Asstt.Comissioner of Income-tax Circle-2, Nagpur V. M/s Manganese Ore(I) Ltd, Nagpur

ITA 4/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1732 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Depreciation; Business expenditure; Additional depreciation; Question of law
• Section: 143(3)

Judgement Text

1 ITA NO. 04/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 04/NAG/2013 ASSESSMENT YEAR S: 2008 - 09. ASSTT. COMMISSIONER OF INCOME - TAX, M/S MANGANESE ORE (I) LTD., CIRCLE - 2, NAGPUR. V/S. 1A, MOIL BHAVAN, KATOL ROAD, NAGPUR . PAN AAACM8952A APPELLANT. RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SHRI K.P. DEWANI . DATE OF HEARING : 07 - 07 - 2015 DATE OF PRONOUNCEMENT : 21 ST AUGUST, 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. . THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 29 - 10 - 2012. GROUND NO. 1 RAISED BY THE REVENUE IS REPRODUCED BELOW : WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS CORRECT IN HOLDING THAT MINE CLOSURE EXPENSES ARE LEGITIMATE BUSINESS EXPENDITURE SINCE UNCRYSTALLIZED AND PURE ESTIMATES ONLY AND WHETHER THE PROVISIONS OF MINES CONSERVATION AND DEVELOPMENT RULES SUPERSEDE THE PROVISIONS OF THE I.T. ACT AND SYSTEMS OF ACCOUNTING RECOGNIZED UNDER THE I.T. ACT. 2 ITA NO. 04/NAG/2013 2. THE ASSESSING OFFICER HAS REPEATED THIS ADDITION FOR THE YEAR UNDER CONSIDERATION V IDE AN ORDER UNDER SECTION 143(3) DATED 31 - 12 - 2010 ON THE SAME LINES AS IT WAS HELD IN THE PAST YEARS. THE FIRST APPELLATE AUTHORITY HAS ALSO FOLLOWED THE VIEW OF HIS PREDECESSOR BY REFERRING ORDERS FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 PASSED BY CIT(A PPEALS) - I AND ALLOWED THE CLAIM. 3. HEARD BOTH THE SIDES. NOW BEFORE US AN ORDER OF ITAT, NAGPUR BENCH PRONOUNCED IN ASSESSEES OWN CASE TITLED AS DCIT V/S. M/S MANGANESE ORE (I) LTD. BEARING ITA NO. 144/NAG/2013 FOR ASSESSMENT YEAR 2009 - 10 DATED 15 TH MAY, 2015 WHEREIN IN RESPECT OF THIS GROUND IT WAS HELD AS UNDER : 4. WE FIND THAT THE LEARNED CIT(APPEALS) HAS FOLLOWED THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07. LEARNED CIT(APPEALS) HELD AS UNDER : IN THEIR ORDER PASSED ON 10.10.2012 IN ITA NO. 01/NAG/2010 FOR A.Y. 2006 - 07 IN THE APPELLANTS OWN CASE ON THE SAME ISSUE, THE ITAT, NAGPUR BENCH HAS HELD WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. IN OUR OPINI ON, THE PROVISION MADE BY THE ASSESSEE REPRESENT THE LIABILITY ACCRUED IN VIEW OF RULE 23A, 23B & 23C OF THE MINERAL REVISION AND DEVELOPMENT RULE, A COY OF WHICH WAS FILED BEFORE US. UNDER THESE RULES, MINING COMPANY IS REQUIRED TO SUBMIT PROGRE SSIVE MINE CLOSURE PLAN AND FINAL MINE CLOSURE PLAN TO THE IBM FOR ITS APPROVAL. AN APPROVAL FROM THE REGIONAL CONTROLLER OF MINES IS TO BE OBTAINED IN THIS REGARD AND ONLY THERE AFTER THE LIABILITY SHALL BE TREATED AS HAVING ARISEN TO THE ASSESSEE, MERELY THAT THE QUANTUM OF LIABILITY IS NOT CERTAIN THAT WILL NOT POSTPONE THE ACCRUAL OF THE LIABILITY. THE BASIS OF CALCULATION OF PROVISIONS MADE BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE. UNDER THESE FACTS, IN OUR OPINION, NO INTERFER ENCE E IS CALLED FOR IN THE ORDER OF THE CIT(A) AND CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THIS IS NOT A FIT CASE, WHICH WARRANT OUR INTERFERENCE. WE ACCORDINGLY DISMISS THE GROUND TAKEN BY THE REVENUE AND CONFIR M THE ORDER OF THE CIT(A). RESPECTFULLY FOLLOWING ORDER OF THE ITAT THE 3 ITA NO. 04/NAG/2013 APPELLANTS OWN CASE, THE GROUNDS ARE ALLOWED AND THE ADDITION IS DELETED. WE FIND THAT THE AFORESAID DECISION OF THE ITAT WAS AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT. IN AN INCOME TAX APPEAL NO.9 OF 2013 , THE HONBLE HIGH COURT HAD HELD AS UNDER : PERUSED THE JUDGMENT OF THE HONBLE APEX COURT REPORTED IN THE CASE OF BHARAT EARTH MOVERS V/S. COMMISSIONER OF INCOME TAX, REPORTED IN (2000 ) 245 ITR 428 (SC). THE FACTS SHOW THAT PROGRESSIVE MINE CLOSURE PLAN IS REQUIRED TO BE SUBMITTED AT THE TIME OF OBTAINING LEASE OR AT THE TIME OF SEEKING ITS RENEWAL AND THE FINAL CLOSURE PLAN IS REQUIRED TO BE SUBMITTED ONE YEAR IN ADVANCE OF PROP OSED CLOSURE. REFILLING OF MINE EXCAVATED CAN BE ONLY AT ONE STAGE, BUT THEN THE LIABILITY IS INCURRED ON THAT ACCOUNT EVERY YEAR AS EXCAVATION IS SPREAD OVER FOR ENTIRE PERIOD OF LEASE. THE PROVISION MADE, THEREFORE, HAS BEEN RIGHTLY APPRECIATED BY C.I.T. AND BY I.T.A.T. THE JUDGMENT OF HONBLE APEX COURT (SUPRA) LEAVES NO MANNER OF DOUBT ABOUT THE CORRECTNESS OF SAID APPROACH. NO SUBSTANTIAL QUESTION OF LAW ARISES. 5. SINCE THE ISSUE IS SQUARELY COVERED BY THE HONBLE HIGH COURT DECISION , WE AFFIRM THE ORDER OF LEARNED CIT(APPEALS). 4. IN THE RESULT, GROUND NO.1 OF THE REVENUE IS HEREBY DISMISSED. 5 . GROUND NO. 2 OF THE REVENUE IS AS UNDER : WHETHER IN THE FACTGS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS CORRECT IN AL LOWING ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY EMPLOYED FOR GENERATING ELECTRICITY ON THE STRENGTH OF CST V/S. M.P. ELECTRICITY BOARD AIR 1970 SC 735 (SC) AND STATE OF A.P. V/S. N.T.P.C. 127 ST 280 (SC) , IGNORING THE FACT THAT BOTH THE SUPREME COURT DECISIONS HAVE BEEN RENDERED IN THE CONTEXT OF LEVY OF ST AND CST AND NOT IN THE CONTEXT OF A LITIGATION UNDER THE I.T. ACT. 4 ITA NO. 04/NAG/2013 THIS GROUND AS WELL HAS BEEN DECIDED BY THE RESPECTED COORDINATE BENCH AS REFE RRED SUPRA IN THE FOLLOWING MANNER: 6. APROPOS THIS GROUND ALSO, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND PRODUCTION OF MA NGANESE COAL AND HAS INSTALLED WIND MILLS FOR PRODUCTION OF ELECTRICITY. REGULAR DEPRECIATION HAS BEEN GRANTED IN ASSESSMENT FRAMED. ONLY ADDITIONAL DEPRECIATION HAS NOT BEEN ALLOWED. 7. LEARNED COUNSEL SUBMITTED THAT IT IS NOW SETTLED LAW THAT PROD UCTION OF ELECTRICITY OR POWER IS A MANUFACTURING PROCESS AND A MACHINERY INSTALLED WHICH ARE INVOLVED IN MANUFACTURING OF POWER WILL BE ELIGIBLE FOR BENEFIT OF SECTION 32(1)(IIA) OF THE ACT. IN THIS REGARD, LEARNED COUNSEL REFERRED TO A CATINA OF CASE LAWS AS UNDER : 1. ITAT ORDER IN ITA NO.943/AHD/2014 IN THE CASE OF AKASH CERAMIC PVT. LTD. VIDE ORDER DATED 09 - 01 - 2015. 2. (2014) 109 DTR (GUJ) 62 CIT V/S. DIAMINES AND CHEMICALS LTD. 3. (2009) 319 ITR 336 CIT V/S. VTM LTD. 4. HONBLE BOMBAY HIGH COURT AT GOA IN TAX APPEAL NO. 21 OF 2014 IN THE CASE OF V.M. SALGAONKAR & BROTHERS PVT. VIDE ORDER DATED 28/04/2014. 5. ITAT ORDER IN ITA NO.63/PN/2013 IN THE CASE OF V.M. SALGAONKAR & BRO. PVT. LTD. VIDE ORDER DATED 08/08/2013. 6. ITAT ORDER IN ITA NO. 832/BANG/2012 IN THE CASE OF THE HUTTIO GOLD MINES CO. LTD. VIDE ORDER DATED 02/08/2013. 7. HONBLE KARNATAKA HIGH COURT AT BANGALORE IN ITA NO. 8 OF 2014 IN THE CASE OF THE HUTTI GOLD MINES CO. LTD. VIDE ORDER DATED 16/09/ 2014. 8. ITAT ORDER IN ITA NO. 1438/DEL/2009 IN THE CASE OF N.T.P.C. LTD. VIDE ORDER DATED 30/04/2014. 8. PER CONTRA, LEARNED DR COULD NOT CONTROVERT THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. 5 ITA NO. 04/NAG/2013 9. WE FIND THAT THE ISSUE IS SETTLED AND CO VERED IN FAVOUR OF THE ASSESSEE. WE MAY REFER HEREUNDER THE PORTION OF THE ORDER OF LEARNED CIT(APPEALS) IN VIEW OF THE FACTS AND IN VIEW OF THE VARIOUS JUDGMENT OF THE SUPREME COURT AND SETTLED ON THE ABOVE SUBJECT AND OTHER POSITION OF LAW I T CANNOT BE SAID THAT THE PRODUCTION OF ELECTRICITY OR POWER IS NOT A MANUFACTURING PROCESS AND THE MACHINERY IS INSTALLED WHICH ARE INVOLVED IN PRODUCTION OR MANUFACTURING OF POWER WILL NOT BE ELIGIBLE FOR BENEFIT OF SECTION 32(1)(IIA) OF THE A CT. IT WAS ALSO STATED THAT THE CLAIM HAS BEEN ALLOWED BY THE CIT(A) IN A.Y. 2008 - 09. FOR A.Y. 2008 - 09 IN APPEAL NO. CIT(A)/556/10 - 11 DATED 29.12.2012 THE CIT(A) HAS HELD THAT ALTHOUGH ELECTRIC ENERGY IS NOT TANGIBLE IT IS CAPABLE OF UTILIZATION LIKE ANY OTHER MOVEABLE PROPERTY AND CAN BE SOLD AND PURCHASED. IT THEREFORE EMERGES THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTURING. FURTHER I FIND THAT THE HONBLE MADRAS HIGH COURT IN ITS DECISION IN HI TECH ARAI LTD. 3 121 ITR 477 (MAD) HAS CONSIDERED AN IDENTICAL ISSUE AND HELD THAT ADDITIONAL DEPRECIATION IS ADMISSIBLE ON WIND MILLS WHICH GENERATE ELECTRICITY. AO IS THEREFORE DIRECTED TO ALLOW THIS AMOUNT. THIS GROUND IS ALLOWED. 6 . SINCE A VIEW HAS ALREAD Y BEEN TAKEN BY THE ITAT, NAGPUR BENCH IN ASSESSEES OWN CASE ON IDENTICAL FACTS, HENCE WE FIND NO REASON TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE SAME. RESULTANTLY WE FIND NO FORCE IN THE GROUNDS OF THE REVENUE. HENCE DISMISSED. 6 ITA NO. 04/NAG/2013 7 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21ST DAY OF AUGUST, 2015. SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: AUGUST, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE