Madhu Industries Ltd, Ahmedabad V. The Income tax Officer, Ward-4(4), Ahmedabad

ITA 4172/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5564 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 21-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV BATHAM
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Depreciation; Additional depreciation
• Section: 32(1)(iia); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.4172/AHD/2007 [ASSTT.YEAR: 2004-05] MADHU INDUSTRIES LTD. -VS- INCOME TAX OFFICER, 39, PHASE-I, GIDC ESTATE WARD-4(4) VATVA, AHMEDABAD AHMEDABAD PAN NO.AAABM0027D (APPELLANT) (RESPONDENT) REVENUE BY : SHRI GAURAV BATHAM, DR ASSESSEE BY: SHRI SUNIL H T ALATI, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABAD IN APPEAL NO. CIT(A)-VIII /ITO.4(4)/ 339/06- 07 DATED 12-09-2007. THE ASSESSMENT WAS FRAMED BY ITO, WARD-4(4), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 22-12-2006 FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) IN CONFIRMING THE CLAIM OF ASSESSEE REGARDING DEPRECIA TION. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THE LEARNED C.I.T.(APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN CONFIRMING THE ORDER OF THE INCOME TAX OFFICER WITH REGARD TO THE CLAIM OF DEPRECIATION AT THE RATE OF 25% AND THEREBY CONFIRMING THE ADDITION OF RS.87,739/-. THE LEARNED C.I.T.(A) OUGHT TO HAVE ACCEPTED THE PLEA O F THE APPELLANT THAT VARIOUS ITEMS OF ADDITION RELATED TO THE PLANT AND MACHINER Y AND HENCE DEPRECIATION AT THE RATE OF 25% WAS CORRECTLY CLAIMED. IT BE SO HEL D NOW. ITA NO.4172/AHD/2007 A.Y. 2004-05 MADHU INDS. LTD. V. ITO WD-4(4), ABD PAGE 2 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIALS ON RECORD. WE FIND THAT THE ASSESSING OFFICER RESTRICTED THE CLAIM OF DEPRECIATION ON ELECTRICAL INSTALLATION AT 15% AS AGAINST CLAIMED BY THE ASSESSEE AT 25% BY STATING THE REASONS THAT THE ASSESSEE HAS PURCHASED VARIOUS STITCHING MACHINES F OR WHICH IT HAD ALSO PURCHASED CABLE AND OTHER PARTS FOR INSTALLATION. ACCORDING T O THE AO, THE ALLOWABLE RATE OF DEPRECIATION ON ELECTRICAL INSTALLATION IS 15% AND ACCORDINGLY HE DISALLOWED 10% OF DEPRECIATION. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY GI VING FOLLOWING FINDING IN PARA-2.2 OF HIS APPELLATE ORDER:- 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE. THE APPELLANT WAS ASKED TO GIVE DETAILS OF ELECTRICAL I NSTALLATION AND COPIES OF INVOICES. ON PERUSAL OF DETAILS FILED. IT IS SEEN T HAT THE ELECTRICAL INSTALLATION CONSISTS OF ELECTRICAL WIRES, SWITCHES, PLUGS, CABL ES, MCB BOX AND ELECTRICAL ITEMS WHICH ARE DEFINITELY OF THE CATEGORY OF ELECT RICAL INSTALLATION. THE DEPRECIATION SCHEDULE CLASSIFIES ELECTRICAL ITEMS A LONG WITH FURNITURE AND FITTINGS AS ELIGIBLE TO DEPRECIATION AT THE RATE OF 15% AND IT HAS ALSO BEEN MENTIONED THAT ELECTRICAL FITTINGS INCLUDE ELECTRIC AL WIRING, SWITCHES, SOCKETS, OTHER FITTINGS AND FANS ETC. THEREFORE, THE ASSESSI NG OFFICER HAS RIGHTLY ALLOWED DEPRECIATION @ 15% AND DISALLOWED THE EXCESS DEPREC IATION THIS GROUND IS ACCORDINGLY DISMISSED. WE FIND FROM THE ARGUMENTS OF BOTH THE SIDES AS WEL L AS THE ORDERS OF THE LOWER AUTHORITIES THAT THE NATURE OF ASSETS I.E. ELECTRIC AL INSTALLATION THAT CONSISTS OF ELECTRICAL WIRES, SWITCHES, PLUGS, CABLES, MCB BOX AND ELECTRICAL ITEMS, WHICH CANNOT FUNCTION INDEPENDENTLY, RATHER, THIS IS A PART OF P LANT & MACHINERY AND IT CANNOT BE CLASSIFIED UNDER FURNITURE AND FITTINGS. ACCORDING LY, WE ARE OF THE VIEW THAT ASSESSEE IS ELIGIBLE FOR DEPRECIATION UNDER THE BLOCK OF PLA NT & MACHINERY @ 25%. WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS ISSUE OF THE ASS ESSEES APPEAL IS ALLOWED. 4. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2 :- THE LEARNED C.I.T. (APPEALS) ALSO ERRED IN CONFIRM ING THE DISALLOWANCE OF RS.1,97,226/- ION RESPECT OF INTEREST EXPENSES. ON THE FACTS OF THE CASE ADVANCES GIVEN TO THE SUPPLIERS OF PURCHASE WERE FO R THE PURPOSE OF BUSINESS AND HENCE THE DISALLOWANCE IS NOT CALLED FOR. ALSO SINCE NO INTEREST-BEARING FUNDS WERE UTILIZED FOR NON-BUSINESS PURPOSE, THE D ISALLOWANCE OF INTEREST EXPENSES AMOUNTING TO RS.1,97,226/- IS NOT JUSTIFIE D. THE SAME BE SO HELD NOW AND THE INTEREST EXPENSES BE ALLOWED IN FULL. ITA NO.4172/AHD/2007 A.Y. 2004-05 MADHU INDS. LTD. V. ITO WD-4(4), ABD PAGE 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING O FFICER HAS DISALLOWED INTEREST EXPENSES OF RS.1,97,226/- ON THE INTEREST FREE LOAN GIVEN TO OTHERS AGGREGATING TO RS.16,43,558/-. THE CIT(A) ALSO CONFIRMED THE ACTIO N OF THE ASSESSING OFFICER. BEFORE US THE ASSESSEE PRODUCED THE COPY OF BALANCE -SHEET AND FROM THIS WE FIND THAT THE SHARE CAPITAL OF THE ASSESSEE IS AMOUNTING TO RS.2.28 CRORES AND RESERVE & SURPLUS AVAILABLE WITH THE ASSESSEE AT RS.6,75,15,2 29/- AND THE LOAN AND ADVANCES ARE AT RS.3,29,94,449/. EVEN OTHERWISE, THE ASSESS EE HAS FILED BEFORE US THE COPIES OF LEDGER ACCOUNT OF SUPPLIERS AT PAGES NO. 31 TO 44 AND 66 TO 69 OF THE ASSESSEES PAPER BOOK, FROM WHERE WE HAVE GATHERED THAT THESE LOANS ARE TO THE SUPPLIERS AS ADVANCE FOR PURCHASE. IN VIEW OF THE ABOVE FACTS, ONCE THERE IS SURPLUS SHARE CAPITAL AND RESERVE & SURPLUS AVAILABLE WITH THE ASSESSEE, THE INTEREST ON ADVANCES CANNOT BE DISALLOWED. ACCORDINGLY, WE REVERSE THE ORDER O F LOWER AUTHORITIES ON THIS ISSUE. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 6. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF ADDITIONAL DEPRECIAT ION ON PLANT AND MACHINERY. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.3 :- 3. THE LEARNED C.I.T.(APPEALS) ALSO FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.5,31, 797/- U/S.32(1)(IIA) ON THE PLANT & MACHINERY BY HOLDING THAT COMBINED CAPACITY WAS TO BE SEEN IRRESPECTIVE OF THE ITEMS FOR WHICH THE MACHINERY W AS PURCHASED. ON THE FACTS AND IN VIEW OF THE CORRECT LEGAL POSITION, ADDITION AL DEPRECIATION OUGHT TO HAVE BEEN ALLOWED AND THE SAME BE DIRECTED TO BE ALLOWED . 7. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATI ON OF RS.5,31,797/- U/S.32(1)(IIA) ON THE PLANT & MACHINERY OF RS.64,27,059/-. THE ASS ESSEE CLAIMED ADDITIONAL DEPRECIATION ON THE GROUND THAT NEW MACHINERY AND P LANT HAVE BEEN ACQUIRED AND INSTALLED DURING THE CURSE OF SUBSTANTIAL EXPANSION OF BUSINESS BY WAY OF INCREASE IN INSTALLED CAPACITY OF THE INDUSTRIAL UNDERTAKING W HICH EXISTED BEFORE 01-04-2002 BUT THE AO OBSERVED THAT THE WORKING FURNISHED BY THE A SSESSEE SHOWED THAT THE INSTALLED CAPACITY ON 31-03-2002 OF 15,60,000 BED S HEETS HAD INCREASED ON THE BASIS OF SEWING MACHINES INSTALLED TO 20,00,000 BUT THE CAPACITY OF TOWEL DIVISION HAS NOT BEEN ALTERED. FURTHER, THE ASSESSEE HAD NOT FURNISHED THE REPORT IN FORM NO.3AA FROM CHARTERED ACCOUNTANT ALONG WITH THE RET URN OF INCOME BUT ASSESSEE ITA NO.4172/AHD/2007 A.Y. 2004-05 MADHU INDS. LTD. V. ITO WD-4(4), ABD PAGE 4 FURNISHED DURING THE ASSESSMENT PROCEEDINGS. IN VIE W OF THE ABOVE FACTS, AO DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION. A GGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 8. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY GIVING IN PARA-6.1 OF HIS APPELLATE ORDER:- 6.1 DISPUTING THE SAID ISSUE, THE LD. AUTHORIZED R EPRESENTATIVE SUBMITTED BEFORE ME THAT THE INSTALLED CAPACITY OF MADE-UPS HAS INCREASED FROM 15,60,000 TO 20,00,000 SETS I.E. MORE THAN 25%, THE DIFFERENTIATION BETWEEN BED SHEETS AND TOWEL DIVISION MADE BY THE ASSESSING OFFICER WAS NOT CORRECT AND THAT THE CAPACITY AS A WHOLE WAS TO BE SEEN AS PER THE LAW. FURTHER REPORT IN FORM NO.3AA WAS NOT ATTACHED WITH THE RETURN OF INCOME, BUT THE SAME WAS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS AND THE MISTAKE BEING PROCEDURAL ONE THE SAME SHOULD BE REGULARIZED . AS REGARDS FILING OF REPORT IN FORM 3AA IT IS SONLY A TECHNICAL DEFAULT AND ONCE THE APPELLANT HAS COMPLIED DURING ASSESSMENT PROCEEDINGS, THE SAME CA N BE ACCEPTED. HOWEVER AS REGARDS CLAIM OF ADDITIONAL DEPRECIATION U/S.32(1)(IIA), I FIND THAT THE APPELLANT WOULD BE ELIGIBLE FOR ADDITIONAL DEPR ECIATION PROVIDED IT HAS ACHIEVED SUBSTANTIAL EXPANSION BY WAY OF INCREASE I N INSTALLED CAPACITY BY AT LEAST 25%. IN THE CASE OF THE APPELLANT AS SEEN FRO M THE DETAILS OF INSTALLED CAPACITY GIVEN IN SCHEDULE 24 TO ANNUAL ACCOUNTS, T HE COMBINED CAPACITY OF BED SHEETS OF 15,60,000 AND TOWELS OF 5,45,000 WAS 21,05,000 IN THE F.Y. 2002-03 AND TOWELS OF 5,45,000. THUS EXPANSION IS F OR 21,05,000 TO 25,345,000 BY 4,40,000 WHICH IS 20.90% OF 21,45,000 AND LESS THAN 25% OF 21,45,000 WHICH IS 5,26,250, HENCE THE REQUIRED EXP ANSION HAS NOT BEEN ACHIEVED, SO THE APPELLANT IS NOT ELIGIBLE FOR ADDI TION AL DEPRECIATION. ACCORDINGLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE CASE RE CORDS THAT THE LOWER AUTHORITIES HAVE DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATIO N ON THE PREMISE THAT, NO DOUBT THE INSTALLED CAPACITY OF MADE-UPS I.E. THE BED S HEETS ETC. HAVE INCREASED ON THE BASIS OF SEWING MACHINES INSTALLED AT 20,00,000 AS AGAINST THE CAPACITY AS ON 31-03- 2002 AT 15.60 LAKHS. ACCORDING TO THE LOWER AUTHORI TIES, AS PER SCHEDULE 24 OF THE ANNUAL ACCOUNTS OF THE ASSESSEE THE COMBINED CAPACI TY OF BED SHEETS OF 15,60,000 AND TOWELS OF 5,45,000 WAS 21,05,000 IN THE F.Y. 20 02-03 AND TOWELS OF 5,45,000. THUS EXPANSION IS FOR 21,05,000 TO 25,345,000 BY 4, 40,000 WHICH IS 20.90% OF 21,45,000. ACCORDING TO THE LOWER AUTHORITIES THE C APACITY IS INCREASED AT LESS THAN 25% OF 21,45,000 WHICH IS AT 5,26,250, HENCE THE RE QUIRED EXPANSION HAS NOT BEEN ACHIEVED. WE FIND THAT THE LOWER AUTHORITIES HAVE C ALCULATED OF 25% OF ENHANCED CAPACITY BY COMPUTING THE TOWEL DIVISION OF THE ASS ESSEES UNIT AND THAT OF THE ITA NO.4172/AHD/2007 A.Y. 2004-05 MADHU INDS. LTD. V. ITO WD-4(4), ABD PAGE 5 MADE-UPS. NOW, WE HAVE TO SEE THE PROVISIONS OF S ECTION OF 32(1)(IIA) OF THE ACT, WHICH READS AS UNDER:- DEPRECIATION SECTION 32 (1) (IIA) AS INSERTED BY THE FINANCE (NO .2) ACT, 2002, W.E.F. 1-4- 2003 IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTH ER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 321 ST DAY OF MARCH, 2002, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO FIFTEEN PE R CENT, OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTI ON UNDER CLAUSE (II): PROVIDED THAT SUCH FURTHER DEDUCTION OF FIFTEEN PER CENT SHALL BE ALLOWED TO (A) A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIOU S YEAR IN WHICH SUCH UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE A NY ARTICLE OR THING ON OR AFTER THE 1 ST DAY OF APRIL, 2002; OR (B) ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THE 1 ST DAY APRIL, 2002, DURING ANY PREVIOUS YEAR IN WHICH IT ACHIEVES THE S UBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALLED CAPACITY BY NOT LESS THAN TWENTY-FIVE PER CENT: PROVIDED FURTHER THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTAL LATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSONS ; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE ; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLE S ; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OR PART OF TH E ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHER WISE) IN COMPUTING THE INCOME \CHARGEABLE UND ER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OF AN Y ONE PREVIOUS YEAR ; PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UN DER CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B), OF THE FIRST PROVISO UNLES S THE ASSESSEE FURNISHES THE DETAILS OF MACHINERY OR PLANT AND INCREASE IN THE I NSTALLED CAPACITY OF PRODUCTION IN SUCH FORM, AS MAYBE PRESCRIBED, ALONG WITH THE RETURN OF INCOME, AND THE REPORT OF AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF THIS C LAUSE. EXPLANATION, - FOR THE PURPOSES OF THIS CLAUSE,- (1) NEW INDUSTRIAL UNDERTAKING MEANS AN UNDERTAKI NG WHICH IS NOT FORMED,- (A) BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE ; OR (B) BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE ; ITA NO.4172/AHD/2007 A.Y. 2004-05 MADHU INDS. LTD. V. ITO WD-4(4), ABD PAGE 6 (2) INSTALLED CAPACITY MEANS THE CAPACITY OF PROD UCTION AS EXISTING ON THE LAST DAY OF ANY PREVIOUS YEAR COMMENCING ON OR AFTER THE 31 ST DAY OF MARCH, 2002. WE FIND FROM THE ABOVE PROVISION THAT ANY INDUSTRIA L UNDERTAKING EXISTING BEFORE 1-4- 2002, AND DURING THE PREVIOUS YEAR IN WHICH IT ACHI EVES THE SUBSTANTIAL EXPENSES BY WAY OF INCREASE IN INSTALLED CAPACITY BY NOT LESS T HAN 25% AN ADDITIONAL DEPRECIATION WILL BE ALLOWED AT 15%. FOR THIS, THE ASSESSEE HAS TO FURNISH THE DETAILS OF MACHINERY OR PLANT AND INCREASE IN THE INSTALLED CAPACITY OF PRODUCTION. WE FIND FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAS FILED AUDIT REPOR T IN FORM NO.3AA UNDER RULE 5A AS PRESCRIBED IN RESPECT OF MADE-UPS DIVISION OF THE ASSESSEE-COMPANY, WHEREBY THE ASSESSEE HAS INCREASED THE CAPACITY OF BED SHEETS F ROM 15.60 LAKH TO 20 LAKH IN THE PRESENT YEAR. THE CAPACITY IS BASED ON NUMBER OF S EWING MACHINES INSTALLED IN THE YEAR UNDER CONSIDERATION AND ACCORDING TO THE AUDIT OR THERE HAS BEEN SUBSTANTIAL ADDITION IN THE NUMBER OF SEWING MACHINES THAT RESU LTED INTO INCREASE IN THE INSTALLED CAPACITY SUBSTANTIALLY. WE FIND THAT THE ASSESSEE HAS FIELD COMPLETE BILLS & VOUCHERS FOR PURCHASE OF SEWING MACHINES FROM VARIOUS SUPPLI ERS BEFORE THE LOWER AUTHORITIES AND EVEN BEFORE US. NOW THE QUESTION ARISES, WHETH ER INCREASE IN SUBSTANTIAL CAPACITY OF ONE UNIT OF THE INDUSTRIAL UNDERTAKING CONSTITUTE INCREASE IN SUBSTANTIAL CAPACITY IN TERMS OF SECTION 32(1)(IIA) OF THE ACT OR NOT. THIS ISSUE HAS BEEN ANSWERED BY THE HONBLE KERALA HIGH COURT IN THE CA SE OF CIT V. HINDUSTAN NEWSPRINT LTD. (2009) 227 CTR 571 (KER), HEREIN HONBLE HIGH COUR T HAS CONSIDERED THE FACTS AS, THERE IS NOTHING TO INDICATE THAT THE ASSESSEE CANNOT SELL PULP AS A PRODUCT AND THE FACT THAT PULP IS AN INTERMEDIARY P RODUCT AND IS GENERALLY CONSUMED CAPTIVE IN THE MANUFACTURE OF NEWSPRINT DOES NOT ME AN THAT PULP IS NOT A PRODUCT THAT CANNOT BE MARKETED BY THE ASSESSEE AS AND WHEN THEY DESIRE. HONBLE HIGH COURT FURTHER CONSIDERED THAT THERE IS NO DISPUTE THAT PU LP IS A MARKETABLE COMMODITY AND IF THERE IS REDUCTION IN THE MANUFACTURE OF FINAL PROD UCT ON ACCOUNT OF ANY REASON, NECESSARILY ASSESSEE WILL HAVE TO MARKET THE EXCESS PULP PRODUCED. THUS, PULP BEING A MARKETABLE COMMODITY PRODUCED BY THE ASSESS EE, THE INCREASE IN THE INSTALLED CAPACITY OF THE PULP PLANT ON ACCOUNT OF THE INSTALLATION OF THE DE-INKING MACHINERY WILL ENTITLE THE ASSESSEE FOR THE BENEFIT OF ADDITIONAL DEPRECIATION HONBLE HIGH COURT HOLDS. HONBLE HIGH COURT FURTHER CONSID ERED THE FINDING OF THE TRIBUNAL THAT THERE HAS BEEN INCREASE IN THE INSTALLED CAPAC ITY OF THE PRODUCTION OF PULP IN TERMS OF THE REQUIREMENT OF THE PROVISION IN THE ST ATUTE IS NOT DISPUTED IN THE APPEAL ITA NO.4172/AHD/2007 A.Y. 2004-05 MADHU INDS. LTD. V. ITO WD-4(4), ABD PAGE 7 FILED BY THE REVENUE AND THEIR CONTENTION THAT THE INSTALLED CAPACITY SHOULD HAVE REFERENCE TO ONLY FINAL PRODUCT, THAT IS NEWSPRINT, CANNOT BE UPHELD. ACCORDING TO HONBLE HIGH COURT THE INTERMEDIARY PRODUCT VIZ., P ULP PRODUCE BY THE COMPANY BEING A MARKETABLE COMMODITY THE INCREASE IN THE IN STALLED CAPACITY FOR CLAIMING BENEFIT OF ADDITIONAL DEPRECIATION UNDER SECTION 32 (1)(IIA) CAN BE IN THE PRODUCTION OF INTERMEDIARY VIZ., PULP. THE FACTS IN THE PRESENT C ASE BEFORE US ARE ON BETTER FOOTING THAT THE ASSESSEE-COMPANYS INSTALLED CAPACITY IN MADE-UPS HAS INCREASED SUBSTANTIALLY I.E. MORE THAN 25%. WE FIND FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAS FILED AUDIT REPORT IN FORM NO.3AA UNDE R RULE 5A AS PRESCRIBED IN RESPECT OF MADE-UPS DIVISION OF THE ASSESSEE-COMP ANY, WHEREBY THE ASSESSEE HAS INCREASED THE CAPACITY OF BED SHEETS FROM 15.60 LAK H TO 20 LAKH IN THE PRESENT YEAR. THE CAPACITY IS BASED ON NUMBER OF SEWING MACHINES INSTALLED IN THE YEAR UNDER CONSIDERATION AND ACCORDING TO THE AUDITOR THERE HA S BEEN SUBSTANTIAL ADDITION IN THE NUMBER OF SEWING MACHINES THAT RESULTED INTO INCREA SE IN THE INSTALLED CAPACITY SUBSTANTIALLY. RESPECTFULLY FOLLOWING HONBLE KERAL A HIGH COURT IN THE CASE OF HINDUSTAN NEWSPRINT LTD. (SUPRA), WE ALLOW THE CLAIM OF THE ASSESSEE. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS DAY OF 23 RD JULY,2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 23/07/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VIII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD