Joint Commissioner of Income-tax (Asstt.), SR-2 Baroda v. Osian L.P.G. Bottling Ltd
[Citation -2006-LL-0512-9]

Citation 2006-LL-0512-9
Appellant Name Joint Commissioner of Income-tax (Asstt.), SR-2 Baroda
Respondent Name Osian L.P.G. Bottling Ltd.
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 12/05/2006
Assessment Year 1996-97
Judgment View Judgment
Keyword Tags assessment proceeding • security deposit • trading business • profit on sale
Bot Summary: The grounds raised in this appeal are pertaining to addition of Rs. 43,46,975 made on account of profit on trading of cylinders and deleting the depreciation disallowed on gas cylinders amounting to Rs. 62,48,348. While estimating the profit from sale of cylinders, the Assessing Officer noticed that the assessee has received Rs. 2,07,47,450 against these cylinders as security deposit whereas in fact assessee has sold these cylinders instead of giving them against deposit as claimed by the assessee. The CIT(A) considered the submission of the assessee and found that LPG selling agents are not authorised to sell the cylinders and the licence issued by the Government of India, Department of Explosives, authorises them only for filling-cum-storage of LPG in cylinders. The CIT(A) further held that since the allowability of depreciation on cylinders amounting to Rs. 62,48,348 which has been used for the purpose of selling of gas and cylinders are the container which were used for the purpose of selling the gas. The CIT(A) noticed that since the assessee did not engage in the business of purchase and sale of cylinders and the cylinders have been sold as assets which has been used for the purpose of the business. We further noticed that the cylinders are given against deposit after filling the LPG. In other words we noticed that the cylinders were used as the container for sale of gas and container i.e., cylinders is assets which have been correctly shown by the assessee as assets in the balance sheet. From the facts of the case, we noticed that when cylinders are used as container is assets which has been used for the purpose of business the assessee is rightly claimed depreciation on cylinders.


This is appeal filed by revenue against order of CIT(A) dated 3- 12-1999 for assessment year 1996-97. 2. grounds raised in this appeal are pertaining to addition of Rs. 43,46,975 made on account of profit on trading of cylinders and deleting depreciation disallowed on gas cylinders amounting to Rs. 62,48,348. 3. facts of case in brief noticed are that this was first year of company. company had taken over business of Shreeji Corporation Anand as going concern. During assessment proceeding, Assessing Officer noticed from para-10 of notes forming part of accounts wherein purchase and sale in quantity regarding regulators, rubber tubes, stoves, cylinders, caps, LPG gas etc. were sold. However, on perusal of sales and purchase shown in profit and loss account for year, it was found that purchases and sales include all items. Assessing Officer noticed that amount pertaining to cylinders were included in current assets of company. Assessing Officer noticed that assessee has engaged in purchase and sale of cylinders during year. Assessing Officer asked explanation from assessee. After considering explanation of assessee, Assessing Officer rejected books of account, after invoking provisions of section 145(2), Assessing Officer estimated total income. While estimating profit from sale of cylinders, Assessing Officer noticed that assessee has received Rs. 2,07,47,450 against these cylinders as security deposit whereas in fact assessee has sold these cylinders instead of giving them against deposit as claimed by assessee. Therefore, entire amount of said amount received and treated as deposit is nothing but sales receipt for cylinder sales. Accordingly, Assessing Officer calculated profit on cylinder sales at Rs. 42,46,975 and same was added to total income of assessee. Since Assessing Officer has taken sale of cylinders and not as assets. He accordingly disallowed depreciation claimed by assessee for Rs. 62,48,348. CIT(A) considered submission of assessee and found that LPG selling agents are not authorised to sell cylinders and licence issued by Government of India, Department of Explosives, authorises them only for filling-cum-storage of LPG in cylinders. CIT(A) noticed that cylinders were given to parties on loan against deposit. Therefore, there was neither purchase nor sale is reflected in profit and loss account. CIT(A) accordingly deleted addition which Assessing Officer has made on account of sale of cylinders. CIT(A) further held that since allowability of depreciation on cylinders amounting to Rs. 62,48,348 which has been used for purpose of selling of gas and cylinders are container which were used for purpose of selling gas. CIT(A) noticed that since assessee did not engage in business of purchase and sale of cylinders and cylinders have been sold as assets which has been used for purpose of business. Therefore, assessee is entitled for depreciation. CIT(A) accordingly allowed depreciation. 4. ld. DR relied upon order of Assessing Officer and submitted that Assessing Officer has rightly considered fact that assessee was engaged in trading business of sale and purchase of cylinders. Since assessee did not show any sale and purchase in Profit and sale account, therefore, Assessing Officer has rightly estimated profit on sale of cylinders. ld. DR further submitted that depreciation issue is linked with above ground No. 1. For this purpose, ld. DR relied upon order of Assessing Officer. He further submitted that while giving appeal effect Assessing Officer noticed that assets were used only for 1 year and were not entitled for full depreciation. 5. ld. AR, on other hand, relied upon order of CIT(A) and submitted that, assessee is public limited company in business of bottling of LPG gas and sale of stoves and regulators. nature of business of assessee is that it gives cooking gas filled in bottles against taking deposit for bottles and making sales of gas. It is fact that no LPG gas bottles sells bottles but same are given on deposit. bottles are ownership of company and assessee had shown bottles as its assets. ld. AR further submitted that in balance sheet of company assessee had given quantity information as to total numbers of bottles purchased, issued and closing stock. In P & L account, there is neither purchase nor sale of bottles. ld. AR further submitted that Assessing Officer, has not properly appreciated fact that quantity details given is pertaining has not properly appreciated fact that quantity details given is pertaining to assets. He further submitted that Assessing Officer has not brought on record any material evidence which show that assessee is engaged in trading of cylinders. ld. AR further submitted that since cylinders were used as assets for purpose of business, therefore, assessee is entitled for depreciation. 6. We have heard ld. representatives of parties and perused record. After considering totality of facts of case, we noticed that assessee is not engaged in business of selling of cylinders. On perusal of statements and enclosures, we noticed that assessee is engaged in selling of gas and other items but not cylinders, as evident from P & L account of which photo copies have been filed by assessee which are on record. We further noticed that cylinders are given against deposit after filling LPG. In other words we noticed that cylinders were used as container for sale of gas and container i.e., cylinders is assets which have been correctly shown by assessee as assets in balance sheet. We noticed that Assessing Officer did not point out any material or evidence basis on which it can be said that assessee is engaged in purchase and sale of cylinders. In view of fact, we find that CIT(A) has correctly deleted addition. We accordingly confirm order of CIT(A) for deletion of Rs. 43,46,975. 7. second ground is pertaining to depreciation of Rs. 62,48,348 which is consequential to first ground. From facts of case, we noticed that when cylinders are used as container is assets which has been used for purpose of business, therefore, assessee is rightly claimed depreciation on cylinders. From ground of appeal it has been noticed that while giving effect of CIT(A)s order, Assessing Officer, noticed that assets were used only for 1 year and were not entitled for full depreciation. This point has not been examined by CIT(A). In this regard, we noticed from original order of Assessing Officer that Assessing Officer has disallowed depreciation simply on reason that assessee had actually been engaged in trading of goods and cylinders purchased during year were not part of its fixed assets but were its current assets. Hence, assessee is not eligible for depreciation of cylinders purchased during year. We find that there was no case of Assessing Officer that assets were used less than 180 days. Therefore, question of examining this aspect by CIT(A) does not arise. We accordingly reject this part of ground of appeal as well as argument of ld. DR. After considering totality of facts of case and in light of above discussion, we find that CIT(A) has rightly deleted addition made by Assessing Officer of Rs. 62,48,348 on account of depreciation claim of assessee. 8. In result, appeal of revenue is dismissed. *** Joint Commissioner of Income-tax (Asstt.), SR-2 Baroda v. Osian L.P.G. Bottling Ltd
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