M/s SDI Mineral Export Co., Gadag V. ITO, Gadag

ITA 1187/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8624 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Depreciation; Principle of natural justice; Additional depreciation; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1187(B)/2015 (ASSESSMENT YEAR : 2007-08) M/S SDI MINERAL EXPORT CO. CTS NO.203/8B-2, YALAMALLI COMPOUND, PALA BADAMI ROAD, GADAG. PAN NO.ABFFS7436Q APPELLANT VS THE INCOME-TAX OFFICER, WARD-1, GADAG RESPONDENT ASSESSEE BY : SMT SHEETAL, ADVOCATE REVENUE BY : DR.P.K.SRIHARI, ADDL.CIT DATE OF HEARING : 25-02-2016 DATE OF PRONOUNCEMENT : 04-03-2016 O R D E R PER SHRI VIJAY PAL RAO, JM: THIS APPEAL OF THE ASSESEE IS DIRECTED AGAINST THE ORDER DATED 12-06- 2015 OF THE CIT(A), HUBLI FOR ASSESSMENT YEAR : 200 7-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS; 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER OF THE CIT(A) IS OPPOSED TO LAW AND TO THE PR INCIPLES OF NATURAL JUSTICE IN THAT THE ORDER PASSED WAS NOT A SPEAKING ORDER AND THE ORDER IS WITHOUT CONSIDERING THE SUBM ISSIONS ITA NO.1187(BANG)2015 2 OF THE ASSESSEE AND CONSEQUENTLY, THE ORDER IS LIAB LE TO BE SET ASIDE. 2. THE CIT(A) HAVING AFFORDED AN OPPORTUNITY OF HE ARING ON 11.02.2015, OUGHT TO HAVE PASSED THE ORDER IMMED IATELY THEREAFTER WHEREAS THE ORDER WAS PASSED ON 12.06.20 15 I.E AFTER A LONG GAP WHICH PROBABLY MADE HIM TO OMIT TO CONSIDER THE VARIOUS SUBMISSIONS OF THE ASSESSEE AN D CONSEQUENTLY THE ORDER OF THE CIT(A) UPHOLDING THE DISALLOWANCE AS MADE BY THE AO WAS OPPOSED TO LAW A ND LIABLE TO BE SET ASIDE. 3. ON THE FACTS, THE LD.CIT(A) OUGHT TO HAVE ALLOW ED THE ADDITIONAL DEPRECIATION AS CLAIMED BY THE ASSESSEE UNDER SEC.32(IIA) OF THE ACT, TO THE EXTENT OF RS.32,43,9 91/- ON THE MACHINERY PUT TO USE FOR PRODUCTION OF IRON ORE. 4. THE LD.CIT(A) ERRED IN RELYING ON THE OBSERVATI ONS OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS ONLY CA RRYING ON JOB WORK OF CLEANING AND WASHING IRON ORE WHEREA S THE ACTUAL ACTIVITY OF THE ASSESSEE BEING EXCAVATING AN D PROCESSING OF ORE. 5. THE LD.CIT(A) IN THE ORDER ALSO FINALLY HAVING O BSERVED THAT THE ASSESSEE HAS NOT ONLY DONE JOB WORK OF CLE ANING AND WASHING OF IRON ORE BUT ALSO INVOLVED IN THE PR ODUCTION, OUGHT TO HAVE ALLOWED THE CLAIM OF THE ASSESSEE TOW ARDS ADDITIONAL DEPRECIATION IN FULL. 6. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THE JUDIC IAL PRECEDENCE OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SESA GOA LTD.(2004) 271 ITR 331(SC) AND ALSO SEV ERAL OTHER CASES AND OUGHT TO HA E HELD THAT THE ASSESSE E WAS ITA NO.1187(BANG)2015 3 ENTITLED TO ADDITIONAL DEPRECIATION UNDER SEC.32(II A) OF THE ACT. 7. WITHOUT PREJUDICE, THE LEARNED CIT(A) ERRED IN C ONFIRMING THE ADDITION AS MADE BY THE ASSESSING OFFICER. 8. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, THE ASSESSEE PRAYS THAT THE AP PEAL MAY BE ALLOWED. 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F FEEDING, SCREENING, DOZING & LOADING OF IRON ORE. THE ASSES SEE HAS ACQUIRED THE MACHINERY FOR ITS ACTIVITY AND CLAIMED ADDITIONAL D EPRECIATION IN THE REVISED RETURN OF INCOME. THE AO DID NOT ALLOW THE ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE IT ACT, ON THE GROUND THAT TH E ASSESSEE IS NOT ENGAGED IN THE MANUFACTURING OR PRODUCTION ACTIVITY. THE A SSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A), BUT COULD NOT S UCCEED. THE CIT(A) HAS HELD THAT NO PRODUCTION WORK WAS CARRIED OUT BY THE ASSESSEE FIRM, AS THE ASSESEE WAS DOING ONLY JOB WORK OF FEEDING, SCREENI NG, DOZING AND LOADING WORK OF IRON ORE. 4. BEFORE US, LEARNED AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESEE IS DOING THE EXCAVATION OF IRON ORE, SCREEN ING, CLEANING, DOZING AND LOADING AND THEREFORE, THIS ACTIVITY OF THE ASS ESSEE CLEARLY FALLS UNDER THE TERM MANUFACTURING. THE LEARNED AR HAS REFE RRED TO THE BILLS RAISED BY THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE HAS EARNED INCOME ITA NO.1187(BANG)2015 4 THROUGH CARRYING OUT THE ACTIVITY OF SCREENING, CLE ANING, DOZING AND LOADING. THEREFORE, THIS ACTIVITY OF THE ASSESSEE AMOUNTS TO MANUFACTURE OF IRON ORE AND CONSEQUENTLY, ELIGIBLE FOR ADDITION AL DEPRECIATION U/S 32(IIA) OF THE IT ACT, 1961. IN SUPPORT OF HER CONT ENTION, SHE HAD RELIED UPON THE DECISION DATED 20-09-2013 OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF SRI R. PRABHU IN ITA NO.758 /BANG/2012 AND SUBMITTED THAT AN IDENTICAL ISSUE HAD BEEN CONSIDER ED AND DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE. 5. ON THE OTHER HAND, LEARNED DR HAS SUBMITTED THE ASSESSEE IS DOING ONLY A JOB WORK AND THEREFORE, THE END PRODUC T DOES NOT BELONG TO THE ASSESSEE. THUS, THE LEARNED DR SUBMITTED THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE DOES NOT FALL UNDER THE EXPRESS ION MANUFACTURE OR PRODUCTION , WHEN THE ASSESSEE DOES NOT OWN THE PRODUCT. HE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS PERUSED THE MATERIAL ON RECORD. THE LIMITED QUESTION ARISES FOR OUR CONSIDERATION AND ADJUDICATION IS WHETHER THE ACTIVITY OF THE ASSESSE E OF FEEDING, SCREENING, DOZING AND LOADING AMOUNTS TO MANUFACTURE OR PRODUC TION ACTIVITY IN TERMS OF SEC.32(1)(IIA) OF THE ACT. THE AUTHORITIE S BELOW DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS DOI NG ONLY A JOB WORK OF FEEDING, SCREENING, DOZING AND LOADING OF IRON ORE WHICH DOES NOT FALL UNDER THE TERM MANUFACTURE OR PRODUCTION . IT IS PERTINENT TO NOTE THAT ITA NO.1187(BANG)2015 5 AS PER THE BILLS RAISED BY THE ASSESSEE, THE INCOME WAS EARNED FROM THE ACTIVITY OF FEEDING, SCREENING, DOZING AND LOADING AND AS PER THE QUANTITY OF PRODUCTION. THEREFORE, THE ACTIVITY OF THE ASSES SEE IS NOT MERELY WASHING AND CLEANING OF IRON ORE ALREADY EXCAVATED BY SOME OTHER PARTY, BUT THE WORK OF FEEDING, SCREENING, DOZING AND LOADING IS D ONE BY ASSESSEE ITSELF. THEREFORE, WE DO NOT AGREE WITH THE FINDING OF THE AUTHORITIES BELOW THAT IT IS ONLY A CLEANING PROCESS CARRIED OUT BY THE ASSES SEE. AN IDENTICAL ISSUE WAS CONSIDERED AND DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN CASE OF ACIT VS SRI R.PRABHU (SUPRA) IN PARA-7 AS U NDER; 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THEIR RIVAL CONTENTIONS, WE FIND THAT CL AUSE-(2A) OF SUB-SEC.1 OF SEC.32, PROVIDES THAN AN ASSESSEE IS E LIGIBLE FOR ADDITIONAL DEPRECIATION IF IT HAS ACQUIRED ANY NEW PLANT OR MACHINERY AND INSTALLED THE SAME AFTER 31 ST DAY OF MARCH 2005 AND IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE ASSESSEE H EREIN IS CLAIMING TO BE IN THE BUSINESS OF MINING I.E PRODUC TION OF THE IRON ORE. AS SEEN FROM THE WORK ORDERS PLACED AND AGREEMENTS BETWEEN THE ASSESSEE AND OWNER/LESSEES O F THE MINES, THE ASSESSEE HAS BEEN ENGAGED TO CARRY OUT EXCAVATION, MATERIAL SHIFTING, CRUSHING AND SCREENI NG OF IRON ORE AND THE RATES FIXED FOR EACH OF SUCH WORK IS AL SO DIFFERENT. TO APPLY THE PROVISIONS OF SEC.32(1)(IIA ) OF THE ACT, IT IS NECESSARY THAT THE ASSESSEE HAS TO CARRY ON T HE WORK OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR TING AND WORK OF EXCAVATION, PROCESSING AND TRANSPORTATION CARRIED O N BY THE ASSESSEE IS EVIDENT FROM THE AGREEMENTS WITH EACH O F THE ITA NO.1187(BANG)2015 6 CONTRACTORS THAT HE HAS ENTERED INTO AND IT WOULD B E SUFFICIENT AND WOULD SATISFY THE CONDITION U/S 32(1 )(IIA) OF THE IT ACT, IF THE ASSESSEE HAS PURCHASED THE MACHI NERY AND HAS INSTALLED AND USED THE SAME DURING THE RELEVANT FINANCIAL YEAR. AS SEEN FROM THE BILLS RAISED BY TH E ASSESSEE, THE ASSESSEE HAS CHARGED THE LESSEES ON TONNAGE BAS IS FOR IRON ORE PRODUCTION, WASTE PRODUCTION AND ROCK BREA KER TONNAGE AS IS EVIDENT FROM BILL NO.3 DATED 9/3/2008 RAISED BY THE ASSESSEE OF B.M.M.P.L, WHICH IS PLACED AT PA GE 12 OF THE PAPER BOOK. THEREFORE, WE ARE SATISFIED THAT T HE ASSESSEE WAS NOT JUST GIVING HIS VEHICLE ON HIRE FO R CARRYING OUR THE WORK OF MINING BUT HE IS IN FACT ENGAGED IN THE MINING BUSINESS AND IS ELIGIBLE FOR CLAIMING ADDITI ONAL DEPRECIATION U/S 32(1)(IIA) OF THE IT ACT. THUS, A SSESSEES APPEAL IS ALLOWED. IN VIEW OF THE FACTS AND CIRCUMSTANCES THE CASE, A S WELL AS BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL (SUPRA), WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND D IRECT THE AO TO ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE IT ACT, 1961. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH MARCH, 2016. SD/- SD/- (INTURI RAMA RAO) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 04-03-2016 PLACE: BANGALORE AM* ITA NO.1187(BANG)2015 7 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE