Formative Fashions Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 1953/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1675 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 05-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: SHAH
• Keywords: Depreciation; Additional depreciation; Capital receipt; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1953/AHD/2011 (ASSESSMENT YEAR: 2008-09) FORMATIVE FASHIONS PVT. LTD. 3024, WORLD TRADE CENTRE, RING ROAD, SURAT V/S DY. COMMISSIONER OF INCOME-TAX CIRCLE-1, SURAT (APPELLANT) (RESPONDENT) PAN: AAACF8809P APPELLANT BY : SHRI M.R.SHAH, AR RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 11 -05-201 6 DATE OF PRONOUNCEMENT : 12 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-I, SURAT DATED 17.06.2011 PERTAINING TO A.Y. 2008-09. 2. THE GRIEVANCE OF THE ASSESSEE READ AS UNDER:- ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 2 1. THE LD. CIT(A) HAS ERRED IN REJECTING APPELLANT'S C LAIM FOR ADDITIONAL DEPRECIATION U/S 32(1) (IIA) ON THE GROUND THAT THE AO HAS GIVEN SOUND REASONS FOR DISALLOWING THE CLAIM OF ADDITIONAL DEP RECIATION. THE APPELLANT HAS NOT BEEN ABLE TO MAKE OUT A CASE AGAINST THE AO 'S ACTION. 2. AS PER SUBMISSIONS OF THE APPELLANT DULY SUPPORTED BY CASE LAW, THE APPELLANT'S EMBROIDERY INDUSTRY WAS INDUSTRIAL UNDE RTAKING PRODUCING ANY ARTICLE OR THING AND IT WAS ENTITLED TO ADDITIONAL DEPRECIATION AS CLAIMED IN REVISED RETURN EVEN THOUGH IT WAS DOING EMBROIDERY JOB WORK. THE ADDITIONAL DEPRECIATION IS ALLOWABLE AND BE ALLOWED . 3. THE LD. CIT(A) HAS ERRED IN REJECTING APPELLANT'S C LAIM FOR TREATING STATE GOVERNMENT INTEREST SUBSIDY AS OF CAPITAL NATURE ON THE GROUND THAT THE AO HAS GIVEN SOUND REASONS FOR DISALLOWING THE CLAI M OF INTEREST SUBSIDY. THE APPELLANT HAS NOT BEEN ABLE TO MAKE OUT A CASE AGAINST THE AO'S ACTION. 4. THE STATE SUBSIDY WAS FOR THE PURPOSE OF COMPREHENS IVE SOCIAL AND ECONOMIC DEVELOPMENT OF GUJARAT AND TO FACILITATE T HE INVESTMENT IN NEW INDUSTRIES IN STATE AND EMPLOYMENT GENERATION AND H ENCE IT WAS OF CAPITAL NATURE AS PER DECISION OF SUPREME COURT AND VARIOUS HIGH COURT. THE CLAIM BEING IN ACCORDANCE WITH LAW MAY KINDLY BE AC CEPTED. 5. THE LD. CIT(A) HAS ERRED IN DISALLOWING 1/6 OF EXPE NDITURE OF RS. 2,60,970/-UNDER THE HEAD REPAIRS & SERVICE CHARGES ON THE GROUND THAT THE AO WAS CORRECT THAT BILLS AND VOUCHERS WERE NOT PRODUCED. IN FACT THE AO HAS NOT CALLED FOR PRODUCTION OF BILLS AND VOUCH ERS. HOWEVER DETAILS WERE FILED AND BILLS AND VOUCHERS WERE PRODUCED BEF ORE CIT(A). THE ENTIRE EXPENDITURE WAS VOUCHED AND INCURRED FOR THE PURPOS E OF BUSINESS AND WAS ALLOWABLE. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT HE IS NOT PRESSING GROUND NO. 5 AND THE SAME IS DISMISSED AS NOT PRESSED. ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 3 4. GROUND NOS. 1 & 2 RELATES TO THE DENIAL OF THE CLAI M OF ADDITIONAL DEPRECIATION. 5. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EMBROIDERY WORK ON JOB WORK BASIS. RETURN FOR THE YEAR WAS SELECTED FOR SCRUTINY ASSESSMENT. WHILE SCRUTINIZING THE RETURN OF INCOME , THE A.O NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON PLANT & MACHINERY PURCHASED DURING THE YEAR @ 35% (I.E. NORMAL DEPREC IATION @ 15% + ADDITIONAL DEPRECIATION @ 20%). THE A.O WAS OF THE FIRM BELIEF THAT SINCE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EM BROIDERY WORK ON JOB WORK BASIS THEREFORE, IT IS NOT ELIGIBLE FOR AD DITIONAL DEPRECIATION OF 20%. 6. ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF ADDITION AL DEPRECIATION. ASSESSEE FILED A DETAILED REPLY WHICH READS AS UNDE R:- THE COMPANY HAS INSTALLED COMPUTERIZED AUTOMATIC E MBROIDERY MACHINES VALUING RS.5,16,65,729/- AS PER BALANCE SHEET OF 31 .03.2008. THE COMPANY USES FABRICS AND EMBROIDERY YARN/ THREAD, JARI AND SEQUINS AS RAW MATERIALS. THE FABRIC IS SUPPLIED BY THE PRINCIPALS. YARN , JA RI AND SEQUINS ROLLS ARE PURCHASED FROM MARKET. DURING THE PREVIOUS YEAR THE ASSESSEE INSTALLED NEW PLANT & MACHINERY BEFORE 30.09.2007 WORTH RS.49,397 /- AND AFTER 01.10.2007 WORTH RS.1,87,61,397/-. IN ORIGINAL RETU RN THE ASSESSEE HAD CLAIMED DEPRECIATION @ 15% ON OPENING AND PURCHASES BEFORE 30.09.2007 AND @ 7.5% ON PURCHASES OF MACHINERY AFTER 01.10.20 07. IN REVISED RETURN THE ASSESSEE HAS ALSO CLAIMED ADDITIONAL DEPRECIATI ON ON NEW PLANT & MACHINERY. IN SUPPORT OF PURCHASE OF NEW MACHINERY COPY OF LASSER MACHINE ACCOUNT WITH BILLS AND RELATED EXPENDITURE ARE FILE D. IT MAY KINDLY BE NOTED THAT ADDITIONAL DEPRECIATION UNDER CLAUSE (IIA) OF SECTION 32(1) IS ALLOWABLE ON ANY NEW MACHINERY OR PLANT (OTHER THAN GRIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED A ND INSTALLED AFTER THE 31.03.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS O F MANUFACTURE OR ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 4 PRODUCTION OF ANY ARTICLE OR THING. THE REQUIREME NT OF THIS CLAUSE IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THERE IS NO FURTHER REQUIREMEN T THAT THE ARTICLE PRODUCED ARE SOLD OR EXPORTED. ALSO THERE IS NO REQUIREME NT THAT THE PRODUCTION SHOULD BE FROM ASSESSEE'S OWN RAW MATERIAL. PRODU CTION USING RAW MATERIAL SUPPLIED BY THE PRINCIPALS ALSO FALL IN THE CATEGORY OF PRODUCTION OF ARTICLES AND THINGS. THEREFORE, THE ASSESSEE IS E NTITLED TO ADDITIONAL DEPRECIATION ON PLANT & MACHINERY USED FOR P RODUCTION OF EMBROIDERY TAPS AND DUPATTA BY MECHANICALLY APPLYING EMBROIDER Y YARN, JARI AND SEQUINS ON FABRICS SUPPLIED BY THE PRINCIPALS'. 7. THE SUBMISSION OF THE ASSESSEE WAS OUT-RIGHTLY REJE CTED BY THE A.O. THE A.O WAS OF THE OPINION THAT SINCE THE ASSESSEE IS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THI NG, THE ADDITIONAL DEPRECIATION IS NOT ALLOWABLE. THE A.O FURTHER OBSE RVED THAT THE ASSESSEE IS JUST CARRYING OUT ONE OF THE PROCESS I. E. EMBROIDERY WORK WHICH IS A PART OF A SERIES OF DIFFERENT PROCESS, T HEREFORE, CANNOT BE CONSTITUTE AS MANUFACTURING. THE A.O CONCLUDED BY D ENYING THE CLAIM OF ADDITIONAL DEPRECIATION BY HOLDING THAT IN THE P RESENT CASE, THE BASIC INPUT MATERIAL IS ALSO FINISHED FABRICS WHEREAS THE FINAL OUTPUT IS ALSO FINISHED FABRICS. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IN SU PPORT OF THE CLAIM OF ADDITIONAL DEPRECIATION OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF MANJUDEVI S FATEHPURA IN ITA NO. 2086/A HD/2011, K.K. CREATION IN ITA NO. 1965/AHD/2011 & M/S. HARI FASH IONS IN ITA NO. 3105/AHD/2010. ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 5 9. PER CONTRA, THE LD. D.R. COULD NOT BRING AN Y DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 10. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. WE HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON B Y THE LD. COUNSEL. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF EMBROIDERY WORK AND HAS ACQUIRED MACHINERY ON WHICH IT HAS CLAIMED ADDITIONAL DEPRECIATION. THE A.O DISALLOWED THE CLA IM OF ADDITIONAL DEPRECIATION BY HOLDING THAT EMBROIDERY WORK DOES N OT CONSTITUTE MANUFACTURING OR PRODUCTION SO AS TO BE ELIGIBLE FO R ADDITIONAL DEPRECIATION. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF MANJUDEVI S FATEHPURA (SUPRA), WHEREIN THE TRIBUNAL HAS FOLLOWED THE FINDINGS GIVEN BY THE CO-ORDINATE BENC H IN THE CASE OF ASWANI INDUSTRIES IN ITA NO. 140/AHD/2013, THE RELE VANT FINDING OF THE TRIBUNAL READ AS UNDER:- WE FIND THAT IN THE CASE OF ITO VS. ASWANI INDUSTRI ES (SUPRA) ISSUE OF ADDITIONAL DEPRECIATION WAS BEFORE THE HONBLE TRIB UNAL AND THE HONBLE CO- ORDINATE BENCH OF THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENG AGED IN THE BUSINESS OF EMBROIDERY WORK ON CLOTHES. DURING THE YEAR UNDER C ONSIDERATION ASSESSEE CLAIMED 20 % OF ADDITIONAL DEPRECIATION OF RS. 35,45,700/- U/S 32(L)(IIA) OF THE ACT ON THE MACHINERY INSTALLED BY HIM CLAIMING HIMSELF INVOLVED IN THE BUSINESS OF MANUFACTURER OR PRODUCT ION OF ARTICLE OR THING. ACCORDING TO A.O. THE ACTIVITIES OF THE ASSESSEE AR E BASICALLY OF JOB WORK OF EMBROIDERY ON FINISHED CLOTHES OBTAINED FROM HIS CL IENTS WHICH ARE NEITHER MANUFACTURED NOR PROCESSED BY HIM THEREFORE ASSESSE E CANNOT BE CONSIDERED AS MANUFACTURER OR PRODUCER. CONSEQUENTL Y, THE ADDITIONAL DEPRECIATION OF RS. 35,45,7007- CLAIMED BY THE ASSE SSEE WAS DISALLOWED BY HIM. LD. C1T(A) HAS GIVEN RELIEF TO THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF ITAT IN ASSESSEE'S OWN CASE FOR A.Y . 2007-08. THE ONLY ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 6 ISSUE TO BE DECIDED BY US IS WHETHER EMBROIDERY WOR K EARNED ON EMBROIDERY MACHINES IS MANUFACTURING ACTIVITY OR NO T AND CONSEQUENTLY WHETHER ADDITIONAL DEPRECIATION U/S 32(L)(IIA) IS A LLOWABLE ON THESE MACHINES OR NOT. SINCE THE ISSUE HAS BEEN DECIDED B Y HON'BLE ITAT AHMEDABAD BENCH IN SEVERAL CASES IN FAVOUR OF THE A SSESSEE INCLUDING THE DECISION IN THE CASE OF ASSESSEE HIMSELF FOR A.Y. 2 007-08 WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. 11. A SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE CAS E OF K.K. CREATION (SUPRA), WHEREIN THE TRIBUNAL HAS FOLLOWE D THE FINDINGS GIVEN BY THE CO-ORDINATE BENCH IN THE CASE OF HARIPRIYA P ROCESSORS PVT. LTD. IN ITA NO. 1569/AHD/2010, THE RELEVANT FINDING OF T HE TRIBUNAL READ AS UNDER:- 4.WE HAVE HEARD THE PARTIES. WE FIND THAT, CONSIDER ING THE FACTS NARRATED HEREINABOVE, THE ISSUE IS SQUARELY COVERED BY THE D ECISION OF ITAT 'SMC' BENCH AHMEDABAD BEARING ITA NO.1569/AHD/2010 FOR A. Y. 2007-08 TITLED AS 'ITO VS. HARIPRIYA PROCESSORS PVT.LTD.' DATED 08/09 /2009, WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- 5. I HAVE HEARD THE RIVAL CONTENTIONS AND GONE THRO UGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM THE FACTS TH AT THE ASSESSEE IS DOING EMBROIDERY WORK ON JOB WORK BASIS AND SAID ACTIVITY ALSO RESULTS IN PRODUCTION OF NEW ARTICLE WHICH HAS DIFFERENT MARKE T OF ITS OWN AND THERE ARE VARIOUS STAGES WHICH ARE INVOLVED IN EMBROIDERY ACT IVITY AND THE SAME CAN BE BRIEFLY CATEGORIZED AS UNDER:- I) CREATING A DIGITALIZED EMBROIDERY DESIGN FILE; II) EDITING THE DESIGN AND/OR COMBINING IT WITH OTH ER DESIGN (OPTIONAL); III) LOAD THE FINAL DESIGN FILE INTO THE EMBROIDERY MACHINE; IV) STABILIZE THE FABRIC AND PLACE IT IN THE MACHIN E; V) START AND MONITOR THE EMBROIDERY MACHINE; ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 7 AND BECAUSE OF THE ABOVE PROCESS WHICH HAS TO BE CA RRIED OUT IN VERY CAREFUL MANNER THE OUTPUT I.E. EMBROIDERED FABRICS HAS ENTI RELY DIFFERENT LOOKS AND HAS DIFFERENT COMMERCIAL VALUE AND THUS, BECAUSE OF ABOVE OPERATIONS NEW COMMODITY EMERGES. THE EXPRESSIONS 'MANUFACTURE' AN D 'PRODUCE' HAVE NOT BEEN DEFINED IN THE ACT AT THE RELEVANT POINT OF TI ME BUT THE DICTIONARY MEANING OF 'MANUFACTURE' IS TO TRANSFORM OR FASHION NEW MATERIAL INTO A CHANGED FORM FOR USE. BECAUSE OF THE ABOVE OPERATIO NS CARRIED OUT BY ASSESSEE, THE LOOK OF THE FABRIC IS CHANGED SUBSTAN TIALLY AND THE NEW ARTICLE IS COMMERCIALLY KNOWN DIFFERENTLY FROM THE ORIGINAL FA BRICS. EVEN OTHERWISE, THE WORD 'PRODUCT' HAS A WIDER CONNOTATION THAN THE WOR K 'MANUFACTURE' AND RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF S.S.M. BROTHERS (P) LTD. & OTHERS V. CIT (2000) 243 ITR 418 (SC), WHEREIN THE DEVELOPMENT REBATE CLAIMED U/S.33(1)(B) (B)(I) WAS ALLOWED BY HOLDING THAT THE PLANT AND MACHINERY WERE USED IN T HE PRODUCTION OF PROCESSED TEXTILES (EMBROIDERY) AND THEREFORE, THE MACHINERY IS ENTITLED TO DEVELOPMENT REBATE UNDER THE ABOVE PROVISIONS. SECTION 33(1)(B)(B)(I) PROVIDES FOR DEVELOPMENT REBATE ON MACHINERY OR PLA NT WHICH IS INSTALLED FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTUR E OR PRODUCTION OF ANY ONE OR MORE OF THE ARTICLES OR THINGS SPECIFIED IN THE LIST IN THE FIFTH SCHEDULE. THE RATIO OF ABOVE DECISION OF HON'BLE SUPREME COUR T IS DIRECTLY APPLICABLE TO FACTS OF THE INSTANT CASE BECAUSE SEC.32(1)(IIA) AL SO PROVIDES FOR ADDITIONAL DEPRECIATION IN RESPECT OF NEW MACHINERY AND PLANT PURCHASED BY ASSESSEE WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PR ODUCTION OF ANY ARTICLE OR THING. IN THE ABOVE CASE THE HON'BLE SUPREME COURT HAS ALREADY HELD THAT ASSESSEE WAS USING MACHINERY IN PRODUCTION OF PROCE SSED TEXTILE I.E. EMBROIDERY WORK AND THUS, THE FACT EMBROIDERY WORK IS REGARDED AS PRODUCTION CANNOT BE DENIED. SECTION 32(1)(IIA) ALSO USED THE WORD 'PRODUCTION OF ANY ARTICLE OR THING' AND THUS, THE PRODUCT WITH EMBROIDERY WORK IS INCLUDED IN THE WORK ANY ARTICLE OR THING. IN FACT THE PROVISIONS OF SECTION 32(1)(IIA) ARE LARGER IN SCOPE AS COMPARED TO SECTION 33 (10(B)(B)(L) INASMUCH AS SECTION 32(1)(IIA) PROVIDES FOR ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY WHICH IS USED IN THE PRODUCTION/MANUF ACTURE OF ANY ARTICLE OR ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 8 THING WHEREAS SECTION 33 (10(B)(B)(I) PROVIDES FOR DEVELOPMENT REBATE ON PLANT AND MACHINERY WHICH IS USED IN THE CONSTRUCTI ON, MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING WHICH IS LISTED IN THE FIFTH SCHEDULE. IN VIEW OF THESE FACTS AND THE DECISION OF HON'BLE SUPREME COURT THE ADDITIONAL DEPRECIATION CLAIMED BY ASSESSEE IS REQUIRED TO BE ALLOWED AS PLANT AND MACHINERY IS USED IN THE PRODUCTION OF EMBROIDERY F ABRICS. I FURTHER FIND THAT EVEN FROM THE ANGLE OF LEVY OF EXCISE DUTY UNDER CENTRAL EXCISE ACT , THIS EMBROIDERY IS SUBJECT TO LEVY OF DUTY AND CONSIDERE D AS MANUFACTURE. THE RELEVANT TARIFF ITEM 5810 READS AS UNDER:- SECTION XI 350 CHAPETER 58 TARIFF ITEM DEPRECIATION OF UNI T RATE OF DUTY GOODS (1) (2) (3 ) (4) 5810 EMBROIDERY IN THE PIECE, IN STRIPS ON IN MOTIFS 5810 10 00 EMBROIDERY WITHOUT KG. 8% VISIBLE GROUND OTHER EMBROIDERY 5810 91 00 OF COTTON 5810 92 OF MAN-MADE FIBRES; KG. 8% 5810 92 10 EMBROIDERED KG. 8% BADGES, MOTIFS AND THE LIKE 5810 92 90 OTHER KG. 8% 5810 99 00 OF OTHER TEXTILES KG. 8% MATERIALS AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE A SSESSEE, WE ALLOW THE CLAIM OF THE ASSESSEE. THIS ISSUE OF REVENUE'S APPE AL IS DISMISSED.' 5. ONCE A CO-ORDINATE BENCH HAS TAKEN A VIEW IN FAV OUR OF THE ASSESSEE BY REJECTING THE REVENUE'S APPEAL, THEREFORE, WE HAVE NO REASON TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE VIEW ALREADY TAKEN, RE PRODUCED HEREINABOVE. RESULTANTLY THE ASSESSEE BEING ENGAGED IN EMBROIDER Y WORK IS ENTITLED FOR ADDITIONAL DEPRECIATION. CONSEQUENTLY, THE ASSESSE E'S GROUND IS HEREBY ALLOWED. ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 9 12. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDI NATE BENCHES (SUPRA), IN OUR CONSIDERED OPINION, THE ISSUE OF AD DITIONAL DEPRECIATION ON EMBROIDERY MACHINE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE; HENCE, JUDICIAL PROPRIETY REQUIRES ONE BENCH OF THE TRIBUNAL TO FOLLOW THE OTHER BENCH ESPECIALL Y WHEN THE ISSUE INVOLVED IS IDENTICAL ON SAME FACTS. WE ACCORDINGLY SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO A LLOW THE CLAIM OF ADDITIONAL DEPRECIATION. GROUND NOS. 1 & 2 ARE ACCO RDINGLY ALLOWED. 13. GROUND NOS. 3 & 4 RELATES TO THE TREATMENT OF STATE GOVERNMENT INTEREST SUBSIDY AS REVENUE RECEIPT AS AGAINST THE CLAIM OF THE ASSESSEE BEING CAPITAL RECEIPT. 14. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O NOTICED THAT THE ASSESSEE HAS RECEIVED SUBSIDY OF RS. 7,27,109/- FROM THE GOVERNMENT OF GUJARAT UNDER THE SCHEME OF INTEREST SUBSIDY TO SMALL AND MEDIUM ENTERPRISE AND CREDITE D IN THE AUDITED PROFIT AND LOSS ACCOUNT. HOWEVER, THE A.O OBSERVED THAT SUBSEQUENTLY THE ASSESSEE REVISED ITS RETURN OF INCOME AND TREAT ED THE SAID INTEREST SUBSIDY AS CAPITAL SUBSIDY AND EXCLUDED THE SAME FR OM THE TOTAL INCOME. THE ASSESSEE WAS ASKED TO FURNISH THE DETAI LS OF SUBSIDY RECEIVED AND TO SHOW CAUSE WHY THE SAME SHOULD NOT BE TREATED AS REVENUE RECEIPT. ASSESSEE FILED A DETAILED REPLY JU STIFYING THE CLAIM OF INTEREST SUBSIDY BEING OF CAPITAL IN NATURE. THE A. O. REJECTED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE MAIN PURPOSE OF GRANTING THE INTEREST SUBSIDY BY THE GOVERNMENT IS TO REDUCE THE INTEREST LIABILITY OF THE ASSESSEE. THEREFORE, THE INTEREST SUBSIDY RECEI VED FROM THE GOVERNMENT IS CLEARLY REVENUE RECEIPT. THE A.O ACCO RDINGLY TREATED RS. ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 10 7,27,109/- AS REVENUE RECEIPT AND ADDED TO THE TOTA L INCOME OF THE ASSESSEE. 15. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL STRAIGHTWAY DREW OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR ASSESSEE YEAR 2007- 08 IN ITA NO. 615/AHD/2010. IT IS THE SAY OF THE LD . COUNSEL THAT A SIMILAR INTEREST SUBSIDY HAS BEEN HELD TO BE OF CAP ITAL IN NATURE BY THE TRIBUNAL IN EARLIER YEARS, THEREFORE, THE SAME TREA TMENT SHOULD BE GIVEN FOR THE YEAR UNDER CONSIDERATION. 16. PER CONTRA, THE LD. D.R. COULD NOT BRING ANY DISTIN GUISHING DECISION IN FAVOUR OF THE REVENUE. 17. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW AND WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA). THE RELEVA NT FINDINGS OF THE TRIBUNAL ARE GIVEN AT PARA 8.2 ON PAGE 9 OF ITS ORD ER WHICH READ AS UNDER:- 8.2 IN THE PRESENT CASE, THE INTEREST SUBSIDY HAS B EEN GRANTED BY GOVERNMENT OF GUJARAT, INDUSTRIES & MINES DEPARTMEN T, RESOLUTION NO. APN/102004/1161(2)/1, SACHIVALAYA, GANDHINAGAR, DAT ED 10 TH JUNE 2004. THE CLAUSE 4 OF THE RESOLUTION SPEAKS AS UNDER:- '4.0 QUANTUM OF ASSISTANCE: (I) INTEREST SUBSIDY WILL BE AVAILABLE FOR ESTABLISHING NEW UNITS OR FOR EXPANSION/DIVERSIFICATION AND MODERNIZATION OF EXIS TING UNITS. (II) FOR THE PURPOSE OF INTEREST SUBSIDY, THE SME UNIT MAY GET TERM LOAN FROM FINANCIAL INSTITUTION/BANK RECOGNIZED BY RESER VE BANK OF INDIA. ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 11 (III) DISBURSEMENT OF THE LOAN SHOULD BE WITHIN THE OPERA TIVE PERIOD OF THE SCHEME. (IV) THE UNIT MUST START COMMERCIAL PRODUCTION WITHIN TH E OPERATIVE PERIOD OF THE SCHEME. (V) MAXIMUM INTEREST SUBSIDY AT THE RATE OF 5% WILL BE AVAILABLE TO SME. HOWEVER, UNIT WILL BE REQUIRED TO PAY MINIMUM 5% IN TEREST PER ANNUM TO THE FINANCIAL INSTITUTIONS. ACCORDINGLY, IF THE RATE OF INTEREST IS LESS THAN 10%, THE INTEREST SUBSIDY SHALL BE REDUCED TO THAT EXTENT. IF THE UNIT IS AVAILING BENEFIT UNDER GOVERNMENT OF INDIA, SCHEME, TOTAL INTEREST SUBSIDY BY GOVERNMENT OF INDIA & THE STATE GOVERNMENT SHALL BE GRANTED IN SUCH A WAY THAT THE UNIT SHALL HAVE T O BEAR MINIMUM 5% INTEREST ON THE LOAN. (VI) THE INTEREST SUBSIDY WILL BE AVAILABLE ONLY ON INTE REST LEVIED BY THE FINANCIAL INSTITUTION. PENAL INTEREST OR OTHER CHAR GES WILL NOT BE REIMBURSED. (VII) THE INTEREST SUBSIDY WILL BE AVAILABLE FOR MAXIMUM 5 YEARS LIMITED TO MAXIMUM RS.5 LAKHS PER YEAR. ' 9. SINCE THE INTEREST SUBSIDY IS GRANTED UNDER THE SCHEME OF GOVERNMENT OF INDIA, RESPECTFULLY FOLLOWING THE JUDGMENT OF HONB LE APEX COURT RENDERED IN THE CASE OF CIT VS. PONNI SUGARS AND CHEMICALS LTD. (SUPRA). THE A.O IS HEREBY DIRECTED TO TREAT THE INTEREST SUBSIDY RECEI VED BY THE ASSESSEE AS CAPITAL RECEIPT AND MAKE NECESSARY CHARGES IN THE C OMPUTATION OF INCOME OF THE ASSESSEE. HENCE, THE GROUND NOS. 5 & 6 ARE DISP OSED OF AS INDICATED HEREINABOVE. 18. THE TRIBUNAL HAS FOLLOWED THE RATIO LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICA LS LTD. 306 ITR 392. THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS (SUPRA) HAS HELD AS UNDER:- 17. APPLYING THE ABOVE TESTS TO THE FACTS OF THE P RESENT CASE AND KEEPING IN MIND THE OBJECT BEHIND THE PAYMENT OF THE INCENTIVE SUBSIDY WE ARE SATISFIED ITA NO. 1953 /AHD/2011 . A.Y. 2008-09 12 THAT SUCH PAYMENT RECEIVED BY THE ASSESSEE UNDER TH E SCHEME WAS NOT IN THE COURSE OF A TRADE BUT WAS OF CAPITAL NATURE. AC CORDINGLY THE FIRST QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE DEPARTMENT. 19. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH WHICH IS FORTIFIED BY THE RATIO LAID DOWN BY THE HO NBLE SUPREME COURT, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIR ECT THE A.O TO DELETE THE ADDITION OF RS. 7,27,109/-. GROUND NOS. 3 & 4 A RE ACCORDINGLY ALLOWED. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12- 05 - 2016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD