The DCIT, Circle-2, Surat V. M/s. Sapna Arts, Surat

ITA 242/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94385 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHM E DABAD , BEFORE: SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER SHRI KUL BHARAT, JUDICIAL MEMBER I T A NO. 2 42 /AHD/ 20 1 2 ASSESSMENT YEAR : 200 8 - 0 9 D Y. COMMISSIONER OF INCOME - TAX, CIRCLE - 2, SURAT - 395001 V/S . M/S.SAPNA ARTS. G - 15/9 - 10, HOGIWALA INDUSTRIAL ESTATE, OPP. G. N. FLOUR MILL LANE, SACHIN, SURAT - 395001 PAN NO. A A NFM7032P (APPELLANT) .. (RESPONDENT) / BY REVENUE SHRI NARENDRA SINGH , SR. D.R. / BY ASSESSEE WRITTEN SUBMISSION (NONE) / DATE OF HEARING 28 . 0 8 .201 5 / DATE OF PRONOUNCEMENT 16 .0 9 .201 5 O R D E R PER : KUL BHARAT, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) - I I , SURAT , DATED 12 . 1 0.201 1 PERTAINING TO ASSESSMENT YEARS 200 8 - 0 9 . THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - II, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.27,17,259/ - MADE ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL DEPRECIATION U/S.32(1)(IIA) OF THE I.T. ACT CLAIMED ON NEW PLANT AND MACHINERIES. WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS DOING JOB WORK IN EMBROIDERING THE FINISHED CLOTHS SUPPLIED BY ITS CLIENTS. EMBROIDERING IS NEITHER A MANUFACTURING ACTIVITY NOR A PROCESSING ACTIVITY. I TA NO. 2 42 /AHD/ 1 2 A.Y. 0 8 - 0 9 ( D CIT VS. M/S. SAPNA ARTS ) PAGE 2 [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - II OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET - ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2 . BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY A SSESSMENT AND ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961, HEREINAFTER REFERRED TO AS THE ACT WAS FRAMED VIDE ORDER DATED 29 .1 0 .20 10 . WHILE FRAMING ASSESSMENT ASSESSING OFFICER MADE DISALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION OF RS. 2 7 , 17 ,2 59 / - . 3. ASSESSEE AGGRIEVED BY THIS ORDER PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS AND RELYING UPON THE DECISION OF CO - ORDINATE BENCH IN CASE OF ASWANI INDUSTRIES, SURAT IN ITA NO.2103/AHD/2010 AND HARIPRIYA PROCESSORS PVT . LTD. IN ITA NO.1569/AHD/2010 ALLOWED THE CLAIM OF DEPRECIATION. LD. SR. DR SUPPORTED THE ORDER OF ASSESSING OFFICER AND SUBMITTED THAT LD. CIT(A) HAD NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE ASSESSING OFFICER HAS OBSERVED THAT THE A SSESSEE HAS BEEN CARRYING OUT THE JOB WORK OF EMBROIDERY AND THEREFORE, IT IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. NO - ONE APPEARED ON BEHALF OF ASSESSEE, HOWEVER, WRITTEN SUBMISSIONS HAVE BEEN FILED. 4 . WE HAVE HEARD LD. SR. D.R. AND PERUSED THE WRITTEN SUBMISSION AND MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER DISALLOWED THE CLAIM BY OBSERVING THAT THE DECISIONS OF THE TRIBUNAL ARE NOT ACCEPTABLE AS THE DECISION OF THE ITAT ARE NOT SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COUR T. THE RELEVANT OBSERVATION OF THE ASSESSING OFFICER ARE REPRODUCED AS UNDER: FURTHER IN FAVOUR OF ALLOWABILITY OF ADDITIONAL DEPRECIAT ION RECENT DECISION OF HON'BLE IT AT (AH D ) IN THE C ASE OF ITO WARD 1(2) , SURAT VS. M/S HARIPRIYA PROCE SSORS PVT. LTD WH ERE HON'BLE IT AT HAS RELIED O N THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF S.S.M. BROTHERS PVT. LTD & OTHERS (243 ITR 41 8) AND ALLOWED THE APPEAL OF THE M/S HARIPRIYA PROCESSORS PVT. LTD ON 20% ADDITIONAL DEPRECIATION . SINCE THE DECISION OF SUPR EME COURT IN THE CASE OF S.S.M. BROTHERS (P) LTD IS ON DIFFERENT FACTS AND CIRCUM STANCES AS ENUMERATED ABOVE AND ISSUE AS DISCUSSED IN HON'BLE TTAT DECISION IS NOT SQUARELY COVERED BY THE DECISION OF THE I TA NO. 2 42 /AHD/ 1 2 A.Y. 0 8 - 0 9 ( D CIT VS. M/S. SAPNA ARTS ) PAGE 3 HON'BLE SUPREME COURT AND DECISION O F HON'BLE ITAT IS NOT ACCEPTABLE. IN VIEW OF THAT 20% ADDITIONAL DEPRECIATION CLAIMED BY ASSESSEE ON MACHINES INSTALLED OF RS.74,92,303/ - IS HEREBY DISALLOWED AND ADDED BACK TO TOTAL INCOME BF THE ASSESSEE. HOWEVER, LD. CIT(A) HAS DECIDED THE ISSUE AS UNDER: 3. I HAVE GONE THROUGH THE FACTS OF THE CASE AND THE ORDERS OF THE HON'BLE ITAT, AHMEDABAD BENCH REFERRED ABOVE. IN THEIR DECISION, THE HON'BLE ITAT, AHMEDABAD BENCH HELD THAT EMBROIDERY JOB WORK WAS MANUFACTURING AND THAT BENEFIT OF ADDITIONAL DEPRECIATION WAS AVA ILABLE TO AN ASSESSEE ENGAGED IN BUSINESS OF EMBROIDERY ON JOB WORK BASIS. I FIND THAT THE FACTS OF THE APPELLANT ARE IDENTICAL TO THE FACTS IN THE CASES REFERRED ABOVE. RESPECTFULLY, FOLLOWING THE ABOVE DECISIONS, IT IS HELD THAT THE ASSESSEE WAS ENTITLED TO ADDITIONAL DEPRECIATION. THE A.O. IS DIRECTED TO ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION. 5. THE ONLY QUESTION IS TO BE EXAMINED WHETHER THE ASSESSING OFFICER WAS RIGHT IN NOT FOLLOWING THE DECISION OF CO - ORDINATE BENCH IN ITA NO.1569/AHD/2010 REN DERED IN CASE OF ITO VS. M/S HARIPRIYA PROCESSORS PVT. LTD . WE FIND THAT THE CO - ORDINATE BENCH HAS REPRODUCED IN PARA 2, THE GROUND RAISED BY THE REVENUE I.E. REPRODUCED FOR THIS HEARING FOR THE SAKE OF CLARITY : 1) ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF CLAIM OF ADDITIONAL DEPRECIATION OF RS.9,45,450/ - . THE CO - ORDINATE BENCH THEN GO E S ON TO RECORD ING THE FACTS IN PARA 3 AS UNDER: 3. THE BRIEF FACTS ARE THAT THE ASSESSEE ENGAGED IN THE ACTIVITY OF EMBROIDERY WORKS ON FABRICS ON JOB WORK BASIS. ACCORDING TO THE ASSESSING OFFICER THE BUSINESS OF EMBROIDERY WORK ON JOB WORK BASIS IS NOT A MANUFACTURING ACTIVITY, HENCE, THE ADDITIONAL DEP RECIATION CLAIMED BY ASSESSEE CANNOT BE ALLOWED AND ACCORDINGLY HE MADE DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED AT RS.9,45,450/ - . IN THE ASSESSMENT ORDER, AO NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.17,65,557/ - ON COMPUTER EMBROIDERY MACHINE, WHICH WAS PURCHASED AFTER 30 - 09 - 2006 AND ASSESSEE CLAIMED DEPRECIATION @ 35%. THE AO NOTED THAT DEPRECIATION ALLOWABLE ON PLANT & MACHINERY IS PRESCRIBED AS PER I.T. RULES, 1962 @ 15%. THE ASSESSEE CLAIMED THAT AS PER SECTION 32(1)(IIA) OF THE AC T IF ANY NEW MACHINERY AND PLANT II ACQUIRED AND INSTALLED AFTER 30 - 03 - 2005 IN THE MANUFACTURE OR PRODUCTION OF ANYTHING, ADDITIONAL DEPRECIATION OF 20% WILL BE ALLOWED AS DEDUCTION. THE ASSESSEE CLAIMED THAT IT IS MANUFACTURING CONCERN ENTITLED FOR ADDITI ONAL 20% DEPRECIATION. ACCORDING TO THE ASSESSING OFFICER, IN VIEW OF DETAILS FURNISHED, IT IS ENGAGED IN THE BUSINESS OF EMBROIDERY WORK ON JOB WORK BASIS WHICH IS NOT A MANUFACTURING ACTIVITY. THE ASSESSEE WAS THEREFORE ISSUED A LETTER TO SHOW CAUSE AS T O WHY DEPRECIATION SHOULD NOT BE RESTRICTED TO 15% AND EXTRA CLAIM OF 20% SHOULD NOT BE DISALLOWED AND ADDED TO ITS TOTAL INCOME VIDE SHOW CAUSE NOTICE DATED 12 - 11 - 2009. THE ASSESSEE REPLIED BUT THE AO STATED THAT THE REPLY IS NOT ACCEPTABLE IN VIEW OF THE CLEAR - CUT PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). I TA NO. 2 42 /AHD/ 1 2 A.Y. 0 8 - 0 9 ( D CIT VS. M/S. SAPNA ARTS ) PAGE 4 THE TRIBUNAL WHILE DECIDING THE ISSUE REPRODUCE D THE FINDING OF THE LD. CIT(A) IN PARA 4 AS UNDER: 4. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING FOLLOWING FINDING IN PARA - 3.3 OF HIS APPELLATE ORDER: - '3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. THE CASE OF THE APPELLANT IS COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.S.M. BROS. PVT. LD. & OTHERS (243 - ITR - 418) WHEREIN THE HON'BLE SUPREME COURT STATED AS UNDER : - '6. WHEN BOTH THE PROVISIONS ARE READ TOGETHER THIS IS T HE RESULT: WHERE THE MACHINERY OR PLANT IS INSTALLED FOR THE PURPOSE OF THE BUSINESS OF PRODUCTION OF TEXTILES, INCLUDING THOSE DYED, PRINTED OR OTHERWISE PROCESSED, MADE WHOLLY OR MAINLY OUT OF COTTON, THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF THE DEVE LOPMENT REBATE THE UNDER. WHAT IS IMPORTANT IS THAT THIS DEVELOPMENT REBATE IS AVAILABLE IF THE MACHINERY OR PLANT IS INSTALLED FOR THE PURPOSES OF THE BUSINESS OF THE PRODUCTION OF TEXTILES, INCLUDING THOSE 'OTHERWISE PROCESSED.' IF THE MACHINERY OR PLANT IS REQUIRED TO BE UTILIZED IN THE PRODUCTION OF SUCH TEXTILES, AT WHATEVER SAGE, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE DEVELOPMENT REBATE. IT IS NOT DISPUTED FAIRLY THAT IF THE ASSESSEE HAD BEEN PRODUCING THE EMBROIDERED CLOTH STARTING FROM SCRAT CH, THAT IS, BY STARTING WITH COTTON, THIS MACHINERY WOULD HAVE BEEN ENTITLED TO BE CONSIDERED FOR THE PURPOSES OF SUCH DEVELOPMENT REBATE. WE ARE OF THE VIEW THAT IT MAKES NO DIFFERENCE THAT IN THE PARTICULAR CASE, THE ASSESSEE BUYS THE CLOTH AND THEN PROCESSES IT, USING THE MACHINERY, BY EMBROIDERING IT AND, IN SOME CASES, BY DYEING IT. THE ASSESSEE UTILIZES THE MACHINERY IN THE PRODUCTION OF PROCESSED TEXTILES. THEREFORE, THE MACHINERY IS ENTITLED TO THE DEVELOPMENT REBATE UNDER S.33(1)(B)(B)(I). THE QUESTION HAS, THEREFORE, TO BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE.' IN VIEW OF THE ABOVE, THE DISALLOWANCE MADE BY THE A.O IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED.' 5(I). WE FIND THAT LD. CIT(A) IN THAT CASE HAD REPRODUCED THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN CASE OF S.S.M. BROS. PVT. LTD. & OTHERS 243 ITR 418 . IT IS PERTINENT TO NOTE THAT T HE DECISION OF THE TRIBUNAL IN ITA NO.1569/AHD/10 WAS FOLLOWED BY THE CO - ORDINATE BENCH IN ITA NO.2103/AHD/2010 IN BOTH C ASES, THE FACTS WERE IDENTICAL AS IN THE PRESENT CASE. THE REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD SUGGESTING THE CHANGE IN FACTS AND CIRCUMSTANCES. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). SAME IS HEREBY AFFIRM ED. THE GROUND RAISED IN THE APPEAL IS REJECTED. I TA NO. 2 42 /AHD/ 1 2 A.Y. 0 8 - 0 9 ( D CIT VS. M/S. SAPNA ARTS ) PAGE 5 5(II). BEFORE PARTING, WE WANT TO OBSERVE THAT THE ASSESSING OFFICER HAS TOTALLY DISREGARDED THE JUDICIAL DISCIPLINE BY NOT FOLLOWING THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF ITO VS. M/S HARIP RIYA PROCESSORS PVT. LTD . (SUPRA). IF THE DECISION WAS NOT ACCEPTABLE IN A PARTICULAR CASE, THE REMEDY IS AVAILABLE UNDER THE ACT FOR FILING THE APPEAL AGAINST SUCH ORDER. BUT MERELY IN THE OPINION OF ASSESSING OFFICER THAT THE DECISION IS NOT ACCEPTABLE AND NOT FOLLOWING THE SAME IS AGAINST THE JUDICIAL DISCIPLINE . THE ASSESSING OFFICER HAS NOT POINTED OUT ANY CHANGE INTO FACTS AND CIRCUMSTANCES AS TO HOW THE FACTS OF THE PRESENT CASE ARE DIFFERENT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE RELIED BY THE COUNSEL FOR THE ASSESSEE I N ITA NO.1569/AHD2010. IN THE ABSENCE OF SUCH FINDING THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IS MISPLACED AND CANNOT BE SUSTAINED. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . TH I S ORDER PRONOUNCED IN OPEN COURT ON 16 TH SEPTEMBER , 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER 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/ , / ,