2013 (9) TMI 806 - HC - Income Tax

Depreciation on the block of assets - Rs.4,27,868/- added by the Assessing Officer towards depreciation of the units on the ground that the factory at Vallabh Vidyanagar had remained closed Held that - Relying upon the judgment in the case of Packwell Printers Vs. Assistant Commissioner of Income-tax reported in (1996)59ITD340(JAB., it has been held that depreciation needs to be allowed on the entire block of assets instead of each individual assets.BR Addition on account of section 69C of the Income Tax Act Held that - if unaccounted production was taxed and on the other hand, unaccounted purchase are also taxed, then the correct position should have been that the unaccounted purchases, alleged to have been utilized for the said production, ought to have been reduced from the unaccounted production Decided against the Revenue.

Summary

Issues:
1. Addition of Rs.86,76,651 on account of unaccounted production and sale of glass.
2. Addition of Rs.80,00,000 under Section 69C of the Income Tax Act.
3. Disallowance of Rs.5,00,000 out of manufacturing and other expenses.
4. Disallowance of Rs.4,27,868 being depreciation of units which did not function during the year.

Issue 1: Addition of Rs.86,76,651 on account of unaccounted production and sale of glass:
The Tribunal confirmed the deletion of this amount by the CIT(A) as it was found that no manufacturing of glass took place during the year, contrary to the Assessing Officer's belief. The CIT(A) noted that only packaging, not production, occurred. The ITAT upheld this decision, stating there was no perversity in the deletion as both revenue authorities concurred on the factual understanding.

Issue 2: Addition of Rs.80,00,000 under Section 69C of the Income Tax Act:
The CIT(A) deleted this amount as business expenditure under Section 37 of the Act, agreeing with the assessee's challenge. The tribunal concurred, pointing out an anomaly in the Assessing Officer's approach and dismissed the revenue's claim, stating that the unaccounted purchases allegedly used for production should have been deducted from the unaccounted production.

Issue 3: Disallowance of Rs.5,00,000 out of manufacturing and other expenses:
The CIT(A) held that as audited accounts supported the expenses and no adverse comments were made, no disallowance should occur. The tribunal upheld this decision, noting that the Profit & Loss account clarified the expenses, leading to the deletion of the amount in question.

Issue 4: Disallowance of Rs.4,27,868 being depreciation of units which did not function during the year:
The CIT(A) allowed depreciation on the block of assets, not individual assets, following a precedent. The tribunal affirmed this decision, stating that assets put to use deserved depreciation benefits, ultimately dismissing the revenue's claim. Both the CIT(A) and the tribunal focused on factual analysis, leading to the dismissal of the Tax Appeal due to the absence of any substantial legal questions.