DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5, Jaipur V. M/s. Shree Balaji Enterprises, Jaipur

ITA 282/JPR/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4094 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P MEENA ACIT
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 282/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 THE DCIT, CIRCLE-5, JAIPUR. CUKE VS. M/S SHREE BALAJI ENTERPRISES 102, STERLING APARTMENT, 6B6, PRITHIVIRAJ ROAD, C-SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABEFS 3243 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI P.P. MEENA (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 02/05/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 08/05/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 21.12.2018 OF THE LD. CIT(A), JAIPUR FOR THE ASSESS MENT YEAR 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- (1) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(APPEALS) IS CORRECT IN HOLDING THAT THE ASSESSEE FULFILL THE CONDITIONS LAID DOWN FOR CLAIM ING ADDITIONAL DEPRECIATION OF RS. 7,86,525/- AND THEREBY IGNORING THE CLEAR ITA NO. 282/JP/2019 DCIT VS. M/S SHREE BALAJI ENTERPRISES 2 FINDING OF THE AO THAT THE ASSESSEE IS A CIVIL CONT RACTOR AND THEREFORE DOES NOT QUALIFY FOR THE ADDITION DEPRECI ATION FOR THE DETAILED FINDINGS MENTIONED IN THE ASSESSMENT ORDER . (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(APPEALS) HAS ERRED IN HOLDING T HAT THE ASSESSEE FIRM IS MANUFACTURING ON ITS OWN AND JOB W ORK BASIS, IN SPITE OF THE FACTS ON RECORD THAT THE ASSESSEE FIRM HAS NOT DONE MANUFACTURING OF ITS OWN BUT DID ONLY JOB WORK OF O THERS ON CONTRACT BASIS. 2. THE ONLY ISSUE ARISES IN THIS APPEAL OF THE REVE NUE IS CLAIM OF ADDITIONAL DEPRECIATION DISALLOWED BY THE AO WAS AL LOWED BY THE LD. CIT(A) BY HOLDING THAT THE ASSESSEE FIRM IS MANUFAC TURING ON ITS OWN AND JOB WORK BASIS. THE ASSESSEE IS A FIRM AND ENGA GED IN THE PRODUCTION OF GSB AND AGGREGATE DURING THE YEAR UND ER CONSIDERATION. THE ASSESSEE PURCHASED NEW PLANT & MACHINERY FOR IT S BUSINESS ACTIVITY AND CLAIMED ADDITION DEPRECIATION U/S 32(I)(IIA) OF THE IT ACT. THE AO DENIED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT THE ASSESSEE IS A CONTRACTOR OF CIVIL WORK AND NOT ENGA GED IN THE PRODUCTION OR MANUFACTURE OF ARTICLE OR THING. ON APPEAL, THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE ASSES SEE IS MANUFACTURE AND PRODUCER OF GSB AND AGGREGATE AND NOT A CONTRA CTOR OF CIVIL WORK. ITA NO. 282/JP/2019 DCIT VS. M/S SHREE BALAJI ENTERPRISES 3 3. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE AO HAS RECORDED THE FACT THAT THE ASSESSEE WAS AWARDED JOB WORK FROM VA RIOUS CONCERNS FOR SUPPLIED OF GSB AND AGGREGATE. THEREFORE, THE ASSES SEE HAS RECEIVED CONTRACTUAL PAYMENTS ON ACCOUNT OF JOB WORK FROM VA RIOUS PARTIES AND NOT ENGAGED IN ANY ACTIVITY OF MANUFACTURE AND PROD UCTION OF GOODS. THE AO HAS RELIED UPON THE DECISION OF HONBLE SUPR EME COURT IN CASE OF CIT VS. NC BUDHIRAJA & CO. & ANR ETC.ETC 204 ITR 412 WHEREIN IT WAS HELD THAT CONTRACTUAL CIVIL WORK WAS NOT CONSID ERED UNDER THE AMBIT OF PRODUCTION OR MANUFACTURE. THUS, THE LD. DR HAS FURTHER SUBMITTED THAT THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSE SSEE DOES NOT FALL IN THE AMBIT OF PRODUCTION OR MANUFACTURE AND CONSEQUE NTLY THE CLAIM OF ADDITIONAL DEPRECIATION IS NOT ALLOWABLE. 4. ON THE OTHER HAND, LD. AR OF THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE IS IN THE ACTIVITY OF MANUFACTURING OR PRO DUCTION OF AGGREGATE AND NOT A CIVIL WORK CONTRACTOR FOR CONSTRUCTION OF BUILDING. THE ASSESSEE WAS AWARDED SUPPLY CONTRACTS OF AGGREGATE BY VARIOUS INFRASTRUCTURE COMPANIES LIKE PUNJ LLOYD LIMITED, G R INFRAPROJECTS LIMITED, SANGYONG ENGINEERING AND CONSTRUCTION COMP ANY LIMITED. THUS, IT IS CLEAR THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF AGGREGATE WHICH WERE SUPPLIED TO THE SE COMPANIES WHO ITA NO. 282/JP/2019 DCIT VS. M/S SHREE BALAJI ENTERPRISES 4 WERE ENGAGED IN THE CONSTRUCTION AND INFRASTRUCTURE DEVELOPMENT. THE ASSESSEE ESTABLISHED A CRUSHER UNIT FOR PRODUCTION OF AGGREGATE FOR SUPPLY TO THE AWARDERS AND THEY HAVE DEDUCTED TAX A T SOURCE FOR SUPPLY CONTRACT OF AGGREGATE. THERE IS NO DISPUTE THAT THE RAW MATERIAL USED BY THE ASSESSEE IS STONE BLOCKS WHICH ARE CRUSHED AND CONVERTED INTO AGGREGATE AND USED IN THE CONSTRUCTION ACTIVITY, TH EREFORE, THE PLANT AND MACHINERY PURCHASE BY THE ASSESSEE FOR CARRYING OUT THE OPERATION OF MANUFACTURING/PRODUCTION OF AGGREGATE IS ELIGIBLE F OR ADDITIONAL DEPRECIATION U/S 32 (I)(IIA) OF THE IT ACT. THE LD. AR HAS REFERRED TO THE VARIOUS MACHINERY USED IN THE PROCESS AND SUBMITTED THAT THE ENTIRE PROCESS IS DIVIDED IN VARIOUS STAGES AND THEREFORE, THE ACTIVITY OF THE ASSESSEE IS MANUFACTURE AND PRODUCTION OF AGGREGATE AND NOT A CIVIL CONTRACTOR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS DENIED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT THE ASSESSEE IS NOT ENGAGED IN THE PRODUCTION OR MANUFACTURE OF ARTICLES OR THINGS BUT THE ASSESSEE IS DOING CONTRACTUAL CIVIL WORK. AT THE OUTSET, WE FI ND THAT THE ASSESSEE IS NOT CARRIED OUT ANY ACTIVITY OF CONSTRUCTION OR DEV ELOPMENT OF PROJECTS BUT THE ASSESSEE IS IN THE ACTIVITY OF CONVERTING T HE STONE BLOCKS INTO ITA NO. 282/JP/2019 DCIT VS. M/S SHREE BALAJI ENTERPRISES 5 AGGREGATE WHICH IS USED IN THE CONSTRUCTION UNIT. T HEREFORE, THE ASSESSEE IS NOT A CIVIL CONTRACTOR BUT SUPPLYING TH E CONSTRUCTION MATERIAL TO OTHER COMPANIES ENGAGED IN THE CONSTRUCTION/INFR ASTRUCTURE ACTIVITY. THE GROUND FOR DISALLOWANCE OF CLAIMED BY THE AO IS CONTRARY TO THE FACT AND RECORD. THE LD. CIT(A) HAS CONSIDERED THIS ISSU E IN PARA 2.3 & 2.3.1 AS UNDER:- 2.3 GROUND NO. 1 AND 2 ARE BEING TAKEN UP TOGETHER . I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION BY PRESUMING T HAT THE ASSESSEE IS A CONTRACTOR OF CIVIL WORK AND NOT ENGA GED IN MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING . LD. AUTHORIZED REPRESENTATIVE SAID THAT ASSESSEE IS NOT A CIVIL CONTRACTOR. HE IS ENGAGED IN MANUFACTURING/PRODUCTI ON OF AGGREGATE FOR WHICH HE HAS ESTABLISHED A CRUSHER UN IT. DURING THE YEAR, HE WAS AWARDED SUPPLY CONTRACT OF AGGREGATE F ROM VARIOUS INFRASTRUCTURE COMPANIES. CONSIDERING THE OVERALL F ACTS, IT IS SEEN THAT ASSESSEE IS DERIVING INCOME FROM THE MANUFACTU RING OF AGGREGATE ON HIS OWN AND ON JOB WORK BASIS. THE ASS ESSING OFFICER WRONGLY PRESUMED THAT HE IS CONTRACTOR OF C IVIL CORK. AS PER SECTION 32, ADDITIONAL DEPRECIATION IS ALLOWABL E, IF THE ASSESSEE IS ENGAGED IN THE PRODUCTION/MANUFACTURING OF AN ARTICLE OR THING AND NEW MACHINE HAS BEEN ACQUIRED AFTER 31 .03.2005. 2.3.1 IN THE PRESENT CASE, THE APPELLANT HAS FULFIL LED THESE CONDITIONS. THE AUTHORIZED REPRESENTATIVE FILED THE DETAILED PROCESS OF PRODUCTION AND BREAK UP OF VARIOUS MACHI NES USED IN THE PRODUCTION WHICH SUPPORTS THIS CASE. CONSIDERIN G THESE FACTS, THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE IS ALLOWED. THIS GROUND OF APPEAL IS ALLOWED. ITA NO. 282/JP/2019 DCIT VS. M/S SHREE BALAJI ENTERPRISES 6 ONCE THE ACTIVITY OF THE ASSESSEE IS CONVERTING THE LARGE STONE BLOCKS INTO AGGREGATE WHICH IS AFTER UNDERGOING THE PROCES S OF CRUSHING THEN THE SAID ACTIVITY IS PRODUCTION/MANUFACTURING OF A NEW ARTICLE OR THING WHICH IS DIFFERENT/DISTINCT FROM INPUT. THE OUTCOME OF THE PROCESS CARRIED OUT BY THE ASSESSEE IS A NEW MARKETABLE PRO DUCT/ ARTICLE OR THING AND THEREFORE, THE ASSESSEE IS ADDING THE VAL UE TO THE RAW MATERIAL USED AND CONVERTING THE SAME INTO A MARKET ABLE ARTICLE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) ALLOWING THE CLAIM OF ADDITIONAL DEPRECIATI ON ON THE NEW PLANT AND MACHINERY PURCHASE AND USED BY THE ASSESSEE FO R THE PURPOSE OF PRODUCTION AND MANUFACTURING. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/05/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08/05/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE RESPONDENT- DCIT, CIRCLE-5, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- M/S SHREE BALAJI ENTERPRISES, JAIPU R. ITA NO. 282/JP/2019 DCIT VS. M/S SHREE BALAJI ENTERPRISES 7 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 282/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR