CIT vs. RANBIR CHEMCIAL INDIA P. LTD.

ITA No. 204 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 204 of 2004 Date of Decision: 6.8.2012 The Commissioner of Income Tax, Chandigarh-II ....Appellant. Versus M/s Ranbir Chemicals Industries (P) Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE G.S. SANDHAWALIA. PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant. Mr. Ravi Shanker, Advocate with Mr. B.M. Monga, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 204 of 2004 and 320 of 2005 as identical question of law is involved therein. For brevity, the facts are extracted from ITA No. 204 of 2004. 2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 23.9.2003 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafter referred to as “the Tribunal) in ITA No. 1081/Chandi/98, for the assessment year 1995-96. The appeal was admitted by this Court vide order dated 1.8.2006 for consideration of the substantial question of law as mentioned in para 5 of the memo of appeal which is as under:-

ITA No. 204 of 2004 -2- “Whether on the facts and in the circumstances of the case, the ITAT was right in law in rejecting the appeal of the revenue and upholding the order of the CIT(A) allowing depreciation on assets which have not been used by the assessee for its business purposes, as per provisions of Section 32(1) of the Income Tax Act?” 3. Put shortly, the facts necessary for adjudication for the present appeal as narrated therein are that the assessee filed its return for the assessment year 1995-96 on 14.11.1995 declaring loss of ` 29,201/-. The said return was proceeded under Section 143(1)(a) of the Act on 29.2.1996. The Assessing Officer vide order dated 26.8.1997 (Annexure A-1) framed assessment under Section 143(3) of the Act at ` 8,81,370/- while disallowing the claim of depreciation amounting to ` 9,10,568/- on plant and machinery. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) vide order dated 28.7.1998 (Annexure A-2) while partly allowing the appeal of the assessee allowed its claim of depreciation on the plant and machinery. Against the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide order dated 23.9.2003 (Annexure A-3) upheld the order of the CIT(A) and dismissed the appeal. Hence, the present appeal by the revenue. 4. Learned counsel for the appellant-revenue submitted that the assessee had let out the machinery without there being any commercial expediency and the amount of lease was not increased in

ITA No. 204 of 2004 -3- spite of providing additional machinery worth ` 45,64,613/-. According to the learned counsel, the Assessing Officer had disallowed the claim on depreciation and the said action was justified. However, the Tribunal on erroneous premise taking the assessment year 1994-95 as the lead year had deleted the addition. 5. On the other hand, learned counsel for the respondent- assessee besides supporting the order passed by the Tribunal submitted that the purchase of machinery and letting out the same to M/s Mahavir Vanaspati Company was not doubted. Moreover, during the assessment year 1994-95, the order of the Assessing Officer was set aside by the CIT(A), wherein it was observed as under:- “Besides, the appellant has also produced before me copies of bills/vouchers to support his contention, which were stated to have been produced before the Assessing Officer, as is evident from the copy of letter, the relevant portion of which has been reproduced above. It is further observed that similar disallowance was also made in the Assessment Year 1988-89 in the case of the appellant and addition of Rs.2,82,540/- was made treating the expenditure on repair and maintenance of building as of disallowable nature. The CIT(A), Chandigarh, vide the order dated 11.1.1991 in Appeal No. 256/P-49/90-91 in the case of the appellant for the A.Y. 1988-89, by making reference to various judgments of Hon'ble Punjab and Haryana High Court reported in 121-ITR-165

ITA No. 204 of 2004 -4- (P&H), of Hon'ble Supreme Court reported in 122- ITR-49 (SC) & of Bombay High Court in the case of Addl. CIT Vs. India United Mills Ltd., reported in 8- Taxman-182(Bom), deleted the addition of Rs.2,81,835/- in para 3.2 on page 7 of the said appellate order, and allowed the claim of the appellant in that year. From the facts discussed above, it is clear that the appellant did replace machinery during the year under appeal which has not been denied at all and which is supported by bills and vouchers and were produced before the Assessing Officer and also in view of the fact that such like claim was also made in the earlier years and was allowed as such. Therefore, there does not appear to be any justification for disallowance of depreciation. The disallowance so made by the Assessing Officer is cancelled and the Assessing Officer is directed to allow the claim of the appellant with regard to depreciation. This ground of appeal, therefore, succeeds.” 6. The aforesaid finding of the CIT(A) for the assessment year 1994-95 has not be upset by any authority. It was, thus, urged that once the genuineness of the purchase of machinery was not doubted, the depreciation for the subsequent years could not be disallowed. 7. After hearing learned counsel for the parties, we do not find any merit in the appeal. Learned counsel for the revenue was unable to

ITA No. 204 of 2004 -5- demonstrate that the finding as recorded by the CIT(A) for the assessment year 1994-95 had not attained finality. Once it was held that the purchase of the machinery and letting out the same to M/s Mahavir Vanaspati Company was not in doubt, the depreciation could not be disallowed for the years subsequent to the assessment year 1994-95. The relevant observations of the Tribunal reads as under:- “5. We have heard both the parties and carefully considered their rival submissions with reference to the facts, evidence and material placed on record. From the facts discussed above, it is obvious that the claim of the assessee has been allowed by the CIT (A) by relying on the appellate order for the assessment year 1994-95. The CIT(A) has further observed in the impugned order that revenue has not filed any appeal against the order of the CIT(A) for the assessment year 1994-95. The ld. D.R. has not placed any material before us to controvert the above finding of the CIT(A). Since depreciation on plant and machinery had been allowed in the earlier assessment year and these assets were used for the purpose of assessee's business, for the assessment year under reference, we are of the considered opinion that the CIT(A) was justified in directing the AO to allow depreciation on the WDV of plant and machinery. Thus, we see no reason to interfere with the order of the CIT(A). The same is upheld and the

ITA No. 204 of 2004 -6- ground of appeal is dismissed.” 8. In view of the above, the substantial question of law as claimed by the revenue is answered against the revenue. The appeals stand dismissed accordingly. (AJAY KUMAR MITTAL) JUDGE August 6, 2012 (G.S. SANDHAWALIA) gbs JUDGE

ITA No. 204 of 2004 -7- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 320 of 2005 Date of Decision: 6.8.2012 Commissioner of Income Tax, Chandigarh-II ....Appellant. Versus M/s Ranbir Chemicals Industries (P) Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE G.S. SANDHAWALIA. PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant. Mr. Ravi Shanker, Advocate with Mr. B.M. Monga, Advocate for the respondent. AJAY KUMAR MITTAL, J. For orders, see ITA No. 204 of 2004 [The Commissioner of Income Tax, Chandigarh-II v. M/s Ranbir Chemicals Industries (P) Ltd]. (AJAY KUMAR MITTAL) JUDGE August 6, 2012 (G.S. SANDHAWALIA) gbs JUDGE