The Commissioner Of Income Tax, Alwar v. Gillette India Ltd. 65-A Bhiwadi Industrial Area, Bhiwadi Distt.alwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 643 / 2011 The Commissioner of Income Tax, Alwar. ----Appellant Versus Gillette India Ltd. 65-A Bhiwadi Industrial Area, Bhiwadi Distt.Alwar. ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHURJudgment Per Hon’ble Jhaveri, J. 30/05/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the assessee and dismissed the appeal ofthe department. 2.This Court while admitting the appeal on 26.02.2016 hasframed the following substantial questions of law: “(i)Whether the Tribunal was legallyjustified in holding that no penalty u/s271(1)(c) could be levied when the incomeis computed u/s 115JB by not consideringthe provisions of Sections 115JB(5)? (ii)Whether the Tribunal was legallyjustified in cancelling the penalty levied u/s271(1)(c) of Rs.6,71,61,350/- out of whichpenalty of Rs.1,02,20,616/- was upheld bythe CIT(A)?” 3.This Court in the case of The Commissioner of IncomeTax vs. Gilleette India Ltd. in D.B. Income Tax AppealNo.349/2011, decided on 23.05.2017 wherein this Court has observed as under: “3.Counsel for the appellant has taken usto the order of the Assessing Officer andCIT(A) and contended that the Tribunal haswrongly taken the view contrary to the viewtaken by the Assessing Officer. He hasfurther contended that the bad debts whichare allowed by the Tribunal and also theforeign exchange fluctuation is bad in lawand is required to be reversed. 3.1Counsel for the respondent has reliedupon the decision of Supreme Court in thecase of T.R.F. Ltd. vs. Commissioner ofIncome Tax [2010] 323 ITR 397 whichhas been relied upon in the case ofassessee itself in the case ofThecommissioner of Income Tax vs. M/sGillette India Ltd. in DB Income TaxAppealNo.65/2008,decidedon03.05.2017 and this Court in para 6 hasfollowed 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 requiredto be answered in favour of the assesseeand against the department. 4.Regarding issue No.(ii), in view of thedecision of Supreme Court in the case ofCommissioner of Income Tax vs.Woodward Governor India (P) Ltd.(2009) 312 ITR 254 which was followedby this Court in the case of presentassessee itself 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 isanswered in favour of the assessee andagainst the department. 5.In so far as issue No.(iii) is concerned,the Tribunal relying upon the decision ofDelhi High Court in the case of CIT vs.Bharat Aluminum Company Ltd. 187Taxman 111, 124(Del.) and in the caseof CIT vs. Yamaha Motors India Pvt.Ltd. 226 CTR 304 and the Gujarat HighCourt in the case of CIT vs. Sonal GumIndustires 322 ITR 542 in para 52 to 56has held as under: 4.1In that view of the matter, the issue isanswered in favour of the assessee andagainst the department. 5.In so far as issue No.(iii) is concerned,the Tribunal relying upon the decision ofDelhi High Court in the case of CIT vs.Bharat Aluminum Company Ltd. 187Taxman 111, 124(Del.) and in the caseof CIT vs. Yamaha Motors India Pvt.Ltd. 226 CTR 304 and the Gujarat HighCourt in the case of CIT vs. Sonal GumIndustires 322 ITR 542 in para 52 to 56has held as under: “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 assessee company.This block was used for the purpose of thebusiness in A.Y.2000-01 & 2001-02. In A.Y.2002-03 the assessee did not fulfill thecondition laid down u/s 72A and thereforethe unabsorbed losses and depreciation ofthe amalgamating company M/s Duracellbatteries India Limited which was set off inA.Y. 2000-01 and 2001-02 was withdrawnand offered in income in A.Y. 2002-03.However the fact remain is that plant &Machinery of Duracell battery India Limitedmerged 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 any assets 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. 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 of 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 of business 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 HighCourts and one decision of the Tribunal, theTribunal has not committed any error andwe affirm the view taken by the Tribunaland also the view taken by the Delhi HighCourt and Gujarat High Court. 5.2In that view of the matter, the issue isanswered in favour of the assessee. 6.In so far as the issue No.(iv) isconcerned, the Tribunal while consideringthis issue has relied upon the decision ofSupreme Court in the case of Apollo TyresLtd. vs. CIT 255 ITR 273 and observed inpara 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 power of 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 bookprofit is therefore directed to be deleted.” 6.1The said decision was followed by thisCourt in the case of Commissioner ofIncome Tax, Kota vs. ChambalFertilizers & Chemicals Ltd. in DBIncome Tax Appeal NO.866/2008,decided on 15.05.2017. 6.2In that view of the matter, the issue isrequired to be answered in favour of theassessee and against the department.7.Accordingly, the appeal standsdismissed.” 4.In that view of the matter, penalty cannot not be imposed on the assessee since, the original appeal was decided in favour ofthe assessee. 5.Hence, the issues are answered in favour of the assesseeand against the department. 6.The appeal stands dismissed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/134