The ACIT, Circle-2, Surat V. M/s. Anita Exports, Surat

ITA 2892/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6122 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSHI
• Keywords: Depreciation; Additional depreciation
• Section: 32(1)(iia); 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BE NCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON BLE SHRI A. MOHAN ALANKAMONY,A.M.) I.T.A. NOS. 2892/AHD./2009 : ASSESSMENT YEAR : 2006-2007 A.C.I.T., CIRCLE-2, SURAT VS- M/S. ANITA EXPORTS, SURAT (PAN: AAJFA 5715D) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.S.SOURYAWANS HI, SR.D.R. RESPONDENT BY : NONE O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST ORDER OF LD. CIT(A)-II , SURAT DATED 16-07-2009 DELETING THE DISALLOWANCE MADE BY THE AO OF RS.47,82,881/- ON ACCOUNT OF ADDITIONAL DEPRECIATION FOR THE ASSESSMENT YEAR 200 6-07. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF EXPORT OF ART SILK CLOTH AND EMBROIDERY ON ART SILK CLOTH. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME DECLARING TOT AL INCOME AT RS.11,31,193/- ALONG WITH AUDIT REPORT IN FORM NO.3CB AND 3CD AND AUDITED ACC OUNTS. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED DEPRECIATION @35% ON BLOCK IV PERT AINING TO PLANT AND MACHINERY AMOUNTING TO RS.47,82,881/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY ADDITIONAL DEPRECIATION OF 20% OVER AND ABOVE THE NORMAL RATE OF 15% WAS CLAIMED ON THE NEW MACHI NERY INSTALLED DURING THE YEAR. IN RESPONSE TO THE SAID NOTICE, IT WAS SUBMITTED THAT ADDITIONAL DEPRECIATION OF 20% WAS CLAIMED ON NEW EMBROIDERY MACHINES PURCHASED DURING THE YEAR. THIS WAS UTILISED MAINLY FOR THE PURPOSE OF OWN WORK OF EMBROIDERY AN D PARTIALLY FOR OUTSIDE PARTIES WORK. IT WAS FURTHER CONTENDED THAT SINCE THE FIRM IS ENG AGED IN THE MANUFACTURING OF CLOTH, IT IS ENTITLED FOR ADDITIONAL DEPRECIATION. IN THE ASSESS MENT ORDER, THE AO REJECTED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT BASIC IN PUT MATERIAL IS ALSO FINISHED FABRICS ITA NOS.2892-AHD-09 2 WHEREAS THE FINAL OUTPUT IS ALSO FINISHED FABRICS A ND NO SEPARATE OR DISTINCT PRODUCT EMERGES OUT OF THE PROCESS OF EMBROIDERY CARRIED OU T BY THE ASSESSEE AND THERE IS EVEN NO TRANSFORMATION OF GOODS TO THE EXTENT THAT THEY ARE COMMERCIALLY KNOWN DIFFERENTLY. 2.1 THE AO FURTHER TOOK THE VIEW THAT THE ACTIVITY OF EMBROIDERY CONSTITUTES ONLY VALUE ADDITION WHEREBY THE FINISHED WEAR-ABLE FABRI CS ARE MADE MORE ATTRACTIVE AND NO DIFFERENT PRODUCT IS MANUFACTURED BY APPLYING THE P ROCESS OF EMBROIDERY. THEREFORE, IT CANNOT BE SAID THAT MANUFACTURE OF ANY ARTICLE OR T HING AS HAS TAKEN PLACE AND ACCORDINGLY, THE ACTIVITY OF EMBROIDERY CANNOT BE S AID TO BE MANUFACTURE AND THEREFORE, THE PLANT AND MACHINERY USED IN THE PROCESS OF EMBR OIDERY IS NOT ELIGIBLE FOR ALLOWANCE OF ADDITIONAL DEPRECIATION AS PER THE PROVISIONS OF SECTION 32(1)(IIA). IN FACT, THE EMBROIDERY MACHINES DO NOT QUALIFY EVEN IN THE LIST OF ARTICLES OR THINGS GIVEN IN THE PRIORITY AS WELL AS NON PRIORITY SECTOR OR THE ELEV ENTH SCHEDULE READ WITH THE PROVISIONS OF SECTION 32 OF THE ACT. HE ACCORDINGLY DISALLOWED ADDITIONAL DEPRECIATION OF RS.47,82,881/-. 3. ON APPEAL BEFORE THE LD. CIT(A), IT WAS CONTENDE D BY THE ASSESSEE THAT IT PURCHASED DIFFERENT QUALITIES OF FINISHED CLOTH IN BULK FOR THE PURPOSE OF MAKING SUIT- PIECES INCLUDING TOP, BOTTOM AND DUPATTA. THE FINIS HED CLOTH IS EMBROIDERED ON COMPUTERISED MACHINES AND CUT INTO REQUIRED PIECES WHICH ARE MATCHED FOR THE PURPOSE OF MAKING A SINGLE SUIT, AND THEN EXPORTED. APART F ROM PURCHASING FINISHED CLOTH THE ASSESSEE ALSO PURCHASES GREY AND GETS THEM PROCESSE D FROM DIFFERENT PROCESS HOUSES. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT THE AO F AILED TO APPRECIATE THE NATURE OF THE ASSESSEE'S BUSINESS. SHE FAILED TO MAKE ANY DETAILE D INQUIRY. SHE IGNORED THE FACT THAT THE ASSESSEE HAD ALSO UNDERTAKEN THE SAME ACTIVITIES OR PROCESSES THAT WERE DISCUSSED BY HER IN THE ASSESSMENT ORDER ITSELF. THE ASSESSEE SUBMIT TED THAT THE AO WAS ALSO CONFUSED ABOUT THE NATURE OF THE EMBROIDERY WORK. THE FINISH ED CLOTH COULD NOT BE USED WITHOUT EMBROIDERY SINCE, IT WAS PURCHASED IN A LUMP WHICH MEASURED APPROXIMATELY 100 MTS IN LENGTH. UNLESS SUCH FABRIC WAS CUT INTO PIECES FOR MAKING THE TOPS AND THE BOTTOMS AS ALSO THE DUPATTA TO MAKE SINGLE SUIT PIECES, IT COU LD NOT BE USED FOR ANY OTHER PURPOSE. EACH PART OF A SUIT PIECE REQUIRES THREE DIFFERENT QUALITIES OF CLOTH. THE ASSESSEE'S ACTIVITY ITA NOS.2892-AHD-09 3 OF CREATING SUCH SUIT-PIECES THEREFORE, AMOUNTED TO MANUFACTURING. THE ASSESSEE FURTHER ARGUED THAT EVEN THOUGH A COMPOSITE UNIT ENGAGED IN ALL THE PROCESSES MAY BE TERMED AS BEING ENGAGED IN MANUFACTURING OF TEXTILES YET, AN INDUSTRY ENGAGED IN ONE OR TWO ACTIVITIES OR PROCESSES IN THE SERIES, SHOULD ALSO BE CONSIDERED AS A MANUFACTURER. 3.1 IN SUPPORT OF THIS, THE LD. COUNSEL OF THE ASSE SSEE ALSO RELIED ON VARIOUS DECISIONS WHICH ARE MENTIONED BY THE AO IN PARA 4.1 OF THE IM PUGNED ORDER. 3.2 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) DIRECTED THE AO TO ALLOW ADDITIONAL DEPRECIA TION CLAIMED AMOUNTING TO RS.27,33,075/- UNDER THE PROVISIONS OF SECTION 32(1 )(IIA) OF THE I.T. ACT FOR THE DETAILED REASONS GIVEN IN PARA 5 TO 5.5 OF THE IMPUGNED ORDE R. 5. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. AT THE OUTSET, IT IS NECESSARY TO REFER TO THE PROVISIONS UNDER WHICH ADDITIONAL DEPR ECIATION WAS CLAIMED BY THE ASSESSEE, WHICH IS SECTION 32(1)(IIA): (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER 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 MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM E QUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II). IT IS EVIDENT THAT THE NEW MACHINERY OR PLANT ON WH ICH ADDITIONAL DEPRECIATION WAS CLAIMED BY THE ASSESSEE WAS ACQUIRED AFTER 31-0 3-2005. IN FACT, THE ADDITION TO THE MACHINERY AND PLANT WAS MADE DURING THE YEAR UNDER CONSIDERATION AND WAS TOTALLY WORTH RS 1,25,08,788, AS IS EVIDENCED B Y THE ANNEXURE-A TO THE TAX AUDIT REPORT WHICH CONTAINS THE DETAILS OF FIXED AS SETS AND THE DEPRECIATION CLAIMED THEREON. THE NEXT CONDITION IS THAT, THE AS SESSEE SHOULD HAVE BEEN ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OR ANY ARTICLE OR THING. IT IS IMPORTANT TO NOTE THE USE OF THE WORD 'OR' BETWEEN THE WORDS MANUFACTURE AND PRODUCTION, WHICH MEANS THAT FOR THE ADDITIONAL DEP RECIATION TO BE ADMISSIBLE, THE ASSESSEE WOULD HAVE TO BE ENGAGED IN EITHER MANUFAC TURE 'OR' PRODUCTION. 5.1 P. RAMANATHAN AIYER'S, THE LAW LEXICON, WHICH IS EDITED BY HON'BLE JUSTICE Y.V.CHANDRACHUD, FORMER CJI, SAYS: THE WORD 'PRODUC TION' OR 'PRODUCE' WHEN USED IN JUXTA-POSITION WITH THE WORD 'MANUFACTURE' TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO M ANUFACTURE. {I. T. COMMISSIONER, ORISSA V/S M/S N.C.BUDHARAJA & CO, AI R 1993 SC 2529, 2534} IT ALSO DEFINES PRODUCTION IN CONNECTION WITH THE L EVY OF THE EXCISE DUTY AS 'SOME EXPENDITURE OF HUMAN SKILL AND LABOUR IN BRINGI NG THE GOODS CONCERNED INTO ITA NOS.2892-AHD-09 4 THE CONDITION WHICH WOULD ATTRACT THE DUTY. THEY S HOULD BE PRODUCED IN THE SENSE THAT SOME HUMAN ACTIVITY SHOULD BE SPENT ON THEM AN D THEY SHOULD BE SUBJECT TO SOME PROCESSES IN ORDER THAT THE THEY MAY BE BROUGH T TO THE STATE IN WHICH THEY BECOME FIT FOR CONSUMPTION' {ALUMINUM CORPORATION O F INDIA LTD. V/S COAL BOARD, AIR 1959 CAL, 222 ,226} 5.2 THUS, THE WORD 'PRODUCTION' DOES NOT NECESSARIL Y HAVE TO BE EXAMINED AND ANALYSED BY THE STRICT RIGOUR OF WHAT OTHERWISE CON STITUTES MANUFACTURE. IT IS A MORE GENERAL TERM AND INVOLVES THE BRINGING INTO EX ISTENCE BY THE USE OF HUMAN SKILL AND LABOUR, AND THE APPLICATION OF SOME PROCE SSES, A PRODUCT WHICH IS FIT FOR CONSUMPTION. UNDER THE CENTRAL EXCISE ACT, THE ACTI VITY OF EMBROIDERY OF MAN- MADE FIBRES IS LIABLE TO EXCISE DUTY UNDER CHAPTER 58, HEADING NO. 5810 AND SUB- HEADING NO. 5810.92 OF THE FIRST SCHEDULE TO THE CE NTRAL EXCISE TARIFF ACT, 1985 @ 8%. HOWEVER, THE CENTRAL GOVERNMENT VIDE NOTIFICA TION NO. 30/2004- CENTRAL EXCISE DATED 09-07-2004 HAS EXEMPTED ALL THE EXCISA BLE GOODS FALLING UNDER CHAPTER 58 (EXCEPT 5804.90, 5805.90, 58.07 AND 5808 .10) FROM THE LEVY OF EXCISE DUTY, (SEE ANNEXURE-2). THUS, EVEN IF THE CRITERIA OF MANUFACTURING IS TO BE APPLIED, THEN ALSO THE ACTIVITY OF EMBROIDERY WOULD AMOUNT TO MANUFACTURING UNDER THE CENTRAL EXCISE ACT, RESULTING IN THE EMBR OIDERED PRODUCT BEING LIABLE TO EXCISE DUTY. 5.3 THE AR HAS PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.S.M.BROS.(P) LTD. & ORS. V/S CIT (200 0) 243 ITR 418. IN THIS CASE, THE HON'BLE SUPREME COURT DEALT WITH THE APPLICATIO N OF THE PROVISIONS OF SECTION 33(1)(B)(B)(I) AND HELD THAT, WHEN READ TOGETHER WI TH ITEM 32 OF SCHEDULE-V, THE MACHINERY OR PLANT INSTALLED FOR THE PRODUCTION OF TEXTILES INCLUDING THOSE DYED , PRINTED OR OTHERWISE PROCESSED MADE WHOLLY OR MAINL Y OUT OF COTTON, THE ASSESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF DEVELOPMENT REBATE UNDER THE SAID SECTION. THE COURT FURTHER OBSERVED THAT, IF THE MACHINERY O R PLANT IS REQUIRED TO BE UTILISED IN THE PRODUCTION OF SUCH TEXTILES AT WHAT EVER STAGE, THE ASSESSEE IS ENTITLED TO THE BENEFIT. IN THIS CASE, THE ASSESSEE HAD BEEN PRODUCING EMBROIDERED CLOTH WHICH STARTED FROM SCRATCH I.E. WITH COTTON. THE COURT OBSERVED THAT IT WOULD MAKE NO DIFFERENCE IF THE ASSESSEE BOUGHT THE CLOTH AND THEN PROCESSED IT USING THE MACHINERY FOR EMBROIDERING, AND IN SOME CASES AFTER DYING. WHAT WAS IMPORTANT WAS THAT, THE ASSESSEE UTILISED THE MACHINERY IN TH E PRODUCTION OF PROCESSED TEXTILES. TO MY MIND, THE RATIO OF THIS CASE IS SQU ARELY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. EVEN THOUGH, THE HON'BLE SUPREME COURT DEALT WITH DEVELOPMENT REBATE YET, SUB-CLAUSE-(B) TO SECTION 3 3(1) ALLOWS FOR THE GRANT DEVELOPMENT REBATE ON NEW MACHINERY OR PLANT WHICH IS INSTALLED FOR THE PURPOSE OF CONSTRUCTION 'OR' MANUFACTURE 'OR' PRODUCTION OF ANY ONE OR MORE OF THE ARTICLES SPECIFIED IN THE FIFTH SCHEDULE. AS ALREADY DISCUSS ED CLAUSE-(IIA) TO SECTION 32(1) THOUGH NOT COVERING CONSTRUCTION, IS APPLICABLE WHE RE THE NEW MACHINERY OR PLANT IS UTILISED IN THE BUSINESS OF MANUFACTURE 'OR' PRO DUCTION. THE LEGISLATIVE INTENT BEHIND BOTH THE SECTIONS WAS APPARENTLY THE SAME, I .E. TO ENCOURAGE AND PROMOTE THE SETTING UP OF NEW BUSINESSES OR THE EXPANSION O F EXISTING BUSINESSES. WHICH ITA NOS.2892-AHD-09 5 ACTIVITIES CONSTITUTE MANUFACTURE OR PRODUCTION, IS LISTED OUT IN THE FIFTH SCHEDULE. ITEM-32 OF THE FIFTH SCHEDULE LISTS: (32) TEXTILES (INCLUDING THOSE DYED, PRINTED OR OTH ERWISE PROCESSED) MADE WHOLLY OR MAINLY OF COTTON, INCLUDING COTTON YARN, HOSIERY AND ROPE. THE HON'BLE SUPREME COURT HELD THAT THE ACTIVITY OF MANUFACTURING FALLS UNDER THE PHRASE 'OTHERWISE PROCESSED' AND IS THEREFORE ELIGI BLE FOR DEVELOPMENT REBATE. IF WE DRAW A PARALLEL AND AGREE ON THE SIMILARITY AND THE LEGISLATIVE INTENT THEN, FOR THE PURPOSES OF ADDITIONAL DEPRECIATION U/S 32(1)(I IA) THE ACTIVITY OF EMBROIDERY WOULD ALSO BE ELIGIBLE FOR DEDUCTION. 5.4 THE ASSESSEE DURING THE YEAR EXPORTED THE EMBROIDE RED PRODUCT, THE TOTAL EXPORT SALES BEING TO THE EXTENT OF RS 5.46 CRORES. IT MUST BE APPRECIATED THAT THE DESIGNS WHICH ARE EMBROIDERED ARE SPECIFIC TO A PRO DUCT AND THE PURPOSE FOR WHICH THE PRODUCT IS TO BE UTILISED. IT IS THUS DIF FERENT FROM PRINTING. WHILE A DESIGN MAY BE PRINTED ON BALES AND BALES OF CLOTH, EMBROIDERY CAN ONLY BE DONE FOR A SPECIFIC PURPOSE AND FOR A SPECIFIC USE. THE EMBROIDERY FOR THE TOP OF A WOMAN'S WEAR WOULD BE CLEARLY DIFFERENT FROM THAT O F THE BOTTOM, THE EMBROIDERY ON THE KAMEEZ WOULD HAVE TO BE A SPECIFIC DESIGN WH ICH IS SUITABLE AND MATCHES A KAMEEZ._THE EMBROIDERY ON THE SALWAR OR THE BOTTOM WOULD BE DIFFERENT. THE ASSESSEE CUT THE PIECES, GOT THEM EMBROIDERED, PACK ED THEM INTO BOXES AND EXPORTED THEM. THIS MEANT THAT THE END PRODUCT WAS COMPLETELY DIFFERENT FROM THE BALE OF CLOTH OR FINISHED FABRIC PRIOR TO BEING EMB ROIDERED. IN OTHER WORDS, THE MARKET RECOGNITION OF THE EMBROIDERED FINISHED PROD UCT NECESSARILY HAD TO BE DIFFERENT FROM THE FINISHED FABRIC PRIOR TO BEING E MBROIDERED. TO THIS EXTENT, SUCH ACTIVITY OF 31 EMBROIDERY COULD ALSO BE TREATED AS MANUFACTURE. 5.5 IN VIEW OF THE DISCUSSION ABOVE, IT IS HELD T HAT THE ASSESSEE WAS FULLY ENTITLED TO THE ADDITIONAL DEPRECIATION OF 20% UNDE R THE PROVISIONS OF 32(1)(IIA) OF THE IT ACT. WHILE IN THE ASSESSMENT ORDER, THE AO M ADE THE DISALLOWANCE OF RS 47,82,881 WHICH INCLUDED THE DISALLOWANCE OF THE CL AIM OF NOT ONLY THE ADDITIONAL DEPRECIATION BUT ALSO THE ORIGINAL DEPRECIATION. TH IS MISTAKE HAS BEEN RECTIFIED BY THE AO VIDE ORDER U/S 154 OF THE IT ACT DATED 02-01 -2009. THE DISALLOWANCE HAS THUS BEEN RESTRICTED TO RS 27,33,075 WHICH WAS THE ADDITIONAL DEPRECIATION CLAIMED, THE AO IS NOW DIRECTED TO ALLOW THE CLAIM OF ADDITIONAL DEPRECIATION I.E. THE SUM OF RS 27,33,075 UNDER THE PROVISIONS OF SEC TION 32(1)(IIA) OF THE IT ACT. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, NONE WAS PRESE NT FROM THE SIDE OF THE ASSESSEE, DESPITE SERVICE OF NOTICE THROUGH A/D. WE, THEREFOR E, PROCEED TO DECIDE THIS APPEAL, AFTER HEARING THE LD. D.R. AND THE MATERIALS AVAILABLE ON RECORD. SHRI G.S.SOURYAWANSHI, ITA NOS.2892-AHD-09 6 SR.D.R. APPEARED, ON BEHALF OF THE REVENUE AND RELY ING ON THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER, CONTENDED THAT THE PROC ESS OF EMBROIDERY CARRIED OUT BY THE ASSESSEE DOES NOT INVOLVE TRANSFORMATION OF GOODS T O THE EXTENT THAT THEY ARE COMMERCIALLY KNOWN DIFFERENTLY. THUS, THE ASSESSEE IS NOT ENGAGED IN THE MANUFACTURING AND THEREFORE, NOT ENTITLED TO ADDITIONAL DEPRECIAT ION UNDER SECTION 32(1)(IIA) OF THE I.T. ACT. 6. AFTER HEARING THE LD. D.R., WE HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT AS PER THE CLAUSE (IIA) OF SUB-SECTION 32(1), WHICH IS REPRODUCED BY THE LD. CIT(A), IN THE IMPUG NED ORDER, PROVIDES FOR ADDITIONAL DEPRECIATION IN RELATION TO ASSESSMENT YEAR 2006-07 AND SUBSEQUENT YEARS. THE SAID CLAUSE (IIA) PROVIDES THAT IN CASE OF NEW MACHINERY OR PLANT (OTHER THAN THE SHIP AND AIRCRAFT) ACQUIRED AND INSTALLED AFTER 31.03.05, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, ADDITIONAL DEPRECIATION @20% OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALL OWED AS DEDUCTION UNDER SECTION 32(1)(II). ADDITIONAL DEPRECIATION ALLOWED WILL BE DEDUCTED FROM THE W.D.V. OF THE ASSETS. APART FROM REASONING GIVEN BY THE LD.CIT(A), IN THE IMPUGNED ORDER, IN DIRECTING THE AO TO ALLOW DEPRECIATION UNDER SECTION 32(1)(IIA), WE HAVE NOTICED THAT THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT-VS- DARSHAK LTD. [2001] 247 ITR 489 (KAR.) HELD THAT CONVERSION OF PLAIN GLASSWARE INTO DECORA TIVE GLASSWARE WITH A PROCESS WHICH IS IRREVERSIBLE, AND MARKETING THE END-PRODUCT AS A CO MMODITY DIFFERENT FROM PLAIN GLASS, IS A PROCESS OF MANUFACTURE. THE ASSESSEE ENGAGED IN SUCH BUSINESS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-I OF THE I.T. ACT. 6.1 ADMITTEDLY, IN THE CASE BEFORE US, THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION ON NEW EMBROIDERY MACHINES PURCHASED DURING THE YEAR. THE MACHINE IN QUESTION WAS UTILIZED MAINLY FOR THE PURPOSE OF EMBROIDERY WORK ON PLAIN CLOTH. AFTER THE EMBROIDERY WORK, THE END-PRODUCT IS KNOWN AS A COMMODITY DIFFE RENT FROM PLAIN CLOTH. WE ARE, THEREFORE, OF THE VIEW THAT THE LD. CIT(A) RIGHTLY TOOK THE VIEW THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING SO AS TO ENTITLE DEPRECIAT ION UNDER SECTION 32(1)(IIA) IN RESPECT OF NEW EMBROIDERY MACHINE PURCHASED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT ITA NOS.2892-AHD-09 7 YEAR UNDER APPEAL. THIS VIEW IS SUPPORTED BY THE RA TIO IN JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DARSHAK LTD. (S UPRA). 6.2 IN VIEW OF THE FOREGOING, WE INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A) WHEREBY HE DIRECTED THE AO TO ALLOW ADDITIONAL DEPRECIATION UNDER SECTION 371(1)(IIA) OF THE I.T. ACT IN RESPECT OF EMBROIDERY MACHINE PURCHASED DURI NG THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. RESULTANTLY, THE APPE AL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE CO URT ON 08.07.2011 SD/- SD/- (A. MOHAN ALANKAMONY) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08/07/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.