PR. COMMISSIONER OF INCOME TAX, PANCHKULA vs. M/S HARYANA AGRO INDUSTRIES CORPORATION LTD

ITA/212/2019HC Punjab & HaryanaPHHC01042157201924 September 2019Author: MR. JUSTICE AJAY TEWARI,MR. JUSTICE HARNARESH SINGH GILL3 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Haryana Agro Industries Corporation Ltd., is engaged in various agricultural activities. For open plinth storage of food grains, it procures wooden crates and poly covers. The assessee's accounting policy was to write off 25% of the cost of these items annually, considering their 3-4 year lifespan. During assessment year 2012-2013, the Assessing Officer (AO) questioned this treatment. Finding the explanation unsatisfactory, the AO treated the acquisition of poly covers and wooden crates as capital assets and allowed only 10% depreciation. The Commissioner upheld the AO's order. The assessee's subsequent appeal to the Income Tax Appellate Tribunal (ITAT) was allowed, leading the Revenue to file this appeal before the High Court.

What did the High Court hold?

The High Court held that the acquisition of wooden crates and poly covers does not constitute a capital asset. The Court reasoned that the open plinth storage method, utilizing these items, is a process to protect food grains from weather. It was not found that these items last for 10 years or that the assessee's accounting policy was incorrect. The Court observed that such items typically last 3-4 years, as claimed by the assessee. Consequently, their acquisition would not provide enduring benefit to the assessee, a characteristic of capital assets. Therefore, the argument for treating them as capital assets for depreciation was rejected. The Court found that no substantial questions of law arose from the ITAT's order. The appeal was dismissed.

What were the issues?

1. Whether the acquisition of wooden crates and poly covers constitutes a capital asset for the purpose of depreciation under the Income Tax Act, 1961? Assessee's Contention: The assessee argued that wooden crates and poly covers have a limited life of 3-4 years and are consumed in the process of storage, thus not qualifying as capital assets. Their accounting policy of writing off 25% annually reflects this consumable nature. Revenue's Contention: The Revenue, through the AO and Commissioner, argued that wooden crates are akin to furniture used for placing stock and therefore are capital assets. They sought to disallow the assessee's method of expensing and allow only depreciation at 10%. No specific argument was recorded for poly covers by the Revenue.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 24.9.2019 Pr. Commissioner of Income Tax, Panchkula .......Appellant Vs. M/s Haryana Agro Industries Corporation Ltd. .......Respondent CORAM: HON’BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE HARNARESH SINGH GILL Present: - Mr. Yogesh Putney, Senior Standing Counsel and Mr. Ajiteshwar Singh, Junior Standing Counsel for the appellant. ***** AJAY TEWARI

, J. (ORAL)

This appeal has been filed under Section 260-A of the Income Tax Act, 1961 ('Act' for short) against the order of Income Tax Appellate Tribunal accepting the appeal of the assessee. The assessee Haryana Agro Industries Corporation Limited carrying on the manufacturing and sale of feed, pesticides, storage of agricultural produce and trading of the agricultural implements and other agricultural related activities. As part of its business it procures wooden crates and poly covers for open plinth storage of food grains. As per its accounting policy, it had been writing off 25% of the cost of these wooden crates and poly covers on the ground that these wooden crates and p

The order continues below.

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