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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the assessee is against the order dated 24.05.2016 passed by the Commissioner of Income Tax (Appeals)-1, Ahmedabad arising out of the order dated 28.08.2015 for the Assessment Year 2013-14 passed by the DCIT, Circle 1(1)(1), Ahmedabad under section 143(3) of the Income Tax Act, 1961 (The Act) with the following grounds: i. “On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming disallowance of depreciation of Rs.20,56,139/- made by the Assessing Officer on the grounds that no business activities were carried on during this year by the appellant. ii. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”
- 2 - ITA No.1882/Ahd/2016 Adani Energy Ltd. vs. DCIT Asst.Year – 2013-14 2. The assessee filed its original return of income on 26.08.2013 declaring loss of Rs.(-) 92,07,180/-. The same was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘The Act’). Upon scrutiny, notice u/s 143(2) of the Act was issued on 12.09.2014 followed by another notice u/s 143(2) r.w.s. 129 due to change of incumbent dated 03.07.2015 asking for details. Further that, the questionnaire dated 13.08.2015 requesting the assessee for details and/or information relating to the assessment proceeding were called for.
The assessee company has claimed depreciation of Rs.20,56,139/-. It revealed that there was no business activity during the year under consideration. By and under letter dated 13.08.2015, the assessee was asked to explain as to why such claim of depreciation would not be disallowed since there was no business activity during the year under consideration. In response to the said letter, the assessee by and under submission dated 24.08.2015 contended that the assessee company is engaged in the trading of gas business mainly involves sourcing of gas from outside India; in the year under consideration, there was a temporary suspension of the business due to business dynamics of import of gas viz availability of gas in domestic market, forex fluctuation, logistic cost etc, it was further contended by the assessee that temporary suspension of business does not necessarily mean discontinuance or closure of the business. The assessee had to maintain its establishment and was waiting for improved market conditions and there was nothing to show that it had completely abandoned or closed down his business forever; the business must be said to be continued. Further that, the assets on which the assessee company claimed depreciation were actually in use. It was pointed out that the assessee company is engaged in the business of bulk trading of Liquid Natural Gas (LNG); the same is not, therefore, a manufacturing unit. The assets of the company mainly consist of office equipments and computers used for maintaining the corporate status of the company and undertaking the administrative work. It was further submitted by the assessee company that though there was no business income, the entity was not closed
- 3 - ITA No.1882/Ahd/2016 Adani Energy Ltd. vs. DCIT Asst.Year – 2013-14 down by the assessee and there was only a temporary suspension of the business due to various business dynamics for which the company had to maintain books of accounts and other requirements for statutory audit and filing of return of income. Therefore, the assets were in use for the purpose of business of the assessee. Apart from that, it was further placed on record that the assessee company and ASEAN LNG Trading Company had entered into an agreement in August 2nd, 2006 for sale and purchase of LNG Cargos to support and strengthen its natural gas distribution business in Ahmedabad and Vadodara as also for third party sales in other parts of India. However, such agreement could not be implemented for some reason or the other and the matter was referred to London Court of International Arbitration and later to City Civil Court, Ahmedabad. The same has been stated to be in the Audited Annual Accounts for the year under consideration. Due to the said litigation, the assessee could not conduct any business during the year under consideration as the case made out by the assessee before the authorities below. However, the assessee’s office was not closed and all the office equipments including computers, furniture & fixtures, in fact, used by employees of the assessee company. It was further pointed out before the Learned AO that the assessee was not engaged in the business of any manufacturing activity or depreciation has not been claimed on any Plant and Machinery required for manufacturing or trading business but all the assets on which depreciation has been claimed were in fact used for smooth functioning of the administrative work. It is Needless to mention that all these assets were used by assessee. However, such plea taken by the assessee in support of his claim for depreciation to the tune of Rs.20,56,139/- was not found acceptable by the Assessing Officer mainly on two counts that depreciation is to be allowed only on actual use of machinery and no manufacturing activity/trading activity were carried out and therefore no depreciation is allowable during the relevant assessment year. In appeal, the same was confirmed by the Learned CIT(A). Hence, the instant appeal.
- 4 - ITA No.1882/Ahd/2016 Adani Energy Ltd. vs. DCIT Asst.Year – 2013-14 4. At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee submitted before us that in the similar set of facts for A.Y. 2011-12 & 2012-13, the Co-ordinate Bench has passed an order in assessee’s own case directing the Assessing Officer for verification of the factual plea as made by the assessee towards for establishing the claim for depreciation, in fact, he thus, prayed for the same relief before us. On the other hand, Learned Representative of the Department relies upon the order passed by the authorities below.
We have heard the respective parties, perused the relevant materials available on record, including order passed by the Co-ordinate Bench in assessee’s own case for A.Y. 2011-12 & 2012-13. In fact, both the orders were in the same line, the operative para of the order passed in ITA No.2605/Ahd/2015 for A.Y. 2012-13 (Adani Energy Ltd-vs- DCIT, Circle – 1, Ahmedabad) reads as follows: 4. Vide our order of even date, and dealing with the AY 2011 -12 in assessee's own case, we have held as follows:
"6. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case in the light of the applicable legal position.
We have noted that the plea of the assessee before us is that what has been covered by the plant and machinery is in fact in the nature of office equipment. It is thus, contended that business activities or no business activities, the office equipments were to be used, even if partially, anyway. We have also perused the financial statements of the assessee which indicate a small level of operations, In these circumstances, the controversy which has been subject matter of consideration before the authorities below in fact ceases to be relevant and what really matters now is to see whether or not the assets, in respect of which depreciation was claimed, were in fact used, even if in a small measure and modest scale, in the course of business. Once it is found that the assets pertain to office use and the office has been used even for a short time, irrespective of whether trading operations or core business activities take place or not. We, therefore, accept the plea of the assessee in principle. The depreciation claimed before us is not in respect of machineries which have not been used at all.
- 5 - ITA No.1882/Ahd/2016 Adani Energy Ltd. vs. DCIT Asst.Year – 2013-14 However, as this aspect of the matter was not taken before any of the authorities below, we also deem it fit and proper to remit the matter to the file of the Assessing Officer for limited verifications of factual plea embedded in the plea of the assessee. He will thus decide the matter in the light of our above observations and following the legal principle so laid down. While doing so, he will decide the matter afresh by way of a speaking order and after giving a fair reasonable opportunity to the assessee. "
Taking into consideration this particular aspect of the matter, we find no reason to take any other view than the view taken by the Co-ordinate Bench. We, therefore, respectfully following the same remit the matter to the file of the Assessing officer to act terms of the direction passed by the Co-ordinate Bench as reproduced hereinabove.
In the result, assessee’s appeal is thus allowed for statistical purposes. This Order pronounced in Open Court on 24/01/2019
Sd/- Sd/- ( WASEEM AHMED ) ( Ms. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 24/01/2019 Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-1, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad