The ITO, Ward-2(1), Surat V. M/s. Aswani Industries, Surat

ITA 1180/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63147 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A TIRKEY
• Assessee Lawyers: RAJESH KUMAR SHAH
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 32

Judgement Text

ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO. 1180/AHD/2010. (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER, WARD 2(1), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) VS. M/S.ASWANI INDUSTRIES, C/O.GEETA FASHIONS C-1023,SURAT GTEXTILE MARKET, RING ROAD, SURAT. (RESPONDENT) PAN: AALFA4927D APPELLANT BY : MR.A.TIRKEY, SR. D.R. RESPONDENT BY : MR.RAJESH KUMAR SHAH. ( )/ ORDER DATE OF HEARING : 22-10-201 2 DATE OF PRONOUNCEMENT : 23-11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THE ASSESSEE IS A FIRM ENGAGED IN THE EMBROIDERY J OB WORK FOR OTHER PARTIES AND EXPORT OF CLOTH. IT FILED ITS RETURN OF INCOME ON 31-12-2006 WITH RETURNED TOTAL INCOME AT RS. NIL. THE CASE WAS SELE CTED FOR SCRUTINY AND SUBSEQUENTLY ASSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 22-12- 2008 AND THE INCOME WAS DETERMINED AT LOSS OF RS.60 ,123/- AFTER MAKING VARIOUS ADDITIONS/DISALLOWANCES. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A). CIT (A) VIDE HIS ORDER DATED 25-1- 2010 PARTLY ALLOWED THE ASSESSEES APPEAL. ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 2 2. AGGRIEVED BY THE ORDER OF CIT (A), THE REVENUE I S NOW IN APPEAL BEFORE US. 3. BEFORE US, THE ONLY EFFECTIVE GROUND IS WITH RES PECT TO ADDITIONAL DEPRECIATION. DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE A.O. OBSERVED THAT THE ASSESSEE HAD ADDED NEW PLANT AND MACHINERY ON WHICH THE ASSESSEE HAD CLAIMED DEPRECIATION AT NORMAL RAT ES AS WELL AS ADDITIONAL DEPRECIATION OF RS.15,61,831/-. A.O. WAS OF THE VIEW THAT SINCE THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF EM BROIDERY ON JOB WORK BASIS IT DID NOT FALL INTO THE CATEGORY OF MANUFACT URING AND AS SUCH THE ASSESSEE WAS NOT ENTITLED TO ADDITIONAL DEPRECIATIO N ON THE NEW MACHINERIES INSTALLED BY IT. HE ACCORDINGLY DISALL OWED THE CLAIM WITH RESPECT TO ADDITIONAL DEPRECIATION OF THE ASSESSEE AND ADDED IT TO THE TOTAL INCOME. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A). CIT (A) AFTER CONSIDERING THE SUBMISSIONS AND VARIOUS DECISIONS O F HIGH COURT AND TRIBUNAL HELD THAT THE ACTIVITY OF EMBROIDERY WOULD BE CONSIDERED AS MANUFACTURING AND THE ASSESSEE WOULD BE ELIGIBLE FO R ADDITIONAL DEPRECIATION. CIT (A) WAS ALSO OF THE VIEW THAT UND ER THE CENTRAL EXCISE ACT, THE ACTIVITY OF EMBROIDERY OF MANMADE FABRICS IS LIABLE TO EXCISE DUTY UNDER CHAPTER 58 HEADING NO.5810 AND SUB-HEADING 58 10-92 OF THE FIRST SCHEDULE OF THE CENTRAL EXCISE TARRIF ACT, 1985 @ 8 %.THUS EVEN BY RELYING ON THE CRITERIA OF MANUFACTURE APPLIED UNDER THE CENTRAL EXCISE ACT, HE WAS OF THE VIEW THAT THE ACTIVITY OF EMBROIDERY WOU LD AMOUNT TO MANUFACTURING. HE ACCORDINGLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. REVENUE IS NOW AGGRIEVED BY THE ORDER OF CIT (A) . ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 3 5. BEFORE US THE LD. D.R. SUBMITTED THAT THE BASIC MATERIAL IS FINISHED FABRICS AND THE FINAL OUTPUT IS ALSO FINISHED FABR ICS AND THEREBY NO SEPARATE OR DISTINCT PRODUCT EMERGES OUT OF THE PROCESS OF E MBROIDERY WORK CARRIED OUT BY THE ASSESSEE AND THERE IS NO TRANSFORMATION OF GOODS TO THE EXTENT THEY ARE COMMERCIALLY KNOWN AS DIFFERENT ITEM. HE FURTHER SUBMITTED THAT THE ACTIVITY OF THE EMBROIDERY CONSTITUTE ONLY VAL UE ADDITION WHEREBY FINISHED WEARABLE FABRICS ARE MADE MORE ATTRACTIVE AND NO DIFFERENT PRODUCT IS MANUFACTURED BY APPLYING THE PROCESS OF EMBROIDE RY. HE THUS SUBMITTED THAT THE ACTIVITY OF EMBROIDERY CANNOT BE SAID TO B E MANUFACTURE WITHIN THE MEANING OT SECTION 32 (1) (IIA) FOR THE PURPOSE OF ALLOWANCE OF ADDITIONAL DEPRECIATION. HE THEREFORE URGED THAT THE ORDER OF THE A.O. BE UPHELD. 6. ON THE OTHER HAND THE LD. A.R. SUBMITTED THAT IN THE ASSESSEES OWN CASE ON IDENTICAL FACTS THE HONBLE TRIBUNAL VIDE O RDER DATED 29-10-2010 IN ITA NO.2103/AHD/2010 HAVE DISMISSED THE DEPARTMENT S APPEAL. HE PLACED ON RECORD COPY OF THE ORDER. HE THEREFORE, U RGED THAT FOLLOWING THE DECISION FOR A.Y.2007-08 THE ORDER OF THE CIT (A) BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT FOR A.Y. 2007-08 THE DEPARTMEN T HAD CARRIED BEFORE TRIBUNAL THE MATTER WITH RESPECT TO THE CLAIM OF AD DITIONAL DEPRECIATION. THE TRIBUNAL HAD DISMISSED THE DEPARTMENTS APPEAL BY H OLDING AS UNDER :- 5. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE DECI SION DATED 8-9-2009 OF ITAT SMC BENCH, AHMEDABAD IN ITA NO.1569/AHD/2 010 FOR THE ASSESSMENT YEAR 2007-08 IN THE CASE OF HARIPRIYA PR OCESSORS PVT. LTD. (SUPRA) RELIED BY THE LD. COUNSEL OF THE ASSES SEE. IN THE SAID ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 4 DECISION, ITAT, SMC BENCH, AHMEDABAD ON IDENTICAL FACTS TOOK THE VIEW THAT THE ASSESSEE IS ENTITLED TO ADDITIONAL DE PRECIATION UNDER SECTION 31(1)(IIA) OF THE INCOME TAX ACT,1961. THE RELEVANT DISCUSSION CONTAINED IN PARA 5 OF THE SAID ORDER, W HICH READS AS UNDER: 5. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM TH E FACTS THAT THE ASSESSEE IS DOING EMBROIDERY WORK ON JOB WORK B ASIS AND SAID ACTIVITY ALSO RESULTS IN PRODUCTION OF NEW ART ICLE WHICH HAS DIFFERENT MARKET OF ITS OWN AND THERE ARE VARIOUS STAGES WHICH ARE INVOLVED IN EMBROIDERY ACTIVITY AND THE SAME CA N BE BRIEFLY CATEGORIZED AS UNDER:- (I) CREATING A DIGITALIZED EMBROIDERY DESIGN FILE; (II) EDITING THE DESIGN AND/OR COMBINING {WITH OTHER DESIGN} (OPTIONAL) (III) LOAD THE FINAL DESIGN FILE INTO THE EMBROIDER Y MACHINE; (IV) STABILIZE THE FABRIC AND PLACE IT IN THE MACHI NE; (V) START AND MONITOR THE EMBROIDERY MACHINE; AND BECAUSE OF THE ABOVE PROCESS WHICH HAS TO BE CA RRIED OUT IN VERY CAREFUL MANNER THE OUTPUT I.E. EMBROIDERY F ABRICS HAS ENTIRELY DIFFERENT LOOKS AND HAS DIFFERENT COMMERCI AL VALUE AND THUS, BECAUSE OF ABOVE OPERATIONS NEW COMMODITY EME RGES. THE EXPRESSIONS MANUFACTURE AND PRODUCE HAVE NOT BEEN DEFINED IN THE ACT AT THE RELEVANT POINT OF TIME BU T THE DICTIONARY MEANING OF MANUFACTURE IS TO TRANSFORM OR FASHION NEW MATERIAL INTO A CHANGED FORM FOR USE. BECAUSE OF TH E ABOVE OPERATIONS CARRIED OUT BY ASSESSEE, THE LOOK OF THE FABRIC IS CHANGED SUBSTANTIALLY AND THE NEW ARTICLE IS COMMER CIALLY KNOWN DIFFERENTLY FROM THE ORIGINAL FABRICS. EVEN O THERWISE, THE WORD PRODUCT HAS A WIDER CONNOTATION THAN THE WOR K MANUFACTURE AND RELIANCE PLACED BY THE ASSESSEE O N THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.S.M . BROTHERS (P) LTD. & OTHERS VS. CIT (2000) 243 ITR 418 (SC) W HEREIN THE ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 5 DEVELOPMENT REBATE CLAIMED U/S. 33(1)(B)(B)(I) WAS ALLOWED BY HOLDING THAT THE PLANT AND MACHINERY WERE USED IN T HE PRODUCTION OF PROCESSED TEXTILES (EMBROIDERY) AND T HEREFORE, THE MACHINERY IS ENTITLED TO DEVELOPMENT REBATE UNDER T HE ABOVE PROVISIONS. SECTION 33(1)(B)(B)(I) PROVIDES FOR DEV ELOPMENT REBATE ON MACHINERY OR PLANT WHICH IS INSTALLED FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTURE OR PRODUCT ION OF ANY ONE OR MORE OF THE ARTICLES OR THINGS SPECIFIED IN THE LIST IN THE FIFTH SCHEDULE. THE RATIO OF ABOVE DECISION OF HON BLE SUPREME COURT IS DIRECTLY APPLICABLE TO FACTS OF THE INSTAN T CASE BECAUSE SEC. 32(1)(IIA) ALSO PROVIDES FOR ADDITIONAL DEPREC IATION IN RESPECT OF NEW MACHINERY AND PLANT PURCHASED BY ASS ESSEE WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PR ODUCTION OF ANY ARTICLE OR THING. IN THE ABOVE CASE THE HONBLE SUPREME COURT HAS ALREADY HELD THAT ASSESSEE WAS USING MACH INERY IN PRODUCTION OF PROCESSED TEXTILE I.E. EMBROIDERY WOR K AND THUS, THE FACT EMBROIDERY WORK IS REGARDED AS PRODUCTION CANNOT BE DENIED. SECTION 32(1)(IIA) ALSO USED THE WORD PROD UCTION OF ANY ARTICLE OR THING AND THUS, THE PRODUCT WITH EMBROI DERY WORK IS INCLUDED IN THE WORK ANY ARTICLE OR THING. IN FACT THE PROVISIONS OF SECTION 32(1)(IIA) ARE LARGER. IN SCOPE AS COMPARED TO SECTION33(1)(B)(B)(1) INASMUCH AS SECTION 32(1)(IIA ) PROVIDES FOR ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY WHICH IS USED IN THE PRODUCTION/MANUFACTURE OF ANY ARTICLE O R THING WHEREAS SECTION 33(1)(B)(B)(I) PROVIDES FOR DEVELOP MENT REBATE ON PLANT AND MACHINERY WHICH IS USED IN THE CONSTRU CTION, MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING W HICH IS LISTED IN THE FIFTH SCHEDULE. IN VIEW OF THESE FACTS AND THE DECISION OF HONBLE SUPREME COURT THE ADDITIONAL DEPRECIATION C LAIMED BY ASSESSEE IS REQUIRED TO BE ALLOWED AS PLANT AND MAC HINERY IS USED IN THE PRODUCTION OF EMBROIDERY FABRICS. I FUR THER FIND THAT EVEN FROM THE ANGLE OF LEVY OF EXCISE DUTY UNDER CE NTRAL EXCISE ACT, THIS EMBROIDERY IS SUBJECT TO LEVY OF DUTY AND CONSIDERED AS MANUFACTURE. THE RELEVANT TARRIF 5810 READ AS UNDER :- SECTION XI 350 CHAPTERS 58 ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 6 TARRIF ITEM DEPRECIATION OF GOODS UNIT RATE OF DUTY 5810 EMBROIDERY IN THE PIECE, IN STRIPS ON IN MOTIFS 5810 10 00 EMBROIDERY WITHOUT VISIBLE GROUND KG. 8% 5810 91 00 OTHER EMBROIDERY OF COTTON KG. 8% 5810 92 OF MAN-MADE FIBRES 5810 92 10 EMBROIDERED BADGES, MOTIFS AND THE LIKE KG. 8% 5810 92 90 OTHER KG. 8% 5810 99 00 OF OTHER TEXTILE MATERIALS KG. 8 % AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE A SSESSEE, WE ALLOW THE CLAIM OF THE ASSESSEE. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 6. IN VIEW OF THE ABOVE, WE FOLLOWING THE DECISION DATED 8-9-2009 OF ITAT, SMC BENCH, AHMEDABAD IN ITA NO.1569/AHD/ 2010 FOR THE ASSESSMENT YEAR 2007-08 IN THE CASE OF HARIPRIYA PR OCESSORS PVT. LTD. (SUPRA) HELD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION UNDER SECTION 31(1)(IIA) OF THE INCOME TAX ACT,1961. WE T HEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT (A) DIRE CTING THE A.O. TO ALLOW ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. 8. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THAT OF EARLIER YEARS AND THE REVENUE HAS NOT BEEN IN A POSITION TO CONTR OVERT THAT THE FACTS ARE DIFFERENT, WE RESPECTFULLY FOLLOWING THE DECISION O F THE CO-ORDINATE BENCH OF THE TRIBUNAL ARE OF THE VIEW THAT THE ASSESSEE IS E NTITLED TO ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT AN THEREFOR E DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT (A) AND THEREFORE , APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NO 1180 /AHD/2010 A.YR.. 2006 -07 7 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 23 -11 - 2012. SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XI, AHMEDABAD 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 29 - 10 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 22 / 11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..