Jai Parvati Forge Limited, Panchkula V. DCIT, Chandigarh

ITA 20/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9926 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.20/CHD/2016 ASSESSMENT YEAR: 2010-11 JAI PARVATI FORGE LIMITED VS. THE DCIT # 5059, MODERN HOUSING COMPLEX CIRCLE-1(1) MANIMAJRA CHANDIGARH NOW: # 72, SECTOR-4, PANCHKULA PAN NO.AABCJ3788Q (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 27/05/2016 DATE OF PRONOUNCEMENT : 14/06/2016 ORDER PER ANNAPURNA GUPTA, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (APPEALS)-1, CHANDIGARH DT. 27/10/2015. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), C HANDIGARH IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION ON ELECTRIC INSTALLATIONS, WHICH ARE A PART & PARCEL OF THE PLANT & MACHINERY. 3. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G ASSESSMENT PROCEEDINGS, ON PERUSAL OF THE DEPRECIATION CHART FILED BY THE ASSE SSEE COMPANY, IT WAS FOUND THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATI ON ON ELECTRICAL INSTALLATION AMOUNTING TO RS. 2,43,301/- UNDER THE HEAD PLANT & MACHINERY. ON BEING ASKED TO JUSTIFY THE SAME, THE ASSESSEE STATED THAT THE E LECTRICAL FITTING WERE PART OF THE NEW MACHINERY INSTALLED AND HENCE ADDITIONAL DEPREC IATION HAD BEEN CLAIMED ON THE SAME AS PER THE PROVISION OF SECTION 32(1)(I IA) OF THE INCOME TAX ACT 1961. LD. AO REJECTED THE CONTENTION OF THE ASSESSE E STATING THAT ELECTRICAL INSTALLATION COULD NOT BE PART OF MACHINERY AND THE REFORE DENIED ADDITIONAL DEPRECIATION ON THE SAME. 2 4. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHO DISMISSED THE ASSESSEES APPEAL BY STATING THAT THE ASSESSEE HAD N OT BROUGHT ANY EVIDENCE TO PROVE THAT IT HAD FULFILLED ALL THE CRITERIA PRESCR IBED IN SECTION 32(1)(IIA) OF THE ACT. LD. CIT(A) HELD AT PARA 5.3 OF HIS ORDER AS FOLLOWS : 5.3 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT. THE APPELLANT HAS CLAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF T HE ACT. HOWEVER, IN ITS SUBMISSION THE EMPHASIS IS MADE ONLY ON THE ISSUE T HAT THE ELECTRIC INSTALLATIONS FORM PART AND PARCEL OF THE MACHINERY AND IS ELIGIB LE FOR ADDITIONAL DEPRECIATION. UNDER SECTION 32(1)(IIA) OF THE ACT, THE ADDITIONAL DEPRECIATION @20% IS ALLOWED ON THE ACTUAL COST OF NEW MACHINERY OR PLANT SUBJEC T TO CERTAIN RESTRICTIONS PROVIDED UNDER PROVISO TO THE RELEVANT SECTION. THE MOST IMPORTANT REQUIREMENT TO BE ELIGIBLE FOR SUCH DEDUCTION IS THAT THE ASSES SEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING. NOWHERE DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS, THE APPEL LANT HAS BOUGHT ANY EVIDENCE AS SUCH WHICH INDICATES THAT IT HAS FULFIL LED ALL THE CRITERION PRESCRIBED IN SECTION 32(1)(IIA) OF THE ACT. ALL THE WAY, THE APP ELLANT IS TRYING TO EXPLAIN THAT THE NEW MACHINERY, PRIMARILY ELECTRIC INSTALLATION, IS PART AND PARCEL OF THE PLANT & MACHINERY WHICH CANNOT BE PUT TO USE WITHOUT SUCH E LECTRIC INSTALLATIONS. ISSUE HERE IS TO FULFILL THE CRITERION PRESCRIBED U/S 32( 1)(IIA) AND ITS PROVISO TO BECOME ELIGIBLE FOR THE ADDITIONAL DEPRECIATION. THE APPEL LANT HAS FAILED TO SUBSTANTIATE ITS CLAIM FOR ADDITIONAL DEPRECIATION UNDER SECTION 32( 1)(IIA) OF THE ACT. IN VIEW OF THE SAME, THE DISALLOWANCE OF ADDITIONAL DEPRECIATION F OR RS. 2,43,301/- IS CONFIRMED AND THE GROUND OF APPEAL NO. 1 IS DISMISSED. 5. BEFORE US LD. AR REITERATED THE CONTENTION MADE BEFORE THE LOWER AUTHORITIES AND STATED THAT THE ELECTRICAL INSTALLA TION WERE PART OF ITS NEWLY INSTALLED PLANT AND MACHINERY AND INCLUDED CABLE WI RES, ELECTRIC PANEL, EXTENSION PANEL, TREATMENT PANEL, DB PANELS, SWITCH ES AND FUSES WITHOUT WHICH THE MACHINE COULD NOT HAVE BEEN PUT TO USE AT ALL. LD. AR FURTHER POINTED OUT THAT THE ASSESSEE HAD CLAIMED AND HAD BEEN ALLOWED DEPRECIATION ON THESE VERY ELECTRICAL INSTALLATION @ 15% WHICH IS THE PRE SCRIBED RATE OF DEPRECIATION FOR PLANT AND MACHINERY. LD. AR ALSO POINTED OUT THAT E LECTRICAL INSTALLATION IN THE NATURE OF ELECTRIC FITTINGS SUCH AS TUBE LIGHT, FAN ETC. ARE ALLOWED DEPRECIATION @ 10% AS PER THE INCOME TAX ACT. THE LD. AR THEREFORE STATED THAT HAVING ACCEPTED THE ELECTRICAL INSTALLATION TO BE IN THE N ATURE OF PLANT AND MACHINERY, THE ASSESSEES CLAIM FOR ADDITIONAL DEPRECIATION COU LD NOT HAVE BEEN REJECTED BY CONSIDERING THE SAME BE ELECTRIC FITTINGS. 6. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F LOWER AUTHORITIES. 3 7. WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERU SED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED BEFORE US. 8. THE ONLY DISPUTE IN THE PRESENT CASE IS REGARDIN G THE ELIGIBILITY OF THE ASSESSEE TO CLAIM OF ADDITIONAL DEPRECIATION ON ELE CTRICAL INSTALLATIONS. 9. WHILE THE AO, WE FIND, DENIED THE DEDUCTION BY H OLDING THAT ELECTRICAL FITTINGS WERE NOT IN THE NATURE OF PLANT AND MACHIN ERY TO BE ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION, THE LD. CIT(A) ENHANCED TH E SCOPE AND DENIED DEDUCTION FOR THE REASON THAT THE ASSESSEE HAD NOT DISCHARGED ITS ONUS OF ESTABLISHING THAT IT FULFILLED ALL THE CRITERIA PRE SCRIBED IN SECTION 32(1)(IIA) FOR CLAIMING ADDITIONAL DEPRECIATION. WE MAY ADD THAT L D. CIT(A) ENHANCED THE SCOPE WITHOUT EVEN CONFRONTING THE ASSESSEE WITH HI S REASONS FOR DENIAL, WHICH IS APPARENT FROM A BARE READING OF THE CIT(A) ORDER, W HERE WE FIND NO MENTION OF ANY SUCH CONFRONTATION MADE TO THE ASSESSEE OR OF A NY RESPONSE OF THE ASSESSEE TO THE SAME IF MADE. CLEARLY THE DISALLOWANCE HAS B EEN UPHELD BY THE LD. CIT(A) IN GROSS VIOLATION OF THE PRINCIPLES OF NATU RAL JUSTICE AND THE ORDER OF THE CIT(A) OUGHT TO BE SET ASIDE FOR THIS REASON ALONE. BUT WE FIND THAT EVEN ON MERITS THE ASSESSEE IS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION ON ELECTRICAL INSTALLATION. FOR CLARITY THE PROVISION OF SECTION 32(1)(IIA) ARE REPRODUCED HEREUNDER: 32(1)(IIA)- IN THE CASE OF ANY NEW MACHINERY OR PLA NT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AF TER THE 31 ST DAY OF MARCH 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTU RE OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION O R GENERATION AND DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF TH E ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II). PROVIDED [FURTHER]THAT NO DEDUCTION SHALL BE ALLOWE D IN RESPECT OF- (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATI ON BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATUR E OF A GUEST-HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; O R (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COS T OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERW ISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OF ANY ONE PREVIOUS YEAR;] 4 A BARE READING OF THE SECTION REVEALS THAT THE FOLL OWING CONDITIONS NEED TO BE FULFILLED FOR CLAIMING ADDITIONAL DEPRECIATION UNDE R SECTION 32(1)(IIA) OF THE ACT. 1) ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUF ACTURING OR PRODUCTION OF ARTICLE OR THING. 2) IT SHOULD HAVE ACQUIRED AND INSTALLED NEW PLANT AND MACHINERY AFTER 31/03/2005. 3) THE MACHINERY OR PLANT SHOULD NOT HAVE BEEN USED EA RLIER BY ANY OTHER PERSON EITHER WITHIN OR OUTSIDE INDIA. 4) THE MACHINERY AND PLANT SHOULD NOT BE AN OFFICE APP LIANCE OR ROAD TRANSPORT VEHICLE NOR SHOULD IT BE INSTALLED IN ANY OFFICE PREMISES AND RESIDENTIAL ACCOMMODATION. 5) 100% DEPRECIATION SHOULD NOT HAVE BEEN CLAIMED ON I T. 10. IN THE PRESENT CASE WE FIND THAT THE ASSESSEE H AS DULY DEMONSTRATED FULFILLING ALL THE ABOVE CONDITIONS. A PERUSAL OF T HE DEPRECIATION CHART, PREPARED AS PER THE INCOME TAX ACT 1961, PLACED AT PAPER BO OK PAGE NO.6 FILED BY THE ASSESSEE, COMPUTING ITS CLAIM OF DEPRECIATION U/S 3 2 OF THE ACT, SHOWS THAT THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION ON ALL ADDITIONS MADE DURING THE YEAR TO THE BLOCK OF ASSETS OF PLANT AND MACHINERY. THIS WE FIND HAS BEEN ACCEPTED BY THE AO, EXCEPT ADDITION MADE TO ELECTRI CAL INSTALLATION MEANING THEREBY THAT IT IS AN ACCEPTED FACT THAT THE ASSESS EE IS A MANUFACTURING CONCERN AS REQUIRED BY THE FIRST CONDITION STATED A BOVE. THAT THE ELECTRIC INSTALLATION ARE IN THE NATURE OF PLANT AND MACHINERY IS EVIDENT FROM THE FACT THAT THEY HAVE BEEN STATED TO BE CABL E WIRES, ELECTRIC PANELS, EXTENSION PANELS, TREATMENT PANELS, DB PANELS, SWIT CH AND FUSES, WHICH WERE USED FOR INSTALLING NEW MACHINES ACQUIRED DURING TH E YEAR. THE ASSESSEE HAS PRODUCED BILLS PERTAINING TO THESE ITEM BEFORE THE LOWER AUTHORITIES REPRODUCED AT PAPER BOOK PAGE NO. 12-48. THIS FACT WE FIND HAS NOT BEEN CONTROVERTED. MOREOVER WE FIND THAT THE ASSESSEE HAS CLAIMED AND HAS BEEN ALLOWED DEPRECIATION ON THESE VERY ELECTRICAL INSTALLATION AT THE RATE OF 15%, WHICH IS THE RATE PRESCRIBED FOR THE BLOCK OF ASSETS PERTAINING TO PLANT & MACHINERY AS PER THE INCOME TAX ACT. THEREFORE IT STANDS ESTABLISHED WITHOUT ANY DOUBT THAT THE 5 ELECTRICAL INSTALLATION WERE IN THE NATURE OF PLANT AND MACHINERY. WE MAY POINT OUT THAT ELECTRICAL FITTINGS ARE ENTITLED TO DEPREC IATION @ 10%. THE AO HAVING ALLOWED THE ASSESSEE DEPRECIATION @ 15% CANNOT NOW QUESTION THE NATURE OF THE ELECTRIC INSTALLATION AND STATE THAT THEY WERE IN THE NATURE OF ELECTRICAL FITTINGS. CONDITION 2 & 4 ALSO THUS STANDS COMPLIED WITH BY THE ASSESSEE. UNDENIABLY AS PER THE DEPRECIATION CHART PLACED AT PAPER BOOK PAGE NO. 6 , THE ASSESSEE HAS CLAIMED DEPRECIATION @15% ON THESE INSTALLATIONS, THUS THE CONDITION THAT DEPRECIATION @100% HAS NOT BEEN CLAI MED BY ASSESSEE ALSO STANDS FULFILLED. THE ASSESSEE WE FIND HAD PRODUCED BILLS EVIDENCING PURCHASE OF THESE ITEMS FROM TRADERS BEFORE THE LOWER AUTHORITIES PLACED AT PAPER BOOK PAGE NO. 12-48. EVIDENTLY IT IS ESTABLISHED THAT THE INSTALLATIONS ARE NEW AND NOT PREVIOUSLY USED. THUS ALL THE CONDITIONS OF 32(1)(IIA)HAD BEEN DEMON STRATED AS BEING FULFILLED AND THEREFORE WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION ON THE ELECTRICAL INSTALLATION AS PER THE PROVISION OF SECTION 32(1)(IIA) OF THE ACT. 11. THE DISALLOWANCE MADE OF RS. 2,43,301/- IS THER EFORE DELETED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14/06/2016. SD/- SD/- (H.L. KARWA) (ANNAPURNA GUPTA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 14/06/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR