M/s. Bhagyodaya Pulse &Rice Mill, Anand V. The CIT-I, Baroda

ITA 1083/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1360 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P PATEL
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER . / ITA NO. 108 3 /AHD/201 3 / ASSESSMENT YEAR : 2008 - 09 M/S. BHAGYODAYA PULSE & RICE MILL, 85, GIDC, KANSARI, KHAMBHAT, DIST : ANAND 388630 PAN : AABFB 7392 K VS COMMISSIONER OF INCOME - TAX - 1, VADODARA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI SURESH THAKKAR, AR REVENUE BY : SHRI N.P. PATEL, SR DR / DATE OF HEARING : 10 / 0 6 /201 6 / DATE OF PRONOUNCEMENT: / 06 /201 6 / O R D E R THIS IS ASSESSEES APPEAL CHALLENGING THE REVISION U/S 263 OF THE ACT UNDERTAKEN BY THE LD. COMMISSIONER OF INCOME - T AX - I , BARODA VIDE ORDER DATED 18 . 0 3 .201 3 ON THE ORDER OF THE LD. AO PASSED U/S 143(3) OF THE ACT FOR ASSESSMENT YEAR 200 8 - 09 . 2. THE EFFECTIVE GROUNDS RAISED ARE AS UNDER: - ( I ) THERE BEING NEITHER ANY ERROR IN THE ORDER OF LD. AO NOR PREJUDIC IAL TO THE INTEREST OF REVENUE, THE ACTION OF LD. CIT IS BAD IN LAW; ( II ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT - 1, VADODARA IS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT FIRM IS NOT ENTITLED TO AN ADDITIONAL DEPRECATION OF RS.17,8 4,638/ - U/S 32(I)(IIA) OF THE INCOME - TAX ACT, 1961. 3 . THE BRIEF FACTS ARE THE ASSESSEE IS A MANUFACTURER OF RICE ALONGWITH BY - PRODUCT S FROM PADDY PROCURE D FROM FARMERS AND MARKET YARD . FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED E - RETURN DECLARING A LOSS OF SMC - ITA NO. 1083/AHD/ 2013 BHAGYODAYA PULSE & RICE MILL VS. CIT AY : 2008 - 09 2 RS.13,93,365/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, IT WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2). ASSESSEE CLAIMED ADDITIONAL DEPRECIATION AS NEW MACHINERY WAS INSTALLED WITH A V IEW TO INCREASE THE PRODUCTION CAPACITY BY MORE THAN 10% OF THE EXISTING CAPACITY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3), THE AO CONSIDERED ALL THE ASPECTS AND PASSED THE ORDER DATED 24.12.2010 BY FOLLOWING OBSERVATIONS: - 6. DURING THE PREVIOUS YEAR THE ASSESSEE FIRM HAS INSTALLED NEW MACHINERY WITH A PRODUCTION CAPACITY MORE THAN 10% OF OLD MACHINERY AND CLAIMED ADDITIONAL DEPRECIATION ON IT. AS THE NEW MACHINERY INSTALLED AFTER 31 ST MARCH, 2005, ADDITIONAL DEPRECIATION IS ALLOWED. 4 . LD. CIT, HOWEVER, WAS OF THE VIEW THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE INASMUCH AS THE ASSESSEE WAS NOT ENGAGED IN THE MANUFACTURING ACTIVITY AND THE ADDITIONAL DEPRECIATION HAS BEEN WRONGLY ALLOWED. IT WAS CONTENDED BEFORE THE LD. CIT THAT THE PADDY AND RICE & BY - PRODUCTS ARE COMMERCIALLY DISTINCT COMMODITIES AND IT IS SETTLED LAW THAT THE CONVERSION OF ANY COMMERCIAL COMMODITY INTO A NEW MARKETABLE COMMODITY AMOUNTS TO MANUFACTURE; THE AO HAVING TAKE N A LEGALLY CORRECT VIEW THERE WAS NO JUSTIFICATION IN REVISIONARY PROCEEDINGS. 4.1 THE ASSESSEE GAVE DETAILED EXPLANATION DESCRIBING THE COMPLETE MANUFACTURING OPERATION TO CO N VERT PADDY INTO RICE AND BY - PRODUCTS ALONGWITH VARIOUS CASE LAWS. LD. CIT, HOW EVER, HELD THAT THE ASSESSEES ACTIVITIES DO NOT AMOUNT TO MANUFACTURE AS RICE WAS AN AGRICULTURAL PRODUCT FROM SOWING OF SEEDS TO SELLING OF RICE AND THE VALUE ADDITION S TO THE PRODUCT DO NOT AMOUNT TO MANUFACTURING. 4.2 AGGRIEVED, THE ASSESSEE IS I N S E C O N D A P P E A L . SMC - ITA NO. 1083/AHD/ 2013 BHAGYODAYA PULSE & RICE MILL VS. CIT AY : 2008 - 09 3 5. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LD. CIT AND RELIED ON THE DETAILED SUBMISSIONS PLACED ON PAPER - BOOK PAGE NOS. 1 TO 10. LD COUNSEL FOR THE ASSESSEE FURTHER DREW MY ATTENTION TO PAGE NO.11 WHIC H IS A CERTIFICATE ISSUED BY DISTRICT INDUSTRIES CENTRE CLASSIFYING THE ASSESSEE AS A MANUFACTURER WITH A CAPACITY OF 3,600 TONS. 6. LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE LD. CIT. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SACS EAGLES CHICORY VS. CIT , REPORTED IN (2002) 255 ITR 178 (SC) WHEREIN IT WAS HELD THAT CONVERSION OF CHICORY ROOT INTO CHICORY POWDER DOES NOT AMOUNT TO MANUFACTURE. 7. LD. COUNSEL FOR THE ASSESSEE, IN REJOINDER, CONTENDS THAT THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE SACS EAGLES CHICORY (SUPRA) IS ON TOTALLY DIFFERENT FACTS AND IS NOT APPLICABLE TO ASSESSEES CASE AS IT WAS SIMPLE PROCESS OF CONVERTING ROOTS INTO POWDER; WHEREAS IN ASSESSEES CASE COMMERCIALLY DISTINCT PRODUCT S , I.E. RICE & BY - PRODUCTS RICE - BRAN OIL CAKES , ARE PRODUCED. 8 . I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN MY CONSIDERED VIEW THE CONVERSION OF PADDY INTO RICE & BY - PRODUCTS BY THE RICE - MILL MACHINERY AMOUNTS TO MANUFACTURING ACTIVITY AS A NEW AND COMMERCIALLY DIFFERENT PRODUCT COMES INTO EXISTENCE. THE LD. AO HAVING ADOPTED ONE OF THE PLAUSIBLE LEGAL VIEWS, HIS ORDER CANNOT BE HELD AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD VS. CIT (SC), REPORTED IN 243 ITR 83 (SC) . THE CASE LAW RELIED ON BY THE LD. DR , BEING ON A DIFFERENT ITEM AND PROCESS WHICH DO NOT RESULT INTO NEW COMMERCIAL SMC - ITA NO. 1083/AHD/ 2013 BHAGYODAYA PULSE & RICE MILL VS. CIT AY : 2008 - 09 4 PRODUCT, CANNOT BE APPLIED IN ASSESSEES CASE. IN VIEW THEREOF I HOLD THAT THE REVISIONARY ORDER U/S 263 IS BA D IN LAW AND IS QUASHED. THUS, THE ASSESSEES APPEAL IS ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 2 0 T H JUNE , 201 6 AT AHMEDABAD. SD/ - R.P. TOLANI ( JUDICIAL MEMBER ) AHMEDABAD; DATED 2 0 / 0 6 /201 6 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD