D.C.I.T, Cir-3 Kolkata, Kolkata V. M/s Barjora Steel & Re-rolling Mills Pvt. Ltd., Kolkata

ITA 1517/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5038 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 15-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2013
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHOWNGTHU
• Assessee Lawyers: ASHOKE MUKHERJ EE
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1517/KOL/20 13 ASSESSMENT YEAR : 2006-0 7 D.C.I.T., CIRCLE-3, -VS.- M/S. BARJORA STEEL & REROLLING KOLKATA MILLS PVT.LTD.,KOLKATA [PAN : AACCB3010A) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : DAVID Z.CHOWNGTHU, JCIT FOR THE RESPONDENT : SHRI ASHOKE MUKHERJ EE, FCA DATE OF HEARING : 15.03.2016. DATE OF PRONOUNCEMENT : 6.4.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 15.02.2013 OF CIT(A)- XX, KOLKATA, RELATING TO AY 2006-07. 2 . GROUND NOS. 1 AND 2 RAISED BY THE REVENUE READS AS FOLLOWS :- 01.WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS CORRECT IN TREATING THE SUBSIDY AS CAPITAL RECEIPT WITHOUT TAKING INTO ACCOUNT THE FACT THAT ONCE THE SUBSIDY WAS RECEIVED AND DEPOSITED IN THE CASH CREDIT ACCOU NT OF THE ASSESSEE, IT BECAME A PART OF GENERAL POOL OF FUND AVAILABLE TO IT. THERE IS NO W AY TO DISTINGUISHED IT AND TREATED IT AS CAPITAL IN NATUR E. 02. THE LD. CIT(A) FAILED TO TAKE INTO ACCOUNT THE FACT THAT THE ASSESSEE CLAIMED DEPRECIATION NOT ON THE REDUCED W.O.V. AFTER ADJUST ING THE IMPUGNED CAPITAL INVESTMENT SUBSIDY BUT ON THE FULL AMOUNT OF B/F W.O.V. OF PLA NT & MACHINERY WHICH ITSELF SHOWS THE INTENTION OF THE ASSESSEE THAT THE SAID AMOUNT OF S UBSIDY WAS REVENUE IN NATURE AND NOT OF CAPITAL NATURE. THIS FACT, BROUGHT ON RECORD BY THE AO WAS NOT DISPUTED BY THE LD. CIT(A). 2 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 2 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF IRON INGOTS. DURING THE PREVIOUS YEAR THE ASSESSEE HAD R ECEIVED SUBSIDY OF RS.31,15,000/- FROM WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION . (WBIDC). THIS SUM WAS NOT OFFERED TO TAX BY THE ASSESSEE ON THE GROUND THAT I T WAS A CAPITAL SUBSIDY NOT CHARGEABLE TO TAX. THE ASSESSEE HOWEVER REDUCED FROM VALUE OF PLANT AND MACHINERY THE SUBSIDY RECEIVED TO ARRIVE AT THE RETURN OF VALUE ON WHICH DEPRECIATION WAS CLAIMED BY THE ASSESSEE. HOWEVER, IN THE TAX AUDIT REPORT IT WAS M ENTIONED THAT DEPRECIATION WAS CLAIMED WITHOUT REDUCING THE VALUE OF THE SUBSIDY F ROM WBIDC. IN THESE CIRCUMSTANCES AO CAME TO THE CONCLUSION THAT THE SUBSIDY IN QUEST ION WAS NEITHER OFFERED TO TAX AS REVENUE SUBSIDY NOR WAS IT REDUCED FROM THE WBIDC O F PLANT AND MACHINERY FOR THE PURPOSE OF CLAIMING DEPRECIATION. AO FURTHER CAME T O THE CONCLUSION THAT SUBSIDY IN QUESTION WAS A REVENUE SUBSIDY AND ULTIMATELY BROUG HT THE SUBSIDY TO TAX. 4. BEFORE CIT(A) THE ASSESSEE SUBMITTED THE SUM OF RS 31.15 LAKHS WHICH WAS STATE CAPITAL INVESTMENT SUBSIDY UNDER WEST BENGAL INCENTIVE SCHEME 2000 NOTIFIED VIDE GOVT. OF WEST BENGAL NOTIFICATION NO 91/CI/H/4 F-54/2000 DATED 13.02.2001, WAS CAPITAL SUBSIDY NOT CHARGEABLE TO TAX AND NOT REVEN UE RECEIPT WHICH IS CHARGEABLE TO TAX. THE ASSESSEE POINTED OUT THAT AS PER THE SAID SCHEM E THE INVESTMENT SUBSIDY EQUAL TO 15% OF THE FIXED CAPITAL INVESTMENT MADE FOR SETTIN G UP 'NEW INDUSTRIAL UNIT' AT BACK WARD AREA IN THE DISTRICT OF BURDWAN, BEFORE COMMEN CEMENT OF PRODUCTION IS ALLOWED. THE ASSESSEE POINTED OUT THAT THE ASSESSEE SUBMITTE D THE ELIGIBILITY CERTIFICATE DATED 31.01.2003, FINAL SANCTION LETTER COPY OF WEST BENG AL GOVERNMENT INCENTIVE SCHEME 2000, CERTIFICATE OF REGISTRATION UNDER THE ABOVE S CHEME, AND OTHER ALLIED DOCUMENTS TO JUSTIFY THAT SUBSIDY IN QUESTION WAS CAPITAL IN NAT URE. THE ASSESSEE POINTED OUT THAT THE BASIC SCHEME OF GOVT. OF WEST BENGAL, COMMERCE & IN DUSTRIES DEPARTMENT, GROUP H, NOTIFICATION NO. 91/CI/4F- 54/2000 DTD 13.02.2001 I S AS FOLLOWS: 3 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 3 'WHEREAS IN PURSUANCE OF A NATIONAL POLICY THE SALE S TAX RELATED INCENTIVE HAVE BEEN WITHDRAWN FROM 1ST JANUARY 2000, AND WHEREAS T HE STATE GOVERNMENT HAVE CONSIDERED IT NECESSARY AND EXPEDIENT TO EXTEND NEW TYPE OF INCENTIVES FOR PROMOTION OF' INDUSTRIES IN THE STATE FROM THE SAME DATE. THE WEST BENGAL INCENTIVE SCHEME 2000(HEREINAFTER R EFERRED TO AS THE 2000 SCHEME) IS FOR INDUSTRIAL PROJECT OF LARGE MEDIUM AND/ SMALL S CALE UNITS, TO BE SET UP IN THE STATE. THE SCHEME SHALL COME INTO EFFECT ON AND FROM 1ST D AY OF JANUARY, 2000 IN THE WHOLE OF WEST' BENGAL AND SHALL REMAIN VALID FOR A PERIOD OF FIVE YEARS ENDING ON 31ST DECEMBER, 2004. AS PER THE SCHEME 'NEW UNIT' MEANS AN INDUSTRIAL UNIT IN THE LARGE ME DIUM/SMALL SCALE SECTOR HAVING INVESTMENT IN CAPITAL ASSETS WHICH IS ESTABLISHED A ND COMMISSIONED BY THE ENTREPRENEUR FOR THE MANUFACTURE OF GOODS IN WEST BENGAL, FOR TH E FIRST TIME ON OR AFTER THE 1ST JANUARY, 2000 AND IS REGISTERED WITH THE DIRECTORAT E OF INDUSTRIES/DIRECTORATE COTTAGE & SMALL SCALE INDUSTRIES/DIRECTORATE OF TOURISM. 'APPROVED PROJECT' : MEANS THE INDUSTRIAL PROJECT O F A UNIT FOR WHICH REGISTRATION CERTIFICATE AND ELIGIBILITY CERTIFICATE HAVE BEEN I SSUED UNDER THE 2000 SCHEME. 'FIXED CAPITAL INVESTMENT': MEANS INVESTMENT MADE I N LAND, BUILDING, PLANT & MACHINERY AND EQUIPMENT INSTALLED FOR POLLUTION CON TROL MEASURES OF THE APPROVED PROJECT OF THE ELIGIBLE UNIT ON OR AFTER THE 1ST AP RIL, 1999 SUBJECT TO OTHER CONDITIONS LAID DOWN IN PARAGRAPH 6 OF 2000 SCHEME. ELIGIBILITY CRITERIA FOR INCENTIVE UNDER THE 2000 S CHEMEIS : LARGE, MEDIUM AND SMALL SECTOR INDUSTRIAL PROJECTS ARE ELIGIBLE FOR SECURIN G ELIGIBILITY CERTIFICATE AFTER FULFILLING CERTAIN CONDITIONS. CLASSIFICATION OF DEVELOPMENT AREAS AND BACKWARD AR EAS: FOR THE PURPOSE OF DETERMINATION OF TYPES AND QUANTUM OF INCENTIVE AVA ILABLE UNDER THE SCHEME FOR THE APPROVED PROJECTS, ACCORDING TO THEIR LOCATION, THE STATE SHALL BE CLASSIFIED IN THE FOLLOWING GROUPS: GROUP A : CALCUTTA MUNICIPALITY AREA, DEVELOPED ARE A. GROUP B : DISTRICT OF BURDWAN AND OTHER BACKWARD AR EA & DISTRICTS. GROUP C : OTHER BACKWARD DISTRICTS. 4 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 4 STATE CAPITAL INVESTMENT SUBSIDY: AN ELIGIBLE INDUS TRIAL UNIT LOCATED IN GROUP 'B' AREA AND SET UP IN THE STATE ON OR AFTER THE 1ST JANUARY , 2000 WILL BE ENTITLED TO STATE CAPITAL INVESTMENT SUBSIDY @ 15% OF THE FIXED CAPITAL INVES TMENT SUBJECT TO A LIMIT OF RS 150 LAKHS. THE ABOVE SCHEME IS APPLICABLE TO THE ASSESSEE AND ACCORDINGLY ELIGIBILITY CERTIFICATE WAS GRANTED AND STATE CAPITAL INVESTMENT SUBSIDY AM OUNTING TO RS 31.15 LAKHS WAS DISBURSED. 5. THE ASSESSEE POINTED OUT THAT THE SOLE PURPOSE BEHIND THE GRANT OF THE ASSISTANCE TO DEVELOP CERTAIN INDUSTRIES IN BACKWARD AREAS OF THE STATE. BOTH THESE ACTIVITIES RELATES TO CAPITAL FIELD AND CANNOT BE CONSIDERED TO BE LINKED UP WITH THE DAY-TO-DAY OPERATION OF THE ASSESSEE IN ANY MANNER. INCENTIVE/SUBSIDY OF TH E GOVERNMENT WAS SANCTIONED BY THE STATE GOVT. BEFORE, COMMENCEMENT OF COMMERCIAL PROD UCTION AND THE QUANTUM OF SUBSIDY WAS DETERMINED ON INVESTMENT MADE BY THE AP PELLANT ON LAND, BUILDING, PLANT & MACHINERY. HENCE INCENTIVE RECEIVED BY THE ASSESSEE THOUGH DEPENDENT UPON CERTAIN CONDITIONALITIES IS ACTUALLY GRATUITOUS IN NATURE A ND FORM CAPITAL RECEIPT IN THE ASSESSEE'S HANDS. THE ASSESSEE RELIED ON THE FOLLOWING TWO CAS ES OF THE APEX COURT, IN SUPPORT OF ITS CLAIMS THAT THE SUBSIDY IN QUESTION WAS CAPITAL RECEIPT NOT CHARGEABLE TO TAX:- (A)PJ CHEMICALS LTD (1994) 210 ITR 830 (SC) WHEREI N THE .APEX COURT HELD THAT WHERE THE GOVT SUBSIDY IS INTENDED AS AN INCENTIVE TO ENC OURAGE ENTREPRENEURS TO MOVE TO BACKWARD AREAS AND ESTABLISH INDUSTRIES THE SPECIFI ED PERCENTAGE WHICH IS THE PERCENTAGE, OF FIXED CAPITAL COST WHICH IS THE BASI S OF DETERMINING THE SUBSIDY BEING ONLY A MEASURE ADOPTED UNDER THE SCHEME TO QUALIFYI NG THE FINANCIAL AID IS NOT PAYMENT DIRECTLY OR INDIRECTLY TO' MEET ANY OF THE ACTUAL C OST, OF SUCH FIXED CAPITAL ASSETS! ' (B) SENAIRAM, DURGAMALL 42 ITR 392 (SC) WHEREIN AT PAGE 397 IT WAS HELD: 'IT IS THE QUALITY OF THE PAYMENT THAT IS DECISIVE OF THE CHARACTER OF THE PAYMENT AND NOT THE METHOD OF THE PAYMENT OF ITS NATURE AND IT FALL WITHIN THE CAPITAL OR REVENUE.' 5 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 5 (C) ITAT KOLKATA BENCH IN THE CASE OF RASOI LTD VS DY COMMISSIONER OF INCOME TAX SPL. RANGE-12, KOLKATA, LT. NO. 1080/CAL/98 (COPY O F THE ORDER ENCLOSED) WHEREIN IT WAS HELD THAT SUBSIDY RECEIVED ON IDENTICAL FACTS W AS HELD TO BE CAPITAL SUBSIDY. (D) IT WAS FURTHER SUBMITTED THAT THE RELIANCE PLAC ED BY THE LD. A.O. ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STE EL & PRESS WORKS LTD AND OTHERS 228 ITR 253 (SC), TO COME TO A CONCLUSION THAT THE SUBSIDY IN QUESTION WAS REVENUE SUBSIDY CHARGEABLE TO TAX IS NOT CORRECT. THE FOLL OWING TABLE WAS GIVEN BY THE ASSESSEE BEFORE CIT(A) IN THIS REGARD:- SAHNEY STEEL & PRESS WORKS LTD APPELLANT COMPANY 'S CASE CASE I)SUBSIDY GRANTED FROM GOVT. AFTER I) SUBSIDY GRAN TED FROM GOVT. THEY STARTED PRODUCTION. THEY STARTED PRODUCTION. BEFORE COMMENCEMENT OF PRODUCTION. II)SUBSIDIES WERE II) SUBSIDY WAS GIVEN @ 15 % ON FIXED (A) REIMBURSEMENT OF SALES TAX CAPITAL INVESTMENT I.E. ON LAND, (B) REIMBURSEMENT TAX ON POWER BU ILDING, PLANT & MACHINERY. CONSUMED & (C) REIMBURSEMENT OF WATER TAXES CHARGES III) AMOUNT RECEIVED WERE PRODUCTION III)AMOUNT RE CEIVED WAS CAPITAL INCENTIVE AND OPERATIONAL SUBSIDIES. INCENTIVE TOWARDS SETTING UP CERTAIN INDUSTRY IN BACKWARD AREAS. 6. THE CIT(A) AGREED WITH THE CONTENTIONS PUT FORT H BY THE ASSESSEE AND HELD THAT THE SUBSIDY IN QUESTION WAS CAPITAL SUBSIDY NOT CHARGEA BLE TO TAX. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(A) IN THIS REGARD: 6.2. I HAVE PERUSED THE ASSESSMENT ORDER AND CON SIDERED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT THE APPELL ANT COMPANY RECEIVED AS SUM OF RS.31.15 LACS FROM GOVT. OF WEST BENGAL AS STATE CA PITAL INVESTMENT SUBSIDY BEING 15%, OF THE FIXED CAPITAL INVESTMENT MADE AS 'NEW' INDUSTRIAL UNIT' NEWLY ESTABLISHED AT BACKWARD AREAS IN THE DISTRICT OF BU RDWAN AS PER THE GOVERNMENT SCHEME. THE SUBSIDY WAS RELATED TO INVESTMENT IN NE W INDUSTRIAL UNIT BEFORE COMMENCEMENT 'OF THE PRODUCTION. HOWEVER, THE' A.O. TREATED THE SAME AS 6 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 6 REVENUE RECEIPT AS AGAINST CLAIM OF THE APPELLANT AS CAPITAL RECEIPT. AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND MERIT IN THE ARGUMENT, BY THE APPELLANT. THE SUBSIDY WAS GRANTED BY THE GOVT. OF WEST BENGAL BEFORE COMMENCEMENT OF THE PRODUCTION WHICH WAS FOR THE PURPOSE OF FIXED CAPITAL INVESTMENT. THEREFORE, THE RECEIPT AR E CERTAINLY IN THE NATURE OF CAPITAL RECEIPT. THE FACTS OF THE JUDGMENT RELIED U PON BY THE A.O. IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. AND OTHERS 228 ITR 253 (SC) ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. UNDER THESE CIRCUMST ANCES AND ALSO F9OLLOWING THE RATIO OF THE JUDGEMENTS OF HONBLE SUPREME COURT IN THE CASE OF E.J.CHEMICALS LTD. (1994) 210 ITR 830(SC) AND SENAIRAM, DURGAMALL 1961 42 ITR 392(SC) AND ALSO THE JUDGEMENT OF HONBLE ITAT KOLKATA IN T HE CASE OF RASOI LTD. VS DCIT SPL. RANGE-12, KOLKATA I.T.NO.1080/CAL/98 AS C ITED BY THE APPELLANT, THE APPEAL ON THIS GROUND IS ALLOWED. 7. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE HAS RA ISED GROUND NOS. 1 AND 2 BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DR, WHO RELIED ON THE ORDER OF AO AND THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE T ESTS TO BE APPLIED TO DECIDE THE QUESTION WHETHER A SUBSIDY RECEIVED BY AN ASSESSEE HAS TO BE REGARDED AS CAPITAL OR REVENUE SUBSIDY HAS BEEN LAID DOWN IN SEVERAL DECIS IONS OF HONBLE SUPREME COURT AND HONBLE HIGH COURTS. THE HONBLE SUPREME IN CIT , MADRAS VS. PONNI SUGARS & CHEMICALS LIMITED, CIVIL APPEAL NO.5694 TO 5715 OF 2008, [2008] 174 TAXMAN 87 (SC) HAS HELD THAT, `IT IS THE OBJECT FOR WHICH SUBSIDY/ ASSISTANCE IS GIVEN, THAT TRULY DETERMINES NATURE OF SUBSIDY. THE CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH TH E SUBSIDY IS GIVEN. IN OTHER WORDS, IN SUCH CASES ONE HAS TO APPLY THE `PURPOSE TEST. THE POINT OF TIME WHEN THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL; THE FORM OF SUBSIDY IS ALSO IMMATERIAL . IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY, THEN THE RECEIPT WAS ON REVENUE AC COUNT. ON THE OTHER HAND, IF THE 7 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 7 OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME W AS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND ITS EXISTING UNITS, THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY/ ASSISTANCE IS GIVEN WHICH DETERMINES THE NATURE OF INCENTIVE SUBSIDY. T HE FORM OF THE MECHANISM THROUGH WHICH THE SUBSIDY IS GIVEN IS IRRELEVANT. 10. IT WOULD ALSO BE OF IMMENSE MERIT TO REFER TO ANOTHER JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE TITLED COMMISSIONER OF INCOME TAX VS. RASOI LIMITED [2011] 335 ITR 438, WHEREIN IT HAS BEEN HELD BY TH E HONBLE COURT BY MAKING A DUE REFERENCE TO THE JUDGEMENT OF THE HONBLE APEX COUR T IN THE CASE TITLED COMMISSIONER OF INCOME TAX VS. PONNI SUGARS & CHEMICALS LTD [200 8] 174 TAXMAN 87 (SC) THAT ONE TIME SUBSIDY RECEIVED AS A PERCENTAGE OF SALES TAX PAID FOR MODERNIZATION AND EXPANSION PURPOSES WOULD CONSTITUTE A CAPITAL RECEIPT NOT SUBJECT TO T HE RIGOURS OF TAX UNDER THE INCOME TAX ACT, 1961. THE HONBLE CALCUTT A HIGH COURT FURTHER HELD THAT MERELY BECAUSE SUBSIDY RECEIVED WAS EQUIVALENT TO A SUBSTANTIAL PERCENTAGE OF THE SALES TAX PAID, IT CANNOT BE CONSTRUED THAT THE SAME WAS IN FORM OF REFUND OF SALES TAX PAID AND EXIGIBLE TO TAX. HENCE ONE TIME SUBSIDY RECEIVED FR OM THE STATE GOVERNMENT UNDER THE SCHEME OF INDUSTRIAL PROMOTION FOR EXPANSION OF ITS FACILITIES AND FOR MODERNIZATION PURPOSES IS CAPITAL RECEIPT AND CANNOT BE BROUGHT INTO TAX NET. 11. KEEPING IN MIND THE PRINCIPLES LAID DOWN IN TH E AFORESAID DECISIONS REFERRED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE SHALL NOW SEE THE OBJECTS OF THE SCHEME UNDER WHICH THE ASSESSEE RECEIVED SUBSIDY IN THE PRESENT CASE. THE OBJECT AND PURPOSE OF THE SCHEME HAS ALREADY BEEN SET OUT IN THE EARLIER PARA GRAPHS. IT IS CLEAR FROM THE READING OF THE OBJECTIVE OF THE SCHEME IS TO WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT. THE OBJECT OF THE SCHEME IN THE PRESENT CASE WAS TO PRO MOTION OF' INDUSTRIES IN THE STATE OF WEST BENGAL. IT WAS AVAILABLE TO A 'NEW UNIT' WHICH HAS BEEN DEFINED UNDER THE SCHEME TO MEAN AN INDUSTRIAL UNIT IN THE LARGE MEDI UM/SMALL SCALE SECTOR HAVING INVESTMENT IN CAPITAL ASSETS WHICH IS ESTABLISHED A ND COMMISSIONED BY THE ENTREPRENEUR 8 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 8 FOR THE MANUFACTURE OF GOODS IN WEST BENGAL, FOR THE FIRST TIME ON OR AFTER THE 1ST JANUARY, 2000 AND IS REGISTERED WITH THE DIRECTORATE OF INDUSTRI ES/DIRECTORATE COTTAGE & SMALL SCALE INDUSTRIES/DIRECTORATE OF TOURISM. ON CE THE OBJECTIVE OF THE SCHEME IS TO ENABLE SETTING UP OF A NEW UNIT, THE MANNER AND QUA NTUM IN WHICH THE SUBSIDY IS DISBURSED IS OF NO CONSEQUENCE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO GROUNDS TO INTERFERE WITH THE CONCLUSIONS O F THE CIT(A). CONSEQUENTLY, GR.NO.1 & 2 RAISED BY THE REVENUE ARE DISMISSED. 12. GROUND NO.3 RAISED BY THE REVENUE READS AS FOLL OWS :- 03. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) IS CORRECT IN ALLOWING DEPRECIATION ON MOULDS @ 30% WHEN THERE IS NO SUCH PROVISION IN THE I.T. RULES I ACT. MOREOVER, IT IS ALSO NOT MENTIONE D BY LD. CIT(A) WHETHER MOULDS AND ROLLING MILL ROLLS (FOR WHICH DEPRECIATION IS A VAILABLE @ 80%) ARE TECHNICALLY SAME ITEM. 13. ON PERUSAL OF THE DEPRECIATION CHART AO NOTICE D THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF 30% ON ACCOUNT OF MOULDS. ACCORDING TO THE AO THE MOULDS WERE TO BE TREATED AS PLANT AND MACHINERY AND 15% DEPRECIATION WERE ALLOWED THERETO. CONSEQUENTLY THE DEPRECIATION OF RS.12,54,893/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 14. ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED TH E ADDITION MADE BY THE AO BY OBSERVING AS FOLLOWS :- 9.1. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A.R. OF THE APPELLANT SUBMITTED AS UNDER : THE ADDITION OF RS.12,54,893/- ON EXCESS DEPRECIA TION CHARGES ON MOULDS. AS PER I.T.ACT U/S 32 & RULES 5 APPENDIX I IN CA SE OF IRON & STEEL INDUSTRY ROLLING MILLS (MOULDS) DEPRECIATION IS ALLOWABLE AT THE RATE OF 80% P.A. HOWEVER THE APPELLANT COMPANY HAD CLAIMED DEPRECIAT ION ON MOULDS (ROLLING MILLS ROLLS) AT THE RATE OF 30% P.A. (INSTEAD OF ALLOWABLE DEPRECIATION OF 80%). 9 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 9 THE LD. A/.O. WITHOUT CONSIDERING THE ABOVE FACTS A RBITRARIL7Y AND ON ESTIMATED BASIS DISALLOWED 15% OF THE DEPRECIATION ON MOULDS, TREATING MOULDS AS PLANT & MACHINERY. YOUR GOODSELF IS REQUE STED TO DELETE THE ADDITION MADE BY LD. A.O. 9.2. I HAVE PERUSED THE ASSESSMENT ORDER AND CONSID ERED THE SUBMISSION OF THE APPELLANT. THE FACT OF THE CASE IS THAT THE APPELLA NT WAS HAVING AN IRON & STEEL INDUSTRY ROLLING MILLS (MOULD). AS PER SECTION 32 AND RULE 5, DEPRECIATION IS ALLOWABLE @ 80% ON SUCH MOULDS. HOWEVER, THE APPELL ANT CLAIMED ONLY 30%. THEREFORE, THE A.O. WAS NOT JUSTIFIED TO RESTRICT T HE CLAIM AT 15%. APPEAL ON THIS GROUND IS, THEREFORE, ALLOWED. 15. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE H AS RAISED GROUND NO.3 BEFORE THE TRIBUNAL. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARN ED DR BROUGHT TO OUR NOTICE THAT AS PER APPENDIX I TO THE RULES MOULD USED IN RUBBER AND PLASTIC MANUFACTURE ALONE ARE ENTITLED TO DEPRECIATION AT 30% AS PER PART-A III (3)(VII) TO APPENDIX-I. ACCORDING TO HIM THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURIN G OF IRON INGOTS AND THEREFORE THE ASSESSEE CANNOT GET 30% DEPRECIATION. THE LEARNED C OUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT IN PART A-III(8)(VII) ROLLING M ILLS IN IRON AND STEEL INDUSTRY ARE ENTITLED TO DEPRECIATION AT 80%. ACCORDING TO HIM R OLLING MILLS USED IN IRON AND STEEL INDUSTRY ARE ALSO IN THE NATURE OF MOULDS BUT ARE I N A ROLLING FORM AND THEREFORE THE CONCLUSION OF THE CIT(A) WAS CORRECT. ACCORDING TO HIM THEREFORE THE CONCLUSION OF CIT(A) THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEPR ECIATION AT 80% AS AGAINST WHICH IT HAD CLAIMED ONLY 30% IS CORRECT AND HAS TO BE UPHEL D. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E OF THE VIEW THAT THE ISSUE REQUIRES FRESH CONSIDERATION BY THE AO. THERE IS NO BASIS TO COME TO A CONCLUSION THAT ROLLING MILLS USED IN IRON AND STEEL INDUSTRY ARE A LSO IN THE NATURE OF MOULDS BUT ARE IN A ROLLING FORM. AS TO WHETHER THEY ARE MATERIALLY SA ME OR DIFFERENT CANNOT BE DECIDED WITHOUT TECHNICAL AND EXPERT EVIDENCE. IT IS ALSO SEEN THAT MOULDS USED IN RUBBER AND 10 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 10 PLASTIC MANUFACTURE ARE ENTITLED TO HIGHER DEPRECIA TION OF 30%. A DIFFERENT TREATMENT FOR MOULDS USED IN IRON INGOT MANUFACTURE CANNOT BE ALL OWED ON THE BASIS OF SUCH GENERAL OBSERVATIONS AS DONE BY THE CIT(A). THEREFORE WE S ET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO EXAMINE THE CLAIM O F THE ASSESSEE IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE. GR.NO.3 RAISED BY THE REV ENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 18. IN THE RESULT, APPEAL IS TREATED AS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 6.4.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6.4.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD., 1 ST FLOOR, 135A, BIPLABI RASHBEHARI BASU ROAD, KOLKATA-700020. 2. D.C.I.T., CIRCLE-3, KOLKATA. 3. CIT(A)-XX, KOLKATA 4. CIT-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER A SSTT.REGISTRAR, ITAT, KOLKATA BENCHES 11 ITA NO.1517/KOL/2013 M/S. BARJORA STEEL & REROLLING MILLS PVT. LTD. A.YR.2006-07 11