MIRC ELECTRONICS LTD, MUMBAI V. ACIT CEN CIR 37, MUMBAI

ITA 2838/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56160 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBACAM RAO
• Assessee Lawyers: ARVIND SONDE
• Keywords: Depreciation; Period of limitation
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RA O, J.M. ITA NO. 2838/MUM/2010 ASSESSMENT YEAR: 2005-06 MIRC ELECTRONICS LTD. APPELLANT ONIDA HOUSE, G-1, MIDC MAHAKALI CAVES ROAD, ANDHERI (EAST) MUMBAI 400 093 (PAN - AAACM8055A) VS. ASSTT. COMMISSIONER OF INCOME-TAX, RESPONDEN T CENTRAL CIRCLE 37, MUMBAI APPELLANT BY : MR. ARVIND SONDE RESPONDENT BY : MR. SUBACAM RAO DATE OF HEARING : 17/10/11 DATE OF PRONOUNCEMENT : 23/12/2011 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT-III, MUMBAI, PASSED U/S 263 OF THE ACT, ON 29 TH MARCH, 2010 FOR THE ASSESSMENT YEAR 2005-06. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS IN T HE BUSINESS OF MANUFACTURING AND TRADING OF TV, AC, WASHING MACHIN E ETC. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED I TS RETURN OF INCOME ON 31/03/2006 CLAIMING DEPRECIATION ON PLASTIC MOUL DS MANUFACTURED BY HIM IN HIS FACTORY @40% AND THE SAME WAS ALLOWED BY THE AO. THE CIT FOUND THAT THE ASSESSEE IS IN THE BUSINESS OF M ANUFACTURING TV, ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 2 AC, WASHING MACHINE, ETC. AND, THEREFORE, HE WAS OF THE VIEW THAT THE DEPRECIATION CLAIM OF THE ASSESSEE @ 40% CANNOT BE CONSIDERED ON THE GROUND THAT THE ASSESSEE IS NOT IN THE BUSINESS OF RUBBER AND PLASTICS GOODS MANUFACTURED. THE RATE OF 40% CAN BE ALLOWED ONLY FOR MOULDS USED IN THE PLASTIC/RUBBER INDUSTRY, THE AO OUGHT TO HAVE BEEN ALLOWED DEPRECIATION @25% ON THE MOULDS, WHICH WERE USED IN ITS BUSINESS OF MANUFACTURING TV, AC, WASHING MACHINE, ETC. AND THE EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE SHOULD HAVE BEEN DISALLOWED. IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT ISSUED SHOW CAUSE US/ 263 TO THE ASSESSEE, AGAINST WHICH THE AS SESSEE FILED ITS SUBMISSIONS DATED 23/032/010, WHICH WERE REPRODUCED BY THE CIT IN HIS ORDER AT PAGE 2 AND THE SAME WERE EXTRACTED BEL OW: THE ASSESSEE HAS CLAIMED THAT IT IS ALSO MANUFACTUR ING PLASTIC AND RUBBER COMPONENTS WHICH ARE USED IN MAKING TEL EVISION, WASHING MACHINE, AIR CONDITION ETC. ON THE MOUNDS FOR MAKING RUBBER AND PLASTIC COMPOENTS USED IN ELECTRONICS I TEMS, MANUFACTURED BY THE ASSESSEE, IT HAD CLAIMED THE HI GHER RATE OF DEPRECIATION @ 40%. IT HAS ALSO BEEN FURTHER CL ARIFIED BY THE ASSESSEE THAT IT HAS CLAIMED DEPRECIATION @ 25% ON MOULDS AND DYES WHICH WERE USED IN THE MANUFACTURE OF ARTICLE S OTHER THAN RUBBER AND PLASTIC ITEMS FOR MANUFACTURING TH E ELECTRICAL GOODS, ASSESSEE REQUIRES THE MOULD FOR M ANUFACTURING THE PLASTIC COATINGS ALSO AND THEREFORE HIGHER CLAI M WAS JUSTIFIED. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT WAS OF THE VIEW THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING TELEVISION, WASHING MACHINE ETC. AND THEREFORE, THE SAME CANNOT BE CONSIDERED TO BE IN THE BUSINESS OF RUBBER AND PLAS TIC GOODS MANUFACTURING. IN THIS CONNECTION, HE REFERRED TO T HE RELEVANT ENTRY IN THE DEPRECIATION SCHEDULE, WHICH RUNS AS UNDER:- III. MACHINERY AND PLANT .............. (VII) MOULDS USED IN RUBBER AND PLASTIC GOODS FAC TORIES ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 3 4. THE CIT NOTED THAT THE ENTRY CLEARLY SHOWS THAT THE MACHINERY AND PLANT USED IN RUBBER AND PLASTIC GOODS FACTORY ALONE WILL BE ENTITLED TO THE DEPRECIATION @40%. HE FURTHER NOTE D THAT, IN THE PRESENT CASE UNDER CONSIDERATION, THE MANUFACTURED GOODS ARE TELEVISION, WASHING MACHINE, ETC., THEREFORE, IT CA N BE SEEN THAT THE ASSESSEE IS A FACTORY MANUFACTURING ELECTRONIC GOOD S. THUS, THE LEGISLATURE HAS ENVISAGED ALLOWANCE OF DEPRECIATION AT THE HIGHER RATE OF 40% ONLY TO RUBBER AND PLASTIC GOODS FACTORIES. THE CIT ALSO NOTED THAT IN THE INSTANT CASE, THE ASSESSEE IS A MANUFAC TURER OF ELECTRONIC GOODS AND NOT MANUFACTURER OF PLASTIC OR RUBBER GOO DS AND, THEREFORE, THE ASSESSEE'S INDUSTRY DOES NOT FALL WITHIN THE EN TRY OF THE DEPRECIATION SCHEDULE AS PER RULE 5 OF THE INCOME-T AX RULES. IN SUCH A SCENARIO, THE RUBBER OR PLASTIC GOODS MANUFACTUR ED AS AN INCIDENCE TO THE CORE MANUFACTURING ACTIVITY AS ELECTRONIC GO ODS IN THE ASSESSEE'S CASE, CANNOT BE HELD AS ELIGIBLE FOR ALL OWANCE OF DEPRECIATION @40%. THE CIT PLACED RELIANCE FOR THE ABOVE FINDINGS ON THE MADRAS HIGH COURT DECISION IN THE CASE OF CIT V S. FALCON WIRES PVT. LTD., [1980] 123 ITR 427 WHEREIN THE HON'BLE C HENNAI HIGH COURT HELD THAT IF AN INDUSTRY DOES NOT FALL WITHIN THE ENTRY, IT C ANNOT BE MADE GOOD BY ANY RECOURSE TO BREADTH OF CONSTRUCTIO N. THERE IS NO QUESTION OF ANY BROAD CONSTRUCTION OF APPENDIX TI TO THE INCOME-TAX RULES, 1962. ON THE BASIS OF ABOVE RULING, THE CIT HAD HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION AT THE RA TE OF 40% WHICH IS ELIGIBLE ONLY FOR MOULDS USED IN THE PLASTIC/RUBBER INDUSTRY AND THE ELIGIBILITY WILL ONLY BE AT THE RATE OF 25%. THE CI T, THEREFORE, HELD THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR THE REASON THAT THE AO HAD ALLOWED DEPR ECIATION @ 40% ON PLASTIC MOULDS IN STEAD OF 25%. WITH THE ABOVE FIN DINGS, THE CIT SET ASIDE THE ORDER OF THE AO AND RESTORED THE MATTER T O THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ISSUE IN DETAIL AND DECIDE THE SAME AFRESH AFTER DUE VERIFICATION AND AFTER PROVIDING R EASONABLE ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 4 OPPORTUNITY OF HEARING TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DEPRECIATION @ 40% CLAIMED BY THE ASSESSEE ON THE M OULDS FOR MAKING RUBBER AND PLASTIC COMPONENTS USED IN THE ELECTRONI C ITEMS MANUFACTURED BY THE ASSESSEE. IT IS SUBMITTED THAT ACCORDING TO THE ENTRY IN THE DEPRECIATION SCHEDULE (SUPRA), AS HELD BY THE CIT, THE ASSESSEE IS A MANUFACTURER OF ELECTRONIC GOODS AND NOT MANUFACTURER OF PLASTIC OR RUBBER GOODS AND, THEREFORE, THE ASS ESSEE'S INDUSTRY DOES NOT FALL WITHIN THE ENTRY OF THE DEPRECIATION SCHEDULE AS PER RULE 5 OF THE INCOME-TAX ACT, BUT, HE POINTED OUT THAT THE ENTRY ONLY SAYS THAT MOULDS USED IN THE RUBBER AND PLASTIC GOODS FA CTORY AND THE ASSESSEE USED MOULDS IN HIS FACTORY FOR THE PURPOSE OF MANUFACTURING PLASTIC GOODS, WHICH ARE NECESSARY FOR ITS BUSINESS , I.E. IN MANUFACTURING TV, WASHING MACHINE, ETC., THEREFORE, THE ASSESSEE IS ELIGIBLE FOR 40% DEPRECIATION ON THE MOULDS USED IN ITS FACTORY FOR MANUFACTURING OF PLASTIC GOODS. IT IS FURTHER SUBMI TTED THAT THE CIT WRONGLY GAVE A FINDING THAT THE ASSESSEE IS A MANU FACTURER OF ELECTRONIC GOODS AND NOT MANUFACTURER OF RUBBER AND PLASTIC GOODS. IT IS POINTED OUT THAT, IN FACT, THE ASSESSEE ITSELF B Y USING MOULDS MANUFACTURED PLASTIC AND RUBBER GOODS IN ITS FACTOR Y, THEREFORE, THE ASSESSEE IS ELIGIBLE FOR HIGHER DEPRECIATION @ 40%. THE LEARNED COUNSEL SUBMITTED THAT THE CASE I.E. CIT VS. FLACON WIRES PVT. LTD. RELIED UPON BY THE CIT IS NOT APPLICABLE TO THE FAC TS OF THE CASE OF THE ASSESSEE. THE ALTERNATIVE SUBMISSION OF THE LEARNED COUNSEL IS THAT IN ANY CASE, WHETHER THE ASSESSEE IS ELIGIBLE FOR 40% OR 25%, ON THIS ISSUE TWO VIEWS ARE POSSIBLE, THEREFORE, THE VIEW T AKEN BY THE AO CANNOT BE SAID THAT THE SAME IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIE D UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F MALABAR ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 5 INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83. TO SUPPORT THE VIEW TAKEN THAT ALLOWING 40% DEPRECIATION ON PLASTIC AND RUBBE R GOODS, THE LEARNED COUNSEL RELIED UPON THE DECISION OF THE ITA T, BANGALORE BENCH IN THE CASE OF BPL REFRIGERATION LTD. VS. ACIT, 272 ITR(A.T) 47 WHEREIN THE TRIBUNAL FOLLOWING THE DECISION IN THE CASE OF BPL SANYO UTILITIES AND APPLIANCES LTD. VS. ACIT, IN ITA NO. 88 AND 89/BANG/1998 HAS HELD THAT 40% DEPRECIATION IS ELIG IBLE. WHILE DECIDING THE ISSUE, THE TRIBUNAL FOLLOWED THE DECIS ION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. AMCO BA TTERIES LTD., 203 ITR 614 (KAR.). 6. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPON T HE ORDER OF CIT AND ALSO RELIED UPON THE FOLLOWING CASE LAWS:- 1. FALCON WIRES PVT. LTD. (SUPRA) 2. SMT. TARADEVI AGARWAL VS. CIT, 88 ITR 323 3. RAMPYARI DEVI SARAOGI VS. CIT,. 67 ITR 87 4. MS. NEHAL N. GANDHI VS. ITO IN ITA NO. 2795/MUM/10 FOR AY 2005-06, ORDER DT. 18 TH MAY, 2011. THE LEARNED DR SUBMITTED THAT THE ASSESSEE IS NOT A MANUFACTURER OF RUBBER AND PLASTIC GOODS THEREFORE AS PER ENTRY I, THE ASSESSEE IS NOT ELIGIBLE FOR HIGHER DEPRECIATION @ 40%. HE, THEREFORE, SUBMITTED THAT THE CIT HAS RIGHTLY INVOKED SECTION 263 AND SET ASIDE THE ORDER OF THE AO. ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 6 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE RECORD, AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W AS WELL AS THE DECISIONS CITED. THE ONLY ISSUED INVOLVED IN THIS A PPEAL IS WHETHER THE LEARNED CIT IS RIGHT IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT, OR NOT ? THE PROVISIONS SECTION 263 READ AS U NDER:- 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD 3 OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDE RS THAT ANY ORDER PASSED THEREIN BY THE [ASSESSING] OFFICER IS ERRONEOUS IN SO FAR 3 AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVEN UE , , HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEE MS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT 3 AND DIRECTING A FRESH ASSESSMENT. [ EXPLANATION .FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, ( A ) AN ORDER PASSED [ON OR BEFORE OR AFTER THE 1ST DA Y OF JUNE, 1988] BY THE ASSESSING OFFICER SHALL INCLUDE ( I ) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER [OR DEPUTY COMMISSIONER] OR THE INCOME -TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY TH E 8 [JOINT] COMMISSIONER UNDER SECTION 144A ; ( II ) AN ORDER MADE BY THE [JOINT] COMMISSIONER IN EXER CISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTIO N 120 ; ( B ) RECORD [SHALL INCLUDE AND SHALL BE DEEMED ALWAY S TO HAVE INCLUDED] ALL RECORDS RELATING TO ANY PROCEEDING UN DER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER; ( C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION A ND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER O F ANY APPEAL 10 [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1 988], THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTI ON SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED ] TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN S UCH APPEAL.] [(2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHI CH THE ORDER SOUGHT TO BE REVISED WAS PASSED.] ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 7 (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF , OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, 12 [NATIONAL TAX TRIBUNAL,] THE HIGH COURT OR THE SUPREME COURT. EXPLANATION .IN COMPUTING THE PERIOD OF LIMITATION FOR THE PUR POSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVING AN OPP ORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTI ON IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUD ED. 7.1 FROM PLAIN READING OF SUB-SECTION (1) OF SECTIO N 263, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISE D BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY O RDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS ' ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER. IT CAN BE EXERCISED ONLY ON FULF ILLMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONS IDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED F OR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COUL D HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDIN GS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION (1) IS IN THE NATURE OF SUPERVISORY JUR ISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPE CIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE C OMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUBSECTION, V IZ.(1)THE ORDER IS ERRONEOUS ; (2) BY VIRTUE OF THE ORDER BEING ERRONE OUS PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS , THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSIONS 'ERRONEOUS', 'ERRONEOUS A SSESSMENT' AND ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 8 'ERRONEOUS JUDGMENT' HAVE BEEN DEFINED IN BLACK'S L AW DICTIONARY. ACCORDING TO THE DEFINITION, 'ERRONEOUS' MEANS 'INV OLVING ERROR; DEVIATING FROM THE LAW'. 'ERRONEOUS ASSESSMENT' REF ERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, THERE FORE, INVALID, AND IS DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, SIM ILARLY, 'ERRONEOUS JUDGMENT' MEANS 'ONE RENDERED ACCORDING TO COURSE A ND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF L AW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES. 7.2 AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS I T IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME TAX OFFICER ACTIN G IN ACCORDANCE WITH LAW MAKES AN ASSESSMENT, THE SAME CANNOT BE BR ANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCOR DING TO HIM, THE ASSESSING OFFICER SHOULD MAKE THOROUGH ENQUIRY AND ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DO ES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER, UNLES S THE DECISION IS HELD TO BE ERRONEOUS. 7.3 IN THE CASE UNDER CONSIDERATION, THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURING TELEVISION, WASHING MACHINE ETC. A ND CLAIMED DEPRECIATION ON THE MOULDS USED FOR THE PURPOSE OF MANUFACTURING RUBBER AND PLASTIC GOODS. IT IS AN ADMITTED FACT TH AT THE ASSESSEE IS MANUFACTURING RUBBER AND PLASTIC GOODS IN ITS FACTO RY FOR THE PURPOSE OF ITS BUSINESS IN MANUFACTURING TELEVISION, WASHIN G MACHINE, ETC. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE IS NOT I N THE BUSINESS OF RUBBER AND PLASTIC GOODS, BUT, THE ASSESSEE USED TH E MOULDS FOR THE PURPOSE OF MANUFACTURING RUBBER AND PLASTIC GOODS I N ITS FACTORY. THE CIT FOLLOWING THE DECISION IN THE CASE OF FALCON WI RES PVT. LTD., (SUPRA) HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION @40% WITHOUT GOING INTO THE MERITS OF THE CASE WHETHER T HE VIEW TAKEN BY ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 9 THE AO IS A POSSIBLE VIEW OR NOT. IN THIS CONTEXT, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED STRONG RELIANCE ON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF AMCO BATTERIES LTD. (SUPRA), WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE CASE OF BPL REFRIGERATION LTD. VS. ACIT (SUPRA), THE HON'BLE KA RNATAKA HIGH COURT HAS HELD AS UNDER:- THE DYES AND MOULDS USED IN THE MANUFACTURE OF PLAS TIC COVERS FOR BATTERIES ARE ENTITLED TO HIGHER DEPRECIATION T HOUGH THE ASSESSEE HAS NOT BEEN SELLING THE COVERS AS SUCH TO ANYBODY. 7.4 FOLLOWING THE JUDGMENT OF THE SAID KARNATAKA HI GH COURT, THE TRIBUNAL IN THE CASE OF BPL REFRIGERATION LTD. (SUP RA) HAS HELD AS UNDER:- IN THE PRESENT CASE ALSO THOUGH SOME PARTS ARE USE D IN MANUFACTURE OF WASHING MACHINE, VACUUM CLEANERS, E TC. YET THESE PARTS ARE MANUFACTURED BY THE ASSESSEE ITSELF . THESE PARTS ARE ADMITTEDLY RUBBER AND PLASTIC GOODS. THUS THE M OULDS USED IN MANUFACTURE OF SUCH RUBBER AND PLASTIC GOODS ARE TO BE HELD AS USED IN RUBBER AND PLASTIC GOODS FACTORIES. THERE N EED NOT BE A SEPARATE AND DISTINGUISHABLE FACTORY FOR PRODUCTION OF SUCH ITEMS AND THE MOULDS NEED NOT BE USED IN SUCH SEPARATE FA CTORY. ONCE THE MOULDS ARE USED FOR MANUFACTURE OF RUBBER AND P LASTIC GOODS PARTS THOUGH IN A COMPOSITE FACTORY MANUFACTURING W ASHING MACHINE, VACUUM CLEANERS, ETC., THE ASSESSEE IS EL IGIBLE FOR DEDUCTION AT HIGHER RATE OF DEPRECIATION, I.E., 40 PER CENT. AS PER APPENDIX I TO THE INCOME TAX RULES. WE ARE THEREFOR E IN AGREEMENT WITH THE SUBMISSION OF LEARNED COUNSEL FO R THE ASSESSEE. IN VIEW OF OUR DISCUSSION ABOVE, WE REVER SE THE FINDING OF THE LEARNED CIT(A) AND ALLOW THE CLAIM OF THE AS SESSEE. 7.5 IN THE PRESENT CASE, THOUGH THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING TV, WASHING MACHINE, ETC. HE MANUFACT URED PLASTIC AND RUBBER GOODS IN CONNECTION WITH ITS BUSINESS FO R THE PURPOSE OF USING THE SAME IN MANUFACTURING TV, WASHING MACHINE , ETC. WE ARE OF THE VIEW THAT EVEN THOUGH THE ASSESSEE WAS NOT SELL ING THE RUBBER AND PLASTIC GOODS TO OTHERS, BUT, THE SAME WERE USED BY MOULDS IN ITS FACTORY, THEREFORE, THE VIEW TAKEN BY THE AO IS A P OSSIBLE VIEW. IN THIS CONTEXT, THE HONBLE SUPREME COURT IN THE CASE OF M ALABAR INDUSTRIAL ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 10 CO. LTD. VS. CIT, 243 ITR 83 HELD THAT WHEN THE INCOME-TAX OFFICER ADOPTED ONE OF THE COURSE PERMISSIBLE UNDER LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW, FOR WHIC H THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLE SS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW . IN SO FAR AS THE CASE LAWS RELIED UPON BY THE DR, THE SAME ARE NOT APPLIC ABLE TO THE FACTS OF THE CASE OF THE ASSESSEE AS THEY ARE DISTINGUISHABL E ON FACTS TO THE CASE UNDER CONSIDERATION. IN VIEW OF THE ABOVE DISC USSION AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (S UPRA) WE SET ASIDE THE ORDER OF CIT AND RESTORE/UPHOLD THE ORDER PASSE D BY THE AO. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF DECEMBER, 2011. SD/- SD/- (P.M. JAGTAP) (V. DURGA R AO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23 RD DECEMBER, 2011. ITA NO. 2838/MUM/10 M/S MIRC ELECTRONICS LTD. 11 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, F BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV