The DCIT, Circle-4, Ahmedabad V. Fairdeal Suppliers Pvt.Ltd., Ahmedabad

ITA 1675/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9881 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR VERMASR
• Assessee Lawyers: PF JAIN
• Keywords: Depreciation; Additional depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1675/AHD/2013 ( / ASSESSMENT YEAR : 2009-2010) THE DEPUTY COMMISSIONER OF INCOME TAX, 1 ST FLOOR, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, CIRCLE-4, AHMEDABAD. / VS. FAIRDEAL SUPPLIERS PVT.LTD, 4 TH FLOOR, SHALIN BUILDING, NR NEHRU BRIDGE, ASHRAM ROAD, AHMEDABAD 380 0009 ./ ./ PAN/GIR NO. : AAACF 2878 C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUMIT KUMAR VERMA,SR.D.R. / RESPONDENT BY : SHRI P.F. JAIN, A.R. / DATE OF HEARING 09/11/2016 / DATE OF PRONOUNCEMENT 30/11/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER OF THE CIT(A) NO.VIII/ACIT/CIR.4/312/11-12 DATED 26/03/2013 AND FOLLOWING GROUND HAS BEEN TAKEN. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION @20% AMOUNTING TO RS.92,00,000/- WITHOUT APPRECIATING THE FACT THAT GENERATION OF POWER IN A POWER PLANT CANNOT BE SAID TO BE PRODUCTION OF MANUFACTURING OF AN ARTICLE OR THING. ITA NO.1675 AHD/2013 THE DCIT VS.FAIRDEAL SUPPLIERS PVT.LTD. ASST.YEAR 2009-2010 - 2 - 2. FACTS OF THE CASE ARE:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED 20% ADDITIONAL DEPRECIATION ON WIND MILL. THE VALUE OF WIND MILL IS RS.4,60,00,000/-. ADDITIONAL DEPRECIATION ON WIND MILL IS NOT ALLOWABLE. ACCORDINGLY, HE ASSESSEE VIDE ORDER SHEET ENTRY DTD.07.12.2011 WAS ASKED TO SHOW CAUSE AS TO WHY 20% OF DEPRECIATION ON WIND MILL OF RS.4,60,00,000/- WHICH IS WORKED OUT AT RS. 92,00,000/- SHOULD NOT BE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE COMPANY. IN RESPONSE TO SAID NOTICE THE ASSESSEE STATED THAT WE HAVE TO STATE THAT THE DETAILS OF WIND MILLS PURCHASED, INSTALLED AND PUT TO USE DURING THE YEAR UNDER REVIEW WERE SUBMITTED WITH OUR EARLIER LETTER. IN THIS REGARD WE HAVE TO STATE THAT WIND MILL MACHINES COSTING RS.4,60,00,000/- WERE ADDED DURING THE YEAR. THE DETAILS SUBMITTED EARLIER SHOW COMPLETE DETAILS OF MACHINE NUMBER, DATE OF BILL, BILL NUMBER, DATE OF ADDITION, NAME OF SUPPLIER, NUMBER OF MACHINES, COST OF MACHINE, COST OF OTHER ACCESSORIES, LOCATION, TOTAL AMOUNT OF INVESTMENT, DATE OF COMMISSIONING/PUT TO USE AND TOTAL AMOUNT OF BILL RAISED. AS CAN BE SEEN FROM THE ABOVE REFERRED TABLE AND FACTS, IT CAN BE EASILY CONSTRUED THAT MACHINE ARE BOUGHT, INSTALLED AND PUT TO USE ON OR BEFORE 31/03/2009. WE HAVE TO FURTHER SUBMIT THAT THE ASSESSEE HAS ALSO CLAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA) @ 20% BECAUSE IN THE SECTION IT IS STATED THAT THE ADDITIONAL DEPRECIATION WILL BE AVAILABLE FOR NEW MACHINERIES OR PLANT INSTALLED ON OR AFTER 31/03/2005 BY AN ASSESSEE AND ENGAGED IN THE BUSINESS OF MANUFACTURING OUR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION. HERE IN THIS CASE THE ASSESSEE COMPANY IS ENGAGED IN THE PRODUCTION OF ENERGY WHICH CAN BE CLASSIFIED AS A THING AND ALSO AS AN ARTICLE. AS ALL THE CONDITIONS OF NEW MACHINERY AND PRODUCTION OF ENERGY ARE FULFILLED, THE ASSESSEE COMPANY IS ELIGIBLE FOR CLAIMING ADDITIONAL DEPRECIATION @ 20%. HOWEVER, IF YOU STILL BEG TO DIFFER ON THIS ACCOUNT THEN WE HUMBLY PLEAD THAT THE RESULTING WDV AS ON 31.03.2009 BE INCREASED BY CORRESPONDING AMOUNT AND THE RESIDUAL DEPRECIATION AVAILABLE DURING A.Y. 2010-11 BE INCREASED BY RESPECTIVE CORRESPONDING FIGURE. FURTHER NO PENALTY PROCEEDINGS BE INITIATED FOR THE DISALLOWANCE OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.92,00,000/- COMPUTED AT THE RATE OF 20% FOR PART OF THE YEAR ON ADDITIONAL OF WINDMILL OF RS.4,60,00,000/-. ITA NO.1675 AHD/2013 THE DCIT VS.FAIRDEAL SUPPLIERS PVT.LTD. ASST.YEAR 2009-2010 - 3 - WE WOULD LIKE TO DRAW YOU KIND ATTENTION TO THE JUDGMENTS IN THE CASE OF CIT VS. HI TECH ARAI LTD. 321 ITR 477 (MADRAS), CIT VS. VTM LTD. 319 ITR 336 (MADRAS) AND CIT VS TEXMO PRECISION CASTINGS LTD. 321 ITR 481(MADRAS), WHERE IT IS HELD THAT FOR THE APPLICATION OF S. 32(1)(IIA) WHAT IS REQUIRED TO BE SATISFIED IS THAT THE SETTING UP OF NEW MACHINERY OF PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31 ST MARCH, 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THERE IS NO REQUIREMENT THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. IN ALL THE ABOVE REFERRED CASES THE HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION ON WIND MILLS INSTALLED AFTER 31/03/2002. COPIES OF THE ABOVE REFERRED JUDGMENTS ARE ENCLOSED HEREWITH AN ANNEXURE-1. IN ADDITION TO THE ABOVE, WE HAVE TO STATE THAT AS THE WIND MILL MACHINES HAVE BEEN PUT TO USE ACTIVELY AND THE ASSESSEE COMPANY IS ELIGIBLE FOR DEPRECIATION AS WELL AS ADDITIONAL DEPRECIATION AND NO DISALLOWANCE OR ADDITION BE MADE IN THIS REGARD. 3. THE SUBMISSION MADE BY THE ASSESSEE WAS CONSIDERED CAREFULLY REQUIRED BY THE AO BUT NOT FOUND ACCEPTABLE. AS PER PROVISION OF SECTION 32(1)(IIA) OF THE INCOME-TAX ACT, 1961, THE ADDITIONAL DEPRECIATION IS AVAILABLE ONLY TO THE ORGANIZATION ENGAGED IN THE MANUFACTURING OR PRODUCTION OF ARTICLE AND THINGS. IT IS PLAIN AND SIMPLE THAT POWER CANNOT BE MANUFACTURED OR PRODUCED. IT IS MERELY CONVERSION OF ONE FORM OF ENERGY INTO ANOTHER FORM WITHOUT ANY CHANGE IN CHEMICAL COMPOSITION. THERE IS NO MANUFACTURING ACTIVITY INVOLVED IN GENERATION OF POWER. 4. THEREFORE, ACCORDINGLY LD.AO MADE THE ADDITION OF RS.92,00,000/- AND DID NOT ALLOW DEPRECIATION AND ALSO DISALLOWANCE WERE MADE U/S.14A OF THE ACT TO THE TUNE OF RS.1,77,682/- AND AMOUNT IN DIMINISHING NATURE OF VALUE OF ASSETS AND TOTAL INCOME WAS COMPUTED RS.8,29,59,283/-. 5. AGAINST THE SAID ORDER ASSESSEE PREFERRED STATUTORY APPEAL BEFORE THE LD.CIT(A) WHO ALLOWED THE DEPRECIATION OF RS.92,00,000/- BY FOLLOWING OBSERVATION THAT I HAVE GONE THROUGH THE RELEVANT PORTION OF THE ITA NO.1675 AHD/2013 THE DCIT VS.FAIRDEAL SUPPLIERS PVT.LTD. ASST.YEAR 2009-2010 - 4 - ORDER AND MORE PARTICULARLY PAGE NO.13 OF THE SAME AND ALSO THE SUBMISSION OF THE APPELLANT. I HAVE OBSERVED THAT THE A.O. HAS NOWHERE IN THE ORDER MENTIONED ABOUT HIS INTENTION OF MAKING THE ADDITION OF RS.92,00,000/- UNDER THE MAT PROVISIONS. IT IS ONLY ON PAGE NO.13, WITHOUT ANY MENTION OF SUCH INTENTION; THIS AMOUNT OF RS.92,00,000/- IS ADDED TO THE BOOK PROFIT. EVEN THERE IS NO PROVISION UNDER SECTION 115JB, WHERE SUCH ADDITIONS IN THE NORMAL COURSE CAN BE ADDED TO BOOK PROFIT UNDER THE MAT PROVISIONS. THERE ARE CLEAR ITEMS OF ADDITIONS AND DELETIONS UNDER THE BOOK PROFIT AND THE A.O. CANNOT TRAVEL BEYOND THE DEFINED PATH OF MAKING ADDITIONS AND DELETIONS UNDER THE BOOK PROFIT. IN THE BOOKS OF ACCOUNT, THE DEPRECIATION IS ALREADY PROVIDED BY FOLLOWING SCHEDULE XIV OF COMPANIES ACT, 1956 AND THERE ARE SEPARATE PROVISIONS OF DEPRECIATION CLAIMED UNDER INCOME-TAX ACT WHICH IS ALSO HELD BY THE APEX COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT 255 ITR 273 (SC). IN VIEW OF ABOVE REFERRED FACTS, IT IS CLEARLY CONSTRUED THAT THE ADDITION MADE OF DENIAL OF ADDITIONAL DEPRECIATION CLAIMED OF RS.92,00,000/- TO THE BOOK PROFIT IS WRONG AND ACCORDINGLY THE A.O. IS DIRECTED TO DELETE THIS ADDITION FROM BOOK PROFIT FOR MAT PURPOSE. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND LD.AR FILED 3 JUDGMENT IN SUPPORT OF HIS CONTENTION I.E. COMMISSIONER OF INCOME TAX VS. DIAMINES AND CHEMICALS LTD. (2017) 271 CTR 0098 OF HONBLE GUJARAT HIGH COURT. IN THIS CASE HONBLE HIGH COURT HAS HELD THAT ITAT CONFIRMED ORDER PASSED BY CIT(A) HELD, ADDITION WAS DELETED BY CIT(A) RELYING UPON DECISIONS OF MADRAS HIGH COURT IN CASE OF CIT VS. VTM LTD. (2009) 319 ITR 336 (MAD) AND CIT VS. HI TECH ARAI LTD. (2010) 321 ITR 477 (MAD), WHEREIN, IT WAS HELD THAT WHILE CLAIMING DEDUCTION U/S 32(1)(IIA) SETTING UP WIND MILL HAS NOTHING TO DO WITH POWER INDUSTRY AND WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM ADDITIONAL DEPRECIATION IS THAT SETTING UP OF NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED BY ASSESSEE, WHO WAS ALREADY ENGAGED IN BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING- ITA NO.1675 AHD/2013 THE DCIT VS.FAIRDEAL SUPPLIERS PVT.LTD. ASST.YEAR 2009-2010 - 5 - ITAT RIGHTLY APPLIED RATIO OF ABOVE SAID CASES AND HAD COMMITTED NO ERROR IN DELETING ADDITION ON ACCOUNT OF DISALLOWANCE OR ADDITIONAL DEPRECIATION OF WIND ELECTRIC GENERATOR. 7. LD.AR ALSO FILED A DECISION OF OUR CO-ORDINATE BENCH IN THE MATTER OF ASSISTANT COMMISSIONER OF INCOME TAX VS. HEAVY METAL AND TUBES LTD. ITA NO. 1951/AHD/2011 & CO.NO.232/AHD/2011 DTD. 30 TH JUNE, 2014. IN THIS CASE ADDITIONAL DEPRECIATION ON WIND MILL WAS ALLOWED - ASSESSEE COMPANY WAS ENGAGED IN BUSINESS OF MANUFACTURING OF M.S AND S.S STEEL TUBES, INSTALLED A WINDMILL FOR THE PURPOSE OF PRODUCTION OF ELECTRICITY AND CLAIMED ADDITIONAL DEPRECIATION - AO DISALLOWED ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION ON GROUND THAT WINDMILL WAS NOT USED BY ASSESSEE IN PROCESS OF MANUFACTURING CIT ALLOWED ASSESSEES CLAIM HOLDING THAT PLANT AND MACHINERY PURCHASED NEED NOT TO BE OPERATIONALLY USED FOR PURPOSE OF MANUFACTURING OF ARTICLES OR THINGS HELD, WHILE CLAIMING DEDUCTION U/S.32(1)(IIA) WHAT IS REQUIRED TO BE SATISFIED IS THAT SETTING UP OF NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED BY AN ASSESSEE WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING CIT(A) HAS GIVEN A FINDING THAT ASSESSEE WAS ALREADY ENGAGED IN BUSINESS OF MANUFACTURING OF PRODUCTION OF PIPES AND TUBES THUS ASSESSEE WAS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION ON WINDMILL REVENUES APPEAL DISMISSED. 8. WE ARE OF THE CONSIDERED OPINION THAT WE HAVE TO AGREE WITH THE ARGUMENTS OF THE LD.AR AND THIS CASE IS SQUARELY COVERED BY THE JUDGMENT COMMISSIONER OF INCOME TAX VS. DIAMINES AND CHEMICALS LTD. (2017) 271 CTR 0098 OF HONBLE GUJARAT HIGH COURT AND ASSISTANT COMMISSIONER OF INCOME TAX VS. HEAVY METAL AND TUBES LTD. IN ITA NO.1951/AHD/2011 & CO. NO. 232/AHD/2011 OF ITAT, AHMEDABAD. ITA NO.1675 AHD/2013 THE DCIT VS.FAIRDEAL SUPPLIERS PVT.LTD. ASST.YEAR 2009-2010 - 6 - 9. IN THE RESULT DEPARTMENTAL APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 30/11/2016 SD/- SD/- (PRAMOD KUMAR ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30 /11/2016 PRITI YADAV / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-VIII, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY