DCIT, New Delhi V. M/s. Nalwa Steel & Power Ltd., New Delhi

ITA 4559/DEL/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7536 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 02-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UC DUBEY
• Assessee Lawyers: V K TULSIYAN
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 142(1); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADI N. MISHRA, ACCOUNTANT MEMBER ITA NO. 4559/DEL/2010 A.Y. : 2006-07 DCIT, CIRCLE 13(1), NEW DELHI ROOM NO. 406, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S NALWA STEEL & POWER LIMITED, 28, NAJAFGARH ROAD, NEW DELHI (AABCN3209L) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. UC DUBEY, SR. DR ASSESSEE BY : SH. V.K. TULSIYAN, CA DATE OF HEARING : 02-08-2016 DATE OF ORDER : 09-08-2016 ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 08/7/2010 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XVI, DELHI ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING ITA NO.4559/DEL/2010 2 THE A.O. TO ALLOW THE DEPRECIATION ON ELECTRICAL INSTALLATIONS & 15% I.E. THE RATE APPLICABLE TO 'PLANT & MACHINERY' AMOUNTING TO RS.59,40,787/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING ADDITIONAL DEPRECIATION AMOUNTING TO RS.1,02,12,533/- CONSIDERING ELECTRICAL INSTALLATIONS AS PART OF FURNITURE AND FIXTURE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT ELECTRICAL INSTALLATIONS FORMED AN INTEGRAL PART OF THE ASSESSEE'S PLANT, THEREFORE, DEPRECIATION WAS ALLOWABLE AT THE RATE APPLICABLE TO 'PLANT & MACHINERY' WHEREAS DEPRECIATION TO ELECTRICAL FITTINGS CAN ONLY BE ALLOWED UNDER 'FURNITURE & FITTINGS' AS PER II PART A R.W. PART B NOTE N.5 OF THE DEPRECIATION TABLE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CTI(A) ERRED IN RELYING UPO N THE CASE LAWS OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. OSWAL WOOLLEN MILLS LTD., ITA NO.4559/DEL/2010 3 BERGER PAINTS INDIA LTD. VS CIT 266 ITR 99, 8HARAT EARTH MOVERS VS CIT 245 ITR 428 AND CIT VS STARLIGHT SILK MILLS P. LTD. 280 ITR 257 WHEREIN IT WAS HELD THAT THE ELECTRICAL INSTALLATIONS FORMED INTEGRAL PART OF ASSESSEE'S PLANT, THEREFORE, DEPRECIATION WAS ALLOWABLE AT THE RATE APPLICABLE TO PLANT & MACHINERY. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT AS PER IT RULES THERE IS NO BLOCK OF ASSETS IN THE NAME OF 'ELECTRICAL FITTINGS' BUT THE BLOCK APPLICABLE TO ELECTRICAL ITEM IS 'FURNITURE & FITTINGS' WHICH ALSO INCLUDES ELECTRICAL ITEMS AND THE APPLICABLE RATE OF DEPRECIATION IS 10%. 6. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. ITA NO.4559/DEL/2010 4 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY I S ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF SPONGE IRON, BILLETS, WIRE ROD, OXYGEN GAS AND GENERATION OF POWER AND HA S FILED ITS E- RETURN DECLARING AN INCOME OF RS. 3,51,07,010/- ON 2 5-1-2006. THEREAFTER PHYSICAL RETURN WAS FILED ON 29-11-2006. THE SAME WAS PROCESSED U/S 143(1) OF THE I.T. ACT ON 20-11-2007 AT RETURNED INCOME. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTI NY THROUGH CASS UNDER THE CATEGORY 'COMPULSORY 44AB' AND NOTICE U/S 143(2) OF THE IT ACT DATED 12-10-2007 WAS ISSUED AND SERVED TO THE ASSESSEE WITHIN THE PRESCRIBED TIME. THEREAFTER, NOT ICE U/S 142(1) DATED 10-03-2008 WAS ISSUED AND SERVED UPON THE ASSE SSEE FIXING THE DATE OF HEARING ON 18-03-2008. IN COMPLIANCE TO TH E ABOVE NOTICES ASSESSEES AUTHORISED REPRESENTATIVE AND OFFICI AL OF THE ASSESEE COMPANY ATTENDED THE PROCEEDINGS AND PRODUCED THE DETAILS CALLED FOR WHICH HAVE BEEN VERIFIED ON TEST C HECK BASIS. THEREAFTER, THE AO OBSERVED THAT SINCE THE TAX ON B OOK PROFIT U/S. 115JB OF I.T. ACT OF RS. 31,14,79,013/- IS MORE THAN THE TAX ON INCOME AS PER NORMAL PROVISIONS OF THE I.T. ACT, ASS ESSED AT BOOK PROFIT OF RS. 31,14,97,013/- AND COMPLETED THE ASSES SMENT VIDE HIS ORDER DATED 24.12.2008 PASSED U/S. 143(3) OF THE ACT. 3. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER, AS SESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ITA NO.4559/DEL/2010 5 ORDER DATED 08.7.2010 HAS DELETED THE ADDITION IN DISP UTE BY ALLOWING THE APPEAL OF THE ASSESSEE. 4. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNED ORDER AND FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. DR RELIED UPON THE ORDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS AND REQUESTED THAT APPEAL OF THE REVENUE MAY BE ALLOW ED. 6. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT HE HAS PASS ED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE, HENCE, THE SAME MAY BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS, ESPECIALLY THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISC USSED THE ISSUE IN DISPUTE BY CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE AND ADJUDICATED THE ISSUE VIDE PARA NO. 3.0 TO 3.2 OF THE IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, WE ARE REPRODU CING PARA NO. 3.0 TO 3.2 OF THE IMPUGNED ORDER AS UNDER:- 3.0 GROUND NO.2 RELATES TO TREATING ELECTRICAL INSTALLATION AS FURNITURE AND FIXTURES ITEMS RATHER ITA NO.4559/DEL/2010 6 THAN AS PART OF PLANT AND MACHINERY BLOCK AND HENCE DISALLOWANCE OF RS.1,61,53,320/- OUT OF DEPRECIATION INCLUDING DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIMED FOR RS.1,02,12,533/- IS NOT IN ORDER. 3.1 IT IS SUBMITTED BY THE LD. AR THAT THE APPELLANT COMPANY IS ENGAGED IN THE MANUFACTURING OF IRON AND STEEL. IT EMPLOYS CONTINUOUS PROCESS PLANT FACILITIES FOR SUCH MANUFACTURING. THE APPELLANT COMPANY ALSO HAS ITS CAPTIVE POWER GENERATION UNIT TO GENERATE AND SUPPLY ELECTRICITY TO THE PLANT AS POWER CONSTITUTES A CRITICAL NEED IN STEEL-AND IRON MANUFACTURING OPERATIONS. DURING THE PREVIOUS YEAR THE APPELLANT COMPANY HAS SET UP A NEW WIRE ROD MILL AT A COST OF RS. 36,29,13,887/-. THE APPELLANT COMPANY ALSO INCURRED A FURTHER COST OF RS. 10,25,19,308/- ON ELECTRICAL INSTALLATION FOR WIRE ROD MILL CONSISTING OF EXPENDITURE ON CONTROL PANELS SUCH AS PCC/PDB/MCCNCB PANEL, ARMORED/INSULATED CABLE, DIGITAL DRIVES, ELECTRICAL SUB-STATION AND TOWER, MOTORS ETC. SUCH INSTALLATIONS ARE INSEPARABLE PART OF THE PLANT OR IN ITA NO.4559/DEL/2010 7 OTHER WORDS PART AND PARCEL OF THE PLANT AND MACHINERY WHICH ARE POWER-DRIVEN. THESE CANNOT BE CONSIDERED DE HORS THE PLANT AND MACHINERY EMPLOYED IN PRODUCTION. THE APPELLANT COMPANY HAS THUS CLAIMED DEPRECIATION ON SUCH ELECTRICAL INSTALLATIONS UNDER THE BLOCK OF ASSETS 'PLANT & MACHINERY' AND CLAIMED DEPRECIATION @ 15% AND AN ADDITIONAL DEPRECIATION OF 10% ON THE SAME. FOR INSTANCE, ARMOURED CABLES ARE USED FOR POWER SUPPLY TO THE PLANT AS WELL AS FOR DISTRIBUTION OF POWER BETWEEN SUB-STATIONS. CONTROL PANELS ARE USED TO CONTROL AND REGULATE THE FLOW OF ELECTRICITY INTO MANUFACTURING AND STATIC CONVERTER SYSTEM (PANELS) IS USED FOR AN UNINTERRUPTIBLE ELECTRICAL POWER SUPPLY TO THE MANUFACTURING PROCESS. BUT, WITHOUT APPRECIATING THE NATURE AND APPLICATION OF ELECTRICAL INSTALLATION ITEMS, THE ASSESSING OFFICER HAS HELD THAT ELECTRICAL INSTALLATIONS ARE IN THE NATURE OF ELECTRICAL FITTINGS AND SHOULD BE ADDED TO THE BLOCK 'FURNITURE AND FITTINGS' AND DISALLOWED TH E CLAIM OF HIGHER DEPRECIATION. ITA NO.4559/DEL/2010 8 IN SUPPORT OF ABOVE, THE LEARNED AR REFERRED TO THE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. STARLIGHT SILK MILLS P. LTD. [2006] 280 ITR 257 WHICH HELD THAT AC PLANTS, ELECTRIC INSTALLATION AND TRANSFORMERS FORM INTEGRAL PART OF PLANT AND MACHINERY. FURTHER RELIANCE IS PLACED ON THE CASE LAWS OF MIHIR TEXTILE LTD. VS. CIT (2001) 252 ITR 686, TRIBENI TISSUES LTD. (1994) 206 ITR 92 (CAL), CIT VS. OSWAL WOOLLEN MILLS LTD. (2007) 289 ITR 261 (P&H), CIT VS. INDIAN TURPENTINE AND ROSIN CO. LTD. (1070) 75 ITR 533 (ALL) AND OF AHMEDABAD BENCH DECISION IN RAW FLINTS (P) LTD. VS. INCOME-TAX OFFICER (1987) 21 ITD 207 WHICH HELD THAT ELECTRICAL INSTALLATIONS ARE AN INTEGRAL PART OF MANUFACTURING PROCESS AND CANNOT BE DIVORCED FROM 'PLANT AND MACHINERY'. 3.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT COMPANY. TO MY MIND, THE ASSESSING OFFICER SHOULD ALLOW DEPRECIATION ON ELECTRICAL INSTALLATIONS @ 15% BY CONSIDERING THE SAME TO BE PART OF 'PLANT AND ITA NO.4559/DEL/2010 9 MACHINERY'. IN THE CASE CIT VS. OSWAL WOOLLEN MILLS LTD. (SUPRA), THE PUNJAB AND HARYANA HIGH COURT APPLIED BERGER PAINTS INDIA LTD. VS. CIT 266 ITR 99 AND FOLLOWED BHARAT EARTHMOVERS VS. CIT 245 ITR 428, CIT VS. OSWAL WOOLLEN MILLS LTD. 254 ITR 666, CRT VS. OSWAL WOOLLEN MILLS LTD. 257 ITR 737 AND CIT VS. STARLIGHT SILK MILLS P. LTD. 280 ITR 257 AND UPHELD THE TRIBUNAL'S DECISION THAT THE ELECTRICAL INSTALLATIONS FORMED AN INTEGRAL PART OF THE ASSESSEE'S PLANT, THEREFORE, DEPRECIATION WAS ALLOWABLE AT THE RATE APPLICABLE TO PLANT AND MACHINERY. HERE ALSO ELECTRICAL INSTALLATION IS INTEGRAL TO THE PLANT AND MACHINERY USED FOR MANUFACTURING STEEL AND AS THE ASSESSING OFFICER HAS NOT CONTROVERTED THE CONTENTIONS OF THE APPELLANT COMPANY HENCE, I DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON ELECTRICAL INSTALLATIONS @ 15% I.E. THE RATE APPLICABLE TO 'PLAN T & MACHINERY'. AS A NATURAL COROLLARY, ADDITIONAL DEPRECIATION AMOUNTING TO RS.1,02,12,533/- IS ALSO REQUIRED TO BE ALLOWED AS THE ASSESSING OFFICER ITA NO.4559/DEL/2010 10 DISALLOWED THE SAME CONSIDERING ELECTRICAL INSTALLATIONS AS PART OF FURNITURE AND FIXTURE. 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD. CIT(A ), AS AFORESAID, IN OUR CONSIDERED VIEW, ON THE ANVIL OF THE DECISION IN THE CASE OF CIT VS. OSWAL WOOLLEN MILLS LTD. (SUPRA), THE PUNJAB AND HARYANA HIGH COURT APPLIED BERGER PAINTS INDIA LTD. VS . CIT 266 ITR 99 BY FOLLOWING THE CASE OF BHARAT EARTHMOVERS VS. CIT 245 ITR 428, CIT VS. OSWAL WOOLLEN MILLS LTD. 254 ITR 666, CIT VS. OSWAL WOOLLEN MILLS LTD. 257 ITR 737 AND CIT VS. STARLIGHT SILK MILLS P. LTD. 280 ITR 257 THE HONBLE HIGH COURT HAS UPHELD THE TRI BUNAL'S DECISION AND HENCE, WE ARE OF THE VIEW THAT THE ELECTR ICAL INSTALLATIONS FORMED AN INTEGRAL PART OF THE ASSESSEE 'S PLANT, THEREFORE, DEPRECIATION WAS ALLOWABLE AT THE RATE APPL ICABLE TO PLANT AND MACHINERY. WE ARE ALSO OF THE CONSIDERED VIEW TH AT ELECTRICAL INSTALLATION IS INTEGRAL TO THE PLANT AND MACHINERY US ED FOR MANUFACTURING STEEL AND AS THE ASSESSING OFFICER HAS NOT CONTROVERTED THE CONTENTIONS OF THE ASSESSEE COMPANY HENCE, LD. CIT(A) HAS RIGHTLY DIRECTED THE AO TO ALLOW DEPRECIA TION ON ELECTRICAL INSTALLATIONS @ 15% I.E. THE RATE APPLICAB LE TO 'PLANT & MACHINERY'. WE FURTHER NOTE THAT LD. CIT(A) WAS JUSTIFI ED IN HOLDING THAT AS A NATURAL COROLLARY, ADDITIONAL DEPRECIATION AM OUNTING TO RS.1,02,12,533/- IS ALSO REQUIRED TO BE ALLOWED AS THE ASSESSING ITA NO.4559/DEL/2010 11 OFFICER DISALLOWED THE SAME CONSIDERING ELECTRICAL INSTALLATIONS AS PART OF FURNITURE AND FIXTURE, WHICH DOES NOT NEED AN Y INTERFERENCE. 7.2 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS A ND RESPECTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID WHICH HAS BEE N RELIED UPON BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, WE ARE OF T HE CONSIDERED VIEW THAT THE LD. CIT(A) HAS PASSED A WELL REASONED O RDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND DISMISS THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/08/2016. SD/- SD/- [ANADI N. MISHRA] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 09/08/2016 SRBHATNAG AR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES