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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI JASON P. BOAZ, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the Assessee against the order of Commissioner of Income Tax (Appeals)- 6, dated 21.03.2013 for A.Y. 2006-07 on the following grounds of appeal.
“The assessee company M/s Volant Textiles Mills Ltd was 100% EOU Company. During the previous year, the company plant was to convert from (A.Y. 2006-07) Volant Textile vs. ACIT 100% EOU unit to local unit and for that purpose the plant was closed one.
Secondly, to complete all major repairing and overall oiling the plant was closed one. This is a brief of the case, of course during the period there was a sale of minimum quantity but it was there. Passive use of the plant was there.”
The brief facts of the case are that the return of income was filed on 29.11.2006 declaring total income of Rs. Nil. The return of income was processed u/s 143(1) of the I.T. Act. Later on the case was selected for scrutiny and after serving statutory notice u/s 142(1) and seeking reply, the AO passed a order of assessment u/s 143(3) of the I.T. Act,1961 determining total income at nil after setting of brought forward losses of Rs.60,59,677/-. An effect to CIT(A)’s order was given on 08.07.2010 determining total income at nil after setting off of brought forward losses of Rs.56,29,818/-. Later on proceeding u/s 148 of the I.T.
Act,1961 was initiated vide notice u/s 148 of the act. Ultimately order of assessment u/s 143(3) r.w.s.147 of the I.T. Act,1961 on 29.11.2011.
Aggrieved by the order of the AO, assessee filed the appeal before CIT(A) and the CIT(A) after considering the case of the assessee had dismissed the appeal vide its order dated 21.03.13.
(A.Y. 2006-07) Volant Textile vs. ACIT 3.1 Aggrieved by the order of CIT(A) the assessee filed the present appeal before us on the grounds mentioned herein above.
At the very outset, it is noticed that even in spite of several notices, none has appeared on behalf of assessee and on the perusal of order sheet we have noticed that nobody was appearing on behalf of assessee for the last several dates.
Although the notices were also served upon the assessee for appearing before us, but even then the assessee has not preferred to appear and even no application for adjournment was moved today. On the other hand ld. DR is present in the court and is ready with arguments. Therefore we have decided to proceed with the hearing of the case ex-parte.
We have considered the orders of AO as well as ld. CIT(A). The AO after verifying the details and after discussion has decided the issue of disallowance of depreciation of Rs.33,35,208/- and also worked out book profit u/s 115JB and on appeal:
“It is seen from the annual accounts that there was no production during the previous year. However, depreciation on plant and machinery amounting to Rs.33,35,208/- was allowed. As the plant and machinery were not used in the previous year, the assessee was not (A.Y. 2006-07) Volant Textile vs. ACIT entitled to depreciation thereon. The assessee was asked to explain the same as to why the depreciation should not be withdrawn.
The assesse submitted its submission and argued that its plant was located in 100% EOU area. The assesee wanted to shift the plant from EOU area to the local area. As a result of this, the plant was stopped for the time being. The assessee, therefore, argued that there was temporary shutdown of the plant and there was never dis continuation of the business activities. The assessee further argued that’ used appearing in section 32 should not be restricted to ‘actual use’ but has wider meaning to include ‘passive user’. Therefore, deprecation should be allowed in full.”
Ld. CIT(A) after having considered the orders of the AO and the grounds of appeal
raised by the assessee and on merits has dealt with grounds which are as under: “
1. Ground 1 is regarding disallowance of depreciation of Rs.33,35,208/-.
2. The AO has discussed this issue of disallowance of depreciation form Para 4.1 o 4.6 pages 1&2 of the assessment order. The AO disallowed depreciation observing as under: (i) There was no production during the previous year. (ii) The plant & machinery were not used in the previous year. (iii) The Appellant’s argument that it wanted to shifted the plant from EOU area to local area therefore, there was temporary shut down and the plant was possibly used is not acceptable as the plant was not used even in the very next year and the plant did not starts its operation in A Y 2007-08 also and the sale of Rs. 1.24 lakhs in A Y 2006-07 was not on account of actual manufacturing.
3. The appellant reiterated the stand taken before the AO.
4. I have gone through the order of the AD and submission of the appellant was no production activity during the year and it is obvious that the Plant was during the previous year, therefore, the conditions of section 32 of the Act, that the plant must be used for the purpose of (A.Y. 2006-07) Volant Textile vs. ACIT the business, has not been fulfilled. As there was no production activity and the plant was not used, there was no or "wear and tear" of the plant and there is no concept of passive use or of allowing notional depreciation, depreciation is not allowable as ‘depreciation’ is also expenditure is allowable only if the expenditure is actually incurred. The AO’s action is therefore found to be valid, therefore, confirmed.
5. Ground 2 is general.
6. The appeal is dismissed.” 7.1. After analyzing the afore mentioned order we found that the CIT(A) has dealt with the all the issues and has passed judicious order and no circumstances have been brought before us in order to controvert or rebut the findings recorded by the CIT(A). Therefore, we see no reason to deviate or interfere into the findings recorded by the CIT(A) and hence, we reject the grounds raised by the assessee and uphold the order of the CIT(A)
In the result, the Assessee’s appeal is dismissed. Order pronounced in the open court on 2nd March, 2016