JCIT, Madurai V. M/s. Madras Cements Ltd., CHENNAI

ITA 1112/CHNY/2001

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6551 (ITAT-CHENNAI)
• Duration Of Justice: 18 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 1998-1999
• Appeal Filed On: 16-07-2001
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO
• Assessee Lawyers: J PRABHAKAR
• Keywords: Depreciation; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , , & BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ ITA NO.1112/MDS/2001 ) ) / ASSESSMENT YEAR : 1998-99 THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE I, MADURAI. V. THE RAMCO CEMENTS LIMITED, (FORMERLY MADRAS CEMENTS LTD.), 98-A, DR. RADHAKRISHNAN ROAD, MYLAPORE, CHENNAI - 600 004. P.A.NO : 47-016-CV-4019 (-/ APPELLANT) (./-/ RESPONDENT) ./ ITA NOS.1121 & 1122/MDS/2001 ) ) / ASSESSMENT YEARS : 1997-98 & 1998-99 THE RAMCO CEMENTS LIMITED, (FORMERLY MADRAS CEMENTS LTD.), 98-A, DR. RADHAKRISHNAN ROAD, MYLAPORE, CHENNAI - 600 004. V. THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE I, MADURAI. (-/ APPELLANT) (./-/ RESPONDENT) 1 /REVENUE BY : DR. M. SRINIVASA RAO, CIT )3 1 /ASSESSEE BY : SHRI J. PRABHAKAR, CA 1 / DATE OF HEARING : 09.09.2019 1 / DATE OF PRONOUNCEMENT : .10.2019 2 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : I.T.A. NO.1121/MDS/2001 IS AN APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 1997-98. IN FACT, THIS APPEAL WAS DISPOSED OF EARLIER BY AN ORDER DATED 7 TH APRIL, 2017. THE ASSESSEE FILED A MISCELLANEOUS PETITION IN M.P. NO.192/CHNY/2017 ON THE GROUND THAT THE DEPRECIATION CLAIMED IN RESPECT OF CROSS B ELT ANALYSER AND MAGNETIC SEPARATOR WAS NOT DISPOSED OF BY THIS TRIB UNAL. THEREFORE, THIS TRIBUNAL BY AN ORDER DATED 26.04.20 19 REFIXED THE APPEAL FOR THE PURPOSE OF DISPOSAL OF CLAIM OF DEPR ECIATION IN RESPECT OF CROSS BELT ANALYSER AND MAGNETIC SEPARAT OR. ACCORDINGLY THE APPEAL WAS POSTED FOR DISPOSAL OF C LAIM OF DEPRECIATION IN RESPECT OF THE ABOVE TWO MACHINES. 2. SHRI J. PRABHAKAR, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT CROSS BELT ANALYSER IS NOTHING BUT A BULK MATERIAL ANALYSER. ACCORDING TO THE LD. REPRESENTATIVE, THI S ANALYSES THE ENTIRE QUANTITY OF LIMESTONE MINED AND CRUSHED. CR OSS BELT ANALYSER IS INSTALLED IN THE BELT CONVEYOR THAT CAR RIES THE CRUSHED LIMESTONE FROM THE MINES TO THE FACTORY. ACCORDING TO THE LD. REPRESENTATIVE, CROSS BELT ANALYSER ANALYSES THE HI GH GRADE AND 3 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 LOW GRADE MINING RESULTS. THIS ENABLES THE ASSESSE E TO RECOVER THE RESOURCE FOR MANUFACTURING CEMENT. ACCORDING TO TH E LD. REPRESENTATIVE, IT IS ALSO RECYCLING THE SOLID WAST E, HENCE, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AT THE RATE O F 100% AS PROVIDED IN OLD APPENDIX I, PART A UNDER THE HEADING III. M ACHINERY AND PLANT IN (VI)(B) OF THE INCOME-TAX RULES, 1962. 3. ON THE CONTRARY, DR. M. SRINIVASA RAO, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT ADMITTEDLY, CROSS BE LT ANALYSER IS ANALYSING THE QUALITY OF LIMESTONE MINED AND CRUSHE D. IN A CONVENTIONAL SAMPLING METHOD, ACCORDING TO THE LD. D.R., AN AUTO SAMPLER WILL BE INSTALLED IN THE BELT CARRYING LIME STONE TO THE FACTORY. THE AUTO SAMPLER WILL COLLECT SAMPLES AT PERIODICAL INTERVALS. DUE TO LACUNAE IN THE CONVENTIONAL METHOD, THE CROSS BELT ANALYSER WAS INSTALLED IN THE BELT TO ANALYSE THE LIMESTONE WHIC H IS REQUIRED FOR MANUFACTURING CEMENT. ACCORDING TO THE LD. D.R., T HERE ARE SEVERAL GRADES IN THE CEMENT WHICH WOULD DEPEND UPON THE QU ALITY OF LIMESTONE USED FOR MANUFACTURING. THE CROSS BELT A NALYSER IS ANALYSING THE QUALITY OF LIMESTONE WHICH IS USED AS RAW MATERIAL FOR MANUFACTURING CEMENT. THEREFORE, ACCORDING TO THE LD. D.R., THE CROSS BELT ANALYSER IS NEITHER RECYCLING THE SOLID WASTE NOR 4 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 RECOVERING ANY RESOURCE. IT IS NOTHING BUT A ANALY SER OF THE RAW MATERIAL WHILE TRANSMITTING THE CEMENT TO THE FACTO RY FROM THE MINE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, CROSS BELT ANALYSER IS INSTALLED IN THE BELT CONVEY OR THAT CARRIES THE CRUSHED LIMESTONE FROM THE MINES TO THE FACTORY. IT IS NOT IN DISPUTE THAT VARIOUS GRADES OF CEMENT WERE MANUFACTURED USI NG THE DIFFERENT QUALITY OF RAW MATERIAL WHICH IS NOTHING BUT LIMESTONE. CROSS BELT ANALYSER IS A NEW TECHNIQUE ADOPTED BY T HE MANUFACTURER TO ANALYSE THE QUALITY OF LIMESTONE WH ICH WAS CARRIED FROM MINES TO THE FACTORY. AS RIGHTLY SUBMITTED BY THE LD. D.R., IT IS NEITHER RECYCLING THE SOLID WASTE NOR RECOVERING OF ANY RESOURCE. IT IS NOTHING BUT A TESTING TOOL TO IDENTIFY THE QUALI TY LIMESTONE WHICH WAS CARRIED IN THE CONVEYOR BELT FROM MINES TO THE FACTORY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE CROSS BELT ANALYSER CANNOT BE CONSTRUED AS SOLID WASTE RE CYCLING OR RESOURCE RECOVERY SYSTEM. 5. DURING THE COURSE OF HEARING, THE LD. REPRESENTA TIVE FOR THE ASSESSEE HAS ALSO BROUGHT TO THE NOTICE OF THE BENC H THE LETTER SAID TO BE RECEIVED FROM THE DEPARTMENT OF SCIENTIFIC AN D INDUSTRIAL 5 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 RESEARCH RECOMMENDING TO CONSIDER FOR 100% DEPRECIA TION. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT INCOME-T AX ACT IS A SPECIAL ENACTMENT, THEREFORE, THE RECOMMENDATION OF THE OTH ER DEPARTMENT IN THE MINISTRY OF SCIENCE & TECHNOLOGY MAY BE ONE OF THE FACTOR TO BE CONSIDERED IN ACCORDANCE WITH THE INCOME-TAX ACT . IF THE INCOME-TAX ACT DOES NOT PERMIT 100% DEPRECIATION, T HE RECOMMENDATION OF MINISTRY OF SCIENCE & TECHNOLOGY MAY NOT GRANT DEPRECIATION AT THE RATE OF 100%. THEREFORE, THE R ECOMMENDATION OF THE MINISTRY OF SCIENCE & TECHNOLOGY CANNOT BE A BA SIS FOR ALLOWING 100% DEPRECIATION UNLESS THE CROSS BELT ANALYSER QU ALIFIES ITSELF AS A SOLID WASTE RECYCLING AND RESOURCE RECOVERY SYSTE M FOR 100% DEPRECIATION. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. NOW COMING TO MAGNETIC SEPARATOR, THE ASSESSEE C LAIMS 100% DEPRECIATION FOR MAGNETIC SEPARATOR ON THE GRO UND THAT IT IS A SOLID WASTE RECYCLING AND RESOURCE RECOVERY SYSTEM. 7. AFTER HEARING THE LD. REPRESENTATIVE FOR THE ASS ESSEE AND THE LD. D.R., THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT AS IN THE CASE OF CROSS BELT ANALYSER, MAGNETIC SEPARATOR IS USED FOR 6 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 SEPARATING THE RAW MATERIAL DEPENDING UPON ITS QUAL ITY, THEREFORE, IT CANNOT BE CONSTRUED AS SOLID WASTE RECYCLING AND RE SOURCE RECOVERY SYSTEM. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MAGNETIC SEPARATOR IS NEITHER RECYCLING THE SOLID WASTE NOR RECOVERING ANY RESOURCE, HENCE, IT IS ALSO NOT ELIGIBLE FOR 100% D EPRECIATION. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 8. IT IS MADE CLEAR THAT THE OTHER PART OF ORDER DA TED 07.04.2017 IN RESPECT OF OTHER ISSUES SHALL REMAIN THE SAME WI THOUT ANY MODIFICATION. 9. I.T.A. NO.1121/MDS/2001 STANDS DISMISSED. 10. NOW COMING TO THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 1998-99 IN I.T.A. NO.1122/MDS/2001, THE FIRST ISSUE ARISES FOR CONSIDERATION IS 100% DEPRECIATION IN RESPECT OF SU RFACE MINER, CROSS BELT ANALYSER AND MAGNETIC SEPARATOR. THIS T RIBUNAL FOR THE ASSESSMENT YEAR 1997-98 IN THE ASSESSEE'S OWN CASE IN I.T.A. NO.1121/MDS/2001 DATED 07.04.2017 FOUND THAT SURFAC E MINER IS NOT A SOLID WASTE CONTROL EQUIPMENT. IT WAS ONLY A MACHINE USED FOR EXCAVATION IN THE MINE LAYER BY LAYER. WITH REGARD TO CROSS BELT 7 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 ANALYSER AND MAGNETIC SEPARATOR, IN THE EARLIER PAR T OF THIS ORDER, WE HAVE CONSIDERED THE SAME AND FOUND THAT IT WAS U SED AS ANALYSER OF QUALITY OF THE LIMESTONE, THEREFORE, IT CANNOT BE CONSIDERED AS SOLID WASTE RECYCLING AND RESOURCE RE COVERY SYSTEM. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDING LY THE SAME IS CONFIRMED. 11. NOW COMING TO NEXT GROUND OF APPEAL WITH REGARD TO PROSPECTING EXPENSES. 12. DURING THE COURSE OF HEARING, SHRI J. PRABHAKAR , THE LD. REPRESENTATIVE FOR THE ASSESSEE, VERY FAIRLY SUBMIT TED THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE FOR THE ASSESSMENT YEAR 1996- 97. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF TH IS TRIBUNAL FOR ASSESSMENT YEAR 1996-97. AT PARAS 27, 28 & 29, THE ISSUE WAS DISCUSSED ELABORATELY BY THIS TRIBUNAL AND FOUND TH AT THERE WAS NO INFIRMITY IN THE ORDER OF THE CIT(APPEALS) CONFIRMI NG THE DISALLOWANCE. SINCE, ADMITTEDLY, THE ISSUE IS IDEN TICAL TO THE NATURE, BY FOLLOWING THE ORDER OF THIS TRIBUNAL FOR ASSESSM ENT YEAR 1996-97 AND THE REASON STATED THEREIN, THE DISALLOWANCE IS CONFIRMED. 8 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 13. NOW COMING TO COMPUTATION OF INCOME UNDER SECTI ON 115JA OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 14. SHRI J. PRABHAKAR, THE LD. REPRESENTATIVE FOR T HE ASSESSEE, SUBMITTED THAT UNDER SECTION 115JA(2)(IV) OF THE AC T, THE AMOUNT OF PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING FROM THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER HAS TO BE REDUCED FROM THE BOOK PROFIT COMPUTED. ACCORDING T O THE LD. REPRESENTATIVE, THE ASSESSING OFFICER INSTEAD OF RE DUCING THE PROFIT DERIVED FROM GENERATION AND DISTRIBUTION OF POWER, FOUND THAT THERE WAS A DEPRECIATION WHICH WAS NOT TAKEN INTO ACCOUNT . ACCORDING TO THE LD. REPRESENTATIVE, IF THE DEPRECIATION WAS TAK EN INTO ACCOUNT, THERE WAS NO PROFIT. HENCE, NOTHING IS AVAILABLE F OR DEDUCTION. ACCORDING TO THE LD. REPRESENTATIVE, WHAT IS TO BE REDUCED IS THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING, THEREFO RE, THE QUESTION OF DEPRECIATION DOES NOT ARISE FOR CONSIDERATION. 15. WE HEARD DR. M. SRINIVASA RAO, THE LD. D.R. ALS O. SECTION 115JA(2)(IV) OF THE ACT CLEARLY SAYS THAT THE AMOUN T OF PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING FROM THE BUSINESS OF GE NERATION OR DISTRIBUTION OF POWER HAS TO BE REDUCED FROM BOOK P ROFIT. THE ASSESSEE NOW CLAIMS THAT DEPRECIATION SHOULD NOT BE TAKEN INTO 9 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 ACCOUNT. ACCORDING TO THE LD. REPRESENTATIVE, THE DEPRECIATION SHALL BE IGNORED AND WHAT IS TO BE TAKEN IS ONLY THE PROF IT. FROM THE PERUSAL OF THE ORDER OF THE CIT(APPEALS) IT IS VERY CLEAR THAT THE ASSESSING OFFICER HAS NOT ALLOWED ANY DEPRECIATION SINCE NO DEPRECIATION WAS AVAILABLE ON THE BOOK PROFIT. WE HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER. THE A SSESSING OFFICER FOUND THAT IF THE DEPRECIATION IS REDUCED, THERE WILL BE NO PROFIT UNDER THE BUSINESS OF GENERATION OF POWER. THEREFORE, THE CIT(APPEALS) IS NOT CORRECT IN SAYING THAT THE ASSE SSING OFFICER HAS NOT ALLOWED DEPRECIATION. IN FACT, THE ASSESSING O FFICER ALLOWED DEPRECIATION AND REDUCED FROM BOOK PROFIT AND FOUND THAT THERE WAS NO PROFIT UNDER THE BUSINESS OF GENERATION OF POWER . 16. THE LANGUAGE EMPLOYED BY THE PARLIAMENT IN SECT ION 115JA(2)(IV) OF THE ACT IS VERY CLEAR THAT WHAT IS TO BE REDUCED FROM BOOK PROFIT IS THE AMOUNT OF PROFIT DERIVED FROM IN DUSTRIAL UNDERTAKING, I.E. GENERATION OF POWER. THEREFORE, PROFIT AS COMPUTED UNDER THE PROVISIONS OF INCOME TAX ACT HAS TO BE RE DUCED. IN OTHER WORDS, WHILE COMPUTING PROFIT, ALL PERMISSIBLE DEDU CTION AND ALLOWANCE INCLUDING DEPRECIATION SHALL BE ALLOWED. WHAT IS TO BE REDUCED IS ONLY PROFIT. PROFIT IS COMPUTED AFTER A LLOWING 10 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 DEPRECIATION. IT IS NOT IN DISPUTE THAT AFTER ALLO WING DEPRECIATION, THERE IS NO PROFIT. THEREFORE, THIS TRIBUNAL DO NO T FIND ANY REASON TO INTERFERE WITH ORDERS OF AUTHORITIES BELOW. ACCORD INGLY, THE SAME IS CONFIRMED. 17. NOW COMING TO REVENUES APPEAL IN I.T.A. NO.1112/MDS/2001, THE FIRST GROUND OF APPEAL IS WIT H REGARD TO DEPRECIATION ON FLY ASH HANDLING SYSTEM. 18. WE HEARD DR. M. SRINIVASA RAO, THE LD. D.R. AND SHRI J. PRABHAKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE. IT WAS BROUGHT TO THE NOTICE OF THE BENCH THAT FOR THE EARLIER ASS ESSMENT YEAR, 100% WAS ALLOWED BY THIS TRIBUNAL FOR FLY ASH HANDL ING SYSTEM. SINCE THIS TRIBUNAL HAS ALREADY ALLOWED 100% FOR TH E SAME FLY ASH HANDLING SYSTEM, WE ARE OF THE OPINION THAT THE CIT (APPEALS) HAS RIGHTLY ALLOWED THE SAME. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUT HORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 19. THE NEXT ISSUE ARISES FOR CONSIDERATION IS COST OF CONSTRUCTION OF VALLALAR CAUSEWAY. 11 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 20. WE HEARD DR. M. SRINIVASA RAO, THE LD. D.R. AND SHRI J. PRABHAKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE. THIS ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE ASSESSEE'S OWN C ASE FOR ASSESSMENT YEAR 1997-98. THIS TRIBUNAL, AFTER CONS IDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, FOUND T HAT THE COST OF CONSTRUCTION OF VALLALAR CAUSEWAY HAS TO BE ALLOWED AS REVENUE EXPENDITURE. SINCE THE VERY SAME EXPENDITURE WAS A LLOWED AS REVENUE EXPENDITURE FOR THE ASSESSMENT YEAR 1997-98 , THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 21. IN THE RESULT, THE ASSESSEES APPEALS I.T.A. NOS.1121/MDS/2001 IS DISMISSED & 1122/MDS/2001 IS P ARTLY ALLOWED. HOWEVER, THE REVENUES APPEAL IN I.T.A. NO.1112/MDS/2001 IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER, 2019 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (RAMIT KOCHAR) (N.R.S. GANESAN) / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 21 ST OCTOBER, 2019. KRI. 12 I.T.A. NO.1112/MDS/2001 I.T.A. NOS.1121 & 1122/MDS/2001 1 . 8 98 /COPY TO: 1. )3 /ASSESSEE 2. ASSESSING OFFICER 3. : () /CIT(A), MADURAI 4. CIT, MADURAI 5. 8 . /DR 6. ) /GF.