P. Mayilvaganan, Bangalore V. Asst. C.I.T., Bangalore

CO 70/BANG/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9924 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: G KRISHNAN
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1806/BANG/2013 ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 10(1), BANGALORE. VS. SHRI P. MAYILVAGANAN, PROP. M/S. SWATHI EXPORTS, NO.14-15, KRISHNAMRAJU LAYOUT, BILEKAHALLI, BANNERGHATTA ROAD, BANGALORE 560 076. PAN : ABPPV 3734Q APPELLANT RESPONDENT CO NO.70/BANG/2014 [IN ITA NO.1806/BANG/2013] ASSESSMENT YEAR : 2009-10 SHRI P. MAYILVAGANAN, PROP. M/S. SWATHI EXPORTS, BANGALORE 560 076. PAN : ABPPV 3734Q VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 10(1), BANGALORE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI P. DHIVAHAR, JT. CIT(DR) ASSESSEE BY : SHRI G. KRISHNAN, C.A. DATE OF HEARING : 13.10.2014 DATE OF PRONOUNCEMENT : 17.10.2014 ITA NO.1806/BANG/2013 & CO NO.70/BANG/2014 PAGE 2 OF 7 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THE APPEAL IS BY THE REVENUE AGAINST THE ORDER D ATED 23.9.2013 OF THE CIT(APPEALS)-V, BANGALORE RELATING TO ASSESSMEN T YEAR 2009-10. THE ASSESSEE HAS FILED THE CROSS OBJECTION, WHICH IS PU RELY SUPPORTIVE OF THE CIT(APPEALS). 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE REA DS AS FOLLOWS:- 2. THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT , THAT THE ASSESSEE IS INVOLVED IN EXCAVATION OF GRANITE FROM THE EARTH AND THE SAME ARE ONLY DRESSED/SIZED TO SHAPE FOR WEIGHI NG, TRANSPORTATION AND BILLING. NEITHER THEY ARE CUT IN TO SLABS NOR POLISHED TO GIVE REQUISITE SHINE AND READY TO USE B Y THE PURCHASER. AS SUCH, THE ACTIVITY DOES NOT COME UNDER THE PURVI EW OF THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR A THIN G AS SPECIFIED IN SEC.32(1)(IIA) OF THE IT ACT. 3. THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT, IN ORDER TO BE ELIGIBLE FOR THE BENEFIT OF ADDITIONAL DEPRECIAT ION OF 20%, THE ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUF ACTURE OR PRODUCTION OF ANY ARTICLE OR A THING. 4. THE CIT (A) HAS ERRED IN NOT APPRECIATING THE J UDICIAL PRONOUNCEMENT OF THE HONBLE SUPREME COURT IN THE C ASE OF VIJAY GRANITES (P) LTD IN 349 ITR 350 (SC)/2012 THE FACTS OF WHICH ARE SIMILAR TO THE PRESENT CASE. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED I N THE BUSINESS OF EXTRACTING GRANITES FROM EARTH, CUTTING IT INTO SIZ ES AND BLOCKS AND EXPORTS ROUGH GRANITE BLOCKS. THE ASSESSEE CLAIMED ADDITIO NAL DEPRECIATION ON NEW MACHINERIES (TILLERS, CRANES & DUMPERS) PURCHAS ED DURING THE PREVIOUS ITA NO.1806/BANG/2013 & CO NO.70/BANG/2014 PAGE 3 OF 7 YEAR. UNDER THE PROVISIONS OF SECTION 32(1)(II)(A) OF THE ACT, IN THE CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED OR INSTALLED AFTER 31.3.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM E QUAL TO 25% OF ACTUAL COST OF SUCH MACHINERY OR PLANT, WILL BE ALLOWED AS A DE DUCTION. 4. THE CRUCIAL EXPRESSION IN SECTION 32(1)(II)(A) O F THE ACT IS THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFA CTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE ASSESSEE CLAIMED THAT IT WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ARTICLE OR THING DURING THE PREVIOUS YEAR. THE ASSESSEE DESCRIBED THE PROCESS CARRIED ON BY IT AS FOLLOWS:- A) BLASTING THE ROCKS. B) REMOVAL OF WASTE MATERIAL LIKE SOIL COVER AND O THER WASTE USING MECHANICAL PROCESS. C) SEPARATING THE GRANITE BLOCK FROM THE PARENT RO CK. D) REMOVAL OF INTRUSIONS AND DEFECTS FROM THE GRAN ITE BLOCKS. E) DIMENSIONAL CUTTING AND DRESSING ON FOUR SIDES TO MAKE THEM MARKETABLE LOTS. ALL THESE ACTIVITIES ARE CARRIED OUT BY USING HEAVY MACHINERIES LIKE EXCAVATORS, CRANES, COMPRESSORS ETC., FOLLOWED BY VARIOUS HUMAN ACTIVITIES AND HUGE AMOUNT OF PLANNING AND EX ECUTION IN TIMELY MANNER NECESSARY FOR CARRYING ITS ACTIVITIES . 5. THE AO, ON EXAMINING THE CLAIM OF THE ASSESSEE, WAS OF THE VIEW THAT EXTRACTING AND CUTTING TO SIZE MARBLES BEFORE EXPORT WOULD NOT AMOUNT ITA NO.1806/BANG/2013 & CO NO.70/BANG/2014 PAGE 4 OF 7 TO MANUFACTURE. ACCORDINGLY, THE AO DISALLOWED CL AIM OF THE ASSESSEE FOR ADDITIONAL DEPRECIATION. 6. ON APPEAL BY THE ASSESSEE, THE LD. CIT(APPEALS) FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. SESA GOA LTD., 271 ITR 331 (SC) , HELD THAT EXTRACTION OF IRON ORE BY ITSELF WAS HE LD BY THE HONBLE APEX COURT TO BE PRODUCTION. THE LD . CIT(A) WAS OF THE VIEW THAT THE ASSESSEE WAS ENTITLED TO ADDITIONAL DEPREC IATION AS HE WAS ENGAGED IN MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WH O PRIMARILY PLACED RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. VIJAY GRANITES PVT. LTD., (2004) 140 TAXMAN 371 (MAD) . 9. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(APPEALS). THE ASSESSEE ALSO SUBMITTED THAT SEC TION 2(29BA) OF THE ACT, MANUFACTURE HAS BEEN DEFINED BY FINANCE NO.2 ACT, OF 2009 W.E.F. 01.04.2009. THIS DEFINITION CLEARLY CONTEMPLATES TH AT A NEW AND DISTINCT OBJECT OR ARTICLE WITH A DIFFERENT CHEMICAL COMPOSI TION OR INTEGRAL STRUCTURE WOULD AMOUNT TO MANUFACTURE OF AN ARTICLE OR THING. ADMITTEDLY IN THE FACTS OF THE PRESENT CASE, THIS CHEMICAL AND PHYSICAL COM POSITION OF RAW IRON ORE IS TRANSFORMED INTO EXPORT AND MARKETABLE COMMODITY WITH A REQUIRED ITA NO.1806/BANG/2013 & CO NO.70/BANG/2014 PAGE 5 OF 7 ACCEPTABILITY OF THE FOREIGN BUYER. THIS PROCESS OF CHANGING THE ORIGINAL PRODUCT WITH A CHEMICAL COMPOSITION AND PHYSICAL CH ANGES WOULD AMOUNT TO MANUFACTURE. HENCE THE CONCLUSION OF THE ASSESSI NG OFFICER THAT THE ASSESSEE DOES NOT CARRY ON MANUFACTURE OR PRODUCTIO N ACTIVITY IS ERRONEOUS. 10. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SESA GOA LTD. (SUPRA) HAD TO DECIDE THE QUESTION, (I) WHETHER MINING ACTI VITY FOR EXTRACTING IRON ORE AND PROCESSING IRON ORE AMOUNTS TO PRODUCTION WITHI N THE MEANING OF SECTION 32(1)(II)(A) OF THE ACT? AND (II) WHETHER I NVESTMENT ALLOWANCE IS TO BE ALLOWED AS A DEDUCTION?; IN RESPECT OF MACHINER Y USED FOR MINING ACTIVITY, PROVIDED THE ASSESSEE IS ENGAGED IN PRODU CTION OR MANUFACTURE OF ARTICLE OR THING. THE HONBLE SUPREME COURT HELD T HAT EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO 'PRODUCTION' WITH IN THE MEANING OF S. 80-I AND CONSEQUENTLY, ASSESSEE WAS ENTITLED TO DEDUCTIO N UNDER S. 80-I IN RESPECT OF MINING ACTIVITY. IN THE VERY SAME DECISION, ANOTHER QUESTION WAS AS TO, WHETHER THE ASSESSEE ENGAGED IN EXTRACTION A ND PROCESSING OF GRANITES CAN BE SAID TO BE ENGAGED IN PRODUCTION OF AN ARTICLE OR THING WITHIN THE MEANING OF SECTION 80I OF THE ACT AND CO NSEQUENT, ENTITLED TO DEDUCTION UNDER THE AFORESAID SECTION? THE HONBLE SUPREME COURT HELD THAT BOTH THE AFORESAID ACTIVITIES WOULD AMOUNT TO PRODUCTION OF AN ARTICLE OR THING. IN THE AFORESAID DECISION, THE HONBLE SUPR EME COURT AFFIRMED THE ITA NO.1806/BANG/2013 & CO NO.70/BANG/2014 PAGE 6 OF 7 DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. MYSORE MINERALS LTD., 250 ITR 730 (KAR) . IN VIEW OF THE AFORESAID DECISION DIRECTLY ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE LD. CIT(APPEALS) DOES NOT CALL FOR ANY INTERFERENCE. 11. AS FAR AS THE DECISION OF THE HONBLE MADRAS H IGH COURT IN THE CASE OF CIT V. VIJAY GRANITES PVT. LTD., (SUPRA) IS CONCERNED, WE FIND THAT IT WAS A CASE WHERE THE ASSESSEE PURCHASED GRANITE BLO CKS, PROCESSED THEM AND EXPORTED THEM OUTSIDE INDIA. THE HONBLE MADRA S HIGH COURT HELD THAT CUTTING AND POLISHING GRANITE SLAPS BEFORE EXPORTIN G DID NOT AMOUNT TO MANUFACTURE OR PRODUCTION. THE AFORESAID DECISION WAS TAKEN UP IN APPEAL BY THE ASSESSEE TO HONBLE SUPREME COURT. THE HON BLE APEX COURT REMANDED THE MATTER TO THE ASSESSING OFFICER FOR FR ESH CONSIDERATION, DIRECTING THE ASSESSEE TO LEAD EVIDENCE AS TO THE E XACT NATURE OF ACTIVITIES UNDERTAKEN BY THE ASSESSEE. IN OUR VIEW, THEREFORE , THE DECISION RENDERED IN THE CASE OF VIJAY GRANITES PVT. LTD., (SUPRA) WILL NOT BE OF ANY ASSISTANCE TO THE PLEA OF THE REVENUE BEFORE US. W E MAY ALSO POINT OUT THAT IN THE PRESENT CASE, THE ASSESSEE WAS EXTRACTI NG GRANITE FROM THE EARTH AND CUTTING THE GRANITE SO EXTRACTED TO MAKE IT MAR KETABLE LOTS. THE ACTIVITY CARRIED ON BY THE ASSESSEE IS MATERIALLY DIFFERENT FROM THE ACTIVITY CARRIED ON BY THE ASSESSEE IN THE CASE OF VIJAY GRANITES PVT. LTD., (SUPRA) . ITA NO.1806/BANG/2013 & CO NO.70/BANG/2014 PAGE 7 OF 7 12. FOR THE REASONS GIVEN ABOVE, WE UPHOLD THE ORD ER OF THE LD. CIT(APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 13. THE CROSS OBJECTION BY THE ASSESSEE IS PURELY SUPPORTIVE OF THE ORDER OF THE LD. CIT(APPEALS) AND THE SAME IS DISMI SSED AS NOT MAINTAINABLE. 14. IN THE RESULT, THE APPEAL AS WELL AS THE CROSS OBJECTION IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF OCTOBER , 2014 . SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 17 TH OCTOBER, 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.