2019 (8) TMI 404 - AT - Income Tax

Disallowance of depreciation - AO alleged claim as bogus for the reason suppler denied supply of ETP plant to the assessee - cost of asset described as Effluent treatment Plant System purchased from other party who has provided bill of different party - HELD THAT - CIT(A) has carefully considered the Inspection Report of Maharashtra Pollution Control Board dated 05.10.2007 who visited the factory of the assessee company at Aurangabad from time to time and their reports which are related to inspection of Effluent Treatment Plant which confirms the operation of ETP(Plant), and other observation made about ETP plant. This confirms the repairs carried out by the assessee in its ETP plant. It is also not out of place, to mention here that on 21.05.2007 when the plant was inspected by the officials of the Maharashtra Pollution Control Board they found leakages in pipe lines carrying effluent from ETP to disposal site. They have specifically mentioned in their report that all resulted pipes are required to be changed and to meet the other adverse observations mentioned and assessee company was directed to remove the same with in a period of 30 days. This all confirmed that assessee was to get repaired its Effluent Treatment Plant as per directions of the Maharashtra Pollution Control Board. Merely because a bill submitted by the assessee was bogus or fabricated cannot negate the other evidences such as the inspection carried out after repair of the ETP plant by the officials of the Maharashtra Pollution Control Board, carriage of the various parts of the plant through transporters from Delhi to Aurangabad, payments made by the assessee through banking Channel to M/s Mahindra Engineering Corporation etc. CIT(A) has rightly observed that repairs were carried out in the ETP plant by the assessee and the same deserves to be allowed. Hence, the AO was rightly directed to allow the depreciation as claimed by the assessee by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute and reject the ground no. 1 raised by the Revenue.

Summary

Issues:
Appeal against deletion of depreciation claim

Detailed Analysis:
The Revenue filed an appeal against the deletion of an addition made on account of a bogus claim of depreciation. The assessee, an authorized bottler of soft drinks, claimed depreciation on an 'ETP System' purchased from a company. The Assessing Officer (AO) disallowed the claim as the supplying company denied the transaction. The assessee explained that the equipment was purchased from an individual, not directly from the supplying company. The AO rejected the explanation, stating lack of evidence of payment to the vendor. The CIT(A) allowed the appeal, leading to the Revenue's appeal before the Tribunal.

During the hearing, the Senior DR emphasized the AO's decision, citing lack of evidence of payment to the supplying company. The assessee's counsel relied on the CIT(A)'s order and submitted written arguments and evidences supporting the claim. The Tribunal examined the records and found that the assessee claimed 100% depreciation on the ETP system. The CIT(A) had considered various evidences, including purchase agreements, bills, and payment records. The Tribunal noted that the assessee purchased parts of the ETP system from an individual, supported by agreements and transport receipts. The CIT(A) also considered reports from the Pollution Control Board confirming repairs to the ETP plant.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the repairs to the ETP plant were necessary to meet regulatory requirements. The Tribunal concluded that despite doubts about the invoice's authenticity, other evidence, such as inspection reports and payment records, supported the claim for depreciation. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the depreciation claim.

In summary, the Tribunal's detailed analysis considered the conflicting claims regarding the depreciation of the ETP system, ultimately supporting the CIT(A)'s decision based on the substantial evidence presented by the assessee.