Income Tax Appellate Tribunal - Mumbai
Echjay Industries Pvt. Ltd, Mumbai vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E",MUMBAI
BEFORE SHRI D.K. AGARWAL (JM) & SHRI J. SUDHAKAR REDDY (AM)
I.T.A. Nos. 851, 4514/Mum/2007 & 3430/Mum/2008
(A.Ys. 2003-04, 2004-05 & 2005-06)
Dy.Commr. of Income-tax, M/s. Echjay Industries P.Ltd.,
Cir. 3(1), 83, Bajaj Bhavan, Nariman Point,
Room No.607, 6th floor, Mumbai-400021.
Aaykar Bhavan,Mumbai-400 020. Vs. PAN:AAACE1157B
Appellant Respondent
Appellant by Shri G.P. Trvedi
Respondent by Shri N.R. Rao.
O R D E R
PER D.K. AGARWAL, JM:
All these appeals preferred by the Revenue are directed against the separate orders dated 20-10-2006, 09-04-2007 and 25-02-2008 passed by the ld. CIT(A) for the asstt. years 2003-04, 2004-05 and 2005-06 respectively. Since the facts are identical and common issues are involved, all these appeals are disposed of by this common order for the sake of convenience. ITA No.851/Mum/2007 (AY: 2003-04):
2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacturing, forging, fabricating engineering products particularly required in the automobile industry. It caters to the requirements of Railways, ISRO, Calcutta Tramways, etc. The return was filed declaring total income of Rs.12,72,38,401/-. However, the assessment was completed at an income of Rs.19,49,09,981/- including disallowance of depreciation and 2 ITA Nos.851-4514-3430/M/08 Echjay Indus. P.Ltd.
disallowance of part-deduction u/s.80HHC and 80IB, vide order dated 24-03- 2006 passed by the AO u/s.143(3) of the I.T. Act, 1961 ("the Act"). On appeal, the ld. CIT(A), while partly allowing the appeal, allowed substantial relief to the assessee.
3. Being aggrieved by the order of the CIT(A), the Revenue is in appeal before us.
4. Ground no.1 is against the direction of the ld. CIT(A) not to reduce any part of the compensation from the W.D.V. of assets while computing the eligible deprecation allowance to the assessee for the current year.
5. The brief facts of the above issue discussed by the AO in para 2 of page 2 of the assessment order are reproduced as under :
"2. Depreciation claim :
Relevant to the Assessment Year 1999-00, the assessee received a compensation of DM 7 Million from the suppliers of the Plant and Machinery being the Axial Closed Die Rolling Line upon settlement of disputes in supply, performance, erection and commissioning of the said plant and machineries. Out of this amount, it was held in the assessment year 1999-00 that a sum of Rs.16,05,29,977/- received on capital account went to reduce the cost of the Plant. Accordingly WDV of the plant and the machineries as at 31.3.1999 was reduced by this amount and lower depreciation allowed accordingly. The assessee filed an appeal against this order before the CIT(A) and the CIT(A), in his order passed in appeal No. CIT(A)-III/CIR 3(1)/IT- 937/01-02 dated 7th March 2002, has held the issue in favour of the assessee. He has held that the cost or WDV of the plant could not be reduced by any amount of such compensation received. The decision of the CIT(A) has not been accepted and a second appeal has been filed by the department on the point before the ITAT, which is pending decision. In the circumstances, with a view to keeping the issue alive while the CIT(A)'s decision is not accepted by the department, depreciation has been reworked on the basis of the reduced WDV of the Plant and Machineries as at 31.3.2002. Working of Depreciation allowable is annexed as Annexure "A" to this order. The claim of Depreciation made by the assessee during the course of assessment was Rs.6,92,49,548/- whereas an amount of Rs.5,65,51,534/-
is only allowable in view of the discussions above. Depreciation is allowed accordingly.
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Echjay Indus. P.Ltd.
On appeal, the ld. CIT(A), following the appellate order for the asstt. year 1999- 2000 and successive asstt. years, directed the AO not to reduce any part of the compensation from the W.D.V. of assets while computing the eligible depreciation allowance for the current year.
6. At the time of hearing, the ld. D.R. submits that since the Tribunal in the assessee's own case for the asstt. years2000-01 and 2002-03 has set aside the issue to the file of AO, therefore, following the same, the issue may be set aside to the file of the AO.
7. On the other hand, the ld. counsel for the assessee supports the order of the ld. CIT(A).
8. We have carefully heard the submissions of the rival parties and perused the material available on record. We find that there is no dispute that this issue arose for the first time in asstt. year 1999-2000 wherein the AO has reduced the W.D.V. of the plant by the figure of compensation received. However, on appeal, the ld. CIT(A) held that the AO was not justified in reducing the actual cost of the asset by the compensation received and reducing the claim of depreciation and, therefore, directed the AO to recompute the depreciation allowance without reducing any part of compensation from the W.D.V. of assets as at 01-04-1998. We further find that AO in the asstt. order for the impugned assessment year has also observed that the decision of the CIT(A) has not been accepted by the department and second appeal has been filed before the Tribunal which is pending for decision. We further find that the Tribunal in the appeal filed by the Revenue in DCIT vs. Echjay Industries P.Ltd. in ITA No.7428/Mum/2003 for asstt. year 2000-01 order dated 15-12-2008 and in ITA No.909/Mum/2006 for asstt. year 2002-03 order dated 30-04-2010 has set aside the order of the ld. CIT(A) and restored the matter to the file of the AO 4 ITA Nos.851-4514-3430/M/08 Echjay Indus. P.Ltd.
for fresh consideration. In the absence of any distinguishing feature brought on record by the ld. counsel for the assessee, we, respectfully following the consistent view of the Tribunal, set aside the orders passed by the Revenue authorities on this account and restore the issue to the file of the AO to decide the same afresh in the light of our observations hereinabove and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the Revenue is, therefore, partly allowed for statistical purposes.
9. Ground no.2 is against exclusion of excise duty, central sales-tax and state sales-tax in the total turnover for the purpose of working deduction u/s.80HHC.
10. The brief facts of the above issue are that the AO included Excise Duty, MST and GST in the total turnover of the assessee for the purpose of working of deduction u/s.80HHC. On appeal, the ld. CIT(A), following the deicison of the Hon'ble jurisdictional High Court in Sudarshan Chemicals Ltd. (245 ITR 769) (Bom), directed the AO to reduce Excise Duty, Central Sales-tax and State Sales-tax from the total turnover while calculating deduction u/s.80HHC OF the Act.
11. At the time of hearing, the ld. D.R. supports the order of the A.O.
12. On the other hand, the ld. counsel for the assessee relied on the order of the ld. CIT(A).
13. Having carefully heard the submissions of the rival parties and perusing the material available on record, we are of the opinion that the issue involved in the present case is no more res integra and is covered by the decisions of Hon'ble Apex Court in the case of CIT vs. Lakshmi Machine Works (290 ITR 667) (SC) and CIT vs. Catapharma India P.Ltd. (292 ITR 641) wherein it has been held that excise duty and sales-tax would not form part of the total turnover 5 ITA Nos.851-4514-3430/M/08 Echjay Indus. P.Ltd.
while computing deduction u/s.80HHC of the Act. Respectfully following the authoritative pronouncement of the Hon'ble Apex Court, we are inclined to uphold the finding of the ld. CIT(A) in directing the AO to reduce excise duty, central sales-tax and state sales-tax from the total turnover while computing deduction u/s.80HHC of the Act. The ground taken by the Revenue is, therefore, rejected.
14. Ground no.3 is against the direction of the ld. CIT(A) to reduce the disallowance of Rs.2.50 lakhs as against Rs.5 lakhs made by the AO on account of electricity expenses in working out the profit of the unit to claim deduction u/s.80IB.
15. The brief facts of the above issue discussed by the AO in para-4 at page 7 of the assessment order are reproduced as under :
"4. Deduction u/s.80 IB:
(a) The assessee has set up a unit known as Axial closed die Rolling Line also known as AGW unit in July -
August 1993 relevant to the Assessment year 1994-95. The subject assessment year is the 10th year of its claim. The assessee has filed the Profit and Loss Account prepared for this Unit separately working out a profit of Rs.10,02,50,490/- and 30% of the same has been claimed as deduction u/s.80IB. As seen from the Profit and Loss Account of the unit filed, although the overhead expenses have been proportionately debited and considered (since the company has three units and various overheads are common such as interest costs, general staff and administrative expenses etc.) in working out the profits of the unit, general electricity expenses is seen to have not been debited at all in the account. The assessee has worked out electricity consumption for each of the machinery in the said unit and debited to the Profit and Loss account but no expense for the general electricity use such as lighting, air conditioning etc., has been debited. This was same in the previous year when the AO estimated an amount of Rs.5,00,000 to be debited to the profit and loss account and accordingly he reduced the profits for the purpose of Section 80IB. In appeal, the CIT(A) in his order for the Assessment year 2002-03 although upheld the action of the AO in debiting a part of the general lighting expenses to the profit and loss account of the industrial 6 ITA Nos.851-4514-3430/M/08 Echjay Indus. P.Ltd.
unit, he reduced the amount to Rs.2,50,000 holding such amount as reasonable. However, I estimate an amount of Rs.5,00,000/- attributable to such general lighting etc., and accordingly the net profits on which the deduction is claimed is reduced by the said amount of Rs.5,00,000."
16. On appeal, the ld. CIT(A), following the appellate order for the asstt. year 2001-02, reduced the disallowance to Rs.2.50 lakhs and allowed a relief of Rs.2.50 lakhs to the assessee.
17. At the time of hearing, the ld. D.R. supports the order of the AO.
18. On the other hand, the ld. counsel for the assessee relied on the order of the ld. CIT(A).
19. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that in the asstt. year 2001-02 the ld. CIT(A) has reduced the disallowance to Rs.2.50 lakhs as against Rs.5 lakhs made by the AO. We further find that the Tribunal in the Revenue's appeal in ITA No.909/Mum/06 for asstt. year 2002-03 dated 30-04-2010 (supra) has considered the similar issue and in the absence of any contrary material, upheld the order of the ld. CIT(A). This being so, and in the absence of any distinguishing features brought on record by the Revenue and keeping in view the rule of consistency, we decline to interfere with the order passed by the ld. CIT(A) in reducing the ad hoc disallowance to Rs.2.50 lakhs as against Rs.5 lakhs made by the AO. The ground taken by the Revenue is, therefore, rejected.
ITA No.4514/Mum/07 (AY : 2004-05):
20. At the time of hearing, both the parties have agreed hat the issues in ground no.1 and 2 are similar to ground nos. 2 and 1 for asstt. year 2003-04. Therefore, the plea taken in that appeal may be considered while deciding the appeal for the year under consideration.
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Echjay Indus. P.Ltd.
21. That being so, and in the absence of any distinguishing feature brought on record by the parties, we, keeping in view of our finding recorded in para 13 and 8 of this order, direct the AO to follow our findings recorded in the aforesaid paras of this order. We hold and order accordingly. The ground no.1 taken by the Revenue is, therefore, rejected and ground no. 2 is partly allowed for statistical purposes.
ITA No.3430/Mum/08 (AY: 2005-06) :
22. At the time of hearing, both the parties have agreed that the issue in ground no.1 is similar to ground no. 1 for asstt. year 2003-04. Therefore, the plea taken in that appeal may be considered while deciding the appeal for the year under consideration.
23. That being so, and in the absence of any distinguishing feature brought on record by the parties, we, keeping in view of our finding recorded in para 8 of this order, direct the AO to follow our finding recorded in the aforesaid para of this order. We hold and order accordingly. Ground taken by the Revenue is, therefore, partly allowed for statistical purposes.
24. In the result, the Revenue's appeals stand partly allowed for statistical purposes.
Order pronounced on the 29th day of June, 2011.
Sd/- Sd/- (J. SUDHAKAR REDDY) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: 29th June , 2011. NG: Copy to : 8 ITA Nos.851-4514-3430/M/08 Echjay Indus. P.Ltd. 1. Department. 2.Assessee. 3 CIT(A)-XXVIII,Mumbai. 4 CIT-3,Mumbai. 5.DR, "E" Bench,Mumbai. 6.Master file. (TRUE COPY) BY ORDER, Asst.Registrar, ITAT, Mumbai. 9 ITA Nos.851-4514-3430/M/08 Echjay Indus. P.Ltd. Details Date Initials Designa tion 1. Draft dictated on 23-06-11 Sr.PS/ 2. Draft Placed before author 27-06-11 Sr.PS/ 3. Draft proposed & placed before the Second JM/AM Member 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/ 6. Kept for pronouncement on Sr.PS/ 7. File sent to the Bench Clerk Sr.PS/
8. Date on which the file goes to the Head clerk
9. Date on which file goes to the AR
10. Date of dispatch of order