ACIT, CIRCLE - 12(2), , KOLKATA vs. M/S. PHILIPS INDIA LIMITED, KOLKATA

आयकर अपीलीय अधिकरण कोलकाता 'बी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA श्री राजेश कुमार, लेखा सदस्य एवं श्री संजय शमाा, न्याधयक सदस्य के समक्ष Before SRI RAJESH KUMAR, ACCOUNTANT MEMBER & SONJOY SARMA, JUDICIAL MEMBER I.T.A. No.: 2097/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited).......................................Appellant [PAN: AABCP 9487 A] Vs. ACIT, Circle-12(2), Kolkata……………………………..Respondent I.T.A. No.: 2418/KOL/2018 Assessment Year: 2009-10 ACIT, Circle-12(2), Kolkata......................................Appellant Vs. M/s. Philips India Limited (Earlier known as Philips Electronics India Limited)……………………………….Respondent [PAN: AABCP 9487 A] Appearances by: Sh. Ketan Ved, CA, appeared on behalf of the Assessee. Sh. Abhijit Kundu, CIT D/R & Sh. P.P. Barman, Addl. CIT, Sr. D/R, appeared on behalf of the Revenue. Date of concluding the hearing : June 28th, 2023 Date of pronouncing the order : August 22nd, 2023

I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). ORDER Per Rajesh Kumar, Accountant Member: These cross appeals preferred by the assessee and the Revenue are against the order passed by Learned Commissioner of Income-tax (Appeals)-4, Kolkata [hereinafter referred to Ld. ‘CIT(A)’] dated 07.08.2018 for the Assessment Year (in short ‘AY’) 2009-10. First, we take assessee’s appeal in ITA No. 2097/KOL/2018. 2. The only issue raised by the assessee in the various grounds of appeal is against the confirmation of disallowance of Rs. 1,89,44,933/- by Ld. CIT(A) as made by The Assessing Officer (in short Ld. 'AO') towards excess depreciation claimed on moulds. 3. The facts in brief are that Ld. AO, upon perusal of the tax audit report noted that the assessee company is in the business of manufacturing, selling and trading of electronic and electrical products, electronic medical equipment and development of embedded software and services. Ld. AO further, noted from the statement of the depreciation attached with the tax audit report that the assessee has claimed depreciation @ 30% on moulds instead of 15%. According to Ld. AO the depreciation @ 30% is only available on the moulds which are used exclusively in rubber and plastic factories and since the assessee has no such rubber and plastic factory, therefore, the depreciation on moulds has be allowed @ 15% as applicable to the normal items of plant and machinery. Accordingly, Ld. AO called upon the assessee to reply as to why the depreciation should not be restricted to 15% on the

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I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). said moulds which was duly replied by the assessee on 26.12.2016 stating that the assessee is engaged in the business of manufacturing/sub-manufacturing of consumer life style products and light-products and the moulds are used for the manufacturing of various plastic products and therefore, the assessee is eligible for depreciation @ 30%. The plea of the assessee did not find favour of Ld. AO and he restricted the depreciation @ 15% in the assessment framed u/s 143(3)/144C/263 of the Act dated 29.12.2016. It is pertinent to note that in the first round of litigation, the Tribunal has dismissed the appeal filed by the assessee against the exercise of revisionary jurisdiction u/s 263 of the Act. In the appellate proceedings, Ld. CIT(A) dismissed the appeal of the assessee on the ground that the assessee is not entitled to the depreciation @ 30% on the ground that these are available to the moulds which are used in the rubber and plastic factories. 4. After hearing rival contentions and perusing the material on record, we find that identical issue of depreciation on moulds which were not used in rubber/plastic manufacturing business come up for consideration before the Coordinate Bench in the case of Honda Motorcycle & Scooter India (P.) Ltd. vs ACIT in ITA No. 3237/DEL/2011 for AY 2003-04 and others and the Coordinate Bench vide order dated 31.08.2016 has decided the issue in favour of the assessee. The facts of the case as decided by the Coordinate Bench are materially same as that of the assessee. In that case the

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I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). assessee has claimed depreciation @ 30% on rubber and plastic goods. 5. In that case, the Revenue’s contention was that since the assessee is a two-wheeler manufacturer, the depreciation @ 30% is not available to the assessee as the assessee is not a rubber/plastic manufacturer. Finally, the Coordinate Bench, having considered all these facts, has held as under: “5. We have heard the arguments of both the sides and carefully perused the relevant material placed on record before us. First of all we may point out that the A.O. has not made any addition or disallowance in any of the earlier or subsequent A.Ys. Secondly, we observe that the A.O has allowed depreciation @ 15% whereas the assessee is claiming deprecation @ 30% by alleging that the assessee has made arrangement with vendors who, in turn, are engaged in manufacturing rubber and plastic goods as per specifications given by the assessee. The main contention of the A.O is that the assessee is not a manufacturer of plastic or rubber goods and the assessee is in the manufacture and sale of two wheelers and it cannot be deemed to be manufacturer of plastic/rubber parts. Accordingly, it is not entitled to depreciation at a higher rate. Thus, admittedly and undisputedly, the assessee is owner of plastic moulds, that is why the A.O allowed deprecation @ 15% and denied higher rate of depreciation as claimed by the assessee on the allegation that plastic moulds have not been used in its own factory premises and the same were given to vendors for use in their respective manufacturing units/factories. At this juncture, we find it appropriate to consider the proposition laid down by the Ahmadabad Bench of the Tribunal in the case of Symphony Comfort Systems Ltd [supra] wherein it was held as below: “4.3. I have considered carefully the observation of the AO and the submission of the counsel along with the appellate order passed for asst. yr. 1991-92. The CIT(A)-XIV while deciding the issue for asst. yr. 1991-92 has discussed the matter at length and observed that in the present "case, instead of having a separate division, the appellant is having plastic components manufactured using its own moulds and

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I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). under its supervision at the factories of its vendors who are exclusive plastic goods factories, applying the same ratio that the moulds have in fact been used in plastic goods factories, the appellant would also be entitled to depreciation at the higher rate of 50 per cent on such moulds, the view taken by the Karnataka High Court has also been followed in the decision of the Tribunal Delhi Bench, wherein, though the end product, viz. vacuum glass was not a plastic product, it was held that the plastic moulds used for manufacturing plastic covers of the vacuum glasses in exactly the same manner as manufacturing is carried out by any other plastic factory, were entitled to depreciation at the higher rate under Appendix-I of the IT Rules. In view of the conclusion arrived at by the CIT(A) while passing the order for asst. yr. 1991-92, I hold that the appellant is entitled to depreciation @ 40 per cent' as claimed by the appellant on plastic moulds and, therefore, the AO is directed to delete the disallowance of Rs. 42,08,947/-.” 6. In view of the above, we are inclined to hold that the conclusion arrived by the ld. CIT(A) in para 5.2 of the impugned order is quite correct and justified and we are unable to see any valid reason to interfere with the impugned order on this issue as admittedly and undisputedly the assessee is owner of the plastic mould which were used in the premises of various vendors for manufacturing of plastic and rubber goods for use of assessee. In our considered opinion, it is immaterial whether the plastic /rubber moulds were used in the factory premises of the assessee or vendors. Prime requirement is that moulds should be owned by the assessee, the same should be part of block assets shown by the assessee and these were put to use for the purpose of business of the assessee and the three requisite conditions have been fulfilled by the assessee in the present case and thus it is entitled to claim depreciation @ 30% which was rightly allowed by the ld. CIT(A). Hence ground No. 1 of the Revenue being devoid of merits is dismissed.” 6. Since the facts of the case are materially same, we, therefore, respectfully following the decision mentioned above, set aside the order of Ld. CIT(A) and direct Ld. AO to allow the depreciation @ 30%. The appeal filed by the assessee is allowed. ITA No. 2418/KOL/2018.

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I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). 7. The only issue raised by the Revenue is against the order of Ld. CIT(A) deleting the addition as made by Ld. AO in respect of excise duty not recovered from sales to the tune of Rs. 9,30,00,000/- by ignoring the facts brought on record by Ld. AO. 8. The brief facts of the case are that Ld. AO during the assessment proceedings observed from the profit and loss account that in the credit side of the profit and loss account Rs. 43,20,00,000/- has been reduced on account of excise duty recovered from clients on sales. Further, an amount of Rs. 9,30,00,000/- has been debited in the profit and loss account as excise duty not recovered from the sales. Ld. AO, further, noted from schedule 10 of 3CD in respect of MODVAT that an amount of Rs. 36,76,95,000/- has been utilized during the year and entire CENVAT account has obviously not been routed through profit and loss account. According to Ld. AO the assessee has got benefit of CENVAT on one hand and has shown reduced income by excluding excise duty not recovered from sales. Therefore, expenses claimed to the tune of Rs. 9,30,00,000/- in the profit and loss account on account of excise duty not recovered from the sales is not allowable. Accordingly, the same was disallowed and added to the income of the assessee. 9. In the appellate proceedings Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: “5.2. Findings of CIT(A):

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I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). The entire issue that requires examination is whether the Appellant was availing double benefit by way of claim of CENVAT/MODVAT credit as well as claim of excise duty of Rs.9,30,00,000. From a perusal of the accounting entries provided by the Appellant and reproduced above, it is clear that CENVAT/MODVAT receivable and Excise duty expense of Rs.9,30,00,000 are two different things which cannot be co-related. While one is an expense, the other is a credit or prepaid tax, which can be adjusted by offsetting the same with excise duty payable. The AO has lost sight of the subtle difference between the two. In light of the above, I find merit in the arguments of the Appellant that the Excise duty not recovered from sales’ amounting to Rs. 9,30,00,000 debited to the profit and loss account is a tax deductible item within the purview of Section 37 of the Act. I thereby allow this ground of appeal. In the result, Ground No. 3 is Allowed.” 10. After hearing rival contentions and perusing the material on record including the findings of the first appellate authority, we note that Ld. AO got confused between the two items; CENVAT/MODVAT and excise duty which are two different items and cannot be co-related. We are fully concurred with the finding of Ld. CIT(A) that one is expense while the other is a credit or prepaid tax which can be adjusted by offsetting the same with the excise duty payable and Ld. AO has failed to notice the difference between the two. Accordingly, we uphold the order of Ld. CIT(A) by holding that excise duty not recovered from sales as debited to the profit and loss account is a deductible item u/s 37 of the Act. Accordingly, the appeal of the Revenue is dismissed by upholding the order of Ld. CIT(A).

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I.T.A. Nos.: 2097 & 2418/KOL/2018 Assessment Year: 2009-10 M/s. Philips India Limited (Earlier known as Philips Electronics India Limited). 11. In the result, the appeal filed by the assessee is allowed whereas by the Revenue is dismissed. Kolkata, the 22nd August, 2023. Sd/- Sd/- [Sonjoy Sarma] [Rajesh Kumar] Judicial Member Accountant Member Dated: 22.08.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. M/s. Philips India Limited (Earlier known as Philips Electronics India Limited), 3rd Floor, Tower A, DLF IT Park, 08 Major Arterial Road, New Town, Kolkata-700 156. 2. ACIT, Circle-12(2), Kolkata. 3. CIT(A)-4, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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