Laffans Petrochemicals Ltd, Mumbai vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No. 1221 /Mum/2012 ( नधा रण वष / Assessment Year : 2008-2009

Laffans Petrochemicals बनाम/ Dy. Commissioner of Ltd., Income Tax, Cir. 8(2), Vs. 10, Luthra Indl. Complex, Aayakar Bhavan, Andheri Kurla Road, M.K. Road, Safed Phool, Mumbai - 400 020. Mumbai - 400 072. थायी ले खा सं . /PAN : AAACL 0645 D (अपीलाथ /Appellant) .. ( यथ / Respondent)

Appellant by Shri Shekhar Gupta Respondent by : Shri Asghar Zain

ु वाई क तार ख / Date of Hearing सन : 03-12-2014 घोषणा क तार ख /Date of Pronouncement :20-02-2015 [

आदे श / O R D E R PER R.C. SHARMA, A.M. :

This is an appeal filed by the assessee is directed against the order of ld. CIT(A) -17, Mumbai dated 31-1-2012 for the A.Y. 2008-09 in the matter of order passed u/s 143(3) of the Income Tax Act, 1961.

2. The following grounds have been taken by the assessee in this appeal:-

"1. The learned CIT (Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer disallowing depreciation on building Rs. 8,59,315/- and electrical fittings Rs. 2,57,498/-

2. The learned CIT (Appeals) has erred in law and on the facts of the case in confirming the addition of Rs. 5,38,502/- and Rs. 1,00,940/- u/s. 40(a)(ia) of the Act."

2 ITA 1221/M/12

3. The A O has disallowed depreciation amounting to Rs. 859315/- and Rs, 2,57,498/- on building and electrical fittings respectively. In this regard, the AO has held as follows:-

"During the year under consideration, the assessee has shown addition to building of Rs. 1, 71,86,298 and addition to furniture, fixtures & electrical fittings of Rs. 73,09.121/- which comprised of electrical fittings of Rs. 51,49,9571- . To verify this addition, the assessee was requested to furnish the details of additions made to the building. On perusal of the details of additions filed by the assessee, it is observed that though the date of supply of material and labour is spread throughout the year, the assessee has considered date of supply as date on which building was put to use and accordingly depreciation was claimed. For construction of the building, the assessee kept on purchasing the material even after 31-03-2008 which proved that the building was not completed upto 31-03-2008 but the assessee has claimed depreciation on the building. To verify the exact date of the completion of building, during the course of assessment proceedings, the assessee was requested to furnish a completion certificate/occupancy certificate in respect of the building. In response to the same, assessee vide its letter dated 11-11-2010, submitted that "the assessee company has constructed additional factory premises during the year. The same were operational and we are enclosing the completion certificate in respect of the same was also furnished. The additional space was constructed in- house by the assessee company" It is observed that the assessee under its own letter head dated 11-11-2010 certified that there was an addition to building during the assessment year 2008-09 and same was completed during the year. This is a self- made letter which cannot be a reliable document. The details of addition to fixed assets show that the assessee has made first payment to Yogi Steel & Cement on 11-04-2007 and also the last payment of Yogi Steel & Cement on 31-03-2008. These facts clearly revealed that the assessee has continued the civil work even after the end of the relevant previous year i.e. 31-03-2008."

4. We have considered the rival contention and found that assessee company has made addition to building and electrical fittings during the year. During the year, the assessee company had built additional storage space, 3 ITA 1221/M/12

storage tanks and purchased pipe lines for connection to the storage tank and besides, had spent on drainage works and road widening works. The Assessing Officer has disallowed claim of the depreciation on the plea that the building could not have been completed till 31-03-2008. The assessee company had furnished a certificate from the Director (Commercial) confirming that the building was completed during the year. It was not a case of construction of new building, but it was mere addition to the existing building already in use for its industrial purposes. Merely because bills were submitted late by the contractors, this should not be the basis to arrive at the conclusion that building was not ready. Accordingly A.O. was not justified in declining the claim of depreciation. We therefore direct the A.O. to delete the disallowance of assessee's claim of depreciation.

5. During the course of scrutiny assessment, the A.O. disallowed payments made to Scientific Sales Corporation on account of repairs and maintenance amounting to Rs. 1,00,940/- and payment made to Exodus Chemtank P. Ltd. amounting to Rs. 5,38,502/- on account of clearing and forwarding charges by invoking the provisions of section 40(a)(ia) of the Income Tax Act, 1961. In respect of payment made to Scientific Sales Corporation, the assessee has contended that they have purchased Low Temperature Cooling Bath and the party has also charged Central Sales Tax. The assessee further contended that since it was a case of supply of material, no tax was required to be deducted. The assessee also produced a copy of the purchase bill. In respect of payment made to Exodus Chemtank Pvt. Ltd. on account of clearing and forwarding amounting to Rs. 5,38,502/-, the assessee contended that since the payment is made to a foreign shipping company through its agent, provision of section 172 shall apply and not provisions of section 194C and 195. The assessee has also filed a certificate from the Asst. Director of Income Tax 4 ITA 1221/M/12

(International Taxation) as required under the provision of section 172 of the Act before the A.O.

6. We found that the payment of Rs. 1,00,940/- to Scientific Sales Corporation was made on account of cooling bath which involves replacement of compressor, thermostat and refilling of gas. We have verified invoice No. JKM/24243/07 dated 6-8-2007 issued by M/s Scientific Sales Corporation placed on record and found that payment was made on account of purchase of these items on which CST at 3% was paid, accordingly it did not require any deduction of tax at source. We therefore direct the A.O. to delete the disallowance of Rs. 1,00,940/- which was on account of purchase of cooling bath.

7. In respect of payment made to Exodus Chemtank Pvt. Ltd., we found that the payment was made to a foreign shipping company through an agent, hence provisions of section 194-C of the Act is not applicable. For this purpose, a certificate from Asstt. Director of Income Tax (International Taxation) was also produced as required u/s 172 of the Act. Accordingly we do not find any merit for the disallowance of payment made on account of freight, forwarding and clearing charges paid to the foreign shipping company through its agent. The A.O. is directed to delete the disallowance so made u/s 40(a)(ia) of the Act.

8. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 20th Feb, 2015

आदे श क घोषणा खल ु े #यायालय म% &दनांकः 20-2-2015 को क गई ।

Sd/- sd/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER मुंबई Mumbai; &दनांक Dated 20-02-2015 [ 5 ITA 1221/M/12

व.6न.स./ RK , Sr. PS

आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु7त(अपील) / The CIT(A) -4,, Mumbai

4. आयकर आय7 ु त / CIT -3Mumbai

5. :वभागीय 6त6न<ध, आयकर अपील य अ<धकरण, मुंबई / DR, ITAT, Mumbai C Bench

6. गाड@ फाईल / Guard file.

ु ार/ BY ORDER, आदे शानस

स या:पत 6त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai