Case Law Details
Addl. CIT Vs Gillette Diversified Operations Pvt. Ltd. (ITAT Delhi)
Section 32 requires that the assessee must use the asset for the ‘purposes of business’. It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for the purpose of business of the assessee, the requirement of section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is preferred by the Department against order passed by the Learned Commissioner of Income Tax (Appeals)-35, New Delhi {CIT(A)} for Assessment Year 2014-15, wherein vide order dated 01.11.2017, the Ld. CIT(A) has allowed relief to the assessee in respect of disallowance on depreciation on Plant and Machinery and Tools and Moulds amounting to Rs.21,27,83,175/- and also allowed relief in respect of insurance expenses incurred on Machinery and Moulds amounting to Rs.14,52,323/- and further relief in respect of repair and maintenance expenses on Plant and Machinery amounting to Rs.23,83,146/-.
2.0 The brief facts of the case are that the assessee company is engaged in trading of wide range of personal care products. The assessee is also engaged in the distribution of Oral-B care and other oral care products primarily falling under the health care segment. The return of income was filed declaring an income of Rs.5,19,14,780/-. The case was selected for scrutiny and the assessment was completed at an income of Rs.26,98,47,910/- after making disallowance on account of depreciation on Plant and Machinery to the tune of Rs.21,27,83,175/-, an addition on account of insurance expenses of Rs.14,52,323/- on Machine and Moulds and a further addition on account of repair and maintenance expenses of Rs.23,83,146/- on Machinery and Moulds.
2.1 The assessee preferred an appeal before the Ld. First Appellate Authority, which was allowed and now the Department is in appeal before this Tribunal challenging the deletion. The following grounds of appeal have been raised in this regard:
“1. On the facts and in the circumstances of the case the Ld. CIT(A) erred in law in deleting the disallowance in respect of depreciation on plant and machinery and tools and moulds of Rs.21,27,83,175/- made by the Assessing Officer.
2. On the facts and in the circumstances of the case the Ld. CIT(A) erred in law in deleting the disallowance in respect of insurance expenses incurred on Machinery and Moulds of Rs.14,52,323/- and in respect of repair and maintenance expenses on plant and machinery expenses amounting to Rs.23,83,146/- made by the Assessing Officer.
3. The appellant craves leave to add, amend, vary omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal.”
3.0 At the outset, the Ld. Authorized Representative (AR) submitted that the appeal of the Department was covered against the Department by the order of this Tribunal in assessee’s own case for Assessment Years 2008-09 to 2010-11 in ITA Nos. 5736/Del/2016, 5675, 5676 & 5677/Del/2015 vide order dated 23.08.2018 which was subsequently also followed by the Tribunal in assessee’s own case for Assessment Year 2011-12 in ITA No.1287/Del/2017 and 1160/Del/2017 vide order dated 12.11.2020. The Ld. Authorized Representative placed a copy of the said orders on record.
4.0 Per contra, the Ld. Sr. Departmental Representative (DR) placed reliance on the orders of the authorities below.
5.0 We have heard the rival submissions and have also perused the material on record. We agree with the contention of the Ld. AR that both the grounds raised by the Department are covered against the Department by the order of the Tribunal in assessee’s own case as aforesaid. The relevant observation of the Co-ordinate Bench of the Tribunal are contained in Paragraph-8 of the order of the ITAT in Assessment Year 2010-11 wherein the Co-ordinate Bench has placed reliance on the judgment of the Hon’ble Apex Court in the case of ICDS Ltd. vs. CIT reported in [2013] 29 taxmann.com 129(SC). The relevant observations of the Bench are being reproduced herein under for a ready reference:
“8.0 Coming to the department’s appeal challenging the action of the Ld. CIT (A) in deleting the disallowance of depreciation, we find that the issue is squarely covered in favour of the assessee by the judgment of the Hon’ble Apex Court in the case of ICDS Ltd. vs. CIT reported in (2013) 29 taxmann.com 129 (SC) wherein the Hon’ble Apex Court, while examining provision of Section 32 of the Act, held as under:
“Section requires that the assessee must use the asset for the “purposes of business”. It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for the purpose of business of the assessee, the requirement of section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee.”
8.1 The Hon’ble Supreme Court considered the phrase ‘use for the purpose of business’ in the case of Liquidators of Pursa Ltd. v. CIT (1954) 25 ITR 265 (SC). The Hon’ble Apex Court pointed out that the critical words which are essentially constituent for the purpose of considering the claim of the assessee was machinery or plant “used for the purposes of business, profession or vocation”. The words “used for the purposes of business” obviously means used for the purpose of enabling the owner to carry on the business and earn profits in the business.
8.2 In view of the binding precedent of the Hon’ble Apex Court, respectfully following the same, we find no reason to interfere with the findings of the Ld. CIT (A) on the issue and dismiss the grounds raised by the Department.
9. In the result, the appeal of the Department stands dismissed.”
5.1 The Ld. Departmental Representative could not negate the binding precedent of the order of the Hon’ble Apex Court as aforesaid and, therefore, respectfully following the same, we dismiss the grounds raised by the Department.
6.0 In the final result, the appeal of the Department stands dismissed.
Order pronounced on 30th June, 2021.
