Girdhar Fibers Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 1582/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5578 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHRY
• Keywords: Depreciation; Set aside
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.1582/AHD/2008 A. Y.: 2005-06 GIRDHAR FIBERS PVT. LTD., 3006, WORLD TRADE CENTRE, RING ROAD, SURAT VS THE D. C. I. T., CIRCLE-1, AAYKAR BHAWAN, MAJURA GATE, SURAT PAN NO. AACCG 0843 L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI HARDIK VORA, AR RESPONDENT BY SHRI D. S. CHAUDHRY, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, SURAT DATED 18-0 2-2008 FOR ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT THE CIT(APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.16,46,849/- MADE BY T HE DCIT BY WAY OF DISALLOWANCE OUT OF DEPRECIATION CLAIMED ON MACHINERIES, PURCHASED UNDER TUFS OF THE GOVT. OF INDIA. 2. IT IS THEREFORE PRAYED THAT THE ADDITION OF RS.16,46,849/- CONFIRMED BY THE HON. CIT (APPEALS) MAY PLEASE BE DELETED. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO DISA LLOWED DEPRECIATION OF RS.16,46,849/- OUT OF TOTAL DEPRECI ATION OF RS.36,27,189/- CLAIMED @ 50% ON PLANT AND MACHINERY UNDER TECHNOLOGY UP-GRADATION FUND SCHEME (TUF) FOR TEXTI LE AND JUTE INDUSTRIES. IN THE ASSESSMENT ORDER THE AO HAS STAT ED THAT THE ASSESSEE ITA NO. 1582/AHD/2008 GIRDHAR FIBRES PVT. LTD. VS DCIT, CIRCLE-1, ANAND 2 COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TEXTURISED YARN. THE SAME ACTIVITY WAS UNDERTAKEN B Y THE ASSESSEE COMPANY IN THE LAST YEAR AND UNIT WAS STARTED IN TH E MONTH OF MARCH, 2004. THE ASSESSEE PURCHASED POY WHICH IS CONVERTED INTO TEXTURISED YARN THROUGH MECHANICAL PROCESS. THE ASSESSEE CLAIM ED HIGHER DEPRECIATION UNDER TUF SCHEME FOR PLANT AND MACHINE RY. THE ASSESSEE EXPLAINED THAT THE ASSESSEE PURCHASED MACHINERY UND ER TUF SCHEME AND LOAN WAS ALSO GRANTED BY THE BANK UNDER TUF SCH EME. THEREFORE, THE ASSESSEE WAS ENTITLED FOR HIGHER DEPRECIATION. BUT THE AO HOWEVER, DID NOT ACCEPT THE EXPLANATION AND STATED THAT TUF SCHEME FOR TEXTILE AND JUTE INDUSTRIES MAY PROVIDE SOME BENEFIT BUT UN DER THE INCOME TAX RULES THE DEPRECIATION IS AVAILABLE UNDER TUF SCHEM E ONLY IN RESPECT OF WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE I NDUSTRY. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF HIGHER DEPRECIA TION. THE LEARNED CIT(A) CONFIRMED THE FINDING OF THE AO. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT TRIBUNAL HAS TAKEN A VIEW THAT TEXTURISING AND TWISTING ACTIVITI ES ARE PART OF PROCESSING AND ARE COVERED UNDER APPENDIX I PART A III, AT S R. NO.6 WHICH HAVE BEEN REFERRED BY THE AO IN THE ORDER AND FILED COPI ES OF SEVERAL ORDERS OF THE TRIBUNAL IN SUPPORT OF THE CONTENTION. HE HAS F URTHER SUBMITTED THAT OBJECTION OF THE LEARNED DR WAS ORIGINALLY CONSIDER ED BY THE TRIBUNAL IN THE CASE OF AGARWAL RAYONS PVT. LTD. VS ITO IN ITA NO.3186/AHD/2007 VIDE ORDER DATED 09-07-2010 AND CLAIM OF THE ASSESS EE HAS BEEN ALLOWED BY THE TRIBUNAL COPY OF WHICH IS FILED IN THE PAPER BOOK ALONG WITH OTHER ORDERS OF THE TRIBUNAL. HE HAS SUBMITTED THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE LEARNED DR REITERATED T HE STAND OF THE DEPARTMENTAL APPEAL AS IS EARLIER ARGUED BY THE LEA RNED DR IN THE CASE OF AGARWAL RAYONS PVT. LTD. (SUPRA). ITA NO. 1582/AHD/2008 GIRDHAR FIBRES PVT. LTD. VS DCIT, CIRCLE-1, ANAND 3 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE ORDER OF THE TRIBUNAL IN SEVERAL CASES PARTICULARLY IN THE CASE OF AGARWA L RAYONS PVT. LTD. (SUPRA) IN WHICH THE SUBMISSIONS OF THE PARTIES AND FINDINGS OF THE TRIBUNAL ARE REPRODUCED AS UNDER: 5. THE LD. A.R. SUBMITTED THAT TRIBUNAL HAS TAKEN A VIEW THAT TEXTURISING AND TWISTING ACTIVITIES ARE PART OF THE PROCESSING AND ARE COVERED UNDER APPENDIX-1 PART-A, III AT SR.NO.6 WHI CH HAS BEEN REFERRED TO BY A.O. ON PAGE-4 OF THE ASSESSMENT ORD ER. HE REFERRED TO THE FOLLOWING JUDGEMENTS IN SUPPORT OF HIS CONTE NTION:- 1. MAVIN TEXTURISERS PVT. LTD. VS. DCIT [ ITA NO.10 44/AHD/07] 2. NANGALIA SYNTHETICS PVT. LTD. VS. DCIT[ITA NO.22 13/AHD/08] 3. BIPINCHANDRA MOHANLAL GAJJAR VS. ITO [ ITA NO. 3128/AHD/08 4. FAIRDEAL FILAMENTS LTD. VS. DCIT [ ITA NO. 870 /AHD/07 ] 6. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT FA CTS IN THE CASE OF THE PRESENT ASSESSEE ARE DIFFERENT THAN THE FACTS IN THE CASE OF JUDGEMENTS REFERRED TO BY LD. A.R. HE MADE FOLLOWING SUBMISSIONS ON PLAIN READING OF THE PROVISIONS OF RULE-5 VIS-A -VIS ASSETS IDENTIFIED FOR DEPRECIATION @ 50% IT COULD BE SEEN THAT MACHINERY & PLANT USED IN WEAVING, PROCESSING AND G ARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS PURCHASED UNDE R TUFS ON OR AFTER 1 ST DAY OF APRIL,2001, BUT BEFORE THE LST DAY OF APRIL,2004 AND IS PUT TO USE BEFORE THE 1STDAY OF A PRIL,2004 IS ELIGIBLE FOR DEPRECIATION OF HIGHER RATE ( @ 50% ) AS AGAINST NORMALLY ALLOWED DEPRECIATION @ 25%. ON GOING THROUGH THE DECISION OF HONBLE ITAT, AHME DABAD RELIED UPON BY THE APPELLANT (NO.2 TO 5), THE NATURE OF BU SINESS ACTIVITY OF THE APPELLANT IS LISTED AS UNDER: ITA NO. 1582/AHD/2008 GIRDHAR FIBRES PVT. LTD. VS DCIT, CIRCLE-1, ANAND 4 SR.NO. NAME OF APPELLANT. NATURE OF BUSINESS. 1. MAVIN TEXTURISERS PVT. LTD. MANUFACTURING OF YA RN & CLOTH. 2. NAGALIA SYNTHETICS PVT. LTD. -DO- 3. BIPINCHANDRA MOHANLAL GAJJAR. MANUFACTURING OF YARN & ART SILK CLOTH. 4. FAIRDEAL FILAMENTS LTD. MANUFACTURING OF GREY FABRICS, SIZING, TEXTILE RISING AND TWISTING OF YARN. 5. AGARWAL RAYONS P. LTD. MANUFACTURING OF YARN. FROM THE ABOVE TABLE FOLLOWING INFERENCES COULD BE DRAWN. 1. ALL THE FOUR APPELLANTS WERE ENGAGED IN THE COMP OSITE ACTIVITY OF MANUFACTURING OF YARN AND ART SILK CLOT H. 2. THEY HAD SEPARATE UNIT FOR MANUFACTURING OF YARN & ART SILK CLOTH. 3. THE YARN MANUFACTURED BY THEM WAS USED FOR CAPTI VE CONSUMPTION OF THE APPELLANTS THEMSELVES TO MANUFAC TURE ART SILK CLOTH. 4. THERE WAS PERFECT BACKWARD AND FORWARD LINKAGE BETWEEN MANUFACTURING PROCESS OF YARN AND ART SILK CLOTH. IN LIGHT OF THE ABOVE INFERENCES WHAT ONE COULD SAF ELY CONCLUDE IS BENEFIT OF DEPRECIATION AT HIGHER RATE ALLOWED BY THE HONBLE ITAT., AHMEDABAD IS TO ALL THOSE APPELLANTS WHICH HAD WEAVING FACILITY ON THEIR OWN AND USED MANUFACTURED YARN FOR THEIR OWN CAPTIVE CONSUMPTION. THIS, NO DOUBT, QUALIFIES TO DEPRECIATION AT HIGHER RATE (@ 50%) BEING MACHINERY & PLANT USED IN WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILES. HOWEVER, IN THE CASE OF APPELLANT, THE BUSINESS ACT IVITY CARRIED OUT IS ONE AND ONLY MANUFACTURING OF YARN. MANUFACTURING OF YARN IS DIFFERENT AND DISTINGUISHABLE FROM THE WEAV ING ACTIVITY. THE LEGISLATURES INTENTION IS CRYSTAL CLEAR VIS-- VIS ALLOWING DEPRECIATION OF HIGHER RATE TO ONLY THOSE ASSESSEES IN WHOSE CASES MACHINERY AND PLANT WAS PURCHASED UNDER TUF SCHEME AND USED FOR WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTI LE. THE LEGISLATURES INTENT IS FURTHER EVIDENCE FROM THE FA CT THAT IT HAS RESTRICTED THE BENEFIT OF HIGHER RATE OF DEPRECIATI ON TO WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE ONLY. IMPL IED IN IT IS THAT THERE ARE OTHER SECTORS IN TEXTILE INDUSTRY, IN WHO SE CASE THIS BENEFIT WAS NOT ALLOWED. ITA NO. 1582/AHD/2008 GIRDHAR FIBRES PVT. LTD. VS DCIT, CIRCLE-1, ANAND 5 IT IS ALSO SUBMITTED THAT AS COULD BE SEEN ELSEWHER E IN THE I.T. ACT THAT WHEREVER AND WHENEVER CERTAIN SPECIAL BENEFITS IN THE FORM OF DEDUCTIONS, EXEMPTIONS, ALLOWANCES ETC., AR E CONFERRED TO ANY CLASS OR CLASSES OF APPELLANTS, THE ACT IS CATE GORICAL IN CLASSS OR CLASSES OF APPELLANTS WHO ARE ELIGIBLE TO AVAIL THE SPECIAL BENEFITS. ONE SUCH EXAMPLE IS EXPORT BENEFIT AVAILABLE TO APP ELLANT EXPORTING GOODS OUT OF INDIA U/S. 80HHC. THE PROVISION OF SEC . 80HHC ALSO SPECIFIES ALLOWABILITY OF DEDUCTION U/S. 80HHC TO S UCH SUPPORTING MANUFACTURER SUBJECT TO FULFILLMENT OF CERTAIN SPE CIFIC TERMS AND CONDITIONS. ABOVE FACTS SQUARELY APPLICABLE TO APPE AL UNDER CONSIDERATION. IT IS ALSO HUMBLY SUBMITTED THAT THE VIEW EXPRESSE BY THE SUPREME COURT IN THE CASE OF IPCA LABORATORIES (266 ITR-521) WHICH CAN ACT AS GUIDING FORCE IN THE INSTANT CASE ALSO. THE SUPREME COURT OPINED IN ITS ORDER (SUPRA) THAT AN I NCENTIVE PROVISION HAS TO BE STRICTLY INTERPRETED AND IF THE WORDINGS OF THE SECTION IS CLEAR, THEN BENEFITS WHICH ARE NOT AVAIL ABLE CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN T HE SECTION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORDS. IN OUR CONSIDERED VIEW THE FACTS OF THE PRESENT CASE AND FACTS IN THE CASE OF REFERRED TO BY THE LD. A. R. PARTICULARLY IN THE CASE OF NANGAL IA SYNTHETICS PVT. LTD., ARE SIMILAR. IN THAT CASE THE TRIBUNAL HAS OBSERVED AS UNDER:- 7. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT AHM EDABAD D BENCH IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR V S. ITO,WD- 6(1), SURAT IN ITA NO. 3128/AHD/2008 DATED 18-02-20 09 RELATING TO A.Y. 2005-06.THE ISSUE RAISED BY THE ASSESSEE IN TH IS APPEAL IS SIMILAR TO THAT OF THE CASE OF BIPINCHANDRA MOHANL AL GAJJAR (SUPRA), WE HOLD THAT SINCE ADMITTEDLY, THE TWISTING MACHINE WAS USED BY WEAVING SECTOR OF TEXTILE INDUSTRY, DEPRECIATION ON THE SAID MACHINERY @ 50% SHOULD BE ALLOWED. WE ACCORDINGLY, ALLOW THE GROUND OF APPEAL. 8. THE LD. D.R. HAS SOUGHT TO DISTINGUISH THE AUTHO RITIES REFERRED TO BY THE LD. A.R. ON THE GROUND THAT THER E WAS A NEXUS OF BACKWARD AND FORWARD LINKAGES OF THE ACTIVITIES. TH ERE WAS A COMPOSITE ACTIVITY IN THESE CASES. WHEREAS IN THE C ASE OF THE PRESENT ASSESSEE IT IS ONLY MANUFACTURING OF YARN A ND NO WEAVING CARRIED OUT. HOWEVER, DISTINCTION SOUGHT TO BE MADE BY THE LD. D.R. IS ARTIFICIAL AND DOES NOT CONFIRM TO THE LANGUAGE USED IN THE RULES. ITA NO. 1582/AHD/2008 GIRDHAR FIBRES PVT. LTD. VS DCIT, CIRCLE-1, ANAND 6 IN FACT, TEXTURISING AND TWISTING ACTIVITIES ARE PA RT OF PROCESSING. IT IS INCORRECT ON THE PART OF THE A.O. TO HOLD THAT LANG UAGE USED IN THE RULE CONFINE PROCESSING OF CLOTH ONLY AND NOT TEXTU RISING AND TWISTING OF THE YARN. THE LANGUAGE USED IN RULE -6 OF BLOCK 3 OF APPENDIX -1 OF DEPRECIATION TABLE READS AS UNDER:- MACHINERY AND PLANT, USED IN WEAVING PROCESSING AN D GARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS PURCHA SED UNDER TUFS.. FROM THIS IT CANNOT BE READ THAT WEAVING AN D PROCESSING IS PROVIDED BY CLOTH SO AS TO INFER THAT IT IS ONLY WEAVING AND PROCESSING OF CLOTH WHOSE MACHINERIES A RE ENTITLED FOR HIGHER DEPRECIATION. THE WORDS USED AR E WEAVING, PROCESSING AND GARMENTS SECTOR OF TEXTILE INDUSTRY. 9. IN OTHER WORDS, WEAVING, PROCESSING AND GARMENTS SECTOR ARE PART OF TEXTILE INDUSTRIES WHICH IS A LARGER GR OUP. IN THIS TEXTILE INDUSTRY, THE WEAVING PROCESSING AND GARMENT SECTOR ARE COVERED IN RESPECT OF WHOSE MACHINERIES, THE HIGH RATE OF D EPRECIATION IS PROVIDED. THUS THE WORD PROCESSING WOULD INCLUDE TE XTURISING AND TWISTING OF YARN WHICH IS FINALLY USED IN TEXTILE I NDUSTRY. THUS RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE TRIBUNAL WE ALLOW THE CLAIM OF THE ASSESSEE. 10. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS AL LOWED . 5. BY FOLLOWING THE ABOVE ORDER, WE SET ASIDE THE O RDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. 6. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 23-07-2010. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23-07-2010 LAKSHMIKANT/- ITA NO. 1582/AHD/2008 GIRDHAR FIBRES PVT. LTD. VS DCIT, CIRCLE-1, ANAND 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD