DCIT, CIRCLE - 3(1), KOLKATA , KOLKATA vs. M/S. THE SUN ROLLING MILLS PVT. LIMITED , KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [Before Shri P.M. Jagtap, AM] I.T.A. No. 333/Kol/2018 Assessment Year: 2012-13 D.C.I.T. CIR 3(1), Kolkata..............................…………………………...........................Appellant P-7, Chowringhee Square, Aayakar Bhawan, 4th Floor, Room No. 19, Kolkata – 700 069 M/s. The Sun Rolling Mills Pvt. Ltd....................…….........................................Respondent P-2, New CIT Road, Kolkata – 700 073. [PAN: AABCT 2647 N] Appearances by: Shri P.K. Mondal, Addl. CIT appearing on behalf of the Revenue. Shri Naresh Kumar Goyal, Advocate appearing on behalf of the Assessee Date of concluding the hearing : May 16, 2018 Date of pronouncing the order : May 18, 2018 ORDER PER P.M. JAGTAP, AM This appeal is preferred by the revenue against the order of Ld. CIT(Appeals) – 1, Kolkata dated 29.11.2017 and the solitary issue involved therein relates to the deletion by the Ld. CIT(A) of the addition of Rs. 1,07,65,892/- made by the A.O. on account of disallowance of assessee’s claim for depreciation at higher rate on rolls.

2 I.T.A. No. 333/Kol/2018 Assessment Year: 2012-13 M/s. The sun Rolling Mills Pvt. Ltd. the said delay and proceed to dispose of this appeal of the revenue on merit.

3 I.T.A. No. 333/Kol/2018 Assessment Year: 2012-13 M/s. The sun Rolling Mills Pvt. Ltd. could not be separated subsequently as per the convenience of the assessee. He also held that the assessee’s calculation of opening W.D.V. was not supported by the necessary evidence. He accordingly restricted the claim of the assessee for depreciation on rolls purchased in the earlier years to 15% which resulted in a disallowance of Rs. 1,07,65,892/-.

4 I.T.A. No. 333/Kol/2018 Assessment Year: 2012-13 M/s. The sun Rolling Mills Pvt. Ltd. on 31.03.2012 as the Depreciation on Rolls was wrongly claimed in the Income Tax Return @ 15% instead of 80% in earlier years. That this is not a change of accounting and bifurcation or division of block of Assets is not as per convenience of the assessee and the A.O wrongly stated that assessee’s calculation of opening W.D.V. of Rolls is not supported by necessary evidence, The opening W.D.V. (as per Income Tax) of Rolls was calculated in proportion the W.D.V. as on 31.03.2011 (as per Companies Act, 1956) of Rolls Rs.1,78,73,644/- to Plant & Machinery inclusive of Rolls amounting to Rs.4,49,17,127/-, as duly disclosed in Note-7 (Fixed Assets) of Audited Accounts of the Company as on 31.03.2012.” In view of the above discussion, it is found that there is substance in the appellants’ arguments that the appellant was entitled to depreciation @80% on W.D.V of Rolls amounting to Rs.4,49,17,127/- and that the opening W.D.V (as per Income Tax) of Rolls was calculated in proportion the W.D.V. as on 31.03.2011 (as per Companies Act, 1956) of Rolls Rs.1,78,73,644/- to Plant and Machinery inclusive of Rolls amounting to Rs.4,49,17,127/- as duly disclosed in Note-7 (Fixed Assets) of Audited Accounts of the Company as on 31.03.2012 and as duly disclosed in Note-7 (Fixed Assets) of Audited Accounts of the Company as on 31.03.2012. The A.O is directed to allow depreciation at the prescribed rate of 80% on the W.D.V of Rolls in accordance with Appendix ‘I’ w.e.f. A.Y 2006-07 and Rule 5 of the I.T. Rules, 1962.

Aggrieved by the order of the Ld. CIT(A), the revenue has preferred this appeal before the Tribunal.

5 I.T.A. No. 333/Kol/2018 Assessment Year: 2012-13 M/s. The sun Rolling Mills Pvt. Ltd. schedule of the earlier years having included in the block of assets of “plant & machinery”, the A.O. required the assessee to explain how the opening W.D.V. of the rolls was determined. In reply, it was explained by the assessee that the same was determined on pro-rate basis taking the written down value appearing in the depreciation schedule prepared for the purpose of Companies Act. This basis adopted by the assessee was not accepted by the A.O. and the claim of the assessee for higher depreciation on rolls was disallowed by him. The Ld. CIT(A) however accepted the basis adopted by the assessee and directed the A.O. to allow depreciation at higher rate on the written down value of the rolls as determined by the assessee on proportionate basis. As rightly contended by the learned DR, the Ld. CIT(A) is not justified to accept the written down value of rolls determined by the assessee on proportionate basis, in view of the provision of sub-section (6) of section 43. As per clause (b) of section 43(6), the written down value in case of assets acquired before the previous year is defined to mean the actual cost of the asset less all depreciation actually allowed to him. The written down value of the rolls acquired by the in earlier years for the purpose of claiming depreciation @ 80% in the year under consideration thus is required to be determined as per section 43(6)(b) and the Ld. CIT(A), in my opinion, is not justified to accept the written down value as determined by the assessee on proportionate basis and that too by relying on the depreciation schedule prepared for the purpose of Companies Act. I, therefore, set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. to decide the same afresh after giving the assessee an opportunity to

6 I.T.A. No. 333/Kol/2018 Assessment Year: 2012-13 M/s. The sun Rolling Mills Pvt. Ltd. determine the opening W.D.V. of rolls in accordance with section 43(6)(b).