DCIT, CIRCLE-2, Nagpur V. M/S MANGANESE ORE(I) LTD, Nagpur

ITA 144/NAG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93369 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Question of law

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.144 /NAG/2013 ASSESSMENT Y EAR : 2009-10 DY. COMMISSIONER OF INCOME-TAX, M/S MANGANESE ORE (I) LTD., CIRCLE-2, NAGPUR. V/S. MOIL BHAVAN 1-K, KATOL ROAD, NAGPUR. PAN AAACM 8952A APPELLANT. RESPONDENT. APPELLANT BY SHRI P.R. MANE. RESPONDENT BY : SH RI K.P. DEWANI. DATE OF HEARING - 24-04-2015 DATE OF ORDER 15 TH MAY,2015 O R D E R PER SHRI SHAMIM YAHYA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(APPEALS)-16, MUMBAI (CAMP NAGPUR) DATED 22-01-2013 AND PERTAINS TO ASSESSMENT YEAR 2001- 10. GROUND NO. 1 READS AS UNDER : WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) WAS CORRECT IN HOLDING THAT MINE CLOSURE EXPENSES, ARE LEGITIMATE BUSINESS 2 EXPENDITURE SINCE UNCRYSTALLIZED AND PURE ESTIMATE S ONLY AND WHETHER THE PROVISIONS OF MINES CONSERVATION AND DEVELOPMENT R ULES SUPERSEDE THE PROVISIONS OF THE I.T. ACT AND SYSTEMS OF ACCOUNTI NG RECOGNIZED UNDER THE I.T. ACT: 2. APROPOS THIS GROUND, AT THE OUTSET, IN THIS CASE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE WHICH W AS AFFIRMED BY THE HONBLE BOMBAY HIGH COURT. 3. PER CONTRA LEARNED D.R. COULD NOT CONTROVERT THE SUBMISSION OF LEARNED COUNSEL OF THE ASSESSEE. 4. WE FIND THAT THE LEARNED CIT(APPEALS) HAS FOLLOW ED THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07. LE ARNED CIT(APPEALS) HELD AS UNDER : IN THEIR ORDER PASSED ON 10.10.2012 IN ITA NO. 0 1/NAG/2010 FOR A.Y. 2006- 07 IN THE APPELLANTS OWN CASE ON THE SAME ISSUE, THE ITAT, NAGPUR BENCH HAS HELD WE HAVE CAREFULLY CONSIDERED THE RIVAL S UBMISSIONS ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. IN OUR OPINION , THE PROVISION MADE BY THE ASSESSEE REPRESENT THE LIABILITY ACCRUED IN VI EW OF RULE 23A, 23B & 23C OF THE MINERAL REVISION AND DEVELOPMENT RULE, A CO Y OF WHICH WAS FILED BEFORE US. UNDER THESE RULES, MINING COMPANY IS RE QUIRED TO SUBMIT PROGRESSIVE MINE CLOSURE PLAN AND FINAL MINE CLOSU RE PLAN TO THE IBM FOR ITS APPROVAL. AN APPROVAL FROM THE REGIONAL CONTROLLER OF MINES IS TO BE OBTAINED IN THIS REGARD AND ONLY THERE AFTER THE L IABILITY SHALL BE TREATED AS HAVING ARISEN TO THE ASSESSEE, MERELY THAT THE QUA NTUM OF LIABILITY IS NOT CERTAIN THAT WILL NOT POSTPONE THE ACCRUAL OF THE LIABILITY. THE BASIS OF CALCULATION OF PROVISIONS MADE BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE. UNDER THESE FACTS, IN OUR OPINION, NO INTERFERENCE E IS CALLED FOR IN THE ORDER OF THE CIT(A) AND CIT(A) HAS RIG HTLY DELETED THE 3 DISALLOWANCE MADE BY THE ASSESSING OFFICER. THIS I S NOT A FIT CASE, WHICH WARRANT OUR INTERFERENCE. WE ACCORDINGLY DISMISS T HE GROUND TAKEN BY THE REVENUE AND CONFIRM THE ORDER OF THE CIT(A). RESP ECTFULLY FOLLOWING ORDER OF THE ITAT THE APPELLANTS OWN CASE, THE GROUNDS ARE ALLOWED AND THE ADDITION IS DELETED. WE FIND THAT THE AFORESAID DECISION OF THE ITAT WAS AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT. IN AN INCOME TAX APPEAL N O.9 OF 2013 , THE HONBLE HIGH COURT HAD HELD AS UNDER : PERUSED THE JUDGMENT OF THE HONBLE APEX COURT R EPORTED IN THE CASE OF BHARAT EARTH MOVERS V/S. COMMISSIONER OF INCOME TAX, REPORTED IN (2000) 245 ITR 428 (SC). THE FACTS SHOW THAT PROGRESSIVE MINE CLOSURE PLAN IS REQUIRED TO BE SUBMITTED AT THE TIME OF OBTAINING LEASE OR AT THE TIME OF SEEKING ITS RENEWAL AND THE FINAL CLOSURE PLAN IS REQUIRED TO BE SUBMITTED ONE YEAR IN ADVANCE OF PROPOSED CLOSURE. REFILLING OF MINE EXCAVATED CAN BE ONLY AT ONE ST AGE, BUT THEN THE LIABILITY IS INCURRED ON THAT ACCOUNT EVERY YEAR A S EXCAVATION IS SPREAD OVER FOR ENTIRE PERIOD OF LEASE. THE PROVISION MADE, THEREFORE, HAS BEEN RIGHTLY A PPRECIATED BY C.I.T. AND BY I.T.A.T. THE JUDGMENT OF HONBLE APEX COURT (SUPRA) LEAVES NO MANNER OF DOUBT ABOUT THE CORRECTNESS OF SAID APPR OACH. NO SUBSTANTIAL QUESTION OF LAW ARISES. 5. SINCE THE ISSUE IS SQUARELY COVERED BY THE HONB LE HIGH COURT DECISION, WE AFFIRM THE ORDER OF LEARNED CIT(APPEALS). GROUND NO. 2 READS AS UNDER: WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) WAS CORRECT IN ALLOW3ING ADDITIONAL DEPRECIATION O N PLANT AND MACHINERY EMPLOYED FOR GENERATING ELECTRICITY ON THE STRENGT H OF CST VS. N.T.P.C. 127 ST 280 (SC), IGNORING THE FACT THAT BOTH THE SUPRE ME COURT DECISIONS HAVE 4 BEEN RENDERED IN THE CONTEXT OF LEVY OF ST AND CST AND NOT IN THE CONTEXT OF A LITIGATION UNDER THE I.T. ACT. 6. APROPOS THIS GROUND ALSO, LEARNED COUNSEL OF TH E ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE. HE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND PRODUCTION OF MANGANESE COAL AND HAS INSTALLED WIND MILLS FOR PRODUCTION OF ELECTRICITY. REGULAR DEPRECIATION HAS BEEN GRANTED IN ASSESSMENT FRAMED. ONLY ADDITIONAL DEPRE CIATION HAS NOT BEEN ALLOWED. 7. LEARNED COUNSEL SUBMITTED THAT IT IS NOW SETTLED LAW THAT PRODUCTION OF ELECTRICITY OR POWER IS A MANUFACTURING PROCESS AND A MACHINERY INSTALLED WHICH ARE INVOLVED IN MANUFACTURING OF POWER WILL BE EL IGIBLE FOR BENEFIT OF SECTION 32(1)(IIA) OF THE ACT. IN THIS REGARD, LEARNED COUN SEL REFERRED TO A CATINA OF CASE LAWS AS UNDER : 1. ITAT ORDER IN ITA NO.943/AHD/2014 IN THE CASE O F AKASH CERAMIC PVT. LTD. VIDE ORDER DATED 09-01-2015. 2. (2014) 109 DTR (GUJ) 62 CIT V/S. DIAMINES AND CH EMICALS LTD. 3. (2009) 319 ITR 336 CIT V/S. VTM LTD. 4. HONBLE BOMBAY HIGH COURT AT GOA IN TAX APPEAL NO. 21 OF 2014 IN THE CASE OF V.M. SALGAONKAR & BROTHERS PVT. VIDE ORDER DATED 28/04/2014. 5. ITAT ORDER IN ITA NO.63/PN/2013 IN THE CASE OF V.M. SALGAONKAR & BRO. PVT. LTD. VIDE ORDER DATED 08/08/2013. 6. ITAT ORDER IN ITA NO. 832/BANG/2012 IN THE CASE OF THE HUTTIO GOLD MINES CO. LTD. VIDE ORDER DATED 02/08/2013. 5 7. HONBLE KARNATAKA HIGH COURT AT BANGALORE IN IT A NO. 8 OF 2014 IN THE CASE OF THE HUTTI GOLD MINES CO. LTD. VIDE ORDER D ATED 16/09/2014. 8. ITAT ORDER IN ITA NO. 1438/DEL/2009 IN THE CASE OF N.T.P.C. LTD. VIDE ORDER DATED 30/04/2014. 8. PER CONTRA, LEARNED DR COULD NOT CONTROVERT THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. 9. WE FIND THAT THE ISSUE IS SETTLED AND COVERED IN FAVOUR OF THE ASSESSEE. WE MAY REFER HEREUNDER THE PORTION OF THE ORDER OF LEA RNED CIT(APPEALS) IN VIEW OF THE FACTS AND IN VIEW OF THE VARIOUS JU DGMENT OF THE SUPREME COURT AND SETTLED ON THE ABOVE SUBJECT AND OTHER PO SITION OF LAW IT CANNOT BE SAID THAT THE PRODUCTION OF ELECTRICITY OR POWE R IS NOT A MANUFACTURING PROCESS AND THE MACHINERY IS INSTALLED WHICH ARE I NVOLVED IN PRODUCTION OR MANUFACTURING OF POWER WILL NOT BE ELIGIBLE FOR BE NEFIT OF SECTION 32(1)(IIA) OF THE ACT. IT WAS ALSO STATED THAT THE CLAIM HAS BEEN ALLOWE D BY THE CIT(A) IN A.Y. 2008-09. FOR A.Y. 2008-09 IN APPEAL NO. CIT(A)/556/10-11 DA TED 29.12.2012 THE CIT(A) HAS HELD THAT ALTHOUGH ELECTRIC ENERGY I S NOT TANGIBLE IT IS CAPABLE OF UTILIZATION LIKE ANY OTHER MOVEABLE PRO PERTY AND CAN BE SOLD AND PURCHASED. IT THEREFORE EMERGES THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURING. FURTHER I FIND THAT THE HONBLE MAD RAS HIGH COURT IN ITS DECISION IN HI TECH ARAI LTD. 3121 ITR 477 (MAD) H AS CONSIDERED AN IDENTICAL ISSUE AND HELD THAT ADDITIONAL DEPRECIATION IS ADM ISSIBLE ON WIND MILLS WHICH GENERATE ELECTRICITY. AO IS THEREFORE DIREC TED TO ALLOW THIS AMOUNT. THIS GROUND IS ALLOWED. 10. IN VIEW OF THE AFORESAID DISCUSSION AND PRECEDE NT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACC ORDINGLY, WE UPHOLD THE SAME. 6 11. IN THE RESULT, THIS APPEAL OF THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2015. SD/- S D/- (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER. ACCOUNTANT MEMBER NAGPUR, DATED: 15 TH MAY, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. T RUE COPY. BY OR DER ASSI STANT REGISTRAR, I.T.A.T., NAGPUR. WAKODE