M/S. EVEREST INDUSTIRIES LTD, NEW DELHI v. THE ACIT CIR-1, THANE

ITA 2077/MUM/2008 | 2001-2002
Pronouncement Date: 18-02-2010 | Result: Allowed

Appeal Details

RSA Number 207719914 RSA 2008
Assessee PAN AAACE7550N
Bench Mumbai
Appeal Number ITA 2077/MUM/2008
Duration Of Justice 1 year(s) 10 month(s) 23 day(s)
Appellant M/S. EVEREST INDUSTIRIES LTD, NEW DELHI
Respondent THE ACIT CIR-1, THANE
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 18-02-2010
Date Of Final Hearing 17-12-2009
Next Hearing Date 17-12-2009
Assessment Year 2001-2002
Appeal Filed On 26-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI. P.M. JAGTAP (A.M.) AND SHRI. N.V. VASU DEVAN (J.M.) ITA NO.2075/MUM/2008 ASSESSMENT YEAR : 1999-2000 ITA NO.2076/MUM/2008 ASSESSMENT YEAR : 2000-2001 ITA NO.2077/MUM/2008 ASSESSMENT YEAR : 2001-2002 ITA NO.2078/MUM/2008 ASSESSMENT YEAR : 2002-2003 EVEREST INDUSTRIES LTD. A-32-1 GENESIS MOHAN CO-OP. INDS. ESTATE MATHURA RD. NEW DELHI 110 044. PAN : AAACE7550N VS. ASST.COMMISSIONER OF INCOME-TAX CIRCLE I THANE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NIRAJ SHETH RESPONDENT BY : SHRI NAVEEN GUPTA/ HEMANT J. LAL O R D E R PER BENCH THESE FOUR APPEALS FILED BY THE ASSESSEE AGAINST TH E FOUR SEPARATE ORDERS OF LEARNED CIT(A) II THANE ALL DATED 18.1 2.2007 FOR ASSESSMENT YEAR 1999-2000 TO ASSESSMENT YEAR 2002-2003 INVOLVE COMMON ISSUES AND THE SAME THEREFORE HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. 2. THE MAIN COMMON ISSUE INVOLVED IN THESE APPEALS AS RAISED BY THE ASSESSEE IN GROUND NO.2 WHICH IS IDENTICAL IN ALL THE APPEALS IS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUCTION OF NOTIONAL TAX ITA NO.1885/MUM/2009 A.Y.: 2007-08 2 ON CAPITAL GAIN CLAIMED AS EXEMPT U/S.54G IN A.Y. 1 995-96 AND 1996-97 FROM THE COST OF PLANT & MACHINERY CAPI TALIZED IN THE SAID ASSESSMENT YEARS FOR THE PURPOSE OF COMPUT ING OPENING WRITTEN DOWN VALUE (WDV) OF THE ASSESSMENT YEAR UNDER CONSIDERATION IN UTTER DISREGARD OF THE PROV ISIONS OF SEC 43(1) APPLICABLE FOR A.Y. 1995-96 & 1996-97. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED INTER ALIA IN THE BUSINESS OF MANUFACTURE AND SALE OF AS BESTOS CEMENT SHEETS AND ACCESSORIES. DURING THE PREVIOUS YEAR RELEVANT T O A.Y.1995-96 THE ASSESSEE COMPANY HAD SHIFTING ITS FACTORY FROM MULU ND MUMBAI TO LAKHAMAPUR NASHIK. AS A RESULT OF THE SAID SHI FTING OF ITS UNIT FROM URBAN AREA TO NON URBAN AREA THE ASSESSEE COMPANY CLAIMED DEDUCTION IN RESPECT OF CAPITAL GAIN ARISING FROM SALE OF ITS IM MOVABLE ASSETS IN MUMBAI U/S.54G. THE SAID DEDUCTION CLAIMED BY THE ASSE SSEE WAS DULY ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED F OR THE RELEVANT PERIOD. IN THE ASSESSMENT COMPLETED U/S.143(3) FOR A.Y. 20 03-04 IT WAS HOWEVER HELD BY THE ASSESSING OFFICER THAT AS PER EXPLANATI ON 10 TO SECTION 43(1) THE BENEFIT DERIVED BY THE ASSESSEE IN TERMS OF TAX BY VIRTUE OF SECTION 54G SHOULD HAVE BEEN REDUCED FROM THE ACTUAL COST OF AS SET AND CONSEQUENTLY THE DEPRECIATION SHOULD HAVE BEEN ALLOWED ONLY ON S UCH REDUCED COST. ACCORDINGLY THE ASSESSING OFFICER DEDUCTED THE BEN EFIT DERIVED BY THE ASSESSEE BY VIRTUE OF SECTION 54G FROM THE COST OF THE ASSETS AS DISCLOSED IN A.Y.1996-97 AND RECOMPUTED THE DEPRECIATION ALLOWAB LE TO THE ASSESSEE BY TAKING THE WRITTEN DOWN VALUE OF ASSETS SO REDUCED. ON THE BASIS OF SAID ASSESSMENT COMPLETED BY HIM U/S.143(3) FOR A.Y.2003 -2004 THE ASSESSMENTS FOR THE YEARS UNDER CONSIDERATION I.E. A.Y.1999-2000 TO A.Y.2002-2003 WERE ALSO REOPENED BY THE ASSESSING O FFICER AFTER RECORDING THE REASONS AND IN THE REASSESSMENTS COMPLETED U/S. 143(3) R.W.S. 147 THE DEPRECIATION ORIGINALLY ALLOWED WAS REDUCED BY THE ASSESSING OFFICER FOLLOWING HIS ORDER FOR A.Y. 2003-2004. ON APPEA L THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THIS ISSUE. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS POINTED OUT BY TH E LEARNED COUNSEL FOR THE ITA NO.1885/MUM/2009 A.Y.: 2007-08 3 ASSESSEE THE APPELLATE ORDER PASSED BY THE LEARNED CIT(A) UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION IN A.Y. 2003-04 WAS ALSO CHALLENGED BY THE ASSESSEE IN AN APPEAL PREFERRED BEFORE THE TRIBUNAL AND THE COORDI NATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DATED 04.12.2009 PASSED IN ITA NO. 814/MUM/2007 HAS ALREADY DISPOSED OF THE SAID APPEAL DECIDING TH E SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. A COPY OF THE SAID ORDER IS PLA CED ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARA 16 & 17 OF THE SAID ORDER WHICH IS AS UNDER: 16. RIVAL CONTENTIONS HEARD. SECTION 54G EXEMPTS FROM CAPITAL GAIN ON TRANSFER OF ASSETS IN CASES WHERE AN INDUSTRIAL UNDERTAKING IS SHIFTED FROM AN URBAN AREA TO A NON URBAN AREA SUBJECT TO FULFILMENT OF CERTAIN CONDITIONS SPECIFI ED IN THAT SECTION. EXPLANATION 10 TO SECTION 43(1) READS AS FOLLOWS: EXPLANATION 10. - WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSES HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON IN THE FORM OF A SUBSIDY OR A GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED) THEN SO MUCH OF THE COST AS IS RELATED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE: PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT IS OF SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIRED SO MUCH OF THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSES IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. 17. A PLAIN READING OF THIS EXPLANATION CLEARLY SHO WS THAT ONLY IN CASES WHERE THE ASSESSEE RECEIVES A PORTION OF THE COST OF THE ASSET DIRECTLY OR INDIRECTLY FROM THE CENTRA L OR STATE GOVERNMENT OR ANY OTHER PERSON AND THAT TOO IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT THEN SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY GRANT OR REIMBURSEMEN T SHALL NOT BE INCLUDED. AN EXEMPTION FROM PAYMENT OF CAPITA L GAINS TAX GRANTED U/S.54G CANNOT BY ANY STRETCH OF IMAGINATIO N BE CALLED A SUBSIDY OR GRANT OR REIMBURSEMENT. SUCH EXEMPTI ON CANNOT ITA NO.1885/MUM/2009 A.Y.: 2007-08 4 BE SAID TO HAVE BEEN GRANTED BY THE STATE OR CENTRA L GOVERNMENT TO MEET DIRECTLY OR INDIRECTLY A PORTION OF THE COST OR THE ASSET. FOR THIS SOLE REASON THE ENTIRE THEO RY MADE OUT BY THE ASSESSING OFFICER HAS TO BE QUASHED AS DEVOID O F MERIT. WE ARE UNABLE TO COMPREHEND HOW SUCH STRANGE THOUG HTS AND PROPOSITIONS CREPT INTO THE MIND OF THE ASSESSING O FFICER. THE BENEFIT U/S.544G WAS ADMITTEDLY GIVEN TO THE ASSESS EE DURING THE A.Y. 1995-96 AND 1996-97. EXPLANATION 10 TO SUBSECTION 43(1) WAS BROUGHT INTO THE STATUE ONLY W.E.F. 01.04 .1999 AND EVEN IN THIS EXPLANATION IN OUR CONSIDERED OPINION THERE IS NO POSSIBILITY OF ANYBODY COMING TO A CONCLUSION THAT ACTUAL COST OF THE ASSET AS ACCEPTED BY THE REVENUE IN THE A.Y. 19 95-96 AND 1996-97 HAVE TO BE DISTURBED WHILE DOING THE ASSESS MENT FOR THE A.Y.2003-04. THE PROPOSITION SUFFICE TO SAY IS DEVOID OF ANY LOGIC. IF SUCH PROPOSITIONS ARE ACCEPTED IT W ILL LEAD TO A SITUATION WHERE ANY EXEMPTION GRANTED UNDER VARIOUS PROVISIONS OF THE I.T. ACT FOR THE PAYMENT OF TAX I NCLUDING DEPRECIATION INVESTMENT ALLOWANCE ETC. WOULD BE TA KEN AS A SUBSIDY GRANT OR REIMBURSEMENT AND CAN BE CONSIDER ED FOR THE REDUCTION OF COST OF ASSET. 5. AS THE ISSUE INVOLVED IN THE YEARS UNDER CONSIDE RATIONS AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE ADMITTEDLY SIMILAR TO THAT OF A.Y.2003- 04 WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNA L FOR A.Y. 2003-04 AND ALLOW GROUND NO. 2 OF THE ASSESSEES APPEALS. THE IMPUGNED ORDERS OF THE LEARNED CIT(A) ON THIS ISSUE ARE ACCORDINGLY SET AS IDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIONS MADE TO THE TOTAL INCOME OF THE ASSESSEE BY RESTRICTING ITS CLAIM FOR DEPRECIATION ON FIXED ASSET. 6. IN VIEW OF OUR DECISION ON THE MAIN ISSUE DELETI NG THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION RENDERED ABOVE WE DO NOT DEEM IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE PRELIMINARY ISSUE RAISED BY THE ASSESSEE IN GROUND NO.1 OF THESE APPEALS CHALLENGING THE VALIDITY OF ASSESSMENTS MADE BY THE ASSESSING OFFICER U/S. 143(3)/147 AS WELL AS THE ALTERNATIVE CLAIMS MADE B Y THE ASSESSEE IN GROUND NO.3 AND 4 AS THEY HAVE BEEN RENDERED ONLY ACADEMIC . 7. AS REGARDS GROUND NO.5 RAISED BY THE ASSESSEE IN ITS APPEAL FOR A.Y.1999-2000 BEING ITA NO.2075/MUM/08 RELATING TO LEVY OF SURCHARGE THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OU T THAT THERE WAS NO SURCHARGE LEVIABLE FOR A.Y.1999-2000 AS PER FINANCE ACT 1999. SINCE THIS ITA NO.1885/MUM/2009 A.Y.: 2007-08 5 POSITION CLEARLY EVIDENT FROM THE RELEVANT PORTION OF FINANCE ACT 1999 HAS NOT BEEN DISPUTED EVEN BY THE LEARNED D.R. WE DIRE CT THE ASSESSING OFFICER TO CANCEL THE SURCHARGE LEVIED FOR A.Y.1999-2000 AN D ALLOW GROUND NO.5 OF THE ASSESSEES APPEAL FOR THAT YEAR. 8. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF FEBRUARY 2010. SD/- (N.V. VASUDEVAN) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI DATED 18 TH FEBRUARY 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-II THANE 4. COMMISSIONER OF INCOME TAX CITY-II THANE 5. DEPARTMENTAL REPRESENTATIVE BENCH E MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.1885/MUM/2009 A.Y.: 2007-08 6 DATE INITIALS 1. DRAFT DICTATED ON 16-02-2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17-02-2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER