TMI Blog2022 (9) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... termining its character as scrap. Further it is not that all machine was disposed off by the assessee which would have been the case if it were merely scrap. Assessee has sufficiently demonstrated the assets as not being scrap but of value. It has been pointed out that the acquisition of these assets alongwith the plant of MIL was negotiated by the assessee eight years back in 2003 but due to delay in getting sanction from BIFR by almost five years and the subsequent act of Board of both the companies being empowered for entering into the agreement, pushed off the actual acquisition of the business of MIL by the assessee by eight years and the same could be acquired in the impugned year only. The business acquisition agreement mentions plant and machinery being acquired by the assessee alongwith other assets . These facts are not disputed by the Revenue. If these machineries acquired by the assessee from MIL were of no use and were only scrap there was no reason to mention them as part of assets being acquired in terms of the agreement. Scrap surely could not have fetched such high proportion of amount out of total value of assets acquired. Further the assesses valuation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming view of AO not allowing alternatively deprecation on plant machinery as per tax audit report. 3. We have heard both the parties. 4. As transpires from orders of the authorities below, there is a solitary issue involved in the present appeal and the same relates to the Revenue authorities treating the plant machinery of the assessee as scrap and thus denying adjustment of cost of acquisition against the consideration received on sale of these assets ,as claimed by the assessee, in turn treating the entire amount of sale consideration received by the assessee as its income and further denying depreciation on the remaining plant machinery for the same reason that it was of scrap and not put to use by the assessee. 5. Brief facts relating to the case are that a survey under section 133A was carried out in the case of the assessee on 29.3.2011. In the course of survey, a sale deed dated 1.12.2010 was found showing that the assessee had bought land and building for Rs.6,77,70,000/-. During the survey proceedings, director of the assessee-company, Shri Kushal Vinodchandra Mehta admitted disclosure of Rs.2.65 crores on account of sale of scrap machinery sold outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the acquisition of MIL were of any value or not. Before proceeding, certain facts relevant to the issue as pointed out by the ld.counsel for the assessee by way of a detail containing chronology of events through which MIL was acquired by the assessee and the plant machinery sold after acquisition is outlined as under: Initially on 21.5.2003, the assessee had entered into an agreement with MIL to acquire its entire unit for Rs.6.77 crores. Later in the year on 21.12.2003, Assets Sale Committee of MIL decided to accept the transaction and put the matter before the BIFR for approval. Immediately thereafter on 28.1.2004, an application was moved before BIFR for its concurrence. BIFR sanctioned Modified Rehabilitation Scheme after 5-years on 24-25/6/2009. Immediately thereafter, MIL authorized its directors to enter into agreement with the purchaser and also Board of the assessee granting power to the directors to purchase MIL finally on 13.12.2010; the date of assignment between the assessee and the MIL was entered into. In February-March, 2011 some of the machineries acquired were sold for Rs.2.30 crores. 8. The issue before us in dispute is vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter referred to valuation report of the plant machinery prepared by an independent valuer and placed at PB Pg.No.35 to 38, pointing out therefrom that the valuer had taken note of the fact that as on the date of preparation of valuation report i.e. 9.4.2011 some of the plant machinery acquired in the MIL unit had been disposed off and he had given a basis for valuing both the disposed off machineries and those remaining with the assessee, all of which, he had valued at Rs.2,32,67,600/-. 11. Next, the ld.counsel for the assessee took us through financial statement of the assessee for the impugned year placed before us at PB Page No.4 to 19 and taking us to the fixed assets chart forming part of annual accounts, placed at PB Page No.13, he pointed out that the assessee had clearly reflected the value of the plant machinery acquired from MIL as addition during the year, and had given a note regarding the same also in the said schedule. He pointed therefrom that even sale of plant machinery amounting to Rs.1,49,59,600/- was also duly reflected in the block asset schedule, and the assessee had accordingly claimed depreciation on the balance block of asset. 12. The ld.coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The sale deed for land, building and Plant Machinery is dt.14/12/2010. Hence these assets came into possession of the assessee w.e.f.14/12/2010 only. 2 During the course of survey proceedings, it is brought on record that the plant Machineries were started being sold from 15- February 2011. By the date of survey i.e.29/03/2011, plant Machinery (P M) worth Rs.2.65 crores was already sold. Hence on record, these P M were in the possession of the assessee for only 2 months. 3. Since P M were absolete and purchased for the purpose of sale at the earliest possibility, there will not be any business use of the absolete P M during these two months. 4 Since P M were purchased along with land and Building with only intention of re-sale, no value or zero value can only be assigned to it. On this account, taking the P M to the block of assets, for business use, is completely wrong and unacceptable. 15. Reference was also made to the question raised to the director of the assessee-company reproduced in para-6 of the assessment (page no.9) as under: Further during the course of survey proceeding statement of Shri Kushal Vinodchandra Mehta has been recorded regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance assets, is insufficient for holding so while the assessee we hold has sufficiently and reasonably demonstrated with evidence that the plant and machinery were not scrap but had value. 17. The Revenues entire case for holding the assets as scrap rests on the statement of the director of the assessee company recorded during survey coupled with the fact that the assets were disposed off within a short period of two months of acquiring the same. Considering the statement of the Director of the assessee company, as reproduced in our order above at para-15, we do not find any such admission being made by him as rightly pointed out by the Ld.Counsel for the assessee. What he has only stated repeatedly when questioned on these assets was only that they were old Machines. The director has not stated these assets to be scrap. There is a world of difference between an asset being old and that being scrap. Being old does not necessarily imply that it is scrap. And an asset qualifies as scrap when it is of no use to the assessee and incapable of fetching any value commensurate with its character. It is basically waste material .Surely the director has at no point stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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