ITO Wd 3(4), Kolkata, Kolkata V. M/s Devashree Ispat (P) Ltd., Kolkata

ITA 1470/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92068 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBASHIS ROY
• Assessee Lawyers: S L KOCHAR; ANIL KOCH
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH , JM] I.T.A NO.1470-1472/KOL/2012 ASSESSMENT YEARS: 2006-07 TO 2008-09 INCOME-TAX OFFICER, WD-3(4), KOLKATA VS. M/S. DEVA SHREE ISPAT PVT. LTD. (PAN: AACCD 0753E) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 29.06.2015 DATE OF PRONOUNCEMENT: 27.07.2015 FOR THE REVENUE: SHRI DEBASHIS ROY, JCIT, SR. DR FOR THE ASSESSEE: SHRI S.L.KOCHAR, ADVOCATE & SHRI ANIL KOCHAR, ADVOCATE ORDER PER SHRI MAHAVIR SINGH, JM: THESE THREE APPEALS BY REVENUE ARE ARISING OUT OF O RDER OF CIT(A)-I, KOLKATA IN APPEALS NO. 397, 496CIT(A)-1/3(4)/08-09/ 09-10 & 235/CIT(A)- 1/3(4)/10-11DATED 09.07.12 AND 16.07.2012. ASSESSM ENTS WERE FRAMED BY ITO, WARD-3(4), KOLKATA U/S. 143(3)(II) OF THE INCOME-TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2006 -07 TO 2008-09 VIDE THEIR ORDERS DATED 31.12.2008, 31.12.2009 AND 15.12.2010 RESPECTIVELY. FIRST WE TAKE UP ITA NO. 1470/KOL/2012 2. AT THE OUTSET, IT IS SEEN THAT THIS APPEAL BY RE VENUE IS BARRED BY LIMITATION OF 5 DAYS AND REVENUE HAS FILED CONDONATION PETITIO N STATING THE REASONS ALONG WITH AFFIDAVITS. IT IS SEEN THAT 6 TH & 7 TH OCTOBER, 2012 BEING SATURDAY AND SUNDAY RESPECTIVELY. THE FACTUAL DELAY IS ONLY FOR THREE D AYS. WHEN A QUERY WAS PUT TO LD. COUNSEL FOR ASSESSEE FAIRLY CONCEDED YES DELAY CA N BE CONDONED DUE TO SMALLNESS OF DELAY. IN TERMS OF ABOVE, WE CONDONE THE DELAY A ND ADMIT THE APPEAL. 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW ADDITIONAL DEPRECIATION ON MOULDS AND ELECTRICAL INSTALLATIONS. FOR THIS, REVENUE HAS RAI SED FOLLOWING FOUR GROUNDS:- (1) THE LD. CIT(A) GROSSLY ERRED IN ALLOWING ASSE SSEES APPEAL AND DIRECTING THE AO TO ALLOW ADDITIONAL DEPRECIATION FOR A TOTAL AMOUNT OF RS.8,,96,436/- TOWARDS ELECTRICAL INSTALLATION AND MOULDS WITHO UT ANY VERIFICATION. 2 ITA NO.1470-1472/K/2012 M/S DEVASHREE ISPAT (P) LTD. AY 2006-07 TO 2008-0 9 2. THE LD. CIT(A) ERRED IN EXPRESSING HIS DISPUTED EXPLANATION ABOUT MOULDS AS A PART OF PLANT & MACHINERY FOR THE AY 2007-08 WITH OUT ANY TECHNICAL EXPERT OPINION AND ALLOWED ENTIRE CLAIM OF ADDITIONAL DEPR ECIATION IN RESPECT OF MOULDS INVOLVING AN AMOUNT OF RS.6,21,409/-, WITHOUT VERIF YING THE NATURE OF OPERATION OF THE MOULDS AND NUMBER OF SUCH MOULDS ACTUALLY PUT I N OPERATION TO BE ELIGIBLE FOR DEPRECIATION. 3. THE LD. CIT(A) ERRED IN CONSIDERING THE ENTIRE C OST OF ELECTRICAL INSTALLATIONS OF RS.2,75,027/- FOR ALLOWING ADDITIONAL DEPRECIATION WITHOUT VERIFYING WHETHER THE INSTALLATION WAS EXCLUSIVELY RELATED TOWARDS THE IN STALLATION OF NEW PLANT& MACHINERIES OR NOT. 4. THE LD. CIT(A) GROSSLY ERRED IN NOT ASKING FOR A REMAND REPORT FROM THE AO TO CROSS VERIFY THE ENTIRE ISSUES INVOLVING THE CLA IM OF ADDITIONAL DEPRECIATION FOR THE OTHER ASSETS OTHER THAN THE PURE PLANT & MACHIN ERY CATEGORY, WHICH MAY BE ALLOWED DEPENDING UPON ITS NATURE AND PURPOSE AND R EAL USE. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE-COMPA NY WAS ENGAGED IN MANUFACTURING OF INGOTS ETC. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED ADDI TIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. THE AO HAS OBSERVED THAT THE RELEVANT CONDITIONS AS NOTED IN THE SEC. 32(1)(IIA) ARE THAT THE ASSESSEE MUST ENGA GED IN MANUFACTURE/PRODUCTION OF ANY ARTICLE OR THING, SO A NEW PLANT & MACHINERY SH OULD BE ACQUIRED AND INSTALLED AFTER 31.03.2005 AND THAT IT SHOULD BE ELIGIBLE PLA NT & MACHINERY. THE AO FURTHER FOUND THAT IT IS A CASE OF NEW PLANT & MACHINERY AN D THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE/PRODUCTION OF ARTICLE OR THINGS AND THAT THE ACQUISITION OF NEW PLANT & MACHINERY IS ELIGIBLE FOR THE SAME. HOWEVER , THE A O FOUND FROM THE RECORDS THAT FOR ELECTRIC INSTALLATION AND MOULDS R EQUIRED FOR THE NEWLY ACQUIRED PLANT & MACHINERY THAT ASSESSEE HAD CLAIMED ADDITIO NAL DEPRECIATION AS WELL WHICH IN THE OPINION OF THE AO WERE NOT PLANT & MACHINERY ON WHICH ADDITIONAL DEPRECIATION COULD BE CLAIMED. ACCORDINGLY, THE AO DISALLOWED AN AMOUNT OF R.8,96,436/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: 8. I HAVE GONE THROUGH THE FACTS AND THE DETAILS SU BMITTED BY THE A/R. RELEVANT PROVISIONS OF SEC. 32(1)(IIA) HAVE ALSO BEEN TAKEN NOTE OF. I FIND THAT THE WORDS ACQUISITION OF NEW PLANT & MACHINERY IS ALSO FOLLOW ED BY THE WORDS INSTALLED . THEREFORE, IN SUCH CIRCUMSTANCES, INSTALLATION EXPE NSES INCURRED BY AN ASSESSEE TO HAVE USE OF THE NEW PLANT & MACHINERY HAS TO BE TAK EN NOTE OF AND SUCH INSTALLATION EXPENSES AND THE MOULDS AND THE COST OF PLANT & MAC HINERY WOULD BE CONSIDERED AS THE TOTAL CAPITAL OUTLAY IN THE ACQUISITION AND INS TALLATION OF NEW PLANT & MACHINERY. I AM, THEREFORE, OF THE CONSIDERED OPINION THAT THE CLAIM OF THE APPELLANT FOR DEDUCTION OF ADDITIONAL DEPRECIATION IN RESPECT OF NEW PLANT & MACHINERY AND 3 ITA NO.1470-1472/K/2012 M/S DEVASHREE ISPAT (P) LTD. AY 2006-07 TO 2008-0 9 INSTALLATION EXPENSES AS CLAIMED ARE TO BE TAKEN AS THE CAPITAL OUTLAY FOR THE NEW PLANT & MACHINERY AND ADDITIONAL DEPRECIATION WILL THUS BE ALLOWABLE TO THE APPELLANT. ACCORDINGLY, I ALLOW THIS GROUND OF THE APPELLANT. AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE TRIBUNAL . 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE PROVISIONS OF SECTIO N 32(1)(IIA) OF THE ACT SPEAK OF ACQUISITION AS WELL AS INSTALLATION OF NEW PLANT & MACHINERY. THAT THE PLANT & MACHINERY SHOULD BE NEW IS DEFINITELY A REQUIREMENT WHICH IS FULFILLED IN THE CASE OF THE ASSESSEE. NOW, THE POINT IS WHAT ABOUT INSTA LLATION OF SUCH PLANT & MACHINERY? IT IS THE IN-BUILT PROVISION IN SECTION 32(1)(IIA) OF THE ACT ITSELF THAT ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INSTALLED WOULD QUANTIFY FOR ADDITIONAL DEPRECIATION. NOW ONE CANNOT CONCEIV E A SITUATION THAT A NEW PLANT & MACHINERY WHICH IS ACQUIRED CAN BE INSTALLED WITH OUT PROPER ELECTRICAL INSTALLATION AND MOULDS. THESE TWO ARE ESSENTIAL PA RT OF THE PLANT & MACHINERY. IT IS BECAUSE OF THIS NECESSITY THAT THE WORD INSTALLED HAS BEEN SPECIFICALLY NOTED IN THE PROVISIONS OF SEC. 32(1)(IIA) OF THE ACT. THE FACTS ARE THAT A PLANT & MACHINERY CANNOT BE TAKEN NOTE OF FOR UNDERTAKING MANUFACTURI NG UNLESS PROPER ELECTRIC INSTALLATIONS ARE PROVIDED TO HAVE ITS USE. FURTHER , MACHINERY CANNOT BE TAKEN NOTE OF AS HAVING BEEN READY FOR USE UNLESS THERE ARE RE LEVANT MOULDS. IN THE LINE OF BUSINESS WHICH THE ASSESSEE IS PURSUING ONE HAS TO CONCEIVE A SITUATION WHERE A NEW PLANT WORTH RS.1,69,54,533/- IS ACQUIRED ALONG WITH ELECTRICAL INSTALLATION OF THE COST OF RS.13,75,133/- AND OF MOULDS OF RS.19,7 2,920/-. THESE ARE ESSENTIAL PART OF THE PLANT & MACHINERY AND THESE HAVE TO BE TAKEN NOTE OF TO MAKE THE SAME AS A NEW PLANT & MACHINERY. WHERE A PLANT & MACHINE RY CANNOT BE SEGREGATED FROM THE ELECTRICAL INSTALLATION AND RELEVANT MOULD S WHICH FROM NECESSARY PART AND PARCEL OF THE PLANT & MACHINERY. IT IS NEW PLANT & MACHINERY TO BE TAKEN NOTE OF AND DEPRECIATION AS CLAIMED HAVE TO BE ALLOWED. FUR THER REFERENCE WAS MADE BY ASSESSEE TO THE PROVISIONS CONTAINED IN SECTION 32( 1))(IIA) SPECIFICALLY STATE IN THE CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN A CQUIRED AND INSTALLED FROM WHERE IT IS THUS CLEAR THAT THE PROVISIONS DO TAKE NOTE OF ACQUISITION AS WELL AS INSTALLATION OF NEW MACHINERY OR PLANT. THUS, IT WILL BE SEEN THAT THERE IS A SPECIFIC PROVISION IN THE INCOME TAX ACT ITSELF REL ATING TO CLAIM FOR DEPRECIATION IN 4 ITA NO.1470-1472/K/2012 M/S DEVASHREE ISPAT (P) LTD. AY 2006-07 TO 2008-0 9 RESPECT OF NEW MACHINERY OR PLANT WHERE IT IS SPECI FICALLY STATED THAT WHICH HAS BEEN ACQUIRED AND INSTALLED. INSTALLATION COVERS AL L THE FITTINGS ELECTRICAL AND OTHERS AND ALL THOSE MOULDS WHICH ESSENTIALLY FORM PART OF THE NEW PLANT & MACHINERY AND, THEREFORE, THE AO HAS RIGHTLY BEEN DIRECTED TO RECOMPUTE THE DEPRECIATION ALLOWABLE TO THE ASSESSEE IN RESPECT OF THE NEW PLA NT & MACHINERY WHICH IS ACQUIRED AND INSTALLED BY CIT(A). WE FIND NO INFIRM ITY IN THE ORDER OF CIT(A) AND HENCE, THE SAME IS CONFIRMED IN ALL THE THREE YEARS . 6. THE FACTS AND CIRCUMSTANCES AND ISSUE INVOLVED I S EXACTLY IDENTICAL IN ALL THE YEARS, HENCE, TAKING A CONSISTENT VIEW, THESE THREE APPEALS OF REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEALS OF REVENUE ARE DISMIS SED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.07. 2015 SD/- SD/- (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JULY, 2015 *DKP-P.S. COPY OF THE ORDER FORWARDED TO: 1 . ASSESSEE M/S DEVASHREE ISPAT (P) LTD. 11/B J.M. A VENUE, , KOL-06 2 REVENUE ITO WD-3(4), 8/2 ESPLANADE EAST, DWARLIE HOUSE, KOLKATA- 700 069 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .