2017 (9) TMI 1952 - HC - Income Tax

Benefit of depreciation u/s 32 on the machineries not put to use before the end of the previous year i.e. 31.3.2001 - HELD THAT - 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. Tribunal being the last fact finding authority it will not be proper for us to reverse the finding in favour of the department.Therefore the first issue is answered in favour of the assessee and against the department. Excessive wastage under Section 145(3) - HELD THAT - The issue is required to be answered in favour of the assessee against the Department. All the issues are answered in favour of the assessee and against the department.

Summary

Issues Involved:
1. Depreciation on machinery not put to use before the end of the previous year.
2. Additions on account of excessive wastage restricted to 20% by the AO under Section 145(3).
3. Valuation of closing stock as per provisions of Section 145A.
4. Incorrect deductions of MODVAT credit.
5. Addition for depositing employee's contribution to PF & ESI beyond the prescribed time limit.

Issue-wise Detailed Analysis:

1. Depreciation on Machinery Not Put to Use:
The appellant challenged the ITAT's decision allowing depreciation of Rs. 38,06,352/- under Section 32 of the Act on machinery not put to use before the end of the previous year (31.03.2001). The court examined the evidence, including bills and certificates from the assessee's plant engineer. The AO had found inconsistencies in the dates and completion details of the machinery. However, the ITAT found that the machinery was ready and put to use by 27.03.2001 based on the plant engineer's certificate and other supporting documents. The court upheld the ITAT's decision, emphasizing that the machinery was indeed put to use before the end of the previous year.

2. Additions on Account of Excessive Wastage:
The appellant contested the ITAT's deletion of additions made by the AO for excessive wastage restricted to 20%. The ITAT found that the assessee had provided sufficient evidence, including books of accounts and excise records, which were regularly verified by the Excise Department. The ITAT noted that the AO did not point out specific defects in the purchases, sales, or stock records. The court agreed with the ITAT's findings, stating that the AO's rejection of books of accounts and estimation of wastage was unjustified.

3. Valuation of Closing Stock:
The issue concerned the ITAT's deletion of an addition of Rs. 2,61,232/- on account of the valuation of closing stock under Section 145A. The ITAT observed that the closing stock was valued exclusive of excise duty, as the assessee was claiming MODVAT. The court upheld the ITAT's decision, noting that the excise duty was already paid, and there was no justification for the addition made by the AO.

4. Incorrect Deductions of MODVAT Credit:
The appellant argued against the ITAT's decision allowing deductions of MODVAT credit. The ITAT found that the assessee's method of accounting for MODVAT credit was consistent with the accounting standards and previous years' practices. The court upheld the ITAT's decision, emphasizing that the AO did not provide sufficient evidence to challenge the assessee's accounting method.

5. Addition for Depositing Employee's Contribution to PF & ESI:
The appellant challenged the ITAT's deletion of an addition of Rs. 4,29,345/- for depositing employee's contribution to PF & ESI beyond the prescribed time limit. The ITAT held that the contributions were governed by Section 43B and not by Section 36(1)(va) r.w.s 2(24)(x) of the Income Tax Act. The court upheld the ITAT's decision, citing previous judgments that allowed deductions if the contributions were deposited before the due date of filing the return under Section 139.

Conclusion:
The court dismissed the appeals, upholding the ITAT's decisions on all issues. The court found that the ITAT's findings were based on substantial evidence and consistent with legal precedents. The issues were answered in favor of the assessee and against the department.