M/s Atma Dyeing & Finishing Mills, Ludhiana V. DCIT, Ludhiana

ITA 100/CHANDI/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8452 (ITAT-CHANDIGARH)
• Duration Of Justice: 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Depreciation; Additional depreciation
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 100/CHD/2016 (ASSESSMENT YEAR : 2008-09) M/S ATAM DYEING & FINISHING MILLS, VS. THE D.C.I.T., PURANA BAZAR, CIRCLE-III, LUDHIANA. LUDHIANA. PAN: AACCS4623C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 03.03.2016 DATE OF PRONOUNCEMENT : 04.03.2016 O R D E R THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA DATED 18.12.2015 FOR ASSESSME NT YEAR 2008-09, CHALLENGING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.7,90,773/-. 2. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED ADDIT IONAL DEPRECIATION AMOUNTING TO RS.7,90,773/- ON PURCHASE OF MACHINERY DURING THE YEAR. THE ASSESSEE FIRM IS BA SICALLY A DYEING UNIT AND THE NATURE OF BUSINESS IS DYEING OF DIFFERENT QUALITIES OF HOSIERY KNIT AND FABRICS. AS PER SECT ION 2 32(1)(IIA) OF THE INCOME TAX ACT, 1961 (IN SHORT T HE ACT), ADDITIONAL DEPRECIATION IS ALLOWED IN THE CASE OF ANY NEW MACHINERY OR PLANT, ACQUIRED AND INSTALLED BY AN AS SESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OR PRODUCT ION OF ANY ARTICLE OR THING. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY ADDITIONAL DEPRECIATION SHO ULD NOT BE DISALLOWED AS THE ASSESSEE IS ENGAGED IN DYEING, WHICH WAS A PROCESSING ACTIVITY AND ADDITIONAL DEPRECIATI ON IS ALLOWABLE ONLY FOR MANUFACTURING INDUSTRY. THE ASS ESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE BUS INESS OF THE ASSESSEE IS DYEING HOUSE AS WELL AS THE PROCESS ING OF GREY YARN PURCHASED FROM MARKET CONVERTED INTO DYED YARN. THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. VARUN PRO CESSORS PVT. LTD., 254 ITR, 564 AND CIT VS. SOVRIN KNIT WOR KS, 199 ITR, 679. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND DISALLOWED THE ADDITIONAL DEPRECIATION BY STATING THAT THE PROCESS OF DYEING DOES NOT RESULT IN MANUFACTURING OF NEW ARTICLE OR THING BUT HAS MERELY RESULTED IN INCREASING THE MARKETABILITY OF THE FABRIC. THE ASSESSING OFFICER ACCORDINGLY, DISALLOWED THE A DDITIONAL DEPRECIATION. 3. THE LEARNED CIT (APPEALS) ON THE SAME REASONING ALSO CONFIRMED THE ADDITION BY RELYING ON SEVERAL D ECISIONS OF HIGH COURT INCLUDING THE DECISION OF RAJASTHAN H IGH COURT IN THE CASE OF CIT VS. ANJANI KUMAR & CO. P. LTD., 227 ITR 786, IN WHICH IT WAS HELD THAT SIMPLY BY DY EING, 3 PRINTING OR CALENDARING, IT CANNOT BE SAID THAT THE RE IS MANUFACTURING FROM TEXTILE. 4. I HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORI TIES BELOW. THE ISSUE IS COVERED IN FAVOUR OF THE ASSES SEE BY THE JUDGMENT OF FULL BENCH OF PUNJAB & HARYANA HIGH COU RT IN THE CASE OF CIT VS. SOVRIN KNIT WORKS, 199 ITR 679 , IN WHICH IT WAS HELD AS UNDER : DYEING, BLEACHING, PRINTING AND EMBROIDERING OF GREY CLOTH CONSTITUTES PRODUCTION AND MANUFACTURE IN TERMS OF ITEM NO.32 OF THE FIFTH SCHEDULE TO THE INCOME-TAX ACT, 1961, AND HENCE ALSO UNDER ENTRY 23 OF THE FIRST SCHEDULE TO THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951. MACHINERY INSTALLED FOR SUCH MANUFACTURE IS ENTITLED TO DEVELOPMENT REBATE. 5. THE SAME JUDGMENT IS FOLLOWED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN LATER DECISION IN TH E CASE OF CIT VS. VARUN PROCESSORS (P) LTD., 254 ITR 564, IN WHICH IT WAS HELD AS UNDER : DYEING, BLEACHING, PRINTING AND EMBROIDERING OF GREY CLOTH CONSTITUTES PRODUCTION AND MANUFACTURE UNDER THE INCOME-TAX ACT, 1961, SO AS ENTITLE THE ASSESSEE TO CLAIM DEDUCTION ON ACCOUNT OF INVESTMENT ALLOWANCE. 6. IT IS ADMITTED FACT THAT THE ASSESSEE FIRM IS A DYEING UNIT, THEREFORE, THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THE ABOVE JUDGMENTS OF THE HON'BLE PUNJ AB & 4 HARYANA HIGH COURT. THEREFORE, THE ACTIVITIES OF T HE ASSESSEE WOULD CONSTITUTE PRODUCTION AND MANUFACTUR E AND AS SUCH, THE ASSESSEE IS ENTITLED TO ADDITIONAL DEP RECIATION. SINCE THE DIRECT DECISION OF THE JURISDICTIONAL HI GH COURT IS APPLICABLE IN THE MATTER IN ISSUE, THEREFORE, NO P RECEDENCE CAN BE GIVEN TO THE JUDGMENT OF HON'BLE RAJASTHAN H IGH COURT IN THE CASE OF ANJANI KUMAR & CO. P. LTD. (S UPRA) AS RELIED ON BY THE LEARNED D.R. 7. I ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO ALLOW ADDITIONAL DEPRECIATION AMOUNTING TO RS.7,90,770/- TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 4 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 5