DCIT, CIR-10(1), KOLKATA, KOLKATA vs. M/S ALBERT DAVID LTD., KOLKATA

This appeal is preferred by the revenue against the order of Ld. CIT(Appeals) – 4, Kolkata dated 29.03.2016 and the solitary issue involved therein relates to the deletion by the Ld. CIT(A) of the addition of Rs. 85,34,346/- made by the A.O. on account of assessee’s claim for additional depreciation of moulds.

The assessee in the present case is a company which is engaged in the business of manufacturing and trading of pharmaceutical products. The return of income for the year under consideration was originally filed by it on 29.09.2012 declaring a total income of Rs. 11,54,94,310/-. Thereafter a revised return was filed by the assessee on 26.03.2013 declaring a total income of Rs. 11,86,54,770/-. In the assessment completed under section 143(3) vide an order dated 2 Assessment Year: 2012-13 M/s. Albert David Ltd. 23.02.2015, the total income of the assessee was determined by the A.O. at Rs. 12,71,94,860/- after making certain additions. Thereafter a survey under section 133A was carried out in the case of the assessee on 16.07.2015. On the basis of the adverse findings of the survey, the assessee company agreed to offer additional income of Rs. 1,43,62,640/- for the year under consideration by way of withdrawing some expenses which were not allowable as business expenditure under section 37(1). The assessment, therefore, was reopened by the A.O. and in response to the notice issued by him under section 148 on 24.08.2015, the return of income was filed by the assessee declaring additional income of Rs. 1,43,62,640/-. During the course of the re-assessment proceedings, it was noticed by the A.O. that the assessee has claimed depreciation of Rs. 1,70,68,691/- at higher rate of 30% on moulds . Since depreciation at higher rate of 30% was allowable on the moulds which are used in rubber and plastic goods factories, the assessee company was called upon by the A.O. to offer its explanation in the matter. In reply, it was submitted on behalf of the assessee company that the moulds were used for manufacturing plastic goods only i.e. I.V. Fluids in plastic bottle and Disposable Syringe and needles. This explanation of the assessee was not accepted by the A.O. in the absence of any documentary evidence produced by the assessee to support and substantiate the same. He accordingly restricted the claim of the assessee for depreciation on moulds at 15% which resulted in disallowance of Rs. 85,34,346/-. 3. The disallowance of Rs. 85,34,346/- made by the A.O. on account of its claim for depreciation on moulds was challenged by the assessee in the appeal filed before the Ld. CIT(A) and after 3 Assessment Year: 2012-13 M/s. Albert David Ltd. considering the submissions made by the assessee, the Ld. CIT(A) deleted the disallowance made by the A.O. for the following reasons given in paragraph no 3.2 of his impugned order: “I have considered the submission of the AR of the appellant in the backdrop of the assessment order. I have also considered the various citations as referred to by the AR in the matter. On a careful perusal of the assessment order at para 2.2. I find that the AO has stringently applied the rate of depreciation applicable to the block of assets pertaining to Plant & Machinery @ 15% in respect of the moulds used by the appellant in manufacturing plastic products as contended without any countervailing finding whatsoever with cogent material and discussion. I further find that the AO has also commented that 30% of depreciation was admissible to Moulds which were used in rubber and plastic goods factories and that there was no dispute regarding the use of moulds by the appellant in manufacturing plastic products as discussed supra. In view of this and as delivered by the various forums, once moulds are used for manufacture of rubber and plastic goods, the appellant would be eligible for deduction at higher rate of depreciation u/s 32 of the Act. A mere cavalier disallowance made by the A.O. in the matter will not hold good unless the A.O. has brought on record any of the attendant materials to prove that the appellant was not entitled to the depreciation as claimed on account of moulds used for the manufacture of plastic products as envisaged in the relevant, statutes and rules. The relevant judicial citations would vindicate the stand of the appellant as follows:  BPL refrigerator Ltd. vs ACIT (2004) 85 TTJ 0066, ITAT (Bangalore Bench)  Kinetic Honda Motor Ltd. vs JCIT (2001) 72 TTJ 72 (Pune ITAT)  CIT vs Amco Batteries Ltd. (1993) 203 ITR 0614 (Karnataka HC)  BPL Sanyo Utilities & Appliances vs ACIT (ITAT Nos. 88 & 89/Bang/1998) In view of the foregoing and also with special reference to the judicial precedence on the apposite matter as depicted above, I find that the appellant is ultimately eligible to claim depreciation on moulds for the manufacture of plastic products supra at the specified rate of 3O%. Consequently, the AO is therefore directed to allow the claim of impugned depreciation on moulds @ 30 and not @ 15%. This ground is allowed”

We have heard the arguments of both the sides and also perused the relevant material available on record. As rightly 4 Assessment Year: 2012-13 M/s. Albert David Ltd. contended by the learned DR, the onus to support and substantiate its claim for depreciation at a higher rate on moulds by filing the relevant documentary evidence was on the assessee and the same was not satisfactorily discharged by the assessee during the course of assessment proceedings before the A.O. in spite of sufficient opportunity afforded in this regard. As further contended by him, this vital aspect was completely overlooked by the Ld. CIT(A) and the disallowance made by the A.O. was deleted by him by observing that there was no dispute regarding use of moulds by the assessee company in manufacturing plastic products. He was also wrong in putting the onus on the A.O. by observing that the A.O. should have brought some attendant material on record to prove that the assessee company was not entitled to claim higher depreciation on moulds. Even the learned counsel for the assessee has not been able to dispute this position clearly evident from the impugned order of the Ld. CIT(A). He has only contended that the assessee company has sufficient documentary evidence to support and substantiate its claim that the moulds were used for manufacturing of plastic goods and urge that one more opportunity may be given to the assessee to substantiate its case by producing the said evidence for the verification of the Assessing Officer. Since the learned DR has not raised any objection in this regard, we set aside the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue and restore the matter to the file of the A.O. with the direction to decide this issue afresh after giving one more opportunity to the assessee to produce the relevant documentary evidence in support of its claim for higher depreciation on moulds.