The DCIT, Circle-1(1), Baroda V. M/s. Diamines & Chemicals Ltd., Baroda

ITA 409/AHD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2098 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 409/AHD/2013 ASSESSMENT YEAR :2007-08 THE DCIT, CIR. 1(1), BARODA V/S . M/S DIAMINES AND CHEMICALS LTD. PLOT NO. 13 P.C.C. AREA PETROCHEMICALS, DIST. BARODA - 391346 PAN NO. A AACD5356R (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI T. SANKAR, SR. D.R. /BY RESPONDENT SHRI SANJAY R. SHAH, A.R. /DATE OF HEARING 16.04.2013 /DATE OF PRONOUNCEMENT 10.05.2013 O R D E R PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT(A)-I, BARODA, DATED 12.11.2011 FOR THE ASSESSMENT YEAR 20 07-08. 2. THE FACTS AS CULLED OUT FROM THE ORDERS ARE AS U NDER: 3. THE ASSESSEE IS A COMPANY MAINLY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF VARIOUS SPECIALITY CHEMICAL S. IT HAS ITS MANUFACTURING PLANT IN THE PETROCHEMICALS AREA NEAR BARODA AND HA S ALSO INSTALLED VARIOUS WINDMILLS FOR GENERATION OF ELECTRICITY. THE ASSES SEE FILED ITS RETURN OF INCOME ON 16.11.2007 DECLARING TOTAL INCOME OF RS.11,21,74 3/- UNDER NORMAL PROVISIONS OF THE ACT. THEREAFTER, A REVISED RETUR N OF INCOME WAS FILED ON 24.03.2009 DECLARING A LOSS OF RS.33,13,525/-. THE RETURN WAS SELECTED FOR ITA NO. 409/AHD/2013 A.Y. 07-08 PAGE 2 SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.1 43(3) VIDE ORDER DATED 03.11.2009 AND THE LOSS RETURNED BY THE ASSESSEE WA S ACCEPTED. THEREAFTER, THE ASSESSMENT WAS REOPENED AND ASSESSMENT WAS FRAM ED U/S.143(3) R.W.S. 147 OF THE ACT, VIDE ORDER DATED 05.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.86,17,396/-. AGGRIEVED BY THE ORDE R OF THE A.O., THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A). CIT (A), VIDE HIS ORDER DATED 12.11.2011, GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT(A), THE REVENUE IS N OW IN APPEAL BEFORE US AND RAISED FOLLOWING EFFECTIVE GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT (APPEALS) ERRED IN DELETING ADDITION OF RS.1,17,98,030/- ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL DEPRECIATION ON WIND ELECTRIC GENERATOR WITHOUT APPRECIATING THAT THE WIND ELECTR IC GENERATOR DOES NOT RESULT INTO MANUFACTURE OR PRODUCTION OR ARTIC LE OR THING, BUT IT IS USED TO GENERATE ELECTRICITY AND THAT THE BASIC CRI TERIA TO GET ADDITIONAL DEPRECIATION UNDER CLAUSE (IIA) OF SECTI ON 32 OF THE ACT IS THAT THE PLANT AND MACHINERY SHOULD BE COVERED UNDE R CLAUSE (II) OF SECTION 32 OF THE ACT, WHEREAS WIND ELECTRIC GENERA TOR IS CLASSIFIED AS PER CLAUSE (I) OF SECTION 32 OF THE ACT. 4. THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED A DDITIONAL DEPRECIATION ON WIND ELECTRIC GENERATOR AMOUNTING TO RS.1,17,98, 030/-. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. THE ASSESSEE, INTER AL IA, SUBMITTED THAT THE ADDITIONAL DEPRECIATION IS AVAILABLE TO THE ASSESSE E WHO IS ENGAGED IN MANUFACTURE AND PRODUCTION OF ANY ARTICLE OR THING SUBJECT TO CONDITIONS MENTIONED IN THE PROVISO TO CLAUSE IIA OF SUB-SECTI ON 1 OF SECTION 32 OF THE ACT. IT WAS, ACCORDINGLY, SUBMITTED THAT THE ASSES SEE WAS ELIGIBLE FOR ITA NO. 409/AHD/2013 A.Y. 07-08 PAGE 3 ADDITIONAL DEPRECIATION ON WIND ELECTRIC GENERATOR INSTALLED FOR THE PURPOSE OF WIND MILL / POWER GENERATION UNDERTAKING. THE CONT ENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. AS HE WAS OF VIEW THAT WIND ELECTRIC GENERATOR DOES NOT RESULT INTO MANUFACTURE OR PRODU CTION OF ARTICLE OR THING. FURTHER, THE WIND ELECTRIC GENERATOR WAS USED TO GE NERATE ELECTRICITY AND HENCE THE CLAIM OF ADDITIONAL DEPRECIATION WAS NOT ACCEPTABLE. HE WAS FURTHER OF THE VIEW THAT THE ASSESSEE WAS COVERED BY THE CL AUSE (I) OF SECTION 32 OF THE ACT AND THEREFORE, THE ASSESSEE WAS NOT ENTITLE D TO CLAIM ADDITIONAL DEPRECIATION AS THE BASIC CRITERIA TO GET ADDITIONA L DEPRECIATION UNDER CLAUSE IIA OF SECTION 32 WAS THAT THE PLANT AND MACHINERY SHOULD BE GOVERNED UNDER CLAUSE II OF SECTION 32 OF THE ACT. HE, ACCORDINGL Y, WORKED OUT THE EXCESS DEPRECIATION CLAIMED BY WAY OF ADDITIONAL DEPRECIAT ION OF RS.1,17,98,030/- AND DISALLOWED THE SAME. 5. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A). THE CIT(A), AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE AND RELYING UPON THE DECISION IN THE CASE OF CIT VS. VTM LTD. 319 ITR 336 (MAD), CIT V. TEXMO PRECISION CASTINGS 321 ITR 481 (MAD) & CIT V. HI TECH ARAI LTD. 321 ITR 477 (MAD), HELD THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY, DIRECTED TO DELETE THE AD DITION. 6. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, THE LD. SR. D.R. RELIED UPON THE ORDE R OF THE A.O., ON THE OTHER HAND, LD. A.R. SUBMITTED THAT THE BENEFIT OF ADDITI ONAL DEPRECIATION IS AVAILABLE TO ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF ANY ITA NO. 409/AHD/2013 A.Y. 07-08 PAGE 4 ARTICLE OR THING. THE ASSESSEE IS ENGAGED IN THE B USINESS OF MANUFACTURING OF VARIOUS SPECIALITY CHEMICALS WHICH FINDS APPLICATIO N IN INDUSTRIES LIKE PHARMACEUTICALS, AGRO-CHEMICALS ETC. THE ASSESSEE ALSO ENTERED INTO GENERATION OF WIND POWER AND HAS INSTALLED WIND ELE CTRIC GENERATORS IN THE STATES OF GUJARAT AND MAHARASHTRA. THUS, THE ASSES SEE FULFILLS THE CRITERIA OF BEING AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING WHICH IS THE REQUIREMENT OF SECTION32(1)(IIA) TO AV AIL THE BENEFIT OF ADDITIONAL DEPRECIATION. IT WAS FURTHER SUBMITTED THAT THE BENEFIT OF ADDITIONAL DEPRECIATION IS AVAILABLE TO THE ASSESSE E WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF ANY ARTIC LE OR THING IRRESPECTIVE OF THE FACT THAT WHETHER PARTICULAR ASSET RESULTS INTO PRODUCTION OR MANUFACTURE OF ARTICLE OR THING OR NOT. LD. A.R. PLACED RELIANCE UPON THE DECISION IN CASE OF CIT VS. VTM LTD. 319 ITR 336 (MAD), CIT V. TEXMO PR ECISION CASTINGS 321 ITR 481 (MAD) & CIT V. HI TECH ARAI LTD. 321 ITR 47 7 (MAD). LD. A.R. FURTHER SUBMITTED THAT IF THE ASSESSEE IS ENGAGED IN MANUFA CTURE AND PRODUCTION OF ANY ARTICLE OR THING AND THE CONDITIONS MENTIONED I N PROVISO TO CLAUSE (IIA) IS FULFILLED THEN THE ASSESSEE WOULD BE ELIGIBLE TO CL AIM ADDITIONAL DEPRECIATION. CLAUSE (IIA) DOES NOT REQUIRE THE ASSET TO FALL UND ER CLAUSE (II) OF SECTION 32(1) BUT IT ONLY STATES THAT DEDUCTION IN RESPECT OF ADD ITIONAL DEPRECIATION AT THE SPECIFIED RATE SHALL BE ALLOWED UNDER CLAUSE (II), IF CONDITIONS SPECIFIED IN CLAUSE (IIA) R.W. PROVISO TO THE SAID CLAUSE ARE SA TISFIED. THUS, THE LD. A.R. SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS WHETHER THE ASSESSEE IS ENTITLED TO ITA NO. 409/AHD/2013 A.Y. 07-08 PAGE 5 CLAIM OF ADDITIONAL DEPRECIATION OF WIND ELECTRIC G ENERATOR. IT IS THE UNDISPUTED FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS O F MANUFACTURING OF SPECIALITY CHEMICALS AND ALSO GENERATION OF WIND PO WER. THE DATE OF INSTALLATION OF WIND POWER GENERATOR IS NOT IN DISP UTE. THE A.O. HAS DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION FOR THE REASON THAT THE WIND POWER GENERATOR DOES NOT RESULT INTO THE MANUFACTURE OR P RODUCTION OF ARTICLE OR THING. BEFORE US, THE ASSESSEE RELIED UPON THE DECISION OF CIT V. HI TECH ARAI LTD. (SUPRA) AND ALSO PLACED ON RECORD THE COPY OF THE DECISION . ON PERUSAL OF THE AFORESAID DECISION, WE FIND THAT THE QUESTION BEFOR E THE HONBLE HIGH COURT WAS WHETHER THE ASSESSEE WAS ENTITLED TO ADDITIONAL DEPRECIATION ON PURCHASE OF WIND MILLS EVEN THOUGH THE MAIN BUSINESS OF THE ASSESSEE WAS NOT PRODUCING OR GENERATING OF ELECTRICITY. THE HONBL E MADRAS HIGH COURT HAS DECIDED IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 5. IN THE CASE ON HAND, THE ASSESSEE IS STATED TO HAVE SET UP TWO WIND MILLS IN ADDITION TO THE ALREADY EXISTING FOUR WIND MILLS AND THEREBY INCREASED ITS POWER GENERATION CAPACITY BY ABOVE 50%. IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF OIL SEEDS, MOULDED RUBBER PARTS, REE D VALUE ASSEMBLIES APART FROM GENERATION OF POWER. AFTER T HE INSTALLATION OF THE ADDITIONAL WIND MILLS, BOTH PRIOR TO AS WELL AS AFTER THE INSTALLATION OF THE ADDITIONAL WIND MILLS, THE ASSESSEE WAS USIN G WIND ENERGY FOR GENERATING POWER FOR ITS CAPITATIVE CONSUMPTION APA RT FROM SELLING THE SURPLUS POWER GENERATED TO THE TAMIL NADU ELECT RICITY BOARD. AS FAR AS APPLICATION OF SECTION 32(1)(IIA) OF THE ACT , IS CONCERNED, WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE A DDITIONAL DEPRECIATION IS THAT THE SETTING UP OF A NEW MACHIN ERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31 ST MARCH 2002 BY AN ITA NO. 409/AHD/2013 A.Y. 07-08 PAGE 6 ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS O F MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE SAID PR OVISION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLA NT, WHICH WAS ACQUIRED AND INSTALLED UPTO 31.03.2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREA DY BEING MANUFACTURED BY THE ASSESSEE. THEREFORE, THE CONTE NTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO DO WITH TH E POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS ETC. IS TOTALLY NO T GERMANE TO THE SPECIFIC PROVISION CONTAINED IN SECTION 32(1)(IIA) OF THE ACT. IN THE CASE OF CIT VS. VTM LTD.(SUPRA) , ONE OF THE ISSUE BEFORE HONBLE MADRAS HIGH COURT WAS WHETHER THE ASSESSEE WHAT RIG HT IN CLAIMING ADDITIONAL DEPRECIATION U/S.32(IIA) HONBLE MADRAS HIGH COURT HAS DECIDED THE ISSUE IN ASSESSEES FAVOUR BY HOLDING AS UNDER: 5. IN THE CASE ON HAND, THE ASSESSEE IS STATED TO HAVE SET UP A WIND MILL AT A COST OF RS.5,85,60,000. IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF T EXTILE GOODS. AS FAR AS APPLICATION OF SECTION 32(1)(IIA) OF THE ACT, IS CONCERNED, WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE ADDITIONAL DEPRECIATION IS THAT THE SETTING UP OF A NEW MACHIN ERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31-3- 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS O F MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE SAID PR OVISION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLA NT, WHICH WAS ACQUIRED AND INSTALLED UP TO 31-3-2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREA DY BEING MANUFACTURED BY THE ASSESSEE. THEREFORE, THE CONTE NTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO DO WITH TH E POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS ETC. IS TOTALLY NO T GERMANE TO THE SPECIFIC PROVISION CONTAINED IN SECTION 32(1)(IIA) OF THE ACT. ITA NO. 409/AHD/2013 A.Y. 07-08 PAGE 7 WE FIND THAT THE ISSUE BEFORE US IN THE PRESENT APP EAL IS DIRECTLY COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISIONS O F HIGH COURTS. FURTHER, THE REVENUE HAS NOT BROUGHT ON RECORD BEFORE US ANY CON TRARY DECISION OF ANY OTHER HIGH COURT OR JURISDICTIONAL COURT IN ITS SUP PORT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 10.05.2013 SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;