M/s. Tipco Industries Ltd. v. DCIT-9(3) Aayakar Bhavan Mumbai
[Citation -2016-LL-0921-138]

Citation 2016-LL-0921-138
Appellant Name M/s. Tipco Industries Ltd.
Respondent Name DCIT-9(3) Aayakar Bhavan Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 21/09/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags disallowance of depreciation • plant and machinery • rejection of claim • written down value • insurance company • insurance claim • passive user • fixed asset
Bot Summary: The AO observed that the assessee had increased the claim of depreciation, u/s. 2 685, 3768/M/12;4514/13-TIPCO After considering the submission of the assessee and the AO it was held by the FAA that the assessee did not claim any depreciation on the damaged machinery for the reason that insurance claim was lodged, that only after rejection of claim by the insurance company the assessee reinstated the WDV to the block of assets, that there was no user of the asset for the AY.s 2005-06 to 2008-09, that assets were damaged. 34(1)(ii) of the Act he held that the assessee was not entitled to depreciation on assets which did not exist. Finally,he upheld the order of the AO. 4.During the course of hearing before us,the Authorised Representative stated that the FAA wrongly held that Plant and Machinery did not exist, that PM was damaged because of flood water,that assessee was manufacturing goods at Silvassa, that insurance had rejected the claim made by the assessee during the year under appeal, that only after receiving the rejection letter from the insurance company it had reinstated its claim. On a query by the bench,the assessee furnished copy of the goods manufactur - ed at the Silvassa factory during the year under consideration and in the earlier and subsequent years. As stated earlier, the assessee had filed before us the details of manufactur -ing activities carried out at the Silvassa Unit.A separate manufacturing Account of the Silvassa Unit clearly establishes that it was carrying out its manufacturing activities at Silvassa after the floods. The assessee had not claimed depreciation as its claim was pending before the insurance authorities.


Income-tax Appellate Tribunal-E Bench Mumbai Before S/Shri Rajendra,Accountant Member and C.N. Prasad,Judicial Member ITA 685/Mum/2012, Assessment Year: 2008-09, ITA 3768/Mum/2012,Assessment Year:2009-10 ITA 4514/Mum/2013, Assessment Year: 2010-11 M/s. Tipco Industries Ltd. DCIT-9(3) Rani Sati Marg, Malad (E) Vs. Aayakar Bhavan Mumbai-400 097. Mumbai. PAN:AAACT 1678 E (Appellant) (Respondent) Revenue by:Shri R.K. Sahu-DR Assessee by: Ms. Aarti Sathe & Shri Kalpesh Turalkar-(AR) Date of Hearing: 29.07.2016 Date of Pronouncement: 21.09.2016 , 1961 254(1) Order u/s.254(1)of Income-tax Act ,1961(Act) PER RAJENDRA, AM- Challenging order of CIT(A)-20,Mumbai,the Assessee has filed appeals for above-mentioned three Assessment Years(AY.s.). As issues involved in all these appeals are common,so for sake of convenience we are passing single order.The assessee-firm is engaged in business of manufacturing of thermo plastic compound, phonetic material and compounds. Details of dates of filing of returns, returned incomes,etc.can be summarised as under: A.Y. ROI filed on Returned Assessment dt. Assessed Income(Rs.) Dt. of CIT(A) order Income(Rs.) 2008-09 30.09.2008 (-)4.86 crores 30.11.2010 (-)33.84 lakhs 15.11.2011 2009-10 29.09.2009 (-)3.04 crores 30.09.2011 (-)3.02 crores 06.03.2012 2010-11 30.09.2012 (-)1.88 crores 25.09.2012 (-)1.86 crores 30.04.2013 2. ITA/685/Mum/2012,A.Y.2008-09: Effective Ground of appeal is about disallowance of depreciation of Rs.17.17 lakhs on machinery,having Written Down Value (WDV) of Rs.1.14 crores, which was damaged due to floods and on which claim was not approved by insurance company. During course of assessment proceedings,the assessee filed revised computation of income wherein it added back amount of Rs. 685, 3768/M/12;4514/13-TIPCO 4.53 crores,being loss arising out of exceptional item.The AO observed that assessee had increased claim of depreciation, u/s. 32 of Act,from Rs.69.49 lakhs to Rs.86.67 lakhs that increase was attributable to addition on account of rejection of insurance claim of Rs.1,14,49,389/- pertaining to fixed assets. He held that addition to fixed asset made by assessee was not on account of floods or on account of purchase of assets or any other asset being put to use, that basic condition of claiming depreciation u/s. 32 remained unsatisfied. assessee had claimed depreciation @ 15% of Rs.1.14 crores i.e. Rs.17,17,403/- in revised computation of income. AO did not allow claim and accordingly made addition. 3.Aggreived by order of AO, assessee preferred appeal before First Appellate Authority (FAA).Before him, it was argued that due to heavy flood in Silvassa on 3.8.2004 flood water entered factory at Silvassa resulting into severe damage to Plant and Machinery(P&M), that insurance claim was filed and assessee had debited amount receivable under head insurance claim receivable in its books, that in books of account separate insurance claim receivable account was created for damage/loss of fixed assets,that it reduced block of assets of P&M for sum of Rs.1.14 crores being WDV under Act, that it did not claim depreciation for AY.s 2005-06 to 2008-09,that during year under consideration insurance claim was rejected, that WDV was reinstated to block of assets of company and accordingly depreciation was claimed, that P&M was not sold/discarded/ demolished/destroyed, that it continued to be in existence, that as per law passive user of P&M was entitled to claim depreciation,that after introduction of concept of block of assets it was not permissible for AO to see as to whether particular/specific asset was put to use or not, that collective use of block of assets was to be examined, that depreciation was to be allowed for entire block, that inspite of heavy flood machinery was in working condition. 2 685, 3768/M/12;4514/13-TIPCO After considering submission of assessee and AO it was held by FAA that assessee did not claim any depreciation on damaged machinery for reason that insurance claim was lodged, that only after rejection of claim by insurance company assessee reinstated WDV to block of assets, that there was no user of asset for AY.s 2005-06 to 2008-09, that assets were damaged. Referring to provisions of sec. 34(1)(ii) of Act he held that assessee was not entitled to depreciation on assets which did not exist. He referred to case of EID Parry (226ITR836) and held that facts of said case were applicable to facts of case under consi - deration.Finally,he upheld order of AO. 4.During course of hearing before us,the Authorised Representative (AR) stated that FAA wrongly held that Plant and Machinery (P&M) did not exist, that P&M was damaged because of flood water,that assessee was manufacturing goods at Silvassa, that insurance had rejected claim made by assessee during year under appeal, that only after receiving rejection letter from insurance company it had reinstated its claim. She referred to page No.9, 10 of PB and relied upon cases of G.N. Agrawal (217 ITR 250); Rishiroop Polymers(P)Ltd. (102 ITD 128). DR supported order of FAA and referred to cases of Oriental Coal Co. Ltd. (120CTR202) and Jiwaji Rao Sugar Co.Ltd. (71ITR3219). In rejoinder AR stated that both cases relied upon by DR, do not deal with concept of block of assets. On query by bench,the assessee furnished copy of goods manufactur - ed at Silvassa factory during year under consideration and in earlier and subsequent years. 5.We have heard rival submissions and perused material before us. undisputed facts of case are that flood waters damaged P&M of Silvassa factory of assessee,that it filed claim before insurance 3 685, 3768/M/12;4514/13-TIPCO company, that insurance authority rejected claim during year under consideration,that it filed revised statement of income before AO claiming depreciation on assets, that as per books of account WDV of P&M as on 1.4.04 was Rs.1.14 crores, that it had claimed depreciation @15% on block of assets,that FAA rejected claim made by AO by invoking provisions of section 34(1) of Act. As stated earlier, assessee had filed before us details of manufactur -ing activities carried out at Silvassa Unit.A separate manufacturing Account of Silvassa Unit clearly establishes that it was carrying out its manufacturing activities at Silvassa after floods. There is distinction between non existence of P&M and damaged P&M.There is nothing on record to disprove fact that manufacturing activities were carried out at Silvassa.Therefore, FAA was not justified in holding that P&M did not exist. fact is that P&M existed and it was being used by assessee for manufacturing activities.Secondly,after introduction of concept of block assets individual assets are not to be considered for allowing/disallowing depreciation.The assessee had not claimed depreciation as its claim was pending before insurance authorities. We find that cases relied upon by DR are of no help because facts of both cases are distinguishable, besides they do not deal with concept of block of assets. Therefore, reversing order of FAA,we hold that assessee was entitled for depreciation for machinery @ 15% (17.17 lakhs).Effective Ground of appeal of assessee is decided in favour of assessee. ITA.s/3768-4514/Mum/2012 & 2013,AY.s:2009-10 and 2010-11 6.The facts and circumstances of both years are identical to facts of earlier year except amount involved under head depreciation.So,following our order for AY.2008-09, we allow effective Ground raised by assessee for both years. 4 685, 3768/M/12;4514/13-TIPCO As result, all appeals filed by assessee for all three AY.s are allowed. Order pronounced in open court on 21st September, 2016. 21, 2016 Sd/- Sd/- (C.N. Prasad) (Rajendra) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 21.09.2016. Jv.Sr.PS. Copy of Order forwarded to : 1.Appellant 2. Respondent 3.The concerned CIT(A), 4.The concerned CIT 5.DR E Bench, ITAT, Mumbai 6.Guard File //True Copy// BY ORDER, Dy. Asst. Registrar ITAT, Mumbai. 5 M/s. Tipco Industries Ltd. v. DCIT-9(3) Aayakar Bhavan Mumbai
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