FOR ASSESSMENT YEARS 2002-03 AND 2003-03 AS UNDER:- A.Y. OPENING W.D.V. ADDITION DURING THE YEAR [NET] DEPRECIATION FOR THE YEAR CLOSING W.D.V 2002-03 4659931 832854 661398 4831387 2003-04 4831387 102130 582899 4350618 AGGRIEVED AGAINST THE ACTION OF THE ASSESSING OFFI CER AGAINST THE DISALLOWANCE OF DEPRECIATION AT RS.10 59 964/- THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE ACTI ON OF ASSESSING OFFICER. THE ASSESSEE AGGRIEVED BY THE ORDER OF CI T(A) PREFERRED SECOND APPEAL BEFORE US. 4. BEFORE US LD. COUNSEL FOR THE ASSESSEE SHRI B. SOPARKAR FILED COPY OF TRIBUNALS ORDER FOR THE ASSESSMENT YEAR 19 99-00 TO 2001-02 IN ITA NO.959-961/AHD/2005 DATED 01-03-2005 WHEREBY THE TRIBUNAL HAS QUASHED THE RECTIFICATION ORDER PASSED U/S.154 BY THE ASSESSING OFFICER THRUSTING UPON THE DEPRECIATION ON THE ASSESSEE. L D. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT ONCE THE DEPRECIATION IS NOT ALLOWED IN THESE YEARS THE ASSESSEE WAS TO CARRY FORWARD THE WDV BY NOTING THE FACT AS NO DEPRECIATION WAS NOT ALLOWED. ON THE O THER HAND LD. SR- DR SMT. NEETA SHAH RELIED ON THE ORDER OF LOWER AU THORITIES. 5. AFTER HEARING THE RIVAL CONTENTIONS WE FIND THA T THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF TRIBUNAL IN ITA NO.1885/AHD/2005 DATED 28-11-2008 IN THE CASE OF KHEMANI DISTILLERIES PVT. LTD. V ACIT WHEREIN THE TRIBUNAL HAS DEALT WITH THIS ISSUE IN PARA-10 AS UNDER:- ITA NO.866-867/AHD/2007 A.Y.2003-04 M/S SIDDHARTH ENTERPRISE & M/S GAUTAM ENTERPRISE V. ACIT VAPI CIR. PAGE 4 10. A PERUSAL OF THE ABOVE PROVISIONS SHOWS THAT T HE WDV IN RESPECT OF WHICH DEPRECIATION IS TO BE CALCULATED I S THE ACTUAL COST OF THE ASSET TO THE ASSESSEE AS REDUCED BY THE AMOU NT OF THE DEPRECIATION ACTUALLY ALLOWED TO THE ASSESSEE. NOW IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT IN THE EARLIER YEAR S NO DEPRECIATION WAS ALLOWED TO THE ASSESSEE IN RESPECT OF THE FIXED ASSETS IN QUESTION. THE REVENUE COULD NOT BRING ON RECORD ANY MATERIAL BEFORE US TO SHOW THAT THOUGH THE DEPRECIATION WAS NOT CLAIMED BY THE ASSESSEE BUT IN FACT SUCH DEPRECIATION WAS ALLO WED BY THE DEPARTMENT AS DEDUCTION TO THE ASSESSEE IN THE ASSE SSMENT MADE IN RESPECT OF THE INCOME OF THE ASSESSEE. IN OUR CO NSIDERED OPINION IT IS NOT OPEN TO THE REVENUE TO DEDUCT AN Y AMOUNT FROM THE COST OF THE ASSET TO DETERMINE THE WDV ON THE G ROUND THAT SUCH AMOUNT SHOULD HAVE BEEN CLAIMED BY THE ASSESSE E AS DEPRECIATION IN EARLIER YEAR. IN OUR CONSIDERED VIE W WDV CAN BE ASCERTAINED ONLY BY REDUCING THE ACTUAL DEPRECIATIO N ALLOWED TO THE ASSESSEE IN ASSESSMENT AND NOT THE AMOUNT WHICH OUG HT TO HAVE BEEN ALLOWED TO THE ASSESSEE. IT IS THE ACTUAL DEPR ECIATION ALLOWED TO THE ASSESSEE WHICH ONLY CAN BE REDUCED FOR ASCER TAINING THE WDV AND NOT THE AMOUNT WHICH IS NOTIONALLY ALLOWED TO THE ASSESSEE. THUS IN THE ABSENCE OF ANY MATERIAL BROU GHT BEFORE US TO SHOW THAT ANY REMEDIAL MEASURE WAS TAKEN BY THE REVENUE IN THE EARLIER ASSESSMENT YEARS TO ACTUALLY ALLOW THE DEPRECIATION TO THE ASSESSEE IN THE YEAR IN WHICH THE ASSESSEE HAS HIMSELF NOT CLAIMED SUCH DEPRECIATION IN OUR CONSIDERED VIEW THE NOTIONAL AMOUNT CANNOT BE REDUCED TO ASCERTAIN THE WEV AS PE R THE PROVISIONS OF SECTION 43(6) OF THE ACT. WE THEREFO RE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE DEPRE CIATION OF RS.3 25 69 030/- AS CLAIMED BY THE ASSESSEE AS AGAI NST THE DEPRECIATION OF RS.2 53 98 048/- ALLOWED TO THE ASS ESSEE. THUS THIS GROUND OF APPEAL IS ALLOWED. 6. IN VIEW OF THE ABOVE WE ARE OF THE VIEW THAT IN THE ASSESSEES CASE IN ASSESSMENT YEARS 1999-00 TO 2001-02 NO DEPR ECIATION CLAIM HAS BEEN MADE BY THE ASSESSEE AND NO DEPRECIATION HAS B EEN ALLOWED BY THE AO AND ONCE THIS IS A CASE THE DEPRECIATION HA S TO BE COMPUTED ON THE WDV TAKEN AT THE END OF THE YEAR. THE AO IN THI S YEAR RE-COMPUTED THE WDV BY THRUSTING UPON THE DEPRECIATION OF EARLI ER YEARS. ACCORDINGLY WE FIND FORCE IN THE ARGUMENTS OF LD. COUNSEL FOR T HE ASSESSEE THAT THE ITA NO.866-867/AHD/2007 A.Y.2003-04 M/S SIDDHARTH ENTERPRISE & M/S GAUTAM ENTERPRISE V. ACIT VAPI CIR. PAGE 5 DEPRECIATION IS TO BE ALLOWED WITHOUT CONSIDERING T HE DEPRECIATION OF EARLIER YEARS AND ALSO ON WDV COMPUTED BY THE ASSES SEE AS PER BOOKS OF ACCOUNT AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. SIMILAR BEING THE FACTS IN ITA NO.867/AHD/2007 IN THE CASE OF M/S. GAUTAM ENTERPRISE WE ALLOW THE CLAIM OF BOTH THE ASSESSEE . 7. THE NEXT COMMON ISSUE IN THESE APPEALS OF THE AS SESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE ACTI ON OF ASSESSING OFFICER IN DISALLOWING THE CLAIM OF BAD DEBTS. THE FACTS A RE THAT THE ASSESSEE HAS CLAIMED BAD DEBTS IN THE BOOKS OF ACCOUNT BY WR ITING OFF THE SAME. THE ASSESSEE CONTENDED THAT THE WRITING OFF IS ON A CCOUNT OF DISCOUNT AND COMMISSION DEDUCTED BY SIX CUSTOMERS FROM THEIR PAYMENTS OVER A PERIOD OF YEARS. THE ASSESSING OFFICER DISALLOWED T HE CLAIM OF BAD DEBT BY OBSERVING THAT THE ASSESSEE HAS CONTINUING BUSIN ESS RELATIONSHIP WITH THESE CUSTOMERS IN WHOSE ACCOUNT WRITTEN OFF HAS BE EN MADE AND CLAIMED AS BAD DEBT. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS BUSINESS TRANSACTION WITH THESE PARTIES SINCE LONG AND THE DISCOUNT KASAR OR COMMISSION SHOULD HAVE BEEN WRITTEN OFF IN THE CONCERNED YEAR IN WHICH THE CUSTOMERS ACTUALLY TOOK DISCOUNT BY MA KING SHORT PAYMENT. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. AGGRIE VED THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRME D THE ACTION OF THE AO BY OBSERVING IN PARA-29 OF HIS APPELLATE ORDER AS UNDER:- 29. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT ARGUMENTS OF THE AR AS WELL AS THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER. THERE IS A FORCE IN THE OBSERVATI ON OF THE AO THAT IT IS NOT A CASE IN WHICH THE APPELLANT HAS SU DDENLY COME TO KNOW OF ANY DEBT BECOMING BAD. IT IS A CASE IN WHIC H THE CUSTOMERS OF THE APPELLANT GAVE SHORT-PAYMENTS AND AVAILED DISCOUNTS ON TRANSACTIONS WITH APPELLANT YEAR AFTER YEAR. THUS THE CLAIM OF THE APPELLANT IN THE YEAR UNDER REFERENCE IS OUT OF PLACE MISCONCEIVED AND WITH A MALA FIDE INTENTION TO REDU CE THE TAX BURDEN IN THE YEAR IN WHICH THE TAX-HOLIDAY IS OVER . THE APPELLANT IS ITA NO.866-867/AHD/2007 A.Y.2003-04 M/S SIDDHARTH ENTERPRISE & M/S GAUTAM ENTERPRISE V. ACIT VAPI CIR. PAGE 6 NOT JUSTIFIED IN MAKING THE CLAIM OF RS.5 29 733/- IN THE CURRENT YEAR TOWARDS THE DISCOUNTS WHICH RELATES TO SHORT PAYMEN TS RECEIVED FROM CUSTOMERS IN SEVERAL PAST YEARS. TO CLAIM THE BUSINESS DISCOUNTS THE APPELLANT CANNOT RESORT TO SEC.36(1) (VI) AS THE SAME CANNOT BE TERMED AS A BAD DEBT IN THE STRICT SENS E AND AS PER THE COMMERCIAL PARLANCE TOO. THE APPELLANTS CLAIM IS T HEREFORE NOT TENABLE IN LAW AND THEREFORE THE ADDITION MADE BY T HE AO IS CONFIRMED. THE APPELLANTS GROUND NO-2 IS DISMISSED . 8. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SHRI SOPARKAR RELIED ON THE CASE LAW OF HONBLE APEX COURT IN THE CASE O F T.R.F. LIMITED V. CIT IN CIVIL APPEAL NO.5293 OF 2003 DATED 9 TH FEBRUARY 2010. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS COMMON IS SUE IN THE APPEALS OF THE ASSESSEE IS IN FAVOUR OF ASSESSEE AND AGAINST T HE REVENUE AS THE ASSESSEE HAS WRITTEN OFF THESE BAD DEBTS IN ITS BOO KS OF ACCOUNT. 9. AFTER HEARING THE RIVAL CONTENTIONS AND WE FIND THAT THESE EXPENSES WRITTEN OFF BY THE ASSESSEE IS AS ON ACCOUNT OF DIS COUNT KASAR AND COMMISSION DEDUCTED BY THEIR CUSTOMERS FROM THEIR P AYMENT MADE OVER A PERIOD OF YEARS. THESE ARE NOT BAD DEBTS AS SUCH BUT THESE ARE EXPENSES OF BUSINESS AND ALLOWABLE. BUT THE ASSESSI NG OFFICER HAS TO EXAMINE THE ISSUE WHETHER THESE ARE CRYSTALLIZED I N THIS YEAR OR NOT. IN PRINCIPLE THE EXPENSES ARE ALLOWABLE BUT THE AO HA S TO VERIFY IN WHICH YEAR THESE HAVE CRYSTALLIZED. IN VIEW OF THIS WE SET ASIDE THIS COMMON ISSUE OF THE ASSESSEES APPEALS TO THE FILE OF AO. THIS COMMON ISSUE IN BOTH THE APPEALS OF ASSESSEE IS ALLOWED FOR STATIST ICAL PURPOSES AS INDICATED ABOVE. 10. THE NEXT COMMON ISSUE IN THESE APPEALS OF THE A SSESSEES IS AS REGARDS TO CONFIRMATION OF DISALLOWANCE OF VEHICLE AND TELEPHONE EXPENSES OF RS.53 584/- AND RS.14 599/-. THE ASSESS ING OFFICER DISALLOWED 1/4 TH OF VEHICLE AND TELEPHONE EXPENSES AT RS.53 584/- A ND ITA NO.866-867/AHD/2007 A.Y.2003-04 M/S SIDDHARTH ENTERPRISE & M/S GAUTAM ENTERPRISE V. ACIT VAPI CIR. PAGE 7 RS.14 559/- FOR BOTH THE YEAR. THE ASSESSEE HAS IN CURRED TOTAL INCOME OF RS.2 15 535/- UNDER THE HEAD OF TELEPHONE EXPENS ES VEHICLE EXPENSES AND VEHICLE DEPRECIATION IN THE CASE OF SI DDHARTH CORPORATION AND RS.58 237/- ON ACCOUNT OF TELEPHONE EXPENSES IN THE CASE OF GAUTAM ENTERPRISES. THE AO HAS DISALLOWED 1/4 TH OF THE EXPENSES. THE CIT(A) RESTRICTED THE DISALLOWANCE AT RS.21 535/- I N THE CASE OF SIDDHARTH CORPORATION AND RS.14 559/- IN THE CASE O F GAUTAM ENTERPRISES. 11. WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) AS HE HAS RESTRICTED THE DISALLOWANCE TO A REASONABLE EXTENT I.E. AT 10% AND ACCORDINGLY WE CONFIRM THE ORDER OF CIT(A). 10. IN THE RESULT BOTH APPEALS OF THE ASSESSEE ARE ALL OWED PARTLY AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS DAY OF 26 TH MARCH 2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD DATED : 26/03/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VALSAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD