Income Tax Appellate Tribunal - Ahmedabad
Beelal Silk Mills Pvt.Ltd.,, Surat vs Department Of Income Tax on 31 August, 2012
1 I.T.A. No.1578/AHD/2010
. Assessment Year 2007-08.
.
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD
(BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No. 1578/AHD/2010
(Assessment Year: 2007-08)
Deputy Commissioner of Vs. M/s. Beelal Silk Mills
Income Tax Circle-1, Private Ltd.,
Room No.108, T-1118-19 Surat Textile Mkt.,
Aayakar Bhavan, Majura Gate, Ring Road,
Surat Surat
(Appellant) (Respondent)
PAN: AAACB9578K
Appellant by : Mr.RahulKumar, Sr.D.R.
Respondent by : Mr. Vartik R.Choksi
आदे श)/ORDER
(आदे Date of hearing : 31- 8 -2012 Date of Pronouncement : 31-10-2012 PER: SHRI ANIL CHATURVEDI, A.M. This appeal is filed by the Revenue against the order of Ld. CIT (A)-I, Surat dated 10-3-2010 for the assessment year 2007-08.
2. The assessee is a company engaged in the business of manufacturing and trading of art silk cloth. The assessee filed its e-return on 30-10-2007 declaring total income at Rs.57,49,660/-.The case was selected for scrutiny. Thereafter assessment was framed u/s. 143(3) of the Act & total income was determined at Rs.88,97,800/- after making various 2 I.T.A. No.1578/AHD/2010 . Assessment Year 2007-08.
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additions/disallowances to the total income. Against the additions made by A.O., assessee preferred appeal before CIT (A). CIT (A) vide his order dated 10-3-2010 granted partial relief to assessee. It is against the aforesaid order of CIT (A), the Revenue is in appeal before us.
First ground is with respect to the G.P. addition - Rs.3,79,097/-
3. During the course of assessment proceedings A.O. noticed that assessee has shown G.P. at 22.10% as against G.P. of 22.37% shown in the immediately preceding year. Assessee was asked to explain the fall in G.P. of 0.27%.The assessee submitted that the reason for fall in G.P. was that as the average realization price per metre of cloth has decreased in the current year as compared to that of earlier year without there being corresponding decrease in the average cost of yarn. Further also due to adverse market conditions, there was fall in G.P. The A.O. did not accept the contentions of the assessee as according to him the explanation were general in nature and was not supported with any proof or evidence. A.O. relying on the decision of Samir Diamonds Exports Ltd. reported in 71 ITD 75, Awadhesh Pratap Singh Abdul Rehman and Bros 210 ITR 406 and in the case of Shri Hari Shankar Gopal Hari 97 ITR 716 and various other decisions was of the view that the books of accounts of the assessee were not correct and complete. He therefore, rejected the book results declared by the assessee u/s. 145(3). He was of the view that the G.P. of the assessee for the year under consideration should have been at the same rate as of 22.37% which was shown in the immediately preceding year. He accordingly worked out G.P. @ 22.37% on the total turnover of Rs.14,04,06,167/- and accordingly added Rs.3,79,097/- to the total income.
3 I.T.A. No.1578/AHD/2010. Assessment Year 2007-08. .
4. Aggrieved by the addition made by the A.O. assessee carried the matter before CIT (A). Before CIT (A) assessee explained in detail the working of average cost of yarn, average cost of production, average cost of processing charges with summary of the same explaining the reasons for the slight fall in G.P. rate. Assessee further submitted that slight fall in G.P. was on account of natural conditions and it is not possible to maintain G.P. rate from year to year. It was also submitted that the A.O. had rejected the books of accounts without pointing out any specific defect. CIT (A) accepted the contentions of the A.O. and deleted the addition made by .A. O. by holding as under:-
"2.3. I have considered the submission made by the appellant and the observation of the A.O. From the above discussion, it is clear that the A.O. has not brought any material on record to show any defects for rejecting the books of account. There are no specific instances of any defects either in the purchase bills/vouchers or in the sales vouchers. The A.O. has brought no instance on record in respect of sales being outside the books of account or undervalued or purchase being inflated or outside the books of account. In view of the above, the rejection of the books of account is wrong. The appellant has been able to explain the marginal fall in G.P. rate. In view of this reason, the addition made by the A.O. is deleted and this ground of appeal is allowed."
5. Aggrieved by the order of CIT (A), Revenue is now in appeal before us.
6. Before us the Ld. D.R. relied on the order of the A.O. On the other hand the Ld. A.R. reiterated the contentions made before the CIT (A) and supported the order of CIT (A).
4 I.T.A. No.1578/AHD/2010. Assessment Year 2007-08. .
7. We have heard the rival submissions and perused the material placed on record. We find that CIT (A) has given a finding to the effect that the A.O. has not brought any material on record to show any defects for rejecting the books of accounts. A.O. has also not pointed out any defects in the purchase bills, vouchers or sales bills. A.O. has not brought any instance on record to prove that the assessee has made sales outside the books of accounts or undervalued the stock for purchase inflated outside the books of accounts. The Ld. D.R. could not controvert the findings of CIT (A) by bringing any material on record. In view of these findings of the CIT (A) we find no reason to interfere in the order of CIT (A) and therefore we uphold order of CIT (A) on this ground. This ground of the Revenue is thus rejected.
8. Second ground is with respect to the disallowance of excess depreciation claimed on Plant and Machinery.
9. During the course of assessment proceedings A.O. noticed that assessee has claimed depreciation on plant and machinery @ 50%. The assessee was asked to justify its claim of depreciation at higher rate of 50%. Assessee submitted that it had purchased the twister machine under TUF Scheme launched by Ministry of Textiles, Government of India and accordingly assessee has rightly claimed depreciation @ 50% as provided under Appendix-1.A.O. did not agree with the contention of the assessee for the reason that according to him the higher rate of depreciation should be claimed only for the machineries used for weaving, processing of garment sector of textile industry. According to the A.O. the twisting activities are activities which take place prior to 'weaving' activity and therefore not included in the provisions of Rule under consideration. He 5 I.T.A. No.1578/AHD/2010 . Assessment Year 2007-08.
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was therefore of the view that depreciation on the plant and machinery purchased under TUF scheme was only allowable under normal rates applicable to machinery. A.O. thus worked out the excess depreciation claimed by the assessee amounting to Rs.25,51,957/- and added to the income.
10. Aggrieved by the action of the A.O. the assessee carried the matter before the CIT (A).
11. Before CIT (A), the assessee relied on the decision of Ahmedabad Tribunal in the case of Shri Bipinchandra Mohanlal Gajjar in ITA No.3128/AHD/2008 dated 18-2-2009. Assessee submitted that the facts in this case were identical to that of Shri Bipinchandra M.Gajjar. CIT (A) agreed with the contention of the assessee and deleted the addition made by the A.O. by holding as under:-
"3.3. I have considered the submission made by the appellant and the observation of the A.O. The Hon'ble ITAT has in the case of Bipinchandra M. Gajjar (supra) allowed higher depreciation when the assessee is engaged in the weaving sector which may include composite activity of twisting as well as weaving. Since the appellant is engaged in both the weaving and twisting activities, therefore, the assessee's case is covered by the decision of the Hon'ble ITAT as stated above. In view of this decision, the higher depreciation is allowable to the assessee. The disallowance made by the A.O. is therefore, deleted and this ground of appeal is allowed."
12. Aggrieved with the order of CIT (A), the Revenue is now in appeal before us.
13. Before us the Ld. D.R. relied on the findings and the order of A.O. On the other hand Ld. A.R. submitted that the facts of his case are identical to that of Shri Bipinchandra M. Gajjar and therefore, he relied on the decision 6 I.T.A. No.1578/AHD/2010 . Assessment Year 2007-08.
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of Hon'ble Ahmedabad Tribunal in ITA No.3128/AHD/2008.He also placed on record the copy of the aforesaid order.
14. We have heard the rival submissions and perused the material on record. We find that in the case of Shri Bipinchandra M.Gajjar (supra), the co-ordinate Bench as on identical matter held as under:-
"7. We have considered rival submissions, gone through the facts and circumstances and also orders of the Tax authorities. It is apparent from the record that the A.O. has restricted the depreciation at the rate of 25% by observing that as per Rule 5 of the I,.T. Act, depreciation was allowable @ 50% only on these machinery and plant, which are actually used in weaving process and not on machinery used for twisting process. On perusal of the Appendix-1 of the Income Tax Rules, it is evident that this particular machinery should be used in weaving sector and does not restrict that it should be used in weaving process of the textile industry. Since admittedly, the twister machine was used by weaving sector of textile industry, depreciation on the said machinery at the rate of 50% should be allowed. The assessee undertakes all the activities right from twisting of yarn to weaving to make final grey cloth. List of machineries mentioned in the schedule published by the Ministry of Textile and referred to above state multiple purpose and usage of twister machines. We find that tax authorities have not justified in denying the claim of the assessee for depreciation on the twister machine at the rate of 50% and therefore, we set aside their respective orders and allow the claim of the assessee."
15. In the case before us we find that the assessee has purchased twister machines under TUF Scheme. It is the contention of the assessee that the machines purchased by it are used for weaving activity. The assessee is engaged in the business of manufacturing and also weaving garments on looms. We find that the facts of the assessee are identical to that of Shri Bipinchandra Gajjar (supra). The Revenue has not brought any material on record to contradict the findings of CIT (A) nor could it 7 I.T.A. No.1578/AHD/2010 . Assessment Year 2007-08.
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distinguish the facts in the case of Bipinchandra Gajjar with respect of that of assessee. In view of these facts we find no reason to interfere in the order of CIT (A). We thus uphold the order of CIT (A). Thus, this ground of the Revenue is dismissed.
16. In the result appeal of the Revenue is dismissed.
Order pronounced in Open Court on 31- 10- 2012.
Sd/- Sd/-
(G.C.GUPTA) (ANIL CHATURVEDI)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahmedabad.
S.A.Patki.
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -I,Surat
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad
8 I.T.A. No.1578/AHD/2010
. Assessment Year 2007-08.
.
1.Date of dictation 31 - 8 -2012
2.Date on which the typed draft is placed before the Dictating 19,22 /10 / 2012 Member................Other Member................
3.Date on which the approved draft comes to the Sr.P.S./P.S 29 -10-2012.
4.Date on which the fair order is placed before the Dictating Member for pronouncement 31 - 10 -2012
5.Date on which the fair order comes back to the Sr.P.S./P.S 31 - 10-2012
6.Date on which the file goes to the Bench Clerk 31 -10 -2012.
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order............