| The Tax Publishers2020 TaxPub(DT) 3853 (Mum-Trib) INCOME TAX ACT, 1961
Section 143(3)
Where assessee entered into lease agreement with its parent company for utilization of their specialized machineries and reimburse actual loss due to wear and tear of precious metals used in such equipments, revenue was not justified in denying deduction of said loss claimed by assessee. However, considering huge quantum of said losses, AO was directed to amortize abnormal loss in two years.
|
Assessment - Additions to income - Precious metal (platinum, etc.) utilized in specialized machinery used for manufacturing process - Claim of loss on account of wear and tear of precious metal
Assessee was engaged in business of manufacturing of specialized glass tubes used for ampoules, vials manufacturing. In manufacturing process, assessee used specialized machinery/equipment made of platinum and rhodium alloy for producing defect free glass products like Stirrer, Feeder, Nozzle, etc. Since these machineries were made of precious metals like platinum and rhodium alloy, assessee was required to replenish precious metals lost during production or compensate the parent company for precious metals loss. AO disallowed amount claimed in assessee's profit and loss account pertaining to loss of precious metal. Held: There was no doubt that assessee entered into lease agreement with its parent company for utilization of their specialized machineries and reimburse actual loss due to wear and tear. During relevant year, due to abnormal circumstances assessee had to replace feeder/nozzles due to frequent leakages in feeder. These were all abnormal and special circumstances in which utilization of metal increased abnormally when compared to previous assessment year. However, abnormality was not observed during subsequent years. Since losses were considerably high, AO was directed to amortize the abnormal loss in 2 years that is 50% during relevant assessment year and balance in next assessment year. Further, certificate issued by technical engineers from company showed that assessee purchased precious metals and internal technical department carried out the respective work of re-fabrication of damaged feeders/nozzles. Therefore, there was nothing wrong in purchasing of precious metals and carrying on repair work of the machineries internally by assessee.
REFERRED : CIT v. Saravana Spinning Mills (P) Ltd. (2007) 293 ITR 201 (SC) : 2007 TaxPub(DT) 1442 (SC) Ballimal Naval Kishore & Anr. v. CIT (1997) 225 ITR 414 (SC) : 1997 TaxPub(DT) 0992 (SC) CIT, West Bengal II v. Kalyanji Mavji and Co. 1980 TaxPub(DT) 0935 (SC) MK Brothers Private Limited v. CIT(1972) 86 ITR 38 (SC) : 1972 TaxPub(DT) 0423 (SC) Travancore Sugars and Chemicals Limited v. CIT (1966) 62 ITR 566 (SC) : 1966 TaxPub(DT) 0372 (SC) CIT, Faridabad v. M/s. Voith Paper Fabrics India Ltd. (2012) 346 ITR 70 (P&H) : 2012 TaxPub(DT) 0577 (P&H-HC) Bharat Forge Co. Ltd. v. CIT (1999) 240 ITR 654 (Bom) CIT v. Chemaux Ltd. (1994) 74 Taxman 201 (Bom) : 1994 TaxPub(DT) 0485 (Bom-HC) CIT v. Kusum Products Limited (1989) 41 Taxman 188 (Cal HC) : 1989 TaxPub(DT) 0338 (Cal-HC) Gannon Norton Metal Diamond Dies Limited v. CIT (1987) 163 ITR 807 (MP) : 1987 TaxPub(DT) 0665 (MP-HC) Allied Metal Products v. CIT (1982) 7 Taxman 181 (Punj & Haryana HC) : 1982 TaxPub(DT) 0542 (P&H-HC) Girdhari Dass and Sons v. CIT (1976) 105 ITR 339) (All HC) : 1976 TaxPub(DT) 0396 (All-HC) New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (1956) 30 ITR 338 (Born HC) : 1956 TaxPub(DT) 0138 (Bom-HC)
 SUBSCRIBE FOR FULL CONTENT
OR Try Reload the Page |