Nangalia Sizers Pvt.Ltd., Surat V. The Income tax Officer,ward-1(4), Surat

ITA 1973/AHD/2011

• Counselvise Citation: 197320514 RSA 2011
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 08-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA SR D R
• Assessee Lawyers: HARDIK VORA
• Keywords: Depreciation

Judgement Text

, , . .. . . .. . , , , , IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M .) . / I.T.A. NO. 1973/AHD./2011 ! '# ! '# ! '# ! '# / ASSESSMENT YEAR : 2006-2007 NANGALIA SIZERS PVT. LTD., SURAT -VS- I.T.O.,WARD-1(4), SURAT (PAN : AAACN 7938B) $% / APPELLANT &'$% / RESPONDENT $% ( ) / APPELLANT BY SHRI HARDIK VORA, A.R. &'$% ( ) / RESPONDENT BY SHRI H.P.MEENA, SR.D.R. *!' + ( , - / DATE OF HEARING 08.09.2011 ./# ( , - / DATE OF PRONOUNCEMENT 16.09.2011 / ORDER THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 16.06.2011 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, SURAT FOR THE ASSESSMENT YEAR 2006-2007. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UND ER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEPRECIATIO N OF RS.2,49,820/- ON TFO MACHINERIES. 3. THE FACTS IN SHORT ARE THAT THE ASSESSEE IS A CO MPANY. IT IS ENGAGED IN THE BUSINESS OF WEAVING OF GREY CLOTH AND TWISTING OF YARN ON JO B WORK BASIS. FROM THE DETAILS OF WORKING OF DEPRECIATION FURNISHED ALONG WITH THE RE TURN OF INCOME, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON PLANT AND MACHINERY UNDER TUFS @50%. HE 2 ITA NO. 1973-AHD-2011 FURTHER OBSERVED THAT AS PER I.T. RULES, THE PLANT & MACHINERY USED FOR WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRIES ONLY ARE ELIGIBLE FOR HIGHER RATE OF DEPRECIATION @50% WHICH MEANS THAT THE PLANT & MACH INERY PURCHASED FOR USE OF OTHER PURPOSES ARE NOT ELIGIBLE FOR HIGHER RATE OF DEPREC IATION @50% EVEN THOUGH PURCHASED UNDER TUFS. FOR THE DETAILED REASONS GIVEN IN THE A SSESSMENT ORDER, THE AO HELD THAT IT IS NOT ELIGIBLE FOR EXCESS DEPRECIATION @50% AGAINST T HE ELIGIBLE DEPRECIATION @15%. HE ACCORDINGLY WORKED OUT THE EXCESS DEPRECIATION AT R S.2,49,820/- AND DISALLOWED THE SAME. 4. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE CO NTENDED THAT THE TFO MACHINERIES ARE COVERED UNDER THE WORD WEAVING FOR WHICH THE ASSESSEE HAS PRODUCED THE DOCUMENTARY EVIDENCE (THE TECHNOLOGY UPGRADATION FU ND SCHEME). IT WAS ALSO CONTENDED THAT FOR COMPLETING THE END-PRODUCT FROM THE VARIOUS KINDS OF ACTIVITIES AND EACH ACTIVITY IN ITSELF IS A MANUFACTURING ACTIVITY . THE RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: I. AVENTIS PHARMA LTD. VS- CIT (2010) 323 ITR 5 70 (BOM) II. SATNAM OVERSEAL LTD. VS- ACIT (2010) 28 CIT 121 (DELHI) 4.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE ASSESSEE HAS FAILED TO LEAD ANY COGENT REASON, WHICH WOULD CALL FOR INTERFERENCE WITH THE ORDER OF THE AO. HE ACCORDINGLY UPHELD THE DISALLOWANCE OF DEPRECIATION TO THE TUNE OF RS.2,49,820/-. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE ME, ON BEHALF OF T HE ASSESSEE, SHRI HARDIK VORA APPEARED AND PRODUCED A COPY OF THE DECISION DATED 10.11.2009 OF THE ITAT B BENCH IN ASSESSEES OWN CASE IN ITA NO.2214/AHD/2008 FOR THE ASSESSMENT YEAR 2005-06. HE POINTED OUT THAT SINCE THE ISSUE REGARDING ALLOWANC E OF DEPRECIATION ON TUFS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06, THEREFORE, FOLLOWI NG THIS DECISION, THE AO BE DIRECTED TO ALLOW THE DEPRECIATION @50% ON TFO MACHINERIES. 3 ITA NO. 1973-AHD-2011 6. ON THE OTHER HAND, SHRI H.P.MEENA, SR.D.R., APPE ARED ON BEHALF OF THE REVENUE AND POINTED OUT THAT THE PROCESS OF TEXTURISING IS DONE ON THE YARN JUST TO IMPROVE ITS QUALITY/APPEARANCE, ETC. AND AS SUCH, IS SIMPLY AN INDEPENDENT INTERMEDIATE PROCESS. THE MACHINERIES USED FOR THE PURPOSE OF TEXTURISING IS COVERED BY PROVISIONS OF RULE 5 OF THE I.T. RULES, 1962, EVEN IF THE SAME IS PURCHASED UND ER TUFS. THEREFORE, THE ASSESSEE IS ELIGIBLE ON DEPRECIATION @15% AS AGAINST @50% CLAIM ED BY IT. 7. HAVING HEARD BOTH THE SIDES, I HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT YEAR 2005-06 IN ITA NO.2214/AHD/2008 ( SUPRA ), THE ASSESSEE HAS CITED THE ORDER OF TRIBUNAL DAT ED 18.02.2009 IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR IN ITA NO.3218/AHD/2008, WHEREIN THE TRIBUNAL HELD THAT THE ASSESSEE IS ENTITLED TO DEPR ECIATION @50% IN TUF MACHINERIES. THE RELEVANT DISCUSSION AND THE OBSERVATION OF THE TRIB UNAL ARE CONTAINED IN PARA 5.1 TO 7, WHICH ARE REPRODUCED HEREUNDER: 5.1 THE LEARNED AR OF THE ASSESSEE ALSO INVITED OUR ATTENTION TO THE ORDER OF THE ITAT AHMEDABAD 'D' BENCH IN THE CASE OF BIPINCHAND RA MOHANLAL GAJJAR IN ITA NO. 3218/AHD/2008 DATED 18-2-2009 FOR AY 2005-0 6. IN THE SAID APPEAL, THE ISSUE BEFORE THE TRIBUNAL WAS AS UNDER: 'ON THE FACTS &. IN THE CIRCUMSTANCES OF THE CASE, THE LD.CLT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF DEPRECIATION ON TFO MA CHINERY PURCHASED UNDER TUF SCHEME AT THE RATE OF 50% AND ALLOWING DE PRECIATION AT 25% APPLICABLE TO PLANT & MACHINERY MADE BY THE AO'. 5.2 THE LEARNED AR OF THE ASSESSEE SUBMITTED T HAT IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR (SUPRA) THE ARGUMENTS OF THE ASS ESSEE BEFORE THE TRIBUNAL WERE AS UNDER: 5. AGGRIEVED BY THIS ORDER OF THE CIT(A), THE ASS ESSEE IS BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERA TED THE SUBMISSIONS MADE BEFORE THE TAX AUTHORITIES PLEADED THAT DEPREC ATION AT THE RATE OF 50% WAS CLEARLY ALLOWABLE ON TWISTING MACHINERY PURCHA SED UNDER TUF SCHEME AS (I) SAID MACHINERY WAS INCLUDED IN TH E LIST OF MACHINERY ELIGIBLE FOR TUF SCHEME AS PER MINISTRY OF TEXTILE, (II) LOAN FOR THE PURCHASE OF SAID MACHINERY WAS SANCTIONED BY THE B ANK UNDER TUF SCHEME, (III) SUBSIDIARY ON THE SAID MACHINERY FOR THE PURCHASE UNDER TUF 4 ITA NO. 1973-AHD-2011 SCHEME WAS RECEIVED FROM THE GOVERNMENT AND (IV) I NCOME TAX RULES SPECIFICALLY PRESCRIBED RATE OF DEPRECATION AT 50% FOR THE MACHINERY USED IN WEAVING SECTOR OF TEXTILE INDUSTRY NOT EXCLUSIVE LY FOR WEAVING PROCESS AND (V) WEAVING SECTOR INCLUDES ALL THE PROCESS RIG HT FROM THE PURCHASE OF YAM TO MANUFACTURING OF GREY CLOTH AND IT DOES NOT SPECIFY THAT MACHINERY PURCHASED UNDER TUF SCHEME BE ACTUALLY W ED ONLY FOR WEAVING PROCESS. THEREFORE, THE CLAIM OF THE ASSESSEE SHOUL D BE ALLOWED. THE ASSESSEE ALSO DREW OUR ATTENTION TO LIST OF ELIGIBL E MACHINERIES ELIGIBLE FOR WEAVING/KNITTING UNITS UNDER TUF SCHEME IN WHICH F OR WEAVING PREPARATORY, AT ITEM NO.11 TWO-FOR-ONE TWISTER/THRE E-FOR-ONE TWISTER OPERATING MACHINES ARE MENTIONED (PB NO. 15). FURTH ER ASSESSEE SUBMITTED THAT TUF MACHINERY PURCHASED BY THE ASSESSEE HAS MU LTIPLE USAGES. TO THIS, HE ALSO DREW OUR ATTENTION ANNEXURE-B-1 SHOWI NG LIST OF MACHINERY ELIGIBLE UNDER THE SCHEME FOR SPINNING/SILK REELING AND TWISTING/SYNTHETIC FILAMENT YARN, TEXTURISING, CRIMPING AND TWISTING. 5.3 THE LEARNED AR OF THE ASSESSF.E FURTHER SUBMI TTED THAT VIDE ITS ORDER DATED 18-02-2009 IN THE CASE OF BIPINCHANDRA MOHANLAL GAJ JAR (SUPRA) THE ITAT AHMEDABAD 'D' BENCH ALLOWED THE APPEAL OBSERVING AS UNDER: '7. WE HAVE CONSIDERED RIVAL SUBMISSIONS, GONE THRO UGH THE FACTS AND CIRCUMSTANCES AND ALSO ORDERS OF THE TAX AUTHORITIE S. IT IS APPARENT FROM THE RECORD THAT THE AO HAS RESTRICTED THE DEPRECIATION AT THE RATE OF 25% BY OBSERVING THAT AS PER RULE 5 OF THE IT ACT, DEPRECI ATION WAS ALLOWABLE @50% ONLY ON THOSE MACHINERY AND PLANT, WHICH ARE A CTUALLY USED IN WEAVING PROCESS AND NOT ON MACHINERY USED FOR TWIST ING PROCESS. ON PERUSAL OF THE APPENDIX-1 OF THE INCOME TAX RULES, IT IS EVIDENT THAT THIS PARTICULAR MACHINERY SHOULD BE USED FOR WEAVING SEC TOR AND DOES NOT RESTRICT THAT IT SHOULD BE USED IN WEAVING PROCESS OF THE TEXTILE INDUSTRY. SINCE ADMITTEDLY, THE TWISTER MACHINE WAS USED BY WEAVING SECTOR OF TEXTILE INDUSTRY, DEPRECIATION ON THE SAID MACHINER Y AT THE RATE OF 50% SHOULD BE ALLOWED. THE ASSESSEE UNDERTAKES ALL THE ACTIVITIES RIGHT FROM TWISTING OF YARN TO WEAVING TO MAKE FINAL GREY CLOT H. LIST OF MACHINERIES MENTIONED IN THE SCHEDULE PUBLISHED BY THE MINISTR Y OF TEXTILE AND REFERRED TO ABOVE STATE MULTIPLE PURPOSE AND USAGE OF TWISTE R MACHINES. WE FIND THAT TAX AUTHORITIES HAVE NOT JUSTIFIED IN DENYING THE C LAIM OF THE ASSESSEE FOR DEPRECIATION ON THE TWISTER MACHINE AT THE RATE OF 50%, AND THEREFORE, WE SET ASIDE THEIR RESPECTIVE ORDERS AND ALLOW THE CLA IM OF THE ASSESSEE'. 5.4 THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ABOVE DECISION OF THE TRIBUNAL IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THEREFORE, THE CLAIM OF THE ASSESSEE MAY BE ALLOWED. 5 ITA NO. 1973-AHD-2011 6. SHRI R. P. GHOSH, LEARNED DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES. 7. AFTER HEARING THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT AHMEDABAD 'D' BENCH IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR VS. ITC, W-6(1), SURAT IN ITA NO. 3128/AHD/2 008 DATED 18-02-2009 RELATING TO AY 2005-06. THE ISSUE RAISED BY THE ASS ESSEE IN THIS APPEAL IS SIMILAR TO THAT OF THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR (S UPRA). RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF BIPINCHAND RA MOHANLAL GAJJAR (SUPRA), WE HOLD THAT SINCE ADMITTEDLY, THE TWISTING MACHINE WA S USED BY WEAVING SECTOR OF TEXTILE INDUSTRY, DEPRECIATION ON THE SAID MACHINER Y @50% SHOULD BE ALLOWED. WE ACCORDINGLY, ALLOW THE GROUND OF APPEAL. 7.1 SINCE THE MATTER IS SQUARELY COVERED BY THE DEC ISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND THE FACTS ARE IDENTICAL WITH THAT OF A SSESSMENT YEAR 2005-06, I, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 ( SUPRA ), DIRECT THE AO TO ALLOW DEPRECIATION ON TFO MACHINER IES @50%, AS CLAIMED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 0 ( ./# 1! 2 16 / 09 /2011 / 3 ( 4+ 5 ORDER PRONOUNCED IN THE COURT ON 16.09.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 16/09/2011 ( (( ( &,6 &,6 &,6 &,6 76#, 76#, 76#, 76#, / COPY OF ORDER FORWARDED TO:- 1. $% / APPELLANT 2. &'$% / RESPONDENT 3. , *; / CONCERNED CIT 4. *;- / CIT (A) 5. 6'? 4 &,!, , / DR, ITAT, AHMEDABAD 6. 4 A B 0 / GUARD FILE. BY ORDER/ , C / D , 5 TALUKDAR/SR.P.S. 6 ITA NO. 1973-AHD-2011