ACIT 19(2), MUMBAI V. K.P. SANGHVI & SONS, MUMBAI

ITA 361/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0431 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT AMLANI
• Assessee Lawyers: M C OMI NINGSHEN
• Keywords: Depreciation; Additional depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 361/ MUM/20 16 ( ASSESSMENT YEAR : 2010 - 11 ) ACIT 19(2) R.NO.L - 207, MATRU MANDIR MUMBAI 400 007 VS. M/S. K.P. SANGHVI & SONS 1301, P RASAD CHAMBERS MAMAM PARMANAND MARG OPERA HOUSE, MUMBAI 400 004 PAN/GIR NO. AAAFK8390F APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI M.C.OMI NINGSHEN REVENUE BY SHRI AMIT AMLANI DATE OF HEARING 08 / 02 /201 8 DATE OF PRONOUNC EME NT 13 / 02 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 30 DATED 03/11/2015 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE IT ACT. 2. THE GRIEVANCE OF RE VENUE RELATES TO ALLOWING ADDITIONAL DEPRECIATION OF RS.53,20,253/ - CLAIMED U/S.32(1)(IIA) OF THE I.T. ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FROM THE RECORD, WE FOUND THAT ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE ORDE R OF TRIBUNAL IN ASSESSEES OWN CASE IN THE ITA NO. 361/MUM/2016 M/S. K.P.SANGH VI & SONS 2 A.Y.2008 - 09 AND 2009 - 10 DATED 03/01/2017 AND 29/09/2016. THE PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER: - 9. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT (A) DELETING THE DISALL OWANCE OF ADDITIONAL CLAIM OF DEPRECIATION. FOR THIS, THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 3. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE ADDITIONAL DEPRECIATION OF RS.29,38,884/ - 4. WHETHER ON FACTS AND CIRCUMSTANCES .OF THE CASE, THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT HON'BLE SUPREME COURT IN THE CASE OF CIT VS. GEM INDIA MANUFACTURING CO.(2001) 249 ITR 307 (SC) & HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF LONDON STAR DIAMON D CO(I)LTD.213 ITR 517 (BOM) HAD HELD THAT THE DIAMOND CUTTING & POLISHING AMOUNTS TO PROCESSING OF GOODS AND NOT MANUFACTURING OF GOODS AND DECISION RELIED UPON IN THE CASE OF M/S SHEETAL MANUFACTURES H AS NOT BEEN ACCEPTED ON MERITS. 10. WE HAVE HEARD T HE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE CLAIM OF THE ASSESSEE IS THAT THE BUSINESS OF CUTTING AND POLISHING OF DIAMONDS IS MANUFACTURING AND PRODUCTION OF AN ARTICLE OR THING AS REQUIRED FOR CLAIMING ADDITIONAL DEPRECIATION U/S 32(1) (IIA) OF THE ACT. THE AO DISALLOWED THE CLAIM BY OBSERVING THAT THE ASSESSEE IS NOT ENGAGED IN MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING. THE CIT (A) RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF ARIHANT TILES & MARBLE PVT. LTD. 320 ITR 79 (SC) ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 2.4.40 AS UNDER: - 2 .4.40 IT IS SEEN THAT IN THE EARLIER YEAR, THIS CLAIM HAS BEEN ALLOWED FOLLOWING THE DECISION IN THE CASE OF SHEETAL DIAMONDS LTD. IN ITA NO.6687 TO 6689/MUM/2002 DATED 23.3.2011 WHERE THE ISSUE OF CUTTING AND POLISHING OF DIAMONDS WHETHER CONSTITUTED MANUFACTURING ACTIVITY OR NOT WAS CONSIDERED IN DETAIL BY THE HONBLE ITAT, MUMBAI BENCH. IN THE AFORESAID DECISION, REFERENCE WAS ALSO MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GEN INDIA MFG. CO. 249 ITR 307 AND THE SUBSEQUENT DECISIONS OF THE APEX COURT IN THE CASE OF ARIHANT TILES AND MARBLE (P) LTD. 320 ITR 79 (SC), VIJAY SHIP BREAKING CORPN. 314 ITR 309 (SC) AND EMPEE PO LY YARN PVT. LTD. 320 ITR 665 TO HOLD THAT T HE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CUTTING AND POLISHING ROUGH DIAMONDS AND HENCE, IT WAS ELIGIBLE FOR DEDUCTION U/S 80 IA OF THE ACT. FOLLOWING THE ABOVE SAID DECISIONS, THE APPELLANTS CLAIM FOR ADDITIONAL DEPRECIATION U/S. 32(1) (II) OF THE ACT WAS ALLOWED. AS THE FACTS OBTAINING IN THE CURRENT YEAR ARE IN PARI ITA NO. 361/MUM/2016 M/S. K.P.SANGH VI & SONS 3 MATERIAL WITH THE FACTS OBTAINING IN EARLIER YEAR IN RESPECT OF THE APPELLANTS CLAIM OF ADDITIONAL DEPRE CIATION, THIS GROUND IS ALLOWED 11. WE ALSO FIND THAT THE TRIBUNAL IN THE CASE OF FLAWLESS DIAMOND INDIA LTD. VS ADDL. CIT (2014) 45 TAXMANN.COM 67 (MUM.) AFTER CONSIDERING THE RECENT OF THE HONBLE SUPREME COURT HELD THAT CUTTING AND POLISHING OF DIAMONDS AMOUNTS TO MANUFAC TURING OR PRODUCTION OF ARTICLE OR THING BY OBSERVING IN PARA 16 AS UNDER: - 16. THUS, FROM THE AFORESAID DECISION, IT CAN BE SAFELY INFERRED THAT, WHAT IS REQUIRED IS THE PROCESS UNDERTAKEN FOR CONVERSION OF RAW / ROUGH DIAMONDS INTO SUPERIOR OR POLISHE D DIAMOND. IN THIS CASE, AS STATED ABOVE, THE ASSESSEE HAS DULY PLACED ON RECORD THE ENTIRE PROCESS AND THE STAGES THROUGH WHICH THE ROUGH DIAMOND UNDERGOES FOR BECOMING THE POLISHED DIAMOND, WHICH IS A SEPARATE AND DISTINCT PRODUCT AND HAS DIFFERENT USAGE . SUCH A PROCESS HAS NEITHER BEEN REBUTTED BY THE REVENUE NOR ANY OTHER COUNTER - OPINION HAVE BEEN SOUGHT TO CONTRADICT THE ASSESSEES VERSION OF THE PROCESS. THUS, IN OUR OPINION, ONCE THE ENTIRE PROCESS OF CUTTING AND POLISHING OF DIAMOND HAVE NOT BEEN RE BUTTED AND ALSO THE FACT THAT THE ROUGH AND POLISHED DIAMOND ARE TWO DISTINCT COMMODITY HAVING DIFFERENT USAGE, NOT ONLY IN THE COMMON PARLANCE BUT ALSO IN REAL SENSE, THEN IT HAS TO BE UNDERSTOOD THAT THE CUTTING AND POLISHING OF DIAMOND AMOUNTS TO MANUFA CTURING OR PRODUCTION OF ARTICLE OR THING AS ENVISAGED FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80 - IC. THUS, THE CONTENTION RAISED BY THE LEARNED COUNSEL BEFORE US IS ACCEPTED THAT SIMPLY RELYING ON THE DECISION OF GEM INDIA MFG. CO (SUPRA) BY THE REVENUE TO DENY THE CLAIM OF DEDUCTION IS UNCALLED FOR IN THE PRESENT CASE, ESPECIALLY IN THE WAKE OF LATER DECISION OF THE HONBLE SUPREME COURT IN HEAVENS DIAMOND (SUPRA) WHICH HAS CLARIFIED THIS POINT. ACCORDINGLY, THE DECISION AND THE CONCLUSION DR AWN BY THE LEARNED COMMISSIONER (APPEALS) FOR THE YEAR UNDER APPEAL I.E., ASSESSMENT YEAR 2008 - 09 ARE SET ASIDE AND ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80 - IC IS ALLOWED. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE OF FLAWLES S DIAMOND INDIA LTD. (SUPRA), WE HOLD THAT CUTTING AND POLISHING OF DIAMONDS AMOUNTS TO MANUFACTURING OR PRODUCTION OF ARTICLE OR THING AS ENVISAGED FOR THE PURPOSE OF CLAIMING ADDITIONAL DEPRECIATION U/S 32(1) (IIA) OF THE ACT. HENCE, WE CONFIRM THE ORDER OF THE CIT (A) ON THIS ISSUE AND DISMISS THE REVENUES APPEAL. 5. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE EXACTLY SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES ITA NO. 361/MUM/2016 M/S. K.P.SANGH VI & SONS 4 OWN CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) WHO HAS ALLOWED CLAIM OF ADDITIONAL DEPRECIATION BY FOLLOWING THE ORDER OF THE TRIBUNAL ITSELF. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 02 /201 8 S D/ - ( SANDEEP GOSAIN ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 /02 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//