The Commissioner Of Income Tax, Alwar v. Gilleette India Ltd. Global Business Park, Tower-A, Mehroli Road, Gurgaon

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 349 / 2011 The Commissioner of Income Tax, Alwar. ----Appellant Versus Gilleette India Ltd. Global Business Park, Tower-A, Mehroli Road, Gurgaon. ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain with Mr. Mukesh Meena For Respondent(s) : Mr. Sanjay Jhanwar with Mr. Prakul Khurana & Ms. Archana _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHURJudgment Per Hon’ble Jhaveri, J. 23/05/2017 1.The department has moved an application (6634/2015) forframing additional substantial questions of law. 1.1We have gone though the application. 1.2The application was moved after the matter was admitted.Even otherwise, the questions which are sought to be framed areappreciation of facts and no substantial question of law is madeEven otherwise, the questions which are sought to be framed areappreciation of facts and no substantial question of law is made out. 1.3Therefore, the application stands disposed of. 2.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal preferred by the assessee and dismissed the appeal of the department. 2.1This Court while admitting the appeal on 29.10.2014 has framed the following substantial questions of law: “(i)WhethertheadditionofRs.3,02,29,057/- made u/s 36(1) (vii) onaccount of provisions of bad and doubtfuldebts could be allowed ignoring theprovisions of Section 36(2) of the Act? (ii)Whether under the facts andcircumstances of the case, addition ofRs.9,02,523/- made on account of foreignexchange fluctuation could be deleted? (iii)Whether under the facts andcircumstances of the case the ITAT wasjustified in deleting the addition ofRs.5,71,22,994/- made on account of dis-allowance of depreciation? (iv)Whether the order of the Tribunal iserroneous in deleting the addition made bythe Assessing Officer while computing bookprofits u/s.115 JB?” 3.Counsel for the appellant has taken us to the order of theAssessing Officer and CIT(A) and contended that the Tribunal haswrongly taken the view contrary to the view taken by theAssessing Officer. He has further contended that the bad debtswhich are allowed by the Tribunal and also the foreign exchangefluctuation is bad in law and is required to be reversed. 3.1Counsel for the respondent has relied upon the decision ofSupreme Court in the case of T.R.F. Ltd. vs. Commissioner ofIncome Tax [2010] 323 ITR 397 which has been relied upon inthe case of assessee itself in the case of The commissioner ofIncome Tax vs. M/s Gillette India Ltd. in DB Income TaxAppeal No.65/2008, decided on 03.05.2017 and this Court in para 6 has followed the said decision: “6.The issues No.3 & 4 are covered bythe decision of Supreme Court in the caseof T.R.F. Ltd. vs. Commissioner ofIncome Tax (2010) 323 ITR 397. Theissue No.5 on facts is covered by thedecision of this Court in the case ofCommissioner of Income Tax vs. Dr.A.M. Singhi (2008) 302 ITR 26 (RAJ)and in the case of Commissioner ofIncome Tax vs. Lake Palace Hotels andMotels Pvt. Ltd. (2002) 258 ITR 526(RAJ).” 3.2Therefore, the issue No.(i) is required to be answered infavour of the assessee and against the department. 4.Regarding issue No.(ii), in view of the decision of SupremeCourt in the case of Commissioner of Income Tax vs.Woodward Governor India (P) Ltd. (2009) 312 ITR 254which was followed by this Court in the case of present assesseeitself as under: 3.2Therefore, the issue No.(i) is required to be answered infavour of the assessee and against the department. 4.Regarding issue No.(ii), in view of the decision of SupremeCourt in the case of Commissioner of Income Tax vs.Woodward Governor India (P) Ltd. (2009) 312 ITR 254which was followed by this Court in the case of present assesseeitself as under: “5.Counsel for respondent Mr. Jhanwarhas contended that the issue No.1 & 2 aresquarely covered by the decision ofSupreme Court in the case ofCommissioner of Income Tax vs.Woodward Governor India (P) Ltd.(2009) 312 ITR 254 and both the issueswith regard to fluctuation loss are to bedecided in favour of the assessee.” 4.1In that view of the matter, the issue is answered in favour ofthe assessee and against the department. 5.In so far as issue No.(iii) is concerned, the Tribunal relyingupon the decision of Delhi High Court in the case of CIT vs.Bharat Aluminum Company Ltd. 187 Taxman 111, 124(Del.)and in the case of CIT vs. Yamaha Motors India Pvt. Ltd. 226 CTR 304 and the Gujarat High Court in the case of CIT vs. Sonal Gum Industires 322 ITR 542 in para 52 to 56 has held asunder: “52. We have heard the rival submissionand considered them carefully. Afterconsidering the relevant material along withwritten submission and various case laws,we find that the assessee deserves tosucceed. It is a fact on record that M/sDuracellbatteriesIndiaLimitedamalgamated with the assessee company inA.Y. 2000-01. On amalgamation its plant &Machinery was included in the block of theplant & Machinery of the assesseecompany. This block was used for thepurpose of the business in A.Y.2000-01 &2001-02. In A.Y. 2002-03 the assessee didnot fulfill the condition laid down u/s 72Aand therefore the unabsorbed losses anddepreciation of the amalgamating companyM/s Duracell batteries India Limited whichwas set off in A.Y. 2000-01 and 2001-02was withdrawn and offered in income in A.Y.2002-03. However the fact remain is thatplant & Machinery of Duracell battery IndiaLimited merged in the block of assets of theassessee company on its amalgamation andon such block depreciation for A.Y. 2000-01& 2001-02 was allowed under the blockconcept of depreciation once an asset hasformed part of the block it can’t be reducedexcept by monies payable in respect of anyassets falling in that block which is sold ordiscarded or demolished or destroyed asper section 43(6) of the Income tax Act.The Money becomes payable in A.Y.2004-05when such plant & Machinery were sold forRs.29,98,65,810/- in A.Y. 2004-05 andRs.1,26,23,967/- in A.Y. 2005-06 whensuch amount was reduced from the block ofplant & machinery. The example given byLd. AR in his written note amply illustratethe mechanism of allowance of depreciationu/s 32 after the block concept of asset.Therefore, the notional disallowance ofdepreciation in respect of plant &machinery of Duracell batteries whichformed part of the block of assets of theassessee is not permitted in law. 53. The Delhi High court of CIT V/s. BharatAluminium Company Ltd. 187 Taxman 111,124 (Del.) held that though as per section32(1), in order to get entitled to claimdepreciation, asset is to be owned by theassessee and it is also be used for thepurpose of business and profession but thisexpression when applied to block of assetsand not any specific building, machinery,plant or furniture in said block of assets asindividual assets loose their identity afterbecoming inseparable part of block of assets. 53. The Delhi High court of CIT V/s. BharatAluminium Company Ltd. 187 Taxman 111,124 (Del.) held that though as per section32(1), in order to get entitled to claimdepreciation, asset is to be owned by theassessee and it is also be used for thepurpose of business and profession but thisexpression when applied to block of assetsand not any specific building, machinery,plant or furniture in said block of assets asindividual assets loose their identity afterbecoming inseparable part of block of assets. 54. The Gujarat High Court in case of CITV/s. Sonal Gum Industries 322 ITR 542 heldthat in relation to block of assets it is notpossible to segregate items falling with in theblock for the purpose of grantingdepreciation or restricting the claim thereof.Once it was found that the assets were usedfor the prupose of business, it was notnecessary that all the items falling withinplant and machinery have to besimultaneously used for being entitled todepreciation. 55. The Delhi High Court in case of CIT V/s.Yamaha Motors India Pvt. Ltd. 226 CTR 304held that Expression “Used for the purpose ofbusiness” in section 32 has to be readharmoniouslywiththeexpression“Discarded” occurring in Clause III of subsection (1) thereof. On harmonious readingof these expressions, “Used for the purposeof business” only means that assessee hasused the machinery for the purpose ofbusiness in earlier years. Therefore oncedepreciation was allowed on block of assetsin previous year actual user of machinery isnot required with respect to the discardedmachinery and the condition for eligibility ofdepreciation that machinery is used for thepurpose of business would mean thatdiscarded machine is used for the purpose ofbusiness in the earlier years for whichdepreciation is allowed. 56. Mumbai ITAT in case of M/s. Swatisynthetics Lts. V/s. ITO 2010 TIOI. 78 heldthat depreciation is allowable on the entireblock even if some of the assets of theblock have not been used. The use of theindividual asset for the purpose of businesscan be examined only in the first year whenthe asset is purchased. In subsequent yearsuse of block of assets is to be examined. Existence of individual assets in the block ofassets itself amounts to use for the purposeof business.” 5.1In view of the decisions of two High Courts and one decisionof the Tribunal, the Tribunal has not committed any error and weaffirm the view taken by the Tribunal and also the view taken bythe Delhi High Court and Gujarat High Court. 5.2In that view of the matter, the issue is answered in favour ofthe assessee. 6.In so far as the issue No.(iv) is concerned, the Tribunal whileconsidering this issue has relied upon the decision of SupremeCourt in the case of Apollo Tyres Ltd. vs. CIT 255 ITR 273 andobserved in para 62 as under: “62. As regard excess depreciation providedin books Rs. 1,65,09,748/-, we note thatthe depreciation charged by the assesseecompany is in commensurate with theprovisions of the Companies Act (ScheduleVI and Schedule XIV) as well as AccountingStandards 6 issued by the Institute ofChartered Accountants of India (ICAI),which is mandatory for preparation ofCompanies’ accounts. There is noqualification by the auditor in this regard.The Supreme Court in Apollo Tyres Ltd. Vs.CIT 255 ITR 273 has held that in computingthe income u/s 115JA the AO whilecomputing the income has only the powerof examining whether the books of accountscertified by the auditors under theCompanies Act has been maintained inaccordance with schedule VI. The AOthereafter has the limited power of makingincreases and reduction as provided for inthe explanation to the ld section. Since theso-called excess depreciation provided bythe assessee is not in deviation from theaccounting principles and standards laiddown by the Companies Act / ICAI, thiscannot be added in computing the bookprofit u/s 115JB. This addition to the book profit is therefore directed to be deleted.” 6.1The said decision was followed by this Court in the case ofCommissioner of Income Tax, Kota vs. Chambal Fertilizers& Chemicals Ltd. in DB Income Tax Appeal NO.866/2008,decided on 15.05.2017. 6.2In that view of the matter, the issue is required to beanswered in favour of the assessee and against the department. 7.Accordingly, the appeal stands dismissed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/188