The ITO, Ward-4(2)., Ahmedabad V. Jalaram Ceramics Ltd, Ahmedabad

ITA 2200/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9411 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAVESH SHAH
• Keywords: Depreciation; Additional depreciation; Tax effect
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD , BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NOS. 2199 & 2200/AHD 2012 & C.O. NO.233/AHD/2012 ( IN ITA NO.2199/AHD/2012 ) ASSESSMENT YEARS : 2006-07 & 2009-10 THE ITO, WARD-4(2), AHMEDABAD JALARAM CERAMICS LTD. 511-512, SHIROMANI COMPLEX, S.M. ROAD, AMBAWADI, AHMEDABAD - 380015 V S . & VS . JALARAM CERAMICS LTD. 511-512, SHIROMANI COMPLEX, S.M. ROAD, AMBAWADI, AHMEDABAD - 380015 THE ITO, WARD-4(2), AHMEDABAD PAN NO. AAACJ4876E (APPELLANT) .. (RESPONDENT) /BY REVENUE MR. JAMES KURIAN, SR. D.R. /BY ASSESSEE SHRI BHAVESH SHAH, A.R. /DATE OF HEARING 08.02.2016 /DATE OF PRONOUNCEMENT 02.03.2016 ITA NOS. 2199 & 2200/AHD/12 & C.O. NO.233/AHD/12 A. Y.06-07 & 09-10 (ITO VS. JALARAM CERAMICS LTD.) PAGE 2 O R D E R PER : MANISH BORAD, ACCOUNTANT MEMBER THESE THREE APPEALS OF WHICH TWO ARE FILED BY REVEN UE AND THE OTHER ONE I.E. CROSS OBJECTION BY ASSESSEE ARE AGAINST THE OR DER OF CIT(A)-VIII, AHMEDABAD, DATED 27.07.2012 FOR THE ASSESSMENT YEAR 2006-07 AND 18.07.2012 FOR A.Y.2009-10. FIRST WE TAKE ITA NO. 2200/AHD/2012 (A.Y. 2006-07) 2. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUN D: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.1,33,96,265/- WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION NOT ON WIND FARM BUT ON WIND MILL, AND THE BENEFIT OF ADDITIONAL DEPRECIATION UN DER CLAUSE (I) OF SECTION 32(1) WAS NOT EXTENDED TO THE UNDERTAKING REFERRED TO CLAUSE (1) OF SECTION 32(1) OF THE ACT., FURTHER, THE POWER GENERATED FRO M THE WIND FARM WAS CONTROLLED BY GEB AND PURCHASED BY GEB AND NOT FOR THE BUSINESS OF THE ASSESSEE OF MANUFACTURING OF TILES. 3. THE LD. D.R. RELIED UPON THE ORDER OF ASSESSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OU TSET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE ORDER OF THE ITAT PASSED IN THE CASE OF THE DCIT VS. M/S. DIAMINES A ND CHEMICALS LTD., IN ITA NO.409/AHD/2013 FOR A.Y. 2007-08. HE PLACED ON REC ORD COPY OF THE TRIBUNAL ORDER DATED 10.05.2013. THE LD. D.R. UNABLE TO CON TROVERT THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND ITA NOS. 2199 & 2200/AHD/12 & C.O. NO.233/AHD/12 A. Y.06-07 & 09-10 (ITO VS. JALARAM CERAMICS LTD.) PAGE 3 THAT THE TRIBUNAL ON IDENTICAL FACTS IN CASE OF THE DCIT VS. M/S. DIAMINES AND CHEMICALS LTD.(SUPRA) HAD DISMISSED THE APPEAL OF R EVENUE, WHEREIN REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT (APPEALS) ERRED IN DELETING ADDITION OF RS.1,17,98, 030/- ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL DEPRECIATION ON WIND ELE CTRIC GENERATOR WITHOUT APPRECIATING THAT THE WIND ELECTRIC GENERATOR DOES NOT RESULT INTO MANUFACTURE OR PRODUCTION OR ARTICLE OR THING, BUT IT IS USED TO G ENERATE ELECTRICITY AND THAT THE BASIC CRITERIA TO GET ADDITIONAL DEPRECIATION UNDER CLAUSE (IIA) OF SECTION 32 OF THE ACT IS THAT THE PLANT AND MACHINERY SHOULD BE COVER ED UNDER CLAUSE (II) OF SECTION 32 OF THE ACT, WHEREAS WIND ELECTRIC GENERATOR IS C LASSIFIED AS PER CLAUSE (I) OF SECTION 32 OF THE ACT. 5.1 THE TRIBUNAL IN THE CASE OF THE DCIT VS. M/S. D IAMINES AND CHEMICALS LTD.(SUPRA) HAD DISMISSED THE APPEAL OF REVENUE BY HOLDING AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS WHETHER THE ASSESSEE IS ENTITLED TO CLAIM OF ADDITIONAL DEPRECIATION OF WIND ELECTRIC GENERATOR. IT IS THE UNDISPUTED FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPECIAL ITY CHEMICALS AND ALSO GENERATION OF WIND POWER. THE DATE OF INSTALLATION OF WIND PO WER GENERATOR IS NOT IN DISPUTE. THE A.O. HAS DISALLOWED THE CLAIM OF ADDITIONAL DEP RECIATION FOR THE REASON THAT THE WIND POWER GENERATOR DOES NOT RESULT INTO THE MANUF ACTURE OR PRODUCTION OF ARTICLE OR THING. BEFORE US, THE ASSESSEE RELIED UPON THE DEC ISION OF CIT V. HI TECH ARAI LTD. (SUPRA) AND ALSO PLACED ON RECORD THE COPY OF THE D ECISION. ON PERUSAL OF THE AFORESAID DECISION, WE FIND THAT THE QUESTION BEFOR E THE HONBLE HIGH COURT WAS WHETHER THE ASSESSEE WAS ENTITLED TO ADDITIONAL DEP RECIATION ON PURCHASE OF WIND MILLS EVEN THOUGH THE MAIN BUSINESS OF THE ASSESSEE WAS NOT PRODUCING OR GENERATING OF ELECTRICITY. THE HONBLE MADRAS HIGH COURT HAS DECIDED IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 5. IN THE CASE ON HAND, THE ASSESSEE IS STATED TO HAVE SET UP TWO WIND MILLS IN ADDITION TO THE ALREADY EXISTING FOUR WIND MILLS AND THEREBY INCREASED ITS POWER GENERATION CAPACITY BY ABOVE 50 %. IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURE OF OIL SEEDS, MOULDED RUBBER PARTS, REED VALUE ASSEMBLIES APART FROM GENERATION OF POWER. AFTER THE INSTALLATION OF THE ADDITIONAL WIND MILLS, BOTH PRIOR TO AS WELL AS AFTER THE INSTALLATION OF THE ADDITIONAL WIND MILLS, THE ASSESSEE WAS USING WIND ENERGY FOR GENERATING POWER FOR ITS CAPITATIVE CONSUMPTION APART FROM SELLING THE SURPLUS POWER GE NERATED TO THE TAMIL NADU ELECTRICITY BOARD. AS FAR AS APPLICATION OF S ECTION 32(1)(IIA) OF THE ACT, IS CONCERNED, WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE ADDITIONAL DEPRECIATION IS THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31 ST MARCH 2002 BY AN ITA NOS. 2199 & 2200/AHD/12 & C.O. NO.233/AHD/12 A. Y.06-07 & 09-10 (ITO VS. JALARAM CERAMICS LTD.) PAGE 4 ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS O F MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE SAID PROVI SION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLANT, WHICH W AS ACQUIRED AND INSTALLED UPTO 31.03.2002 SHOULD HAVE ANY OPERATION AL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFACTURE D BY THE ASSESSEE. THEREFORE, THE CONTENTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS ETC. IS TOTALLY NOT GERMANE TO THE SPECIFIC PROVISION CONTAINED IN SECTION 32(1)(IIA) OF THE ACT. IN THE CASE OF CIT VS. VTM LTD.(SUPRA), ONE OF THE ISSUE BEFORE HONBLE MADRAS HIGH COURT WAS WHETHER THE ASSESSEE WHAT RIGHT IN CLAIMI NG ADDITIONAL DEPRECIATION U/S.32(IIA) HONBLE MADRAS HIGH COURT HAS DECIDED T HE ISSUE IN ASSESSEES FAVOUR BY HOLDING AS UNDER: 5. IN THE CASE ON HAND, THE ASSESSEE IS STATED TO HAVE SET UP A WIND MILL AT A COST OF RS.5,85,60,000. IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF TEXTILE G OODS. AS FAR AS APPLICATION OF SECTION 32(1)(IIA) OF THE ACT, IS CO NCERNED, WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE ADDITIONAL DE PRECIATION IS THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31-3-2002 BY AN ASSESSEE, WHO WAS A LREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING. THE SAID PROVISION DOES NOT STATE THAT THE SETTING UP OF A N EW MACHINERY OR PLANT, WHICH WAS ACQUIRED AND INSTALLED UP TO 31-3-2002 SH OULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING TH AT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. THEREFORE, THE CONTE NTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS ETC. IS TOTALLY NOT GERMAN E TO THE SPECIFIC PROVISION CONTAINED IN SECTION 32(1)(IIA) OF THE AC T. WE FIND THAT THE ISSUE BEFORE US IN THE PRESENT APP EAL IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISIONS OF HIGH COU RTS. FURTHER, THE REVENUE HAS NOT BROUGHT ON RECORD BEFORE US ANY CONTRARY DECISION O F ANY OTHER HIGH COURT OR JURISDICTIONAL COURT IN ITS SUPPORT. IN VIEW OF TH E AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 6. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF THE DCIT VS. M/S. DIAMINES AND CHEMICALS LTD., (SUPRA), DISM ISS THE APPEAL OF REVENUE. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ITA NOS. 2199 & 2200/AHD/12 & C.O. NO.233/AHD/12 A. Y.06-07 & 09-10 (ITO VS. JALARAM CERAMICS LTD.) PAGE 5 NOW, WE TAKE C.O. NO. 233/AHD/2012 (A.Y. 2006-07) 8. LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE CROSS OBJECTION. THEREFORE, THE C.O. IS DISMISSED AS NOT PRESSED. AT LAST, WE TAKE ITA NO. 2200/AHD/2012 (A.Y. 2009-10) 9. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUN D :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS OF RS.23,47 ,928/- WITHOUT APPRECIATING THE FACTS THAT THE TOTAL VALUE OF CLOSING STOCK OF FINISHED GOODS OF RS.12,92,29,785/- AS REFLECTED IN THE BALANCE SHEET , STOCK OF RS.9,90,26,206/- WAS LYING IN THE FACTORY PREMISES AND THE REMAINING STOCK WAS LYING AT VARIOUS DEPOT OF THE COMPANY WHICH WERE CLEARED FROM THE FA CTORY AFTER PAYMENT OF EXCISE DUTY. 10. THIS APPEAL WAS PRESENTED ON 04/10/2012. ON 10 .12.2015 THE CBDT HAS ISSUED INSTRUCTIONS BEARING NO. 21/2015 PROHIBITING ITS SUBORDINATE AUTHORITIES FROM FILING OF THE APPEAL TO THE TRIBUNAL AGAINST T HE ORDER OF THE CIT(A) WHERE THE TAX EFFECT BY VIRTUE OF THE RELIEF GIVEN BY THE CIT(A) IS LESS THAN RS.10 LAKHS. THE INSTRUCTIONS HAVE BEEN MADE APPLICABLE WITH RET ROSPECTIVE EFFECT, MEANING THEREBY, THESE INSTRUCTIONS ARE APPLICABLE ON PENDI NG APPEALS ALSO. THE TAX EFFECT ON DELETION OF THIS TOTAL ADDITION WOULD BE LESS THAN RS.10 LAKHS. THE PRESENT APPEAL DESERVES TO BE DISMISSED BEING TREAT ED TO BE FILED IN VIOLATION OF CBDT INSTRUCTIONS. THE CASE DOES NOT FALL WITHIN T HE AMBIT OF EXCEPTIONS PROVIDED IN THE INSTRUCTIONS. IT IS FURTHER OBSERV ED THAT SINCE, WHILE HEARING THE APPEAL, SUCH FACTORS WERE NOT CONSIDERED, THEREFORE , IN CASE, ON RE-VERIFICATION AT THE END OF THE AO, IT COMES TO THE NOTICE THAT THE TAX EFFECT IS MORE OR IT FALLS WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE INST RUCTION, THEN THE DEPARTMENT WILL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR REC ALL OF THIS ORDER. SUCH ITA NOS. 2199 & 2200/AHD/12 & C.O. NO.233/AHD/12 A. Y.06-07 & 09-10 (ITO VS. JALARAM CERAMICS LTD.) PAGE 6 APPLICATION SHOULD BE FILED WITHIN FOUR YEARS OF TH IS ORDER. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 12. IN THE RESULT, BOTH APPEALS OF REVENUE AND A CR OSS OBJECTION OF ASSESSEE ALL ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 02/03/20 16 SD/- SD/- (RAJPAL YADAV) ( MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 02/03/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. !' / RESPONDENT 3. #$#%& ' ' ' / CONCERNED CIT 4. ' ' ' - / CIT (A) 5. ()*' ++%& , ' ' %& , $ / DR, ITAT, AHMEDABAD 6. *./ / GUARD FILE. BY ORDER/ , / ' # ' ' %& , $