Bhagyanagar India Limited,, Hyderabad vs Department Of Income Tax

DCIT, Circle-1(3), vs. Bhagyanagar India Limited Hyderabad. Secunderabad. PAN AAACR8963C (Appellant) (Respondent)

For Revenue : Mr. D. Sudhakar Rao For Assessee : Mr. K.C. Devdas

Date of Hearing : 07.05.2015 Date of Pronouncement : 27.05.2015

ORDER

PER P.M. JAGTAP, A.M.

This appeal is preferred by the Revenue against the order of the Ld. CIT(A)-II, Hyderabad dated 01.10.2013 whereby she deleted the additions made by the A.O. to the total income of the assessee by way of rectification order passed under section 154 of the I.T. Act, 1961.

2. The assessee in the present case is a limited company which is engaged in the business of manufacturing and selling of copper products, telephone cables as well as generation of wind power. The return of income for the year under consideration was filed by it on 29.09.2008 declaring total income of Rs.18,74,72,717. In the assessment completed under section 143(3) vide order dated 29.12.2010, the total income of the assessee was determined by the A.O. at 2 ITA.No.5/Hyd/2014 Bhagyanagar India Ltd., Secunderabad.

Rs.20,28,41,540. The record of the said assessment subsequently came to be examined by the Ld. CIT and on such examination, he was of the opinion that the order passed by the A.O. under section 143(3) has the following errors.

(i) "Excess depreciation allowed on electrical installation at 15%.

(ii) Excess depreciation allowed on office equipment at 15%.

(iii) Payment of contributions of P.F./ESI beyond the due date remain to be disallowed.

(iv) Income arising out of the development agreement with Vansh Builders taxed as capital gains instead of business income."

3. The Ld. CIT therefore issued a notice under section 263, in response to which, a detailed reply was filed by the assessee objecting to the revision of assessment proposed by the Ld. CIT under section 263. The submissions made by the assessee in the said reply was partly found acceptable by the Ld. CIT who did not revise the assessment order passed by the A.O. under section 143(3) on the issues of excess depreciation and belated payment of contributions towards P.F. and ESI. He however passed order under section 263 directing the A.O. to assess the income arising out of development agreement with Vansh Builders in the hands of the assessee as business income as against capital gains. Accordingly, order under section 143(3) read with section 263 was passed by the A.O. on 14.06.2012 bringing to tax the said income in the hands of the assessee as business income. Meanwhile, the appeal filed by the assessee against the order passed by the Ld. CIT under section 263 came to be disposed of by the Tribunal vide order dated 06.11.2012 passed in ITA.No.599/Hyd/2012 whereby it was held by the Tribunal that the income arising to the 3 ITA.No.5/Hyd/2014 Bhagyanagar India Ltd., Secunderabad.

assessee out of development agreement with Vansh Builders was chargeable to tax as income from capital gains.

4. While giving effect to the order of the Tribunal dated 06.11.2012 vide order dated 06.11.2012, the A.O. committed a mistake of adding the short term capital gain of Rs.46,27,052 twice. The assessee therefore moved an application under section 154 seeking rectification of the said mistake and the A.O. vide order dated 28.12.2012 passed under section 154 duly rectified the mistake committed by him by making the addition on account of short term capital gain twice. While passing the said order, he also made rectification on account of the following issues which, according to him, also constituted mistakes in the order dated 06.12.2012.

Sl.No. Nature of Additions Amount in Rs. i. Disallowance of additional depreciation 8,44,715 claimed under I.T. Act on Plant and Machinery ii. Disallowance of depreciation claimed 1,41,713

under I.T. Act on Electrical Installation iii. Disallowance of depreciation claimed 1,19,457 under I.T. Act on Office Equipment iv. Non consideration of Employee's 41,600 Contribution made to P.F. & ESI.

5. Against the order passed by the A.O. under section 154, an appeal was preferred by the assessee before the Ld. CIT(A) and the following submission was made on behalf of the assessee before him in support of its case that there were no mistakes in the order of the A.O. dated 06.12.2012 calling for any rectification as done by the A.O. vide order passed under section 154 of the Act.

4 ITA.No.5/Hyd/2014 Bhagyanagar India Ltd., Secunderabad.

"Coming to the issue of additional depreciation on plant and machinery, it was explained that the addition to plant and machinery of Rs.84,4 7,149 1were made after 30.09.2006 during the A.Y. 2007-08. Accordingly, the depreciation at the rate of 10% of Rs. 84,47,149 I - was claimed in A. Y. 200708 and the balance at the rate of 10% of Rs.8,44,715/- was claimed in A.Y.2008-09. Exactly identical issue was deal with in the case of ACIT Vs .SIL Investments Ltd. - 73 DTR 233 (Delhi), which was decided in favour of the assessee.

From the Depreciation Schedule as shown in I.T. Rules, there are three categories of depreciation regarding electrical fittings.

(a) First category, furniture and fittings - in this category electric items like electric wiring, switches, sockets other fittings etc., are included and they are entitled for depreciation at the rate of 10%.

(b) The second category included in plant and machinery III(8)(E) which includes condensers, automatic power cut device, capacitors etc., entitled for depreciation at the rate of 80%.

(c) All other electrical equipment other than the above two categories classified under the head plant and machinery. Part III(1) entitled for depreciation at the rate of 15%.

It was explained by the appellant that the depreciation in this case was claimed on electric transformers, gear boxes heavy duty motors, power distribution boards etc., which were classified as plant and machinery, Part III(1) of Depreciation Schedule. Accordingly, 15% of depreciation was correctly claimed by the appellant."

5.1. After taking into consideration the above submissions made by the assessee, the Ld. CIT(A) held that the issues raised by the A.O. in the order under section 154 were 5 ITA.No.5/Hyd/2014 Bhagyanagar India Ltd., Secunderabad.

all debatable issues and the same therefore were beyond the scope of rectification permissible under section 154. Accordingly, the additions made by the A.O. on the said issues by way of rectification under section 154 were deleted by the Ld. CIT(A) allowing the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the Revenue has preferred this appeal before the Tribunal.

6. We have heard both the parties and also perused the relevant material on record. It is observed that the submissions made on behalf of the assessee before the Ld. CIT(A), which has been reiterated by the Ld. Counsel for the assessee at the time of hearing before us, is sufficient to show that all the issues raised by the A.O. in his order under section 154 were certainly debatable and as rightly held by the Ld. CIT(A), the same were beyond the scope of rectification permissible under section 154. Moreover, it is also observed that even though all these issues were raised by the Ld. CIT in the notice issued under section 263, the same were dropped by him while passing the order under section 263 inasmuch as the order of the A.O. on these issues was not revised by him. These issues therefore were not involved in the appeal filed by the assessee before the Tribunal against the Order passed by the A.O. under section 263 and there was thus no occasion for the Tribunal to give any decision or direction on these issues. The order passed by the A.O. on 06.12.2012 giving effect to the order of the Tribunal thus did not involve these issues as the scope of the said order was limited to give effect to the order of the Tribunal which did not involve these issues at all. It therefore cannot be said, by any stretch of imagination, that there was any mistake in the order of the A.O. dated 6 ITA.No.5/Hyd/2014 Bhagyanagar India Ltd., Secunderabad.

06.12.2012 on these issues calling for any rectification under section 154 and this position clearly evident from the relevant orders, copies of which are placed on record before us, has not been disputed even by the learned D.R. We therefore uphold the impugned order of the Ld. CIT(A) holding that there were no mistakes in the order of the A.O. dated 06.12.2012 calling for any rectification under section 154 and upholding the same, we dismiss this appeal filed by the Revenue.

7. In the result, appeal of the Revenue is dismissed.

Order pronounced in the open Court on 27.05.2015.

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 27th May, 2015

VBP/-

Copy to

1. The Dy. Commissioner of Income Tax, Circle 1(3), 4th Floor, Aayakar Bhavan, Hyderabad.

2. Bhagyanagar India Limited, 5th Floor, Surya Towers, S.P. Road, Secunderabad.

3. CIT(A)-II, Hyderabad.

4. CIT-I, Hyderabad.

5. D.R. I.T.A.T. "B" Bench, Hyderabad.

6. Guard File