ACIT, Jaipur V. ASSOCATED ENGINEERS INDUSTRIAL LTD., Jaipur

ITA 323/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5440 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AASHISH SHARMA ADV DHK
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 323/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2006-07 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD., 303, SHYAM ANKAMPA, O-11, ASHOK MARG, C-SCHEME, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AACCA 0370 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI AASHISH SHARMA (ADV) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/01/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT :24/02/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 19/02/2014 OF THE LEARNED C.I.T.(A)-II JAIPUR, FOR A .Y. 2006-07. THE EFFECTIVE GROUND OF APPEAL IS AS UNDER:- (I) WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ALLOWING ADDITIONAL DEPRECIATION OF RS. 58,14,792/- U/S 32(1)(IIA) ON WIND MILL. 2 ITA NO. 323/JP/2014 ACIT VS M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD. (II) WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN ALLOWING DEPRECIATION U/S 32(1)(IIA) ON WIND MILL EVEN THOUGH THE WIND MILL WAS NOT PURCHASED IN THE CONTEXT OF CORE BUSINESS OF MANUFACTURING OF CABLES/CONDUCTORS/PARTS AND SPARE PARTS OF MACHINES. 2. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESS EE FILED RETURN ON 27/11/2006 AT NIL INCOME. IN THIS CASE, SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 29/12/2008 AT THE RETURNED INCOME I.E. NIL INCOME. THEREAFTER, AFTER RECORDING THE REASONS U/S 147 OF THE ACT, THE CASE WAS REOPENED AND NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE AND ACCORD INGLY THE CASE WAS SCRUTINIZED BY THE ASSESSING OFFICER. THE ASSESSEE I S ENGAGED IN MANUFACTURING OF MACHINERIES AND POWER GENERATION FR OM WIND MILL. THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 2,90,73,95 8/- IN RESPECT OF WIND MILL. THE LD ASSESSING OFFICER OBSERVED THAT THE COST OF MACHINERY WAS 5,81,47,916/-. THE DEPRECIATION CLAIMED THEREON I NCLUDED NORMAL DEPRECIATION OF RS. 2,32,59,166/- @ 80% OF WRITTEN DO WN VALUE AND ADDITIONAL DEPRECIATION U/S 32(IIA) OF RS. 58,14,79 2/- @ 20% ON WINDMILL INSTALLED IF BUSINESS OF MANUFACTURING. THE ASSESSING OFFICER AFTER GIVING REASONABLE OPPORTUNITY, HAS HELD THAT THE CASE LAW I.E. 3 ITA NO. 323/JP/2014 ACIT VS M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD. PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA, ACIT 236 ITR 8 32 AND VASANT CHUNILAL PATEL VS. M.J. MAKWANA, ACIT ARE NOT APPLICA BLE IN THE ASSESSEES CASE. THE ASSESSEE IS NOT ENGAGED IN PRO DUCING AND MANUFACTURING OF ANY ARTICLE OR THING BUT IS SIMPLY GENERATING POWER. THE POWER IS A FORM OF ENERGY, WHICH CAN NEVER BE PROD UCED OR DESTROYED. BY USING THE WINDMILL, IT IS CONVERTED IN TO ELECTRICAL ENERGY AND NO NEW ARTICLE OR THING IS MANUFACTURED OR PROD UCED. AS PER SECTION 32(1)(IIA), THE WORD MANUFACTURE OR PRODUCE HAVE BEEN USED TO EXPLAIN THE TRUE SPIRIT OF PROVISIONS OF THE ACT, WH ICH IS EVIDENT FROM THE FACTS THAT THE PROVISIONS REGARDING GENERATION OR G ENERATING HAS BEEN SEPARATELY DEALT WITH IN SECTION 32(1)(II)(I) WHEREI N IT IS STATED THAT IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GEN ERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAG E OF ACTUAL COST THEREOF TO THE ASSESSED AS MAY BE PRESCRIBED. THE AS SESSING OFFICER FURTHER HELD THAT MANUFACTURE OR PRODUCE IS ENTIREL Y DIFFERENT FROM GENERATION. MANUFACTURING IS THE USE OF MACHINES, T OOLS AND LABOR TO PRODUCE GOODS FOR USE OR SALE. THE TERM MAY REFER TO A RANGE OF HUMAN ACTIVITY, FROM HANDICRAFT TO HIGH TECH BUT IS MOST COMMONLY APPLIED TO INDUSTRIAL PRODUCTION, IN WHICH RAW MATERIALS ARE TR ANSFORMED INTO FINISHED GOODS ON A LARGE SCALE. SUCH FINISHED GOOD S MAY BE USED FOR 4 ITA NO. 323/JP/2014 ACIT VS M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD. MANUFACTURING OTHER, MORE COMPLEX PRODUCTS, SUCH AS AIRCRAFT, HOUSEHOLD APPLIANCES OR AUTOMOBILES, OR SOLD TO WHO LESALERS, WHO IN TURN SELL THEM TO RETAILERS, WHO THEN SELL THEM TO E ND USERS. AFTER CONSIDERING THE ASSESSEES REPLY, HE ALLOWED THE DEP RECIATION U/S 32(1)(IIA) OF THE ACT @ 15% ON PLANT AND MACHINERY A ND 80% ON WINDMILL. THUS, HE MADE ADDITION OF RS. 32,82,608/- I N THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER DISALLOWED ADDITIONAL DEPRECIATION ON WINDMI LL ON THE GROUND THAT IT WAS NOT PRODUCING ARTICLES OR THINGS BUT IT WAS ONLY DOING GENERATION OF ELECTRICI TY. APPELLANT SUBMITTED THAT ITS CASE IS COVERED DIRECT LY BY THE DECISION OF MADRAS HIGH COURT. I HAVE GONE THROUGH THE DECISION OF MADRAS HIGH COURT IN THE CA SE OF TEXMACO PRECISION CASTING IN WHICH DEPRECIATION ON WINDMILL WAS ALLOWED ON THE GROUND THAT IT IS NOT NECESSARY THAT MACHINE PURCHASED SHOULD PRODUCE ARTICLE OR THING. IF ASSESSEE IS ENGAGED IN THE ACT IVITY 5 ITA NO. 323/JP/2014 ACIT VS M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD. OF PRODUCING ARTICLES OR THINGS, IT IS SUFFICIENT T O ALLOW ADDITIONAL DEPRECIATION ON NEW MACHINE ACQUIRED. SINCE APPELLANT IS ENGAGED IN PRODUCING MACHINERIES WHICH ARE ARTICLES OR THINGS, APPELLANT IS ENTITLED TO ADDITIONAL DEPRECIATION. RESPECTFULLY FOLLOWING THE DECISION OF MADRAS HIGH COURT RELIED UPON BY THE APPELLANT, APPELLANT IS ALLOWED ADDITIONAL DEPRECIAT ION ON WINDMILL. 4. NOW REVENUE IS IN APPEAL BEFORE US. THE LD DR VEHE MENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS ARG UED THAT THE HONBLE ITAT HAS DECIDED THE NUMBER OF CASES ON WIND MILL AND WHEREIN IT HAS ALLOWED DEPRECIATION @ 80% ON IT. THE LD CIT(A) ALSO CONSIDERED THE DECISION CITED BY THE ASSESSEE AT THE TIME OF D ECIDING THE APPEAL IN CASE THE TEXMO PRECISION CASTINGS 321 ITR 481(MAD) WHE REIN IT HAS BEEN HELD THAT IN SETTING UP OF A NEW MACHINERY OR P LANT SHOULD HAVE BEEN ACQUIRED OR INSTALLED AFTER 31/3/2002 BY THE A SSESSEE, WHICH SHOULD HAVE ANY OPERATION ACTIVITY TO THE ARTICLE O R THING THAT WAS ALREADY BEEN MANUFACTURED BY THE ASSESSEE. THEREFORE , THE CONTENTION THAT THE SETTING UP ON A WINDMILL HAS NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS, ETC. IS TOTALLY NOT GERMENE TO 6 ITA NO. 323/JP/2014 ACIT VS M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD. THE SPECIFIC PROVISION CONTAINED IN SECTION 32(1)(I IA) OF THE ACT. THEREFORE, HE PRAYED TO UPHOLD THE ORDER OF THE LD C IT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESS EE PRODUCED THE ELECTRICITY THROUGH WINDMILL AND CLAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT. THE ASSESSEE HAD ACQUIRED NEW MACHINE, WHICH COMES UNDER MANUFACTURING AND PRODUCE. ACCORDINGLY, THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION FOLLOWING THE DECISI ON OF HONBLE MADRAS HIGH COURT. THE LD DR HAS NOT CONTROVERTED THE FINDI NG GIVEN BY THE LD CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD CI T(A). 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24 TH FEBRUARY, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD., JAIPUR. 7 ITA NO. 323/JP/2014 ACIT VS M/S ASSOCIATED ENGINEERS INDUSTRIAL LTD. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.323/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR