M/S.FAURECIA AUTOMOTIVE SEATING INDIA PRIVATE LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 9, PUNE

आदेश / ORDER

PER R.S.SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A)-3, Bengaluru on 30-09-2016 in relation to the assessment year 2009-10.

2 ITA No.2177/Bang.//2016 Faurecia Automotive Seating India Pvt. Ltd.,

business of manufacturing Automotive Metal seating components.

Return of income was filed declaring total loss of Rs.6.21 crore.

During the course of assessment proceedings, the Assessing

Officer (AO) observed that the assessee did not credit any

operational income, but only an income of Rs.32.38 lakh which

was on account of scrap sales and interest received/foreign

exchange gain etc. He found that similar position prevailed in the

preceding year as well in asmuchas no manufacturing activity was

carried on in such an earlier year also. He considered the details of

expenses claimed by the assessee at Rs.5,79,74,581/- consisting of

Materials and components consumed at Rs.29,34,882/-; Operating

expenses at Rs.5,08,83,750; Finance charges at Rs.94,202/-; and

Depreciation at Rs.40,61,807/-. On being called upon to explain as

to why such expenses/allowances should not be disallowed

because the assessee was not engaged in any manufacturing

activity during the year, the assessee submitted vide its letter dated

11-12-2013 that earlier it was having its manufacturing facility at

Bengaluru. Due to certain issues, the factory at Bengaluru was

closed down w.e.f. 18-12-2006. During the financial year 2008-

09, assessee company set up its new location for conducting

operations at Manesar, Gurgaon. The assessee claimed that it was

3 ITA No.2177/Bang.//2016 Faurecia Automotive Seating India Pvt. Ltd.,

simply a temporary stoppage of manufacturing activity but the

business, in fact, continued. Not convinced with the assessee’s

submissions, AO held that no business was carried on by the

assessee and hence, the huge expenses of Rs.5.79 crore could not

be allowed. The ld. CIT(A) countenanced the assessment order on

this score.

material on record. From the nature of details of expenses and

allowance, it is seen that they are of the revenue nature. It is

evident from the assessment order itself in which the assessee’s

letter dated 11-02-2013 has been reproduced that the assessee

company came into existence from 1995 with its manufacturing

facility at Bengaluru. Due to certain reasons, the Bengaluru unit

had to be closed from December 2006. During the financial year

relevant to the assessment year under consideration, the assessee

set up its new location at Manesar, Gurgaon and also carried out

trial production at the new Manesar plant. Thus, it is manifest that

the business of the company was closed for a brief period due to

temporary lull. A copy of the assessee’s Profit and loss account for

the succeeding years has been placed on record. Financial

statements of the assessee for the financial year ending 2011, copy

4 ITA No.2177/Bang.//2016 Faurecia Automotive Seating India Pvt. Ltd.,

placed at page 53 onwards of the paper book, amply indicate that

the assessee started its business operations. On the year ending

31-03-2010, i.e. immediately succeeding assessment year, the

assessee managed to make sales at Rs.72.97 crore and in the

immediately succeeding assessment year ending 31-03-2011, the

total sales shot up at Rs.162.04 crore. When we go through the

details of expenses which have been disallowed by the AO, it

becomes apparent that the assessee, in fact, consumed materials

and components at Rs.29.34 lakh which was nothing but user of

material for trial production at the new Manesar plant. When the

manufacturing activity was earlier carried on and after sometime it

again got re-started, the assessee cannot be said to have stopped its

business activity during the interregnum. The AO has not alleged

in the assessment order that the expenses claimed to the tune of

Rs.5.79 crore were in any manner fictitious or bogus. Once the

factum of incurring expenses towards Materials and components

consumed, Operating expenses and Finance charges etc. is

established and the business re-started after sometime, there can be

no question of denial of deduction of such expenses incurred by the

assessee during the period when the business was temporarily shut

down. As the assessee closed down its Bengaluru unit for which

5 ITA No.2177/Bang.//2016 Faurecia Automotive Seating India Pvt. Ltd.,

trial production was also carried down during the year, the business

of the assessee has to be held as carried on during the year.

Consequently, the deduction is directed to be given in respect of all

the expenses/allowance claimed by the assessee which were

wrongly disallowed.

CIT(A) on account of further claim of depreciation.

of Rs.40,61,807/-. The ld. CIT(A) noted that this amount of

depreciation was debited to the Profit and loss account. Apart

from that the assessee was also found to have claimed further

depreciation of Rs.1,21,99,712/- under the Income-tax Act, 1961.

The ld. CIT(A) observed that since the AO did not disallow the

amount of depreciation claimed under the Income-tax Act at

Rs.1.21 crore, he, therefore, directed the AO to disallow the

depreciation at Rs.121.99 lakh instead of Rs.40.61 lakh.

material on record, it is found that the ld. CIT(A) enhanced the

amount of disallowance of depreciation on the same reasoning that

the business of the assessee was not carried on. As we have

6 ITA No.2177/Bang.//2016 Faurecia Automotive Seating India Pvt. Ltd.,

overturned the above finding recorded by the authorities below, it

is but natural that the assessee is entitled to claim depreciation as

per the rates admissible under the Income-tax Act. We, therefore,

hold that the enhancement made by the ld. CIT(A) with the

direction to the AO to disallow to depreciation of Rs.121.99 lakh

instead of Rs.40.61 lakh is hereby reversed. This ground is

allowed.

business losses and unabsorbed depreciation is consequential.

otherwise also pre-mature or consequential.

Order pronounced in the Open Court on 26th March, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 26th March, 2019 सतीश

7 ITA No.2177/Bang.//2016 Faurecia Automotive Seating India Pvt. Ltd.,

आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-3, Bengaluru 4. The Pr. CIT-3, Bengaluru िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “बी” / DR ‘B’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 25-03-2019 Sr.PS 2. Draft placed before author 25-03-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *