Central UP Gas Limited, Kanpur V. Astt. Commissioner of Income Tax-6, Kanpur

ITA 391/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1202 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WAS COVERED UNDER PHRASE OF
• Keywords: Depreciation; Additional depreciation

Judgement Text

I.T.A. NO.391/LKW/2016 ASSESSMENT YEAR:2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.391/LKW/2016 ASSESSMENT YEAR:2010-11 M/S CENTRAL UP GAS LIMITED, 7 TH FLOOR, UPSIDC COMPLEX, A-1/4, LAKHANPUR, KANPUR. PAN:AACCC 5883 A VS. A.C.I.T.-VI, KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED23/02/2016. THE ONLY ISSUE INVOLVED IN THIS A PPEAL RELATES TO DENIAL OF CLAIM OF ADDITIONAL DEPRECIATION WHICH THE ASSESSEE HAS CLAIMED ON PLANT & MACHINERY REQUIRED FOR MANUFACTURE OF COMPRESSED NA TURAL GAS (CNG) FROM NATURAL GAS. 2. LEARNED A. R., AT THE OUTSET, SUBMITTED THAT IN EARLIER YEAR SIMILAR ISSUE HAD ARISEN AND CIT(A) AND HON'BLE TRIBUNAL HA D DECIDED THE ISSUE AGAINST THE ASSESSEE. HOWEVER, HON'BLE ALLAHABAD H IGH COURT VIDE JUDGMENT DATED 08/12/2016 FOR ASSESSMENT YEAR 2008 -09 HAS HELD THAT CNG PRODUCED BY THE ASSESSEE WAS COVERED UNDER THE PHRASE OF APPELLANT BY SHRI SAURAV GUPTA, A.R. RESPONDENT BY DR. A. K. SINGH, CIT, D.R. DATE OF HEARING 13/12/2017 DATE OF PRONOUNCEMENT 08 / 01 /201 8 I.T.A. NO.391/LKW/2016 ASSESSMENT YEAR:2010-11 2 MANUFACTURE OR PRODUCTION AND THEREFORE, HAD ALLOWE D THE ADDITIONAL DEPRECIATION. 3. LEARNED D. R. FAIRLY AGREED THAT THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF HON'BLE ALLAHABAD HIGH COU RT. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE IS ENG AGED IN THE BUSINESS ACTIVITIES OF COMPRESSING AND SELLING OF CNG AND PI PED NATURAL GAS AND HAD CLAIMED ADDITIONAL DEPRECIATION AGAINST THE INVESTM ENT IN NEW PLANT & MACHINERY. HOWEVER, THE ASSESSING OFFICER DISALLOW ED THE CLAIM OF ADDITIONAL DEPRECIATION BY HOLDING THAT THE ASSESSE E WAS NOT ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING AND HAS FURTHER HELD THAT IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2008-09 THE CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE ON THE S AME ISSUE. THE CIT(A) HAS ALSO UPHELD THE DECISION OF ASSESSING OF FICER RELYING ON HIS OWN ORDER. HOWEVER, HON'BLE ALLAHABAD HIGH COURT VIDE ITS JUDGMENT DATED 08/12/2016 IN THE CASE OF THE ASSESSEE ITSELF FOR A SSESSMENT YEAR 2008-09 HAS HELD THAT ASSESSEE WAS ENGAGED IN THE MANUFACTU RING PROCESS AND THEREFORE, IT ANSWERED THE QUESTION IN FAVOUR OF AS SESSEE. THE FINDINGS OF HON'BLE COURT ARE REPRODUCED BELOW: FROM A READING OF THE FACTS ABOVE AND THE TRIBUNAL 'S ORDER AND OTHER MATERIAL ON RECORD, IT COMES TO THE FORE THAT NATURAL GAS WHICH COMES THROUGH PIPELINES IN ITS NATURAL FORM C ANNOT BE USED FOR THE SAME PURPOSES AS COMPRESSED NATURAL GA S THAT IS TO BE USED AS AUTOMOBILE FUEL. THE APPELLANT ON THE OTHER HAND CONTENDS THAT IT IS MANUFACTURED COMPRESSED NATURAL GAS WHICH IS USED F OR THE AUTOMOBILE FUEL, WHICH IS PREPARED BY A PROCESS OF MANUFACTURE, BY WHICH THE NATURAL GAS IS PUT THROUG H A PLANT/MACHINERY FOR COMPRESSION AND WHEN THE COMPRE SSED GAS COMES OUT IN ITS NEW FORM IT IS USED FOR THE AUTOMO BILE FUEL. I.T.A. NO.391/LKW/2016 ASSESSMENT YEAR:2010-11 3 AFTER UNDERGOING THE PROCESS OF COMPRESSION, NATURA L GAS ACQUIRES A NEW FORM BY THE NAME OF COMPRESSED NATUR AL GAS. IT HAS A DISTINCT USE AS AUTOMOBILE FUEL AND A DIST INCT COMMERCIAL NAME. THE PROVISIONS OF SECTION 2 (29BA) DEFINES 'MANUFACTURE 1 AS HEREUNDER: '(29BA)- MANUFACTURE WITH ITS GRAMMATICAL VARIATION S, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR A RTICLE OR THING- (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR AR TICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USED; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT O BJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSIT ION OR INTEGRAL STRUCTURE;' LEARNED COUNSEL FOR THE APPELLANT HAS PLACED RELIAN CE ON THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INCOME T AX OFFICER VSARIHANT TILES AND MARBLES P. LTD. REPORTED IN 201 0 320 ITR 79 (SC) IN SUPPORT OF HIS CASE. ON THE FACE OF IT, IT APPEARS THAT COMPRESSED NATUR AL GAS IS A COMMODITY HAVING A DISTINCT NAME, CHARACTER AND USE AND THEREFORE, THE TEST TO DETERMINE WHETHER 'MANUFACTU RE' HAS TAKEN PLACE IS SATISFIED. WITHOUT UNDERGOING THE PROCESS OF COMPRESSION NATUR AL GAS IN ITS ORIGINAL FORM CANNOT BE USED AS FUEL FOR THE AU TOMOBILE INDUSTRY. IT IS ONLY UPON UNDERGOING THE PROCESS OF COMPRESSION, IT IS CONVERTED INTO COMPRESSED NATURA L GAS WHICH IS A COMMODITY, TO BE USED AS A FUEL FOR THE AUTOMO BILE INDUSTRY. THE TRIBUNAL HAS FAILED TO DISCUSS THIS ASPECT OF T HE MATTER COMPLETELY AND HAS IGNORED THE MATERIAL PLACED BY T HE APPELLANT ON RECORD WHEREBY IT HAS SOUGHT TO SHOW THAT THE EN TIRE PROCESS BY WHICH NATURAL GAS IS COMPRESSED AND HAVI NG BEEN COMPRESSED ACQUIRES A NEW AND CHANGED NAME OF COMPR ESSED NATURAL GAS ACQUIRES A NEW USE AND A DISTINCT COMME RCIAL IDENTITY. I.T.A. NO.391/LKW/2016 ASSESSMENT YEAR:2010-11 4 HAVING HEARD LEARNED COUNSEL FOR BOTH SIDES, WE ARE SATISFIED THAT COMPRESSED NATURAL GAS IN ITS COMPRESSED FORM HAS A DISTINCT IDENTITY AND CHARACTER AND USE. IT IS SETT LED LAW OF THE APEX COURT AS WELL AS OF THIS COURT THAT WHEN A COM MODITY ACQUIRES A DISTINCT NAME, USE AND COMMERCIAL IDENTI TY, IT WOULD ACQUIRE THE TRAIT OF 'MANUFACTURE. IN VIEW OF ABOVE, THE QUESTION IS ANSWERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4.1 RESPECTFULLY FOLLOWING THE ABOVE ORDER OF HON'B LE HIGH COURT, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:08/01/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR