TMI Blog2017 (9) TMI 1952X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-2017 - HON'BLE MR. JUSTICE K.S. JHAVERI AND HON'BLE MR. JUSTICE VIJAY KUMAR VYAS For the Appellant : Mr. K.D. Mathur with Mr. Prateek Kedawat for Mr. R.B. Mathur For the Respondent : Mr. Mahendra Gargieya JUDGMENT 1. In all these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby tribunal has partly allowed the appeal of the assessee and dismissed the appeal of the department. 3. This court while admitting the appeals framed following substantial questions of law:- 3.1 Appeal No.493/2008 admitted on 10.12.2008 (i) Whether in the facts and circumstances of the case, the ITAT has acted illegally and perversely and was justified in allowing the benefit of depreciation of ₹ 38,06,352/- u/s 32 of the Act on the machineries which were not put to use before the end of the previous year i.e. 31.3.2001. (ii) Whether in the facts and circumstances of the case, the ITAT has acted illegally and perversely in deleting the additions on account of excessive wastage which was restricted to 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT was justified in not considering that the estimation of wastage made by Assessing Officer was on the basis of report of Central Glas and Ceramic Institute, Kolkata which is an independent agency having expertise in the related filed. 3.6 Appeal No.213/2016 admitted on 25.4.2017 1. Whether in the facts and circumstances of the case the ITAT was justified in deleting trading of ₹ 11904998/- on account of excessive wastage which was rightly and on the basis of record restricted to 20% by the Assessing Officer? 2. Whether on the facts and in law the ITAT was justified in not considering that the estimation of wastage made by Assessing Officer was on the basis of report of Central Glas and Ceramic Institute, Kolkata which is an independent agency having expertise in the related filed. 3.7 Appeal No.15/2017 admitted 7.2.2017 1. Whether in the facts and circumstances of the case, the ITAT was justified in deleting trading of ₹ 2,95,65,756/- ignoring the fact that the Assessing Officer made addition reasonably and rejected books of accounts pointing out specific defects in the books of accounts. 4. The facts of the case are that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pg 17-29 Pr 601-6017 (PB 64-76) ITAT Pg 13-15 Pr 10-15 (PB95-98) Admitted Q. Of Law 1 Amount ₹ 38,06,352/- 2. Deleting the additions on account of excessive wastage which was restricted to 20% by the AO u/s 145(3) AO Pg 2-13 Pr 2-15 (PB 15-26) Pg 2-6 Pr 3-401 (PB 10-14) Pg 8-9, Pr 4.3-55 (PB 8-9) CIT (A) Pg 3-17 Pr 3.1-3.16 (PB 61-64) Pg 2-4 (PB 16- 18) Pg 2-9 Pr 3-3.6 (PB 11-18) ITAT Pg 2-12 Pr 4- 7 (PB 85-95) Pg 1-4 Pr 3-9 (PB 19-21) Pg 1-3 (PB 19-21) Admitted Q. Of Law 2 1 1 2 1 2 1 2 1 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is dated 26.3.2001 from Shri Om Prakash Mistree. Perusal of the first bill clearly shows that date of completion of new glowst machine for which the bill was raised for ₹ 80,000/- was no where mentioned in the bill (copy of the bill is placed on record (at case file page 37 volume-II).Similarly in the second bill also neither the complete detail of work was given not the date of completion was mentioned (copy of the bill is placed on record (at case file page 38 volume-II). Since Shri Om Prakash Mistree was local, he was summoned u/s 131 and his statements were recorded, in the statements he was asked same basic questions regarding making of the continuous pusher type furnace was made of insulated bricks and insulated mixture, owing to high temperature iron and steel cannot be used inside the furnace, hence it was made out of these sort of bricks and mixture only. Needless to say that these bricks form basic part of compositions of the furnace. Ahri Om Prakash further explained that approximately 7-8 thousand bricks would be needed for the furnace like that of the assessee. In the beginning Shri Om Prakash, who is nor an qualified Engineer states that the work of the furnac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 124938 3 22.3.01 Gadia 15144 15.3.01 DS -100 ₹ 26779 4 22.3.01 -do- 15162 16.3.01 Different type MCCB ₹ 57259 5 22.3.01 Adcon instrument Pvt.Ltd. 2955 23.3.01 Thermo couple etc ₹ 136365 6 24.2.01 R.K. Steels 4138 23.3.01 MS Iron steel ₹ 11970 7 24.2.01 Karni Inds. 14 24.3.01 DI Control Panel ₹ 104600 6.2 He contended that the depreciation claimed cannot be given to the assessee. 6.3 On the other hand, regarding wastage and other, the view taken by the tribunal is just and proper and in case of 145A for the Modvat Credit, the view taken by the tribunal is not just and proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he kept ready theory is not available to the assessee for the purpose of claiming depreciation when the Legislature has chosen to use the word 'used' we have to give a full meaning to it and avoid reading something not intended by the Legislation. After all, these benefits are provided for certain purposes. That purpose is used in terms of the Statute. If the machinery is not used, Section 32 is not applicable and hence, the assessee cannot have any benefits, if granted would result in reading something which is not provided in the Statute in terms of Section 32. 7. Counsel for the respondent Mr. Gargeiya has taken us to the order of the Tribunal which reads as under:- 9. In Ground No.2 and 3, the Revenue is aggrieved taht the ld. CIT(A) has erred in disallowing depreciation amounting to ₹ 13,59,029/- on pusher type furnace. The disallowance of depreciation is totally unwarranted. 11. We have perused the facts of the case. As regards the depreciation on complete plant of hallowware and flatware where the assessee has claimed the depreciation of ₹ 6,39,482/-. Shri R N Sharma, Plant Manager was examined where Shri Sharma stated that the machine started ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w material was to be valued exclusive of excise duty as the assessee was claiming MODVAT. AS such, the income was overstated on account of inclusion of excise duty in the value of the closing stock of raw material for the F.Y. 2000-01 i.e. for the impugned year was valued exclusive of excise duty and the said amount of ₹ 1,01,604/- was on account of the said reason. The excise duty has already been paid more than it was due in the assessment year 2000-01 and there was no justification to add the said amount into the total income of the assessee. In such circumstances and facts of the case, when the closing stock does not include the excise duty and the opening stock is inclusive of excise duty, the remarks were made by the auditor. The remarks of the auditor were made for the year ending 31-03-2000 relevant to asserssment year 2000-01 and therefore, the said amount does not have any relevance for the profit of the impugned year. In such circumstances and facts of the case, the additions made by the AO is directed to be deleted and the other of the ld. CIT(A) is reversed. Thus Ground No.5 of the assessee is allowed. 8. Regarding question of no.1, he has relied upon the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling dealer are on record. The authorities below have not accepted the case of the assessee-appellant about the use of trucks in question on the ground that the assessee could not produce the documents to show that these tankers were used by the appellant-assessee on the last day of the previous year. The assesseeappellant submitted that these two oil tankers were, in fact, challaned by Chakeri police on 31st March, 1997, at 4.00 PM, at Ramadevi Chauraha. Copies of these challans were produced before the AO. The orders passed by the C.M.M., Kanpur, were also produced before it, but were not accepted on the ground that these have been managed by the appellant-assessee. This approach of the authorities below cannot be approved in the face of judicial order levying fine on the appellant-assessee. There is a presumption of existence of certain facts under Section 114 of the Evidence Act. The Court may presume under Clause (e) of Section 114 of the Evidence Act (that) the judicial and official acts have been regularly performed. The said presumption although is presumption of fact, could be rebutted on production of some cogent and relevant material and not otherwise. The authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was manufactured and with the permission of the authorities of Kandla Port Trust, the material was disposed of. Thus, use of machinery is not in doubt. 39. We are, therefore, of the opinion that when there is commencement of the business by way of production of the articles, it can be said that the assessee is entitled to depreciation. 9. Regarding Question no.2 he has relied upon the decision of CIT vs. Cermatic 9.1 In Commissioner of Income Tax vs. Ceramic Industries and Ors. on 25.5.2017, it has been held as under:- 7. Taking into consideration the tribunal has observed as under: We have perused the facts of the case. The learned authorised representative Mr. H.M. Singhvi argued that the assessee has produced all the books of account, vouchers and the assessee's accounts are audited and all the production is subject to excise duty and not even a single unit of production can go out of the factory without recording the same in the excise registers which are regularly and continuously verified by the Excise Department and are under their control. The Assessing Officer has not pointed out any defect in the purchases, sales, opening stock and closing stock and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated March 26, 2004 which was ignored by the Assessing Officer and the Assessing Officer has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the Assessing Officer has not brought on record any cogent material to prove that the assessee has sold the underproduction out of the books of account. Therefore, in such circumstances and facts of the case, the Assessing Officer is not justified in rejecting the books of account by invoking the provisions of section 145(3) of the Act and the additions made by the Assessing Officer are liable to deleted. The objection of the learned Departmental representative that the learned Commissioner of Income-tax (Appeals) has not relied upon the CGCRI report, Calcutta, the learned authorised representative has pointed out that in the same report it has been mentioned that the said organisation is not involved production practice and they are not sure to what extent their opinion will be useful for the purpose of the assessee and in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of the books of account and making an est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... npal National Ltd.'s case was not challenged by the department before this court and thus has been accepted by the department. The interpretation placed on Section 43B in Lakhanpal National Ltd.'s case was directly followed by the judgment of the Bombay High Court in CIT v. Bharat Petroleum Corporation Ltd., MANU/MH/0505/2001MANU/MH/0505/200 1 : [2001] 252 ITR 43 and by the Madras High Court in Chemicals and Plastics India Ltd. v. CIT, MANU/TN/1743/2002MANU/TN/1743/2002 : [2003] 260 ITR 193. These two judgments also appear to have been accepted by the Revenue and have not been challenged before this court at all. This fact asserted before us by the petitioner-assessee has not been disputed in the counter affidavit of the Department. 10.2 In Commissioner of Income Tax vs. Excel Industries Ltd. (2013) 358 ITR 295 (SC), it has been held as under:- 32. Thirdly, the real question concerning us is the year in which the Assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the Assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distinction as sought to be canvassed to come out from the law already settled by the Apex Court in case of Berger Paints referred supra is without any substance and cannot be accepted. 22. In view of the aforesaid observations and discussion, the resultant situation would be that the deduction so claimed and made permissible by the Tribunal in the impugned order is covered by the above referred decision of Gujarat High Court in case of Lakhanpal case read with the further decision of the Apex Court in case of Berger Paints Ltd., supra. Hence, on the aspects of allowable deduction, the matter was already covered by in any case the decision of the Apex Court in case of Berger Paints India Ltd., (supra). The said legal position was prevailing at the time when the assessing officer allowed the deduction. Hence, it could not be said that the view taken by the assessing officer was erroneous in law. In any case, the treatment is to be given in the opening stock of the subsequent accounting year when the deduction is made under Section 43B of the Act, hence it could also not be said as prejudicial to the interest of Revenue. 10.4 In Pr. CIT vs. RSEB (RRVNL) in ITA No.138/2016 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two percent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as incometax on income comprised therein. (2) Where any sum referred to in subsection (1) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in subclause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner of Income Tax-II and Ors. Vs Delhi Transport Ltd. Manu/ DE/ 2199/2015. 5. We have heard learned counsel for the parties. 6. In view of the fact that issue is concluded by decision of Bombay High Court and Delhi High Court and SLP against the same has been dismissed. In that view of the matter the issues are required to be answered in favour of the assessee against the department. 11. We have heard counsel for the parties. 12. On the first issue regarding depreciation in view of the finding of the tribunal in para 11 15 as reproduced above, it is clear that the assessee has furnished the fabrication charges bill, certificate from AGM, production and bill of fuel consumption and quantitative details of work in progress and in such circumstances, there is no reason to hold that the machine is not put to use during the year prior to 31.3.2001. 13. In that view of the matter, the tribunal being the last fact finding authority, it will not be proper for us to reverse the finding in favour of the department. 14. Therefore, the first issue is answered in favour of the assessee and against the department. 15. On the ceramic issue, in view of the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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