Asst. Commissioner of Income Tax, Circle-2, Margao., Margao V. M/s V. M. Salgaokar & Brothers Pvt. Ltd., Vasco

ITA 338/PAN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1418 (ITAT-PANAJI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Depreciation; Additional depreciation; Question of law
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO S . 338 & 339 /PNJ/201 4 (ASST. YEAR S : 200 6 - 0 7 & 2007 - 08 ) ACIT, CIRCLE - 2, MARGAO - GOA. VS. M/S. V.M. SALGAOCAR & BROTHERS PVT. LTD., SALGAOCAR HOUSE, F.L. GOMES ROAD, VASCO - DA - GAMA, GOA. PAN NO. AAACV 5950 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GIRISH DAVE ADV. DEPARTMENT BY : SHRI K.M. MAHESH - D R DATE OF HEARING : 10 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 1 0 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER TH E S E ARE THE APPEAL S FILED BY THE REVENUE AGAINST THE CONSOLIDATED ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS) , PANAJI , DATED 31 /0 7 /201 4 FOR THE ASSESSMENT YEARS 2006 - 07 & 2007 - 08 . 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE HONBLE CIT(A) HAS ERRED IN ALLOWING THE RELIEF TO THE ASSESSEE IN RESPECT OF ADDITIONAL DEPRECIATION OF RS.66,61,862/ - ON THE MACHINERY USED IN MINING ACTIVITIES AND ADDITIONAL DEPRECIATION OF RS. 3,75,84,849/ - ON THE MACHINERY USED IN WIND MILL ACTIVITIES FOR THE ASSESSME NT YEAR 2006 - 07 AND RS. 1,11,50,305 / - ON THE MACHINERY USED IN MINING ACTIVITIES AND ADDITIONAL DEPRECIATION OF 2 ITA NOS. 338 & 339/PNJ/2014 RS. 2,51,48,645 / - ON THE MACHINERY USED IN WIND MILL ACTIVITIES FOR THE ASSESSMENT YEAR 2007 - 08 , EVEN THOUGH THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING AS REQUIRED UNDER SECTION 32(IIA) OF THE I. T. ACT. 3. THE HONBLE CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT AS PER THE DEFINITION O F MANUFACTURE IN SECTION 2(29BA) OF THE IT ACT, THE PROCESSING OF IRON ORE DOES NOT AMOUNT TO TRANSFORMATION/PRODUCTION OF DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE OR BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJ ECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT ORDER OF THE ASSESSING OFFICER RESTORED. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION OF RS.66,61,862/ - ON COMPUTERS/MACHINERY USED IN MINING ACTIVITIES AND ADDITIONAL DEPRECIATION OF RS. 3,75,84,849/ - IN RESPECT OF WIND MILL IN ASSESSMENT YEAR 2006 - 07 ; AND RS.1,11,50,305/ - ON THE COMPUTERS/ MACHINERY USED IN MINING ACTIVITIES AND ADDITIONAL DEPRECIATION OF RS.2,51,48,645/ - IN RESPECT OF WIND MILL IN ASSESSMENT YEAR 2007 - 08 . THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT I N VIEW OF THE DEFINITION OF MANUFACTURE GIVEN IN SEC.2(29BA) , P ROCESSING OF IRON ORE DOES NOT AMOUNT TO TRANSFORMATION/ PRODUCTION OF DISTIN C T OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE OR BRINING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND, THE SUBMISSION OF THE APPELLANT. THE A.O. HAS DISALLOWED CLAIM OF ADDITIONAL DEPRECIATION ON PLANT AND M ACHINERY USED IN MINING AS WELL AS WINDMILL DIVISION ON THE GROUND THAT PROCESSING OF ORE AND GENERATION OF POWER THROUGH WINDMILL DOES NOT AMOUNT TO 3 ITA NOS. 338 & 339/PNJ/2014 MANUFACTURE OR PRODUCTION. THE APPELLANT HAS PLACED RELIANCE ON A HOST OF DECISIONS IN SUPPORT OF ITS CLAI M OF ADDITIONAL DECISION. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED COUNSEL OF THE APPELLANT CLAIMED THAT ENTIRE ISSUE OF ADDITIONAL DEPRECIATION IS COVERED BY THE DECISION OF HONOURABLE BOMBAY H.C. AND PANAJI ITAT IN ASSESSEES OWN CASE FOR A.YR. 2008 - 09. I HAVE GONE THROUGH THESE DECISIONS AND FIND IT RELEVANT TO QUOTE THE RELEVANT EXTRACTS FROM THE ORDER OF HONOURABLE PANAJI, ITAT IN ITA N O .63/PNJ/20 13: WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THE CLAIM OF ASSESSEE REGARDING ADDITIONAL DEPRE CIATION ON MACHINERY U/S 32(1)(II A) AND WINDMILL HAS BEEN NOT ALLOWED IN A Y 2006 - 07 AND 2007 - 08 WITHOUT MAKING PROPER INQUIRY BY AO. THE COMMISSIONER OF I NCOME TAX U/S.263 HAS REVISED THE ORDER OF AO AND AO WAS DIRECTED TO CONSIDER THE ISSUE A FRESH AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AND DIRECTED TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. THIS ACTION OF THE CIT HAS BEEN CONFIRMED BY TRIBUNAL IN RESPECTIVE ASSESSMENT YEAR IN A.Y. 2006 - 07 & 2007 - 08, ITA NO.139/PNJ/ 2011 AND ITA NO.44/PNJ/20 12 RESPECTIVELY. WE FIND IN ASSESSMENT YEAR UNDER CONSIDERATION FOR A.Y 2008 - 09 TH E AO HAS MADE INQUIRY REGARDING THE CLAIM OF ASSESSEE OF ADDITIONAL DEPRECIATION ON MACHINERY AND WINDMILL. THE ASSESSEE HAS REPLIED TO THIS QUERY BY THIS LETTER DT.18/10/2010 WHICH READS AS UNDER: AS CAN BE SEEN FROM THE DETAILS OF DEPRECIATION, AS ANNE XED, THE COMPANY HAS CLAIMED ADDITIONAL DEPRECIATION IN RESPECT OF NEW PLANT AND MACHINERY USED IN THE BUSINESS OF IRON - ORE PROCESSING CARRIED ON ITS MINING DIVISIONS AS WELL AS IN GENERATION OF ELECTRICITY CARRIED ON IT ITS WINDMILL DIVISION. IN THIS CON NECTION, WE INVITE YOUR GOODSELFS ATTENTION TO THE PROVISIONS OF SECTION 32(1)(IIA) OF THE INCOME TAX ACT (THE ACT) WHICH DEALS WITH ADDITIONAL DEPRECIATION. IN TERMS THEREOF ADDITIONAL DEPRECIATION IS ALLOWED IN THE CASE OF ANY NEW MACHINERY OR PLANT ( OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, SUBJECT TO THE SATISFACTION OF PRESCRIBED CONDITIONS. THU S FORM THE ABOVE YOUR GOODSE L F WILL APPRECIATE THAT AN ASSESSEE, TO BE ELIGIBLE FOR ADDITIONAL DEPRECIATION, SHOULD BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE. 4 ITA NOS. 338 & 339/PNJ/2014 WE ARE OF THE OPINION THAT THE AO HAS EXAMINED THE CLAIM OF ASSESS EE REGARDING ADDITIONAL DEPRECIATION ON MACHINERY AND WINDMILL AND ALLOWED THE CLAIM IN THE YEAR UNDER CONSIDERATION. WE ARE OF THE OPINION THAT THE ITO ACTED IN ACCORDANCE WITH THE LAW AND MAKES AN ASSESSMENT THE SAME CANNOT BE BRANDED AS ERRONEOUS BY C IT SIMPLY BECAUSE ACCORDING TO HIM THE ORDER HAVE BEEN NOT WRITTEN ELABORATELY. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF BOMBAY HIGH COURT IN CASE OF GABRIEL INDIA LIMITED 203 ITR 108. WE ARE ALSO OF A VIEW THAT WHEN AO HAS MADE THE INQUIRY AND ALLOW ED THE ADDITIONAL DEPRECIATION ON MACHINERY AND WINDMILL. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH THE LAW. WE FIND THAT ASSESSEE IS ENTITLE TO ADDITIONAL DEPRECIATION ON MACHINERY AS PER THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF CIT VS. SESA GOA LTD., 271 ITR 331 AS WELL ASSESSEE IS ENTITLE ADDITIONAL DEPRECIATION ON WINDMILL OPERATION AS PER THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS. V T M LIMITED, 319 ITR 336. WHEN AO HAS TAKEN ONE OF THE POSSIBL E VIEW THE POWER OF REVISION U/S.263 CANNOT BE EXERCISED. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE MAX INDIA LTD., 295 ITR 282. IN VIEW OF THESE DECISIONS WE ALLOW THE APPEAL OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATIO N. THIS ORDER OF HONBLE ITAT HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT AT PANAJI AND DEPARTMENTAL APPEAL HAS BEEN REJECTED SAYING THAT, AS IT IS NOT DISPUTED BY THE APPELLANT THAT THE RESPONDENTS ARE ENGAGED IN THE BUSINESS OF PROCESSING OF IRON ORE IN THE PLANT AND GENERATION OF WINDMILL ENERGY WHICH IS HELD TO BE A MANUFACTURING ACTIVITY WITHIN THE SAID PROVISION OF S.32(1)(IIA) OF THE INCOME TAX ACT, THE OBSERVATIONS OF THE APEX COURT IN THE DE CISION CITED SUPRA, ARE THUS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE HONBLE HIGH COURT DID NOT FIND ANY SUBSTANTIAL QUESTION OF LAW AND REJECTED DEPARTMENTAL APPEAL. SINCE, THIS ISSUE IS COVERED BY THE DECISION OF JURISDICTIONAL ITAT, R ESPECTFULLY FOLLOWING THE DECISION, THE A.O. IS DIRECTED TO ALLOW ADDITIONAL DEPRECIATION AMOUNTING TO RS.4,42,46,71 1/ - TO THE APPELLANT. 5. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. WHEN ASKED BY THE BENCH AS TO WHAT W AS THE MISTAKE IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , WHO WHILE ALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION TO THE ASSESSEE FOLLOWED THE ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR THE 5 ITA NOS. 338 & 339/PNJ/2014 ASSESSMENT YEAR 200 8 - 09 IN I.T.A.NO. 63/PNJ/2013 DATED 08/08/2013, HE COULD NOT GIVE ANY SPECIFIC REPLY. 6 . ON THE OTHER HAND, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FILED BEFORE US COPY OF THE ORDER OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2008 - 09 REPORTED IN ( 2014 ) 47 TAXMANN.COM 21 (BOMBAY) AND SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT HAS CONFIRMED THE ORDER OF THE TRIBUNAL ALLOWING ADDITIONAL DEPRECIATION TO THE ASSESSEE ON COMPUTERS & MACHINERY USED I N PROCESS OF IRON ORE AND ON WIND MILL USED IN GENERATION OF ENERGY. 7 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE FACTS NARRATED ABOVE, WE FIND THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) F I N D S S U P P O R T THE ORDER OF THE HONBLE BOMBAY HIGH COURT AT GOA. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) W HICH IS CONFIRMED AND GROUND S OF APPEAL OF THE REVENUE ARE DISMISSED. 8 . IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 1 0 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 0 RD AUGUST , 201 5 . VR/ - COPY TO: 6 ITA NOS. 338 & 339/PNJ/2014 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 7 ITA NOS. 338 & 339/PNJ/2014 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 0 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 1 0 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 1 0 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 1 0 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 0 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 1 0 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 11 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER