MINERAL EXPLORATION CORPORATION LTD., Nagpur V. JCIT, RANGE-2, Nagpur

ITA 14/NAG/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3586 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 07-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P G MUDLIAR
• Assessee Lawyers: DR JAYANT M RANADE
• Keywords: Depreciation

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH: NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 1 4 /NAG/20 1 5 ASSESSMENT YEAR: 20 11 - 12 MINERAL EXPLORATION CORPORATION LTD., AMBEDKAR BHAWAN, SEMINARY HILLS, NAGPUR - 06 PAN: - AABCM9165C VS JT. COMMISSIONER OF INCOME TAX RANGE - 2, MECL BLDG., SEMINARY HILLS, NAGPUR - 06 (APPELLANT) (RESPONDENT) APPELLANT BY SHRI DR.JAYANT M. RANADE, A.R. RESPONDENT BY SHRI S.P.G.MUDLIAR , D.R. DATE OF HEARING: 02 - 0 6 - 201 6 DATE OF PRONOUNCEMENT: - 15 / 0 6 /2016 O R D E R PER SHAMIM YAHYA , A .M. TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.CIT(A) DATED 0 9 .0 9.2014 AND PERTAIN S TO ASSESSMENT YEAR 20 11 - 12. THE GROUNDS OF APPEAL READ AS UNDER: - 1. THE L EARNED CIT(A) - I HAS ERRED IN OBSERVING DRILLING & MINING ACCESSORIES LIKE DRILLING RODS AND PIPE CASING, DOES NOT CONSTITUTE SAND STOWING PIPES UNDER MAJOR HEAD (X) MINES & QUARRIES, UNDER (A) TUBES, WINDING ROPES, HAULAGE ROPES AND STOWING PIPES ELIGIBL E FOR 100% DEPRECIATION AS PER RULE 5 OF APPENDIX - I. IT WAS CONTENDED THAT THE DRILLING AND MINING ACCESSORIES ARE IN FACT ACCESSORIES BEING INTEGRAL PART OF MINING INDUSTRIES TO WHICH APPENDIX - I, ENTRY NO.(X) (A) TUBE, WINDING ROPES HAULAGE ROPES AND STOW ING PIPES TO WHICH100% RATE OF DEPRECIATION IS APPLICABLE. IT WAS CONTENDED THAT THE DRILLING AND MINING ACCESSORIES ARE IN FACT STORES ITEMS, LIFE TO WHICH IS NOT MORE THAN 1 YEAR. 2 I TA NO. 1 4/NAG/20 1 5 2. THE LD. CIT(A) - I HAS ERRED IN OBSERV ING TH AT DRILL RODS AND PIPE CASIN GS UNDER DRILLING & MINING ACCESSORIES ARE PLANT & MACHINERY TO WHICH 100% DEPRECIATION IS NOT APPLICABLE & THE DEPRECIATION IS RESTRICTED TO GENERAL RATE APPLICABLE TO PLANT & MACHINERY. 3. THE LD. CIT(A) - I HAS ERRED IN OBSERVING THAT THE NEW APPENDIX - I WAS APPLICABLE TILL ASST. YEAR 2005 - 06 & THE SAME BEING NOT APPLICABLE TO ASST. YEAR 2011 - 12, THE CLAIM OF THE APPELLANT FOR 100% DEPRECIATION IS NOT COVERED WITHIN THE SCOPE OF ITEMS MENTIONED IN CLAUSE (X) TO APPENDIX - I. 4. THE LEARNED CIT(A) - I HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.1,67,69,126/ - ON ACCOUNT OF DEPRECIATION ON DRILLING & MINING ACCESSORIES DISCUSSED ABOVE. 2 . AT THE OUTSET, IN THIS CASE THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ISSUE IS FULL Y COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN BATCH OF APPEALS BY THE ORDER DATED 18/11/2015 . 3. PER CONTRA THE LD. DR RELIED UPON THE ORDER OF THE AO . H OWEVER H E COULD NOT DISPUTE THE PROPOSITION THAT THIS ITAT IN ASSESSEE S OWN CASE IN EARLIER APPEALS HAS DECIDED THE SAME ISSUE IN FAVOUR OF ASSESSEE. 4. UPON CAREFUL CONSIDERATION WE FIND THAT THE ISSUE IN THIS CASE PERTAINS TO 100% CLAIM OF DEPRECIATION BY THE ASSESSEE O N DRILLING AND MINING ACCESSORIES . T HIS TRIBUNAL HAS ELABORATELY CONSIDERED THE ISSUE IN ASSESSEES OWN CASE IN ITA NO.94 TO 98/NAG/2014 VIDE ORDER DATED 18.11.2015 . THE TRIBUNAL HAS CONCLUDED AS UNDER: - 7. WE HAVE CAREFULLY HEARD THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN ASSESSMENT YEAR 2003 - 04 AS PER THE AOS ORDER, 100% DEPRECIATION WAS CLAIMED ON DRILLING AND MINING ACCESSORIES AND TENTAGES. THE ASSESSEE HAS EXPLAINED THAT DRILLING AND MINING ACCESSORIES CONSISTS OF DRILLING RODS, PIPE CASINGS ETC. THE EXPLOITERY DRILLING AND MINING IS DONE 3 I TA NO. 1 4/NAG/20 1 5 WITH THE HELP OF MACHINES CALLED DRIGS. RODS, PIPES ETC. IN QUESTION ARE USED AT THE TIME OF DRILLING FOR LOWERING INTO BORE HOLES. THESE ITEMS ARE REQUIRED IN LARGE QUANTITIES DEPENDING UPON THE DEPTH AND SIZE OF BOREHOLE. THESE RODS ETC. ARE LOWERED INTO BOREHOLE ALMOST UPTO THE DEPTH OF 800 TO 1200 . BELOW THE EARTH THESE RODS AND CASINGS BECOME UNUSEFUL WITHIN A PERIOD OF 8 TO 10 MONTHS AND THEIR CONDITION WARRANTS THEM TO BE REPLACED FREQUENTLY AND AS SUCH THE LIFE OF SUCH ITEM IS ALWAYS LESS THAN ONE YEAR. THE ASSESSE E HAD PLEADED THAT SINCE THE COMPANYS WORK IS PREPARATORY TO MINING ACTIVITIES AND SINCE THERE IS A SPECIFIC ITEM SAND STOWING PIPES UNDER SUB HEADING MINES AND QUERIES UNDER THE HEAD PLANT AND MACHINERY, THESE ACCESSORIES WHICH CLOSELY RESEMBLE SUCH PIPES AND HAVE RIGHTLY BEING CLASSIFIED AS SAND STOWING PIPES WHICH CARRIES 100% DEPRECIATION. NOW THE LEARNED CIT(APPEALS) HAS DECLINED TO AGREE WITH THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO ADDUCE ANY SORT OF PROOF TO DEMONS TRATE THAT THE DRILLING RODS AND PIPE CASINGS ARE PART OF SAND STOWING PIPES AS MENTIONED IN ITEM 10 OF APPENDIX I. 8. UPON CAREFUL CONSIDERATION WE FIND THAT THERE IS CONSIDERABLE COGENCY IN THE ASSESSEES SUBMISSION THAT THE IMPUGNED ITEMS DESERVE 100% WRITE OFF. THE NATURE OF THESE ACCESSORIES HAS BEEN DULY DETAILED AS ABOVE. THEIR LIFE IS LESS THAN ONE YEAR. THEY ARE USED BENEATH THE EARTH. THE FACTUAL ASPECT OF THE NATURE AND THEIR USES HAS NOT AT ALL BEEN DISPUTED BY THE REVENUE. THE CIT(APPEALS) H AS ALSO HELD THAT AS PER RANDOM VERIFICATION HE HAS FOUND THAT THESE ACCESSORIES COST AROUND RS.8000/ - . NOW THE UNDISPUTED FACT OF THE ISSUE IS THAT THE ITEMS INVOLVED ARE ACCESSORIES USED IN DRILLING AND MINING. THEIR LIFE IS LESS THAN ONE YEAR. THE COS T AROUND RS.8000/ - . THEY ARE USED BENEATH THE EARTH AT THE TIME OF DRILLING FOR LOWERING INTO BORE HOLES ALMOST UPTO THE DEPTH OF 800 TO 1200 METERS. WITH THESE UNDISPUTED FACTS IT IS CLEAR THAT THESE DRILLING RODS AND PIPE CASINGS DO CONSTITUTE ACCESSORIE S. THEY ARE AT BEST CONSUMABLE STORES AND THEY ARE ELIGIBLE FOR 100% WRITE OFF. HENCE WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND HOLD THAT THE ASSESSEE IS ENTITLED TO WRITE OFF OF THESE ITEMS. 4 I TA NO. 1 4/NAG/20 1 5 5. ACCORDINGLY WE FIND THAT THE ISSUE COVERED IN FAVOU R OF THE ASSESSEE BY THE ABOVE DECISION OF THE TRIBUNAL. WE HAVE ALSO NOTED THAT IT IS NOT THE CASE THAT HONBLE JURISDICTIONAL HIGH COURT HAS REVERSED THE ORDER OF THE TRIBUNAL AS ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JUNE , 2016 SD/ - SD/ - (MUKUL K. SHRAW AT) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: - NAGPUR DATED: - 15 / 0 6 /2016 COPY FORWARDED TO : 1. MINER AL EXPLORATION CORPORATION LTD. HIGH LAND DRIVE ROAD, AMBEDKAR BHAWAN, SEMINARY HILLS, NAGPUR - 06 2. JT. COMMISSIONER OF INCOME TAX , RANGE - 2, MECL BLDG., SEMINARY HILLS, NAGPUR - 06 3. C.I.T. - I, NAGPUR. 4. CIT (APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TR UE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX A PPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR M.B.BODKHE /SR. P.S.