Asst. Commissioner of Income tax Cir. 2, Goa V. M/s. Chowgule & Co Pvt Ltd, Goa

ITA 17/PAN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8420 (ITAT-PANAJI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Assessee Lawyers: PRADIP P S KAKODKAR
• Keywords: Depreciation; Additional depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO S . 16 & 17 /PNJ/201 4 : (ASST. YEAR S :20 06 - 07 & 2007 - 08 ) ASST. COMMISSIONER OF INCOME TAX , CIRCLE - 2, MARGAO, GOA . (APPELLANT) VS. M/S CHOWGULE & COMPANY PVT. LTD, CHOWGULE HOUSE, MORMUGAO HARBOUR, GOA. PAN : AAACC5479J . (RESPONDENT) A PPELLANT BY : SHRI NISHANT K. , LD. D.R. RE SPONDENT BY : SHRI PRADIP P.S. KAKODKAR, C . A. DATE OF HE ARING : 28 / 1 0/2014 D ATE OF PRONOUNCEMENT : 28 /10 / 2014 O R D E R PER P.K. BANSAL BOTH THESE APPEAL S HA VE BEEN FILED BY THE REVENUE AGAINST THE COMBINED ORDER OF CIT(A), PANAJI DTD. 22 . 1 0 .201 3 FOR THE ASSESSMENT YEAR S 200 6 - 07 AND 2007 - 08 BY TAKING TH E FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - 2 . THE L D . CIT(A) HAS ERRED IN ALLOWING THE ADDITIONAL DEPRECIATION OF RS.4,11,11,086/ - CLAIMED ON PLANT AND MACHINERY USED IN MINING ACTIVITY EVEN WHEN THE ASSESSEE IS ENGA GED IN THE BUSINESS OF PROCESSING O F IRON ORE AND NOT ENGAGED IN THE BUSINESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING AS REQUIRED US/ 32(IIA) OF THE IT ACT FOR CLAIMING THE ADDITIONAL DEPRECIATION. 2. SINCE B OTH THESE APPEALS INVOLVE THE COMMON ISSUE THEREFORE BEIN G DISPOSED OFF BY THIS COMMON ORDER. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MINING, MANUFACTURING OF PELLETS, SHIPBUILDING AND CRANE DIVISION ALONG WITH OTHER ANCILLARY ACTIVITIES. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 25.11.2006 DECLARING TOTAL INCOME OF RS.291,98,87,708/ - . THE RETURN OF INCOME HAS BEEN PROCESSED U/S. 143(1) ON 2 I TA NO S . 16 & 17 / P NJ/201 4 (ASST. YEAR S : 20 06 - 07 & 07 - 08 ) 31.03.2008. LATER ON THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT U/S. 143(3) WAS COMPLETED ON 30.06.2008 DETERMINING THE TOTAL INCOME OF RS.300,56,48,845/ - . SUBSEQUENTLY THE COMMISSIONER OF INCOME TAX, PANAJI, INVOKED SECTION 263(1) OF THE INCOME TAX ACT, 1961 VIDE LETTER NO. F.NO.263/14/CIT(PNJ)/2010 - 11 DATED 16.03.2011. THE CIT PANAJI, WAS OF THE VIEW THAT THE ASSESSEE HAS CLAIMED ERRONEOUSLY ADDITIONAL DEPRECIATION ON VALUE ADDITION OF RS. 30,92,02,570/ - TO THE PLANT AND MACHINERY IN ITS MINING DIVISION AND HAS CLAIMED ADDITIONAL DEPRECIATION OF RS . 4,11,11,086/ - IN ADDITION TO THE NORMAL DEPRECIATION. THE ADDITIONAL DEPR ECIATION U/S. 32(1)(IIA) OF THE INCOME TAX ACT, IS AVAILABLE IN CASE OF ANY NEW PLANT AND MACHINERY WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER 31.03.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OF PRODUCTION OF ANY ARTICLE OR PRODUCTION OF ANY ARTICLE OR THING. THE ASSESSING OFFICER DISALLOWED THE ADDITIONAL DEPRECIATION IN THE ORDER PASSED U/S 143(3) R.W.S.263 BY TAKING THE VIEW THAT THE ASSESSEE WAS NOT ENGAGED IN THE PRODUCTION OF AN ARTICLE OR THING. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO DELETED THE DISALLOWANCE BY OBSERVING AS UNDER : - 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND CONTENTS OF ASSESSEES SUBMISSION. I HAVE ALSO PERUSED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. THE CLAIM OF ADDL DEPRECIAT ION WAS DISALLOWED BY THE A.O HOLDING THAT THE ACTIVITIES CARRIED ON BY THE APPELLANT DO NOT QUALIFY FOR PRODUCTION. HOWEVER, THE HONBLE ITAT, IN THE CASE OF THE APPELLANT ITSELF, IN ITS ORDER FOR A.YR. 2002 - 03 DATED 19.07.2007, FOUND THAT THE ACTIVITIE S CARRIED OUT BY THE APPELLANT AMOUNTS TO PRODUCTION AND ALLOWED DEDUCTION U/S 10B. THE HONBLE ITAT HELD THAT SINCE THE APPELLANT IS ENGAGED IN THE BUSINESS OF EXTRACTING AND PROCESSING OF IRON ORE, IT AMOUNTS TO PRODUCTION AND RATIO LAID DOWN BY THE HON BLE APEX COURT IN THE CASE OF M/S SESA GOA LTD. (271 ITR 331) IS APPLICABLE. ALSO, IN A VERY RECENT DECISION, IN THE CASE OF M/S SESA GOA LTD., THE HONBLE ITAT HAS HELD THAT PROCESSING OF IRON ORE ALONE QUALIFIES FOR PRODUCTION. IN THIS CASE THE HONBLE ITAT HAS EXAMINED THE ISSUE OF PRODUCTION IN THE CASE OF A MINING COMPANY AT LENGTH. RELYING ON THE ABOVE QUOTED JUDGEMENTS, I HOLD THAT THE APPELLANT, IN THE INSTANT CASE, IS ENGAGED IN PRODUCTION AND THEREFORE ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATI ON. THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION. 3. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE C IT(A) AS THE 3 I TA NO S . 16 & 17 / P NJ/201 4 (ASST. YEAR S : 20 06 - 07 & 07 - 08 ) ISSUE INVOLVED IN THESE APPEALS IS DULY COVERED BY OUR ORDER DATED 08.03.2013 IN ITA NOS. 72 & 85/PNJ/2012 IN THE CASE OF SESA GOA LTD IN WHICH THIS TRIBUNAL HAS HELD AS UNDER : - 46. GROUNDS NOS.10 & 11 IN ASSESSEES APPEAL RELATE TO DISALLO WANCE OF DEPRECIATION CLAIMED U/S 32(1)(IIA). THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION AMOUNTING TO RS.10,91,79,435/ - AND RS.10,01,21,951/ - IN RESPECT OF IRON ORE DIVISION AND RS.90,57,484/ - FOR METALLURGICAL COK E DIVISION. THE AO TOOK THE VIEW THAT THE ASSESSEE WAS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THEREFORE, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THE ASSESSEE 271 ITR 331 RELATING TO ADDITIONAL DEPRECIATIO N IS NOT APPLICABLE. THE SAID DECISION RELATE PRIOR TO 1.4.1999. ACCORDING TO HIM, THERE IS NO CHANGE EITHER IN THE NAME OR IN THE COMPOSITION OF THE IRON ORE BEFORE EXTRACTION AND AFTER EXTRACTION AND PROCESSING AND THE CONDITIONS AS LAID DOWN U/S 2(29B A) ARE NOT FULFILLED. SIMILARLY, IT WAS HELD THAT IN THE CASE OF CONVERSION OF COAL INTO COKE THERE IS NO DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE IN THE NEW ARTICLE AND IT HAS NO DIFFERENT CHARACTER AND USE. RELIANCE WAS PLACED ON THE DECISIO N OF THE SUPREME COURT IN THE CASE OF CIT VS GEM INDIA MANUFACTURING CO., 249 ITR 307(2001) AND LUCKY MINERALS (P) LTD., 116 TAXMAN 1(SC). THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) ALSO TOOK THE VIEW THAT THE ASSESSEE PRIMARILY ENGAGED I N THE PROCESS OF CONVERTING COAL TO COKE ESSENTIALLY THERE IS NOT MUCH OF DIFFERENCE IN THE PHYSICAL AND CHEMICAL CHARACTERISTIC OF COAL AND COKE. THE DIVISION IS NOT ASSOCIATED WITH ANY KIND OF EXTRACTION OF COAL OR ANY OTHER ORE AS PART OF ITS BUSINESS A CTIVITY. IN THE CASE OF CIT VS SESA GOA LTD., 271 ITR 331(SC) THE HONBLE APEX COURT HELD THAT FOR AN ACTIVITY TO BE PRODUCTION, IT SHOULD COMPRISE OF BOTH EXTRACTION OF IRON ORE AND ITS PROCESSING. THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). IT WAS CONTENDED THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF EXTRACTION AND PROCESSING OF IRON ORE. THE ASSESSEE IS PROCESSING THE IRON ORE NOT ONLY ONE WHICH IS EXTRACTED OUT OF ITS OWN MINES, BUT ALSO THE ONE WHICH IS EXTRACTED FROM THE MI NES WHICH ARE HIRED. THE HONBLE SUPREME COURT HAS CLEARLY HELD THAT THE EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO PRODUCTION. THERE IS NO SUBSEQUENT AMENDMENT IN THIS REGARD OR INTRODUCTION OF THE DEFINITION OF THE WORD PRODUCTION IN THE ACT. SEC. 32(1)(IIA) USED BOTH THE WORD MANUFACTURE OR PRODUCTION AND DOES NOT REQUIRE THAT THE ASSESSEE SHOULD BE ENGAGED IN THE MANUFACTURE AND PRODUCTION. SEC.2(29BA) OF THE ACT DEFINES THE WORD MANUFACTURE. THE CIT(A) TOOK THE VIEW THAT THE IRON ORE PROC ESSING PLANT AT CODLI, AMONA AND CHITRADURGA DO NOT AMOUNT TO EITHER MANUFACTURE OR PRODUCTION. THE REVENUE IS FULLY AWARE OF THAT IN THESE PLANTS, THE ASSESSEE HAS USED THE IRON ORE EXTRACTED FROM ITS MINES AND ALSO FROM OTHER MINES TAKEN ON LEASE FO R PROCESSING TO MAKE IT MARKETABLE FOR EXPORT. SEC.32(1)(IIA) ONLY REQUIRES THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THUS, THE ASSESSEE MUST BE ALLOWED INVESTMENT ALLOWANCE SO FAR AS IT RELAT ES TO PLANT AND MACHINERY USED IN IRON ORE DIVISION. IN RESPECT OF CLAIM OF THE ASSESSEE FOR THE ADDITIONAL DEPRECIATION FOR THE PLANT AND MACHINERY INSTALLED IN METALLURGICAL COKE DIVISION, THE ASSESSEE CONTENDED THAT SEC.32(1)(IIA) NOWHERE REQUIRES THAT THE NEW PLANT 4 I TA NO S . 16 & 17 / P NJ/201 4 (ASST. YEAR S : 20 06 - 07 & 07 - 08 ) AND MACHINERY MUST BE ACQUIRED OR INSTALLED FOR MANUFACTURE OR PRODUCTION. THE ONLY CONDITION SUBJECT TO THE PROVISO THEREIN IS THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OR ARTICLE OR THING. THE LEARNED AR ALSO TRIED TO EXPLAIN THE PROCESS OF COKE DIVISION TO PROVE THAT THE COKE DIVISION IS ENGAGED IN THE PRODUCTION OF AN ARTICLE OR THING. THE LEARNED DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(A). 46.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTEN TIONS ALONGWITH THE ORDER OF THE TAX AUTHORITIES. SEC.32(1)(IIA) LAID DOWN AS UNDER; IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING (OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER) A FURTHER SUM EQUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE(II): PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF - A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE; OR C) ANY OFFICE APPLIANCES O ROAD TRANSPORT VEHICLES; OR D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTI ON(WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OF ANY ONE PREVIOUS YEAR. 46.2 FROM THE PROVISIONS OF THE SECTION, IT IS APPARENT THAT THE ASSESSEE IS EN TITLED IN THE CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED OR INSTALLED BY HIM AFTER 31.03.2005 FOR THE ADDITIONAL DEPRECIATION IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. PROVISO TO SECTI ON DENIES THE DEDUCTION TO AN ASSESSEE OF THE ADDITIONAL DEPRECIATION IN CERTAIN CASES. FROM THE BALANCE SHEET AND ALL OTHER EVIDENCES FILED BEFORE US IT IS APPARENTLY CLEAR THAT THE ASSESSEE IS ENGAGED PRIMARILY IN THE BUSINESS OF EXTRACTION OF ORE AND IT S PROCESSING. THE AUTHORITIES BELOW INTERPRETED THE PROVISIONS OF SECTION, CORRECTLY TAKING THE VIEW THAT THE PLANT AND MACHINERY SHOULD BE INSTALLED FOR THE PRODUCTION OF AN ARTICLE OR THING. THE ASSESSEES PLANTS AT CODLI, AMONA AND CHITRADURGA WHETHER E NGAGED FOR THE MANUFACTURE OR PRODUCTION INDEPENDENTLY, IN OUR VIEW, IS NOT RELEVANT. THE RELEVANT CONSIDERATION IS THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THE NEW PLANT AND MACHINERY MUST BE ACQUIRED AND INSTALLED. THE ASSESSEE HAS EXTRACTED THE IRON ORE AND ALSO PROCESSED IT. THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN ASSESSEES OWN CASE REPORTED IN 271 ITR 331(SC) (SUPRA). THIS SECTION USED TH E WORD BUSINESS OF MANUFACTURE OR PRODUCTION NOT THE WORD MANUFACTURE AND PRODUCTION. WE DO NOT AGREE WITH THE REVENUE THAT THE CASE OF THE ASSESSEE IS 5 I TA NO S . 16 & 17 / P NJ/201 4 (ASST. YEAR S : 20 06 - 07 & 07 - 08 ) NOT COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN ASSESSEES OWN CASE. RESPECTFULLY FOLL OWING THE DECISION OF THE HONBLE SUPREME COURT IN ASSESSEES OWN CASE, WE DELETE THE DISALLOWANCE AND ALLOW THE ADDITIONAL DEPRECIATION TO THE ASSESSEE AMOUNTING TO RS.10,91,75,435/ - . 4. RESPECTFULLY FOLLOWING THE AFORESAID ORDER WE CONFIRM THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER IN BOTH THE YEARS. 5 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. 6 . ORDER PRONOUN CED IN THE OPEN COURT ON 28 .10.2014. SD/ - SD/ - (D.T.GARASIA) JUDIC IAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 28 . 10 .2014 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA