M/s Prestige Feed Mills Ltd., Indore V. The Addl. CIT Range -1, Indore

ITA 113/IND/2013

• Counselvise Citation: 11322714 RSA 2013
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: H P VERMA
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

PAGE 1 OF 14 A IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABCPO412H I.T.A.NO. 113 /IND/201 3 A.Y. : 2008-09 M/S.PRESTIGE FEED MILLS LIMITED, 30, JAORA COMPOUND, INDORE. VS. ADDL. CIT, RANGE I, INDORE. APPELLANT RESPONDENT I.T.A.NO. 251 /IND/2013 A.Y. : 2008-09 ADDL. CIT, RANGE I, INDORE. VS. M/S.PRESTIGE FEED MILLS LIMITED, 30, JAORA COMPOUND, INDORE APPELLANT RESPONDENT ASSESSEE BY : S HRI H.P.VERMA, ADV. DEPARTMENT BY : SHRI R. A. VERMA, SR. DR. DATE OF HEARING : 30 . 09 .201 3 DATE OF PRONOUNCEMENT : 20 . 1 1 .201 3 PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 2 PAGE 2 OF 14 O R D E R PER R. C. SHARMA, A.M. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND REVENUE AGAINST THE ORDER PASSED BY THE CIT(A), DAT ED 23.01.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, INDORE, ERRED IN DISALLOWING ADDITIONAL D EPRECIATION U/S 32(IIA) OF THE INCOME-TAX ACT, 1961, OF RS. 16, 00,872/- ON THE FOLLOWING MACHINERY INSTALLED :- A) FLAKER REPLACEMENT RS. 43,70,100/- B. ONE JACKET IN EXISTING COOKERS RS. 5,05,000/- C. LINE REPLACEMENT OF COOLING TOWER PLANT RS. 10,42,470/- D) BOILER TUBES & TUBE REPLACEMENT RS. 15,00,000/- E) UPGRADING & EXPANDING OF OLD B OILERS RS. 12,91,150/- F) AUTOMATION IN FLUDISED BOILER RS. 73,00,000/- RS. 1,60,08,720/- PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 3 PAGE 3 OF 14 3. THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPA NY IS ENGAGED IN MANUFACTURING OF SOYA RAW OIL AND REFINE D OIL AND OTHER BYE PRODUCTS. DURING THE YEAR, THE ASSESSEE H AS INSTALLED A NEW PLANT AND MACHINERY FOR SMOOTH RUNN ING OF MANUFACTURING PROCESS AND ALSO TO INCREASE CAPACITY AND EFFICIENCY OF PLANT. BY SUCH INCREASE IN CAPACITY, THE CAPACITY OF PLANT HAS BEEN INCREASED BY 100 % FROM 15000 M. T. TO 30,000 M. T. ON THE ADDITIONAL 18 ITEMS OF BLOCK OF PLANT AND MACHINERY, THE ASSESSEE HAS CLAIMED ADDITIONAL DEPR ECIATION. HOWEVER, THE CLAIM WAS ALLOWED IN RESPECT OF TWELV E ITEMS. HOWEVER, CLAIM WAS DECLINED IN RESPECT OF FOLLOWING SIX ITEMS :- A) FLAKER REPLACEMENT RS. 43,70,100/- B. ONE JACKET IN EXISTING COOKERS RS. 5,05,000/- C. LINE REPLACEMENT OF COOLING TOWER PLANT RS. 10,42,470/- D) BOILER TUBES & TUBE PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 4 PAGE 4 OF 14 REPLACEMENT RS. 15,00,000/- E) UPGRADING & EXPANDING OF OLD B OILERS RS. 12,91,150/- F) AUTOMATION IN FLUDISED BOILER RS. 73,00,000/- RS. 1,60,08,720/- 4. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DECL INED ADDITIONAL DEPRECIATION ON THE SIX ITEMS, ON THE PL EA THAT THESE WERE FOR REPAIRS OR ADDITIONS OF SOME ITEM I N THE EXISTING PLANT AND MACHINERY. THE LD. CIT(A) MISRE AD THIS PARAGRAPH, WHICH, INTER ALIA, MENTIONED THE PROVISI ON OF SECTION 32(1)(IIA) I.R.O. NEW MACHINERY/PLANT AND H ELD AT PAGE 15 LAST TWO LINES THAT THE PLANT AND MACHINERY MUS T BE NEW ONE AND NOT REMODELED OR REPAIRED ONE. 5. FROM THE RECORD, WE FOUND THAT RS. 43,70,100/- WAS INCURRED FOR FLAKER REPLACEMENT, WHICH WAS COMPLETE D ON 20 TH MARCH, 2008, AND, THEREAFTER, TRANSFERRED FROM CAPI TAL WORK IN PROGRESS. WE FOUND THAT THE EXISTING 500 X 1200 FLA KER WAS DISCARDED AND WAS REPLACED BY 600 X 1300 ROLLS AND 60 H.P. MOTORS WITH AUTO FEEDER AND FANNER PULLEYS TO HAVE EDGE IN GRINDING ARRANGEMENT FOR TROUBLE FREE NON-STOP WORK ING. PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 5 PAGE 5 OF 14 HYDRAULIC CYLINDERS OF SOYBEAN IS PLACED INTO IT TO MAKE FLAKES. BEAN IS BROKEN INTO FOUR PIECES. IT IS HEATED. OIL COMES ON THE SURFACE. FLAKER MACHINE IS A CRUCIAL COMPONENT ENAB LING OIL EXTRACTION IN A SOLVENT EXTRACTION UNIT. THE WHOLE SOYABEAN AFTER CLEARING IS CRACKED IN TO 3-4 PIECES, COOKED AND HEATED BY OPEN AND INDIRECT STEAM AND THEN MOVED ON TO THE FL AKER WHERE THE COOKED SEED IS FLAKED IN TO THICKNESS RAN GING FROM 0.2 TO 0.35 INCHES. DURING THIS PROCESS OIL DROP-LE TS DISPERSED IN THE SEED GET COAGULATED AND COME TO SURFACE ENAB LING PROPER SEPARATION OF OIL THROUGH HEXANE AS SOLVENT. THE OLD FLAKERS WERE REMOVED AND REPLACED BY LARGER SIZED M ACHINES WHICH RESULTED INTO BETTER OIL RECOVERY AND CAPACIT Y ENHANCEMENT. 6. IN RESPECT OF AMOUNT OF RS. 5,05,000/- INCURRED ON JACKET IN THE EXISTING COOKERS, THE SAME WAS COMPLE TED ON 20 TH MARCH, 2008, AND, THEREAFTER, TRANSFERRED FROM CAP ITAL WORK IN PROGRESS. INSTEAD OF REPLACING THE ENTIRE C OOKER, ONE COMPARTMENT IN BETWEEN HAS BEEN ADDED. FOR THIS ONE DOUBLE BOTTOM OF 14 & 16 MM PLATE WAS MADE AND A SHELL OF 10 MM PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 6 PAGE 6 OF 14 AND SHAFT WAS EXTENDED THROUGH COUPLING. ONE SET OF DOOR AND FLOAT ARRANGEMENT WAS PROVIDED. ONE JACKET IN EXIST ING COOKER THE COOKING PROCESS, PRECEDING FLAKING, MENTIONED ABOVE TAKES PLACE IN COOKER. IF COOKER DOES NOT PERFORM W ELL, FLAKING OPERATION WILL BE IMPROPER. THE JACKET OF THE COOKE R, THROUGH WHICH STEAM FOR HEATING IS PASSED, WAS REPLACED BY A NEW ONE TO IMPROVE HEATING AND REDUCE STEAM CONSUMPTION. 7. AN AMOUNT OF RS. 10,42,470/- WAS INCURRED ON REPLACEMENT OF COOLING TOWER PLANT ON 20 TH MARCH, 2008, TRANSFERRED FROM CAPITAL WORK IN PROGRESS. AS PER MANUFACTURING PROCESS, THE COLD WATER IS USED TO CO NDENSE HEXANE VAPORS RECEIVED FROM OIL DISTILLATION AND DE - SOLVENTIZATION SECTION OF THE SOLVENT EXTRACTION PR OCESS. THE HEAT GAINED BY THE COLD WATER MAKES IT HOT. THE COO LING TOWERS ARE MEANT TO REMOVE HEAT FROM HOT WATER AND COOL IT FOR RECYCLING IN THE PROCESS. THE PIPELINES WHICH CARRY HOT AND COLD WATER WREN REPLACEMENT. PIPELINE IS A PART OF THIS PLANT. PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 7 PAGE 7 OF 14 8. THE ASSESSEE HAS INCURRED RS. 15 LAKHS ON BOILERS TUBES AND TUBE REPLACEMENT. FOR THE UPGRADING OF B OILERS, IT WAS NECESSARY TO CHANGE THE TUBES. THERE ARE 300 TU BES. 9. THE ASSESSEE HAS INCURRED RS. 12,91,150/- ON UPGRADING AND EXPANDING OF OLD BOILERS. IT INCREASE S THE CAPACITY OF BOILER. 10. AN AMOUNT OF RS. 73 LAKHS WERE INCURRED ON AUTOMATION IN FLUIDIZED BOILER. LOOKING TO POWER AN D COAL SAVING AND FOR POLLUTION CONTROL NORMS, AUTOMATION IN BOILER HAS BEEN DONE. IT IS A MUST TO RUN THESE BOILERS AT THE BEST EFFICIENCY AND FULL CAPACITY. WHEN ONE OF THE REFIN ERY AND SOLVENT PLANT IS NOT WORKING DUE TO MANY REASONS, T HE FLUIDIZED BED BIGGER ONE BOILER HAS BEEN VERY EXPENSIVE TO RU N. HENCE, BY EXPANDING THESE HAND FIRED BOILER AND UPGRADING TOO, IT CAN RUN EITHER REFINERY OR THE PLANT VERY WELL HENCE IN STALLED. 11. FROM THE RECORD, WE FOUND THAT BOTH THE ASSESSING OFFICER AND CIT(A) WERE SATISFIED ABOUT FULFILLMENT OF CRITERIA OF AMOUNT OF DEPRECIATION IN RESPECT OF OTHER 12 PLANT AND MACHINERY/PLANT. OTHER SIX ITEMS AS DISCUSSED ABOVE WERE PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 8 PAGE 8 OF 14 ALSO NECESSARY TO BE INSTALLED TO MAKE THE PLANT WO RK WITH DOUBLE CAPACITY. 12. AS PER BOARDS CIRCULAR NO. 8/2002 DATED 27 TH AUGUST, 2002, AND NO. 3/2006 DATED 27 TH FEBRUARY, 2006, ADDITIONAL DEPRECIATION IS ALLOWABLE ON THE REMAINING SIX ITEM S. CIRCULAR NO.87/2002 READS AS UNDER :- 27.1 UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (1) OF SECTION 32 OF THE INCOME-TAX ACT , DEDUCTION IS ALLOWED IN RESPECT OF DEPRECIATION ON ASSETS OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION AT THE RATES PRESCRIBED UNDER THE INCOME-TAX RULES, 1962. 27.2 CLAUSE (IIA) HAS BEEN INSERTED IN SUB- SECTION (1) OF SECTION 32 TO ALLOW A DEDUCTION OF A FURTHER SUB EQUAL TO FIFTEEN PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT ACQUIRED AND INSTALLED AFTER 31 ST DAY OF MARCH, 2002 PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 9 PAGE 9 OF 14 (I) IN THE CASE OF A NEW INDUSTRY UNDERTAKING, IN THE PREVIOUS YEAR IN WHICH IT BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING; OR (II) IN THE CASE OF AN INDUSTRIAL UNDERTAKING EXIS TING BEFORE 1 ST APRIL, 2002, IN THE PREVIOUS YEAR IN WHICH IT ACHIEVES SUBSTANTIAL EXPANSION BY WAY OF INCREASE I N THE INSTALLED CAPACITY BY NOT LESS THAN TWENTY-FIVE PERCENT. 27.3 SUCH FURTHER SUM SHALL BE DEDUCTIBLE FROM THE WRITTEN DOWN VALUE OF THE ASSET. THE DEDUCTION SHALL BE ALLOWED ONLY IF THE ASSESSEE FURNISHES THE DETAILS OF PLANT AND MACHINERY AND THE INCREASE IN INSTALLED CAPACITY OF PRODUCTION IN THE PRESCRIBED FORM ALONG WITH THE RETURN OF INCOME AND A REPORT FROM AN ACCOUNTANT CERTIFYING THAT THE DEDUCTION HA S BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF THE CLAUSE. NO DEDUCTION WILL BE ADMISSIBLE IN RESPECT OF MACHINERY OR PLANT INSTALL ED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 10 PAGE 10 OF 14 ACCOMMODATION, INCLUDING ANY ACCOMMODATION IN THE NATURE OF GUEST HOUSE OR IN RESPECT OF ANY OFFI CE APPLIANCES OR ROAD TRANSPORT VEHICLES. FURTHER, NO DEDUCTION WILL BE ADMISSIBLE IN RESPECT OF ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS DEDUCTION, EITHER BY WAY OF DEPRECIATION OR OTHERWISE IN ANY ONE PREVIOUS YEAR. INSTALLED CAPACITY HAS BEEN DEFINED TO MEAN THE CAPACITY OF PRODUCTION AS EXISTING ON THE 31 ST MARCH, 2002. 27.4 THE INCOME-TAX RULES, 1962, HAVE BEEN SUITABLY AMENDED. THE SUBSTITUTED RULE 5A PROVIDES THAT THE REPORT FROM THE ACCOUNTANT AS REQUIRED UNDER SECTION 32(1)(IIA) SHALL BE IN FORM NO. 3AA. THE EARLIER FORM NO. 3AA RELATING TO AUDIT REPORT U/S 32AB HAS BEEN RENUMBERED AS FORM NO. 3AAA. 27.5 THE AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATI ON PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 11 PAGE 11 OF 14 TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. [SECTION 14]. 13. BOARDS CIRCULAR NO. 3/2006 DATED 27 TH FEBRUARY, 2003, READS AS UNDER :- 3.6 UNDER THE EXISTING PROVISIONS OF CLAUSE (IIA) OF SUB-SECTION (1) OF SECTION 32, ADDITIONAL DEPRECIATION IS ALLOWED AT THE RATE OF FIFTEEN PER CENT OF THE ACTUAL COST OF NEW MACHINERY AND PLANT (OTHER THAN SHIPS AND AIRCRAFT) ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2002. ADDITIONAL DEPRECIATION IS ALLOWED IN THE CASE OF A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIOUS YEAR IN WHICH IT BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING ON OR AFTER THE 1 ST DAY OF APRIL, 2002, OR TO ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THAT DATE IF IT ACHIEVES SUBSTANTIAL EXPANSION DURING THE PREVIOUS YEAR BY WAY OF INCREASE IN ITS INSTALLED CAPACITY BY NOT LESS THAN TEN PER CENT. IN ORDER TO ENCOURAGE INVESTMENT, THE FINANCE ACT, 2005, HAS AMENDED SECTION 32 TO INCREASE THE RATE OF ADDITIONAL DEPRECIATION TO TWENTY PER CENT ON NEW MACHINERY AND PLANT OTHER THAN PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 12 PAGE 12 OF 14 SHIPS AND AIRCRAFT, ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005, AND DISPENSED WITH THE CONDITION OF ADDITIONAL DEPRECIATION TO BE ALLOWED TO A NEW INDUSTRIAL UNDERTAKING AND THE CONDITION OF EXPANSION IN INSTALLED CAPACITY. DEPRECIATION RATES HAVE BEEN MODIFIED THROUGH A NOTIFICATION DATED 28 TH FEBRUARY, 2005. THE MODIFIED DEPRECATION RATES ARE EFFECTIVE FROM THE ASSESSMENT YEAR 2006-07. AMONG OTHER THINGS, THE RATE OF DEPRECIATION ON PLANT AND MACHINERY HAS BEEN REDUCED FROM 25% TO 15%. APPLICABILITY : FROM THE ASSESSMENT YEAR 2006- 07 ONWARDS. [SECTION 8]. 14. IN VIEW OF THE ABOVE BOARDS CIRCULAR AND KEEPING I N VIEW THE FACT THAT CAPACITY OF PLANT HAS INCREASED BY 100% FROM 15000 M. T. TO 30,000 M. T., THERE WAS NO JUST IFICATION FOR DENIAL OF CLAIM OF ADDITIONAL DEPRECIATION. ACC ORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE ASSESSEE S CLAIM OF ADDITIONAL DEPRECIATION IN RESPECT OF 12 ITEMS DISC USSED ABOVE. WE DIRECT ACCORDINGLY. 15. AFTER GOING THROUGH THE ENTIRE MATERIAL PLACED ON RECORD, WHICH INDICATED INCREASE IN CAPACITY OF PLA NT BY 100 %, PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 13 PAGE 13 OF 14 WE FOUND THAT CONDITIONS FOR ALLOWABILITY OF ADDITI ONAL DEPRECIATION U/S 32(1)(IIA) HAVE BEEN FULFILLED IN RESPECT OF SIX ITEMS DISCUSSED ABOVE. ACCORDINGLY, THERE IS NO JUS TIFICATION FOR DECLINE OF CLAIM OF ADDITIONAL DEPRECIATION IN RESP ECT OF THESE ITEMS. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 17. REVENUE IS ALSO IN APPEAL WITH REGARD TO RESTRICTIN G THE DISALLOWANCE OF INTEREST FROM RS. 3,52,408/- TO RS. 1,61,702/-. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE LD. CIT(A) HAS CONFIRMED THE P ART DISALLOWANCE OF INTEREST. HOWEVER, IN RESPECT OF AD VANCES GIVEN TO PRESTIGE FABRICATORS PRIVATE LIMITED, PRESTIGE F ORTUNE PRIVATE LIMITED AND M/S. PRESTIGE ROLLING MILLS PRI VATE LIMITED, THE LD. CIT(A) FOUND THAT AFTER ADJUSTMENT OF CREDI T BALANCE OUTSTANDING IN THESE ACCOUNTS, THERE WAS NO DEBIT B ALANCE. ACCORDINGLY, DISALLOWANCE MADE WITH RESPECT TO THES E THREE ACCOUNTS WERE DELETED. THE FINDING RECORDED BY THE LD.CIT(A) TO THE EFFECT THAT AFTER ADJUSTMENT OF CREDIT BALANCE IN THESE THREE ACCOUNTS, THERE DOES NOT REMAIN ANY DEBIT BALANCE, PRESTIGE FEED MILLS LTD., INDORE. I.T.A.NO. 113/IND/2013 A.Y. 2008-09 14 PAGE 14 OF 14 ACCORDINGLY, NO DISALLOWANCE OF INTEREST IS WARRANT ED IN RESPECT OF THESE THREE ACCOUNTS, HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECO RD. ACCORDINGLY, WE CONFIRM THE ACTION OF CIT(A) FOR RE DUCING THE DISALLOWANCE OF INTEREST FROM RS. 3,52,408/- TO RS. 1,61,702/-. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D, WHEREAS THE APPEAL OF REVENUE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH NOVEMBER, 2013. CPU* 182011