The DCIT, Circle-1(1),, Baroda v. M/s. ADI ArtechTransducer Pvt.Ltd.,, Baroda

ITA 880/AHD/2009 | 2005-2006
Pronouncement Date: 30-09-2011 | Result: Allowed

Appeal Details

RSA Number 88020514 RSA 2009
Assessee PAN AABCA6598D
Bench Ahmedabad
Appeal Number ITA 880/AHD/2009
Duration Of Justice 2 year(s) 6 month(s) 10 day(s)
Appellant The DCIT, Circle-1(1),, Baroda
Respondent M/s. ADI ArtechTransducer Pvt.Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 30-09-2011
Date Of Final Hearing 22-09-2011
Next Hearing Date 22-09-2011
Assessment Year 2005-2006
Appeal Filed On 20-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. K. GARODIA AM) ITA NO.880/AHD/2008 A. Y.: 2005-06 THE D. C. I. T. CIRCLE-1 (1) AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA VS ADI ARTECH TRNADUCERS PVT. LTD. 91/71 GIDC ESTATE MAKARPURA BARODA PA NO. AABCA 6598 D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI O. P. BATHEJA DR RESPONDENT BY SHRI S. N. SOPARKAR AR DATE OF HEARING: 22-09-2011 DATE OF PRONOUNCEMENT: 30-09-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I BARODA DATED 15 TH DECEMBER 2008 FOR ASSESSMENT YEARS 2005-06 ON TH E FOLLOWING GROUND: 1. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED CIT(A) ERRED IN LAW AND FACTS IN DELETING CAPITAL EXPENDITURE IN RESPECT OF TOOLS AN D INSTRUMENT EXPENSES AMOUNTING TO RS.44 57 236/- IRRESPECTIVE OF THE FACT THAT THE HON. ITAT HAS CONFIRMED THIS EXPENDITURE AS CAPITAL EXPENDITURE I N ASSESSEES OWN CASE FOR A. Y. 1998-99. 2. THE ASSESSEE IS A MANUFACTURER OF LOAD CELLS AND WEIGH-BRIDGE MODULES. DURING THE COURSE OF ASSESSMENT PROCEEDING S IT WAS ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 2 NOTICED BY THE AO THAT THE ASSESSEE HAD DEBITED RS. 50 93 984/- TO PROFIT & LOSS ACCOUNT UNDER THE HEAD PURCHASED OF TOOLS AND INSTRUMENTS. THE AO PROPOSED TO TREAT THE PURCHASES OF SUCH TOOLS AND INSTRUMENTS AS CAPITAL EXPENDITURE AND THEREFOR E CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THIS AMOUNT OF RS. 50 93 984/- NOT BE DISALLOWED. THE ASSESSEES EXPLANATION TO THAT E FFECT THAT THE TOOLS AND INSTRUMENTS PURCHASED BY THE ASSESSEE WERE CONS UMABLE ITEMS HAVING VERY SHORT LIFE WAS NOT ACCEPTED BY THE AO A ND THE ENTIRE PURCHASES WERE DISALLOWED AS CAPITAL EXPENDITURE. A FTER ALLOWING DEPRECIATION THEREON THE NET ADDITION CAME TO RS.4 4 57 236/-. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PURCHASES CONSISTED OF CONSUMABLE ITEMS LIKE COTTON WASTE KEROSENE GLOVES POWDER DRILL BITS HAND GLOVES BANDAGE END MILLS DISTILLED WATER PAPER DRILL ARALDITE CHEMICALS HACKSAW BLADES M-SEAL BRUSH INSERTS ACETONE NE EDLE FILE TAP SET WASHER BOLT SOLUBLE CUTTING OIL THINNER NUT CU TTER ALCOHOL BEARINGS PRIMER GLASS BITS SOLDRON BIT FEVIQUICK ETC. AN D THAT THESE ITEMS GOT FULLY CONSUMED IN THE PROCESS OF MANUFACTURE AND TH AT OUT OF THE ABOVE PURCHASES NONE OF THE ITEMS REMAINED IN EXIST ENCE AT THE END OF THE YEAR. HENCE THE ASSESSEE WROTE OFF THE VALU E OF ITEMS CONSUMED DURING THE YEAR AMOUNTING TO RS.50 93 984/ - 3. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE DELETED THE ADDITION. HIS FINDINGS IN PARA 3.2 AND 3.3 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 3 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A . R. AND THE FACTS OF THE CASE. THE APPELLANT HAS FILED DETAILS REGARDING THE PURCHASES OF DRILLS TOOLS ETC. FROM THE DETAILS FURNISHED IT IS SEEN THAT THE PURCHASES REL ATE TO SMALL & SUNDRY ITEMS LIKE CONSUMABLE TOOLS (DRILL B ITS BEARING HACKSAW BLADES ETC.) AND CONSUMABLE ITEMS (KEROSENE COTTON WASTE ACETONE GLASS BEADS SCRE W NUT BOLT BANDAGE GLOVES ETC.). NONE OF THESE ITE MS HAS A LIFE MORE THAN A FEW DAYS. THE QUANTITY CONSUMED ITSELF INDICATES THAT THE LIFE OF EACH ITEM WAS VERY SHORT . THE QUANTITY CONSUMED ITSELF INDICATES THAT THE LIFE OF EACH ITEM WAS VERY SHORT. THESE WERE UTILIZED ON FOUR MACHINES. THUS THE AVERAGE LIFE OF EACH WAS ABOUT3 TO 4 DAYS. SIMILARLY INSERT/ROUND FILES (2170 NUMBERS CONSUMED ON SIX MACHINES) TAP SETS (1186 NUMBERS CONSUMED ON FOUR MACHINES) HACKSAW BLADES (211 NUMBERS CONSUMED ON ONE MACHINE) ETC SHOW THAT BY NO STRETCH OF IMAGINATION SUCH ITEMS COULD BE HELD TO BE CAPITAL ITEMS BESTOWING LONG AND ENDURING BENEFIT T O THE APPELLANT. THE VALUE OF SUCH PURCHASES WAS RS.37 10 530/- OUT OF THE TOTAL IMPUGNED EXPENDITU RE OF RS.50 93 984/-. THE BALANCE RELATES TO PURCHASES OF PURELY CONSUMABLE ITEMS LIKE COTTON GREASE BANDAG E GLOVES ETC. IN MY OPINION NO ITEM OF PURCHASE HAS BEEN IDENTIFIED WHICH COULD QUALIFY AS A CAPITAL ITEM. F ROM THE NATURE OF THE ITEMS IT IS QUITE ORDINARY COURSE OF THE MANUFACTURING PROCESS. FURTHER IT IS NOTEWORTHY TH AT THE IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN APPELLANTS APPEAL FOR AY 1998-99 IN ITA NO.2993/AHD/2002. VIDE ORDER DT. 13.07.2007 THE TRIBUNAL NOTED THAT THE ASSESSEE HAS ADOPTED THE PRACTICE OF WRITING OFF ONLY THOSE ITEMS WHICH DID NOT REMAIN IN EXISTENCE AT THE END OF THE ACCOUNTING PE RIOD. IT WAS NOTED THAT THE EXPENDITURE INCURRED BY THE ASS ESSEE HAS BEEN INCURRED FOR THE PURPOSE OF ACQUIRING THE ASSETS SOME OF WHICH MAY BE CONSUMED DURING THE DAY WHILE THE OTHER CAN BE REUSED MORE TIMES IF USED PROPERLY OR STORED PROPERLY. THE ASSETS IN OUR OPINION ARE AP PARATUS WHICH PERFORMED A PARTICULAR PURPOSE AS WAS POINTED OUT TO US. DRILL BITS ARE USED FOR MILLING SHAPING DR ILLING ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 4 OPERATION WHILE ENDMILLS ARE USED FOR POCKETING SN ORTING OPERATION AND BOTH ARE CONSUMED DURING OPERATION. I F THESE ITEMS ARE CONSUMED DURING THE MANUFACTURING OPERATION THE ASSESSEE SHOULD HAVE NOT VALUED THE SAME BY ADOPTING THE ESTIMATED USEFUL LIFE METHOD BUT TH E ASSESSEE SHOULD HAVE SHOWN IT AS CONSUMABLES. HOWEVER IT WAS HELD THAT THE PURCHASES REPRESENTED ACQUISITION OF CAPITAL ASSETS AND ASSESSEES APPEAL ON THIS GROUND WAS DISMISSED. 3.3 ON CAREFUL CONSIDERATION OF THE ORDER OF THE TRIBUNAL IT APPEARS THAT THE ITAT WAS INCLINED TO ALLOW THE EXPENDITURE HAD IT BEEN CLASSIFIED AS CONSUMABLES A ND WRITTEN OFF AS SUCH. THE DISALLOWANCE MADE BY THE A O APPEARS TO HAVE BEEN UPHELD TAKING THE VIEW THAT ME RELY BECAUSE AN ASSET HAS LESS USEFUL LIFE IT CANNOT BE REGARDED TO BE A REVENUE ITEM AND WAS THEREFORE HEL D TO BE A CAPITAL ASSET. HOWEVER I FIND THAT THE ITAT D OES NOT APPEAR TO HAVE GONE INTO THE DETAILED DESCRIPTION O F THE ITEMS PURCHASED. AS SEEN ABOVE THE USEFUL LIFE OF THE ITEMS PURCHASED WAS FEW DAYS ONLY. IT IS DIFFICULT TO HOLD AN ITEM HAVING LIFE OF ONLY A FEW DAYS TO BE A CAPI TAL ASSET. A CAPITAL ASSET BY DEFINITION MEANS AN ITEM WHICH PROVIDES LONG-LASTING BENEFIT SPREAD OVER AT LEAST TWO OR MORE ACCOUNTING PERIODS. HOWEVER IN THE INSTANT CA SE THE LIFE OF THE ITEM IN QUESTION WAS SO SHORT THAT THE BENEFIT ACCRUING FROM THE USE THEREOF CAN ONLY BE S AID TO BE MOMENTARY TRANSIENT AND NASCENT RATHER THAN ENDURING IN NATURE. ACCORDINGLY RESPECTFULLY DISAG REEING WITH THE DECISION OF ITAT (WHICH APPEARS TO BE PER INCURIAM) I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN TREATING THE ITEMS AS CAPITAL IN NATURE. THE NET DISALLOWANCE OF RS.44 57 236/- (AFTER DEPRECIATION) IS DIRECTED TO BE DELETED. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE TRIBUNAL CONFIRMED THE ADDITION IN THE ASS ESSMENT YEAR 1998- 99. THEREFORE THE LEARNED CIT(A) SHOULD NOT HAVE A LLOWED THE CLAIM ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 5 OF THE ASSESSEE. ON THE OTHER HAND THE LEARNED COU NSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THOUGH IN ASSESSME NT YEAR 1998-99 THE TRIBUNAL DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE VIDE ORDER DATED 13-07-2007 (PB-12) BUT THE SAME WAS REC ONSIDERED IN ASSESSMENT YEAR 2004-05 IN THE CASE OF THE SAME ASS ESSEE IN ITA NO.4395/AHD/2007 AND VIDE ORDER DATED 24-09-2008(PB -1) THE MATTER WAS RESTORED TO THE FILE OF THE AO FOR RE-EXAMINATI ON OF THE ISSUE FOR COMPARING THE ITEMS WITH ASSESSMENT YEAR 1998-99 WI TH RESPECT TO THE EXPENDITURE INCURRED BY THE ASSESSEE WHICH ITEM S WERE INCLUDED IN THE TOOLS AND INSTRUMENTS. COPY OF THE SAME IS F ILED ON PAGE 1 OF THE PAPER BOOK. HE HAS SUBMITTED THAT THE ASSESSEE PREFERRED APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THIS ORDER. H OWEVER THE HONBLE HIGH COURT DISMISSED THE APPEAL OF THE ASSE SSEE IN TAX APPEAL NO.791/2009 VIDE ORDER DATED 10-05-2011 (PB- 6). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF THE SAME ASSESSEE FOR ASSES SMENT YEAR 2002- 03 IN ITA NO.301/AHD/2006 DATED 20-11-2009 IN WHICH FOLLOWING THE ORDER OF THE TRIBUNAL IN ITA NO.4395/AHD/2007 THE MATTER WAS RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MATTER IS STILL PENDING BEFORE THE AO FOR RE-CONSIDERATION. HOWEVER APART FROM THE AB OVE ORDERS OF THE TRIBUNAL AND THE HONBLE HIGH COURT HE HAS SUBMITT ED THAT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS METALMAN AUTO (P) LTD. 11 TAXMAN.COM 51 HELD THAT THE AMOUNTS SPENT BY ASSESSEE ON DESIGNING AND CONSULTANCY CHAR GES ON TOOLS AND DIES WAS ALLOWABLE REVENUE EXPENDITURE. COPY OF THE ORDER IS ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 6 FILED ON RECORD. HE HAS ALSO REFERRED TO THE DETAIL S OF THE ITEMS USED IN THE ASSESSMENT YEAR UNDER APPEAL COPY OF WHICH IS F ILED AT PAGE 26 OF THE PAPER BOOK TO SHOW THAT TOOLS WERE CONSUMED DURING THE YEAR UNDER CONSIDERATION AS WELL AS CONSUMED ALL CONSUMA BLE ITEMS. HE THEREFORE SUBMITTED THAT THE DEPARTMENTAL APPEAL H AS NO MERIT AND MAY BE DISMISSED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT IN ASSESSMENT YEA R 1998-99 THE TRIBUNAL DISMISSED THE SIMILAR GROUND OF APPEAL VID E ORDER DATED 13-07-2007. THE LEARNED CIT(A) DESPITE NOTING THE O RDER OF THE TRIBUNAL IN THE IMPUGNED ORDER FURTHER NOTED THAT ITAT DOES NOT APPEAR TO HAVE GONE INTO THE DETAILED DESCRIPTION O F THE ITEMS PURCHASED. COPY OF THE COMPLETE ORDER IS PLACED IN THE PAPER BOOK (PB-12) IN WHICH THE DESCRIPTION OF THE ITEMS HAVE BEEN NOTED IN THE ORDER OF THE LEARNED CIT(A) AND SUBMISSION OF THE A SSESSEE. MOREOVER THE LEARNED CIT(A) IS SUBORDINATE TO THE TRIBUNAL IN JUDICIAL HIERARCHY THEREFORE THE LEARNED CIT(A) HAS NO RIG HT OR JUSTIFICATION TO COMMENT UPON THE ORDER OF THE TRIBUNAL. JUDICIAL PR OPRIETY DEMANDS THAT THE LEARNED CIT(A) SHALL HAVE TO FOLLOW THE OR DER OF THE TRIBUNAL WITHOUT MAKING COMMENT UPON THE SAME. AS NOTED ABOV E IN THE ASSESSMENT YEAR 1998-99 THE ITEMS HAVE BEEN TAKEN I NTO CONSIDERATION BY THE TRIBUNAL THEREFORE THE LEARN ED CIT(A) SHOULD NOT HAVE SHOWN ANY DISAGREEMENT WITH THE ORDER OF T HE TRIBUNAL. THIS OBSERVATION IS SUFFICIENT TO SET ASIDE THE ORDER OF THE LEARNED CIT(A). WE FURTHER FIND THAT APART FROM THE ORDER FOR ASSES SMENT YEAR 1998-99 AGAINST THE ASSESSEE THE TRIBUNAL AGAIN CONSIDERED IDENTICAL ISSUE IN ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 7 ASSESSMENT YEAR 2004-05 AND VIDE ORDER DATED 24-09- 2008 RESTORED THE ISSUE TO THE FILE OF THE AO FOR LOOKING INTO TH E FACTS OF THE CASE AND COMPARE THE ITEMS WITH RESPECT TO THE EXPENDITURE I NCURRED BY THE ASSESSEE ON THE ABOVE ISSUE IN THE LIGHT OF THE ORD ER FOR ASSESSMENT YEAR 1998-99. THE ASSESSEE PREFERRED APPEAL AGAINS T THIS ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT BUT THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE HONBLE HIGH COURT VI DE ORDER DATED 10-05-2011 (SUPRA). IT IS ALSO ADMITTED FACT THAT I N ASSESSMENT YEAR 2002-03 THE TRIBUNAL IN THE CASE OF THE SAME ASSES SEE FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSMENT YEAR 2004-05 DA TED 24-09-2008 RESTORED THE ISSUE TO THE FILE OF THE AO FOR RE-ADJ UDICATION. THUS IN ASSESSMENT YEARS 2004-05 AND 2002-03 THE MATTER IS STILL PENDING BEFORE THE AO FOR RE-ADJUDICATION AS PER THE DIRECT ION OF THE TRIBUNAL AS IS EXPLAINED BY THE LEARNED COUNSEL FOR THE ASSE SSEE. THEREFORE PROPRIETY DEMANDS THAT SINCE THE IDENTICAL ISSUE IS PENDING BEFORE THE AO FOR RE-CONSIDERATION THEREFORE THE MATTER SHOU LD ALSO BE RESTORED TO THE FILE OF THE AO FOR TAKING CONSISTENT VIEW IN THE MATTER CONSIDERING THE ITEMS OF TOOLS AND INSTRUMENTS ETC. PURCHASED BY THE ASSESSEE. THOUGH THE LEARNED COUNSEL FOR THE ASSES SEE HAS FILED THE DETAILS OF ITEMS CONSUMED DURING THE YEAR UNDER CONSIDERATION AND ALSO RELIED UPON THE DECISION OF THE HONBLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF METALMAN AUTO (P) LTD. (S UPRA) THE FACTS REMAIN THAT THE ORDER OF THE TRIBUNAL RESTORING THE MATTER TO THE FILE OF THE AO IS CONFIRMED BY THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF THE SAME ASSESSEE. THEREFORE IT WOULD BE R EASONABLE AND PROPER TO RESTORE THE MATTER IN ISSUE TO THE FILE O F THE AO FOR RE- CONSIDERATION OF THE ISSUE IN ALL THE ASSESSMENT YE ARS PENDING BEFORE ITA NO.880/AHD/2009 DCIT CIR-1 (1) BARODA VS ADI ARTECH TRANSDUCER PV T. LTD. 8 HIM INCLUDING THE ASSESSMENT YEAR UNDER APPEAL FOR TAKING CONSISTENT VIEW ON SAME MATTER. CONSIDERING THE ABOVE DISCUSSI ONS WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTO RE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THIS ISS UE BY GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE AO SHALL ALSO TAKE INTO CONSIDERATION THE DECISION OF THE HO NBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF METALMAN AUTO (P) LTD. (SUPRA) WHILE DECIDING THE ISSUE. 7. IN THE RESULT THE DEPARTMENTAL APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD