NRB BEARINGS LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 4775/MUM/2010

• Counselvise Citation: 477519914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY GHADGAY
• Assessee Lawyers: A V SONDE
• Keywords: Depreciation; Additional depreciation
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4775/MUM/2010 (ASSESSMENT YEAR: 2005-06) M/S. NRB BEARINGS LTD. DCIT, CIRCLE 2(2) 15 DHANNUR, SIR P.M. ROAD AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400001 VS. MUMBAI 40020 PAN - AAACN 3479 P APPELLANT RESPONDENT APPELLANT BY: SHRI A.V. SONDE RESPONDENT BY: SHRI SANJAY GHADGAY DATE OF HEARING: 20/07/2011 DATE OF PRONOUNCEMENT: 20/09/2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- V, MUMBAI DATED 04.03.2010. 2. ASSESSEE IS CONTESTING THE ISSUE OF WITHDRAWING THE ADDITIONAL DEPRECIATION OF ` 56,87,343/- ON THE PLANT AND MACHINERY ORIGINALLY A LLOWED IN THE ASSESSMENT ORDER DATED 30 TH MARCH 2007 BUT WITHDRAWN CONSEQUENT TO THE REVISION ORDER UNDER SECTION 263 BY THE CIT. 3. BRIEFLY STATED, THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING NEEDLE ROLLERS, NEEDLE BUSHES, NEEDLE ROLLER CAGES, NEEDLE BEARING CYLINDRICAL ROLLER, SPHERICAL ROLLER, NEEDLE ROLLER BALL AND TAPER ROLL ER BEARINGS. IT HAS VARIOUS UNITS SITUATED AT DIFFERENT LOCATIONS ACROSS INDIA AS FOLLOWS: I. POKHRAN ROAD, THANE II. MIDC INDUSTRIAL AREA, CHIKALTHANA, AURANGABAD III. ADDITIONAL MIDC INDUSTRIAL AREA, JALNA IV. MIDC WALUJ, AURANGABAD V. UPPAL INDDUSTRIAL ESTATE, HYDERABAD ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 2 ASSESSEE CLAIMED ADDITIONAL DEPRECIATION UNDER SECT ION 32(1)(IIA) IN RESPECT OF NEW PLANT AND MACHINERY ACQUIRED AND INSTALLED B Y THE ASSESSEE IN AN UNIT SITUATED AT MIDC WALUJ, AURANGABAD. THE INSTAL LED CAPACITY OF THE SAID UNIT HAD INCREASED FROM 23,000 NUMBERS AS ON 31 ST MARCH 2004 TO 32,500 NUMBERS AS ON 31 ST MARCH 2005. ASSESSEE ACCORDINGLY CLAIMED DEPRECIAT ION UNDER THE PROVISIONS OF SECTION 32(1)(IIA), WHICH W AS ALLOWED BY THE A.O. VIDE ORDER UNDER SECTION 143(3). SUBSEQUENTLY ON EXAMINA TION OF RECORD THE CIT CONSIDERED THAT THE A.O. HAS NOT EXAMINED THE ISSUE OF ADDITIONAL DEPRECIATION CORRECTLY AND INVOKED PROVISIONS OF SE CTION 263 TO SET ASIDE THE ASSESSMENT ORDER DATED 30.03.2007 WITH A DIRECTION TO EXAMINE ASSESSEES ELIGIBILITY FOR ADDITIONAL DEPRECIATION UNDER SECTI ON 32(1)(IIA) AND TO DISALLOW IF IT WAS FOUND THAT THE CONDITIONS ARE NOT SATISFI ED. THIS ORDER OF THE CIT WAS NOT CONTESTED AS IT WAS ONLY A DIRECTION GIVEN TO THE A.O. TO EXAMINE THE ELIGIBILITY. HOWEVER, THE A.O. IN THE CONSEQUENTIAL PROCEEDINGS EXAMINED THE ELIGIBILITY. IT WAS ASSESSEES CONTENTION THAT PROV ISIONS PERMIT ADDITIONAL DEPRECIATION OF THE INDUSTRIAL UNDERTAKING WHICH IN CREASED THE INSTALLED CAPACITY BY MORE THAN 10% AND THE CONDITIONS ARE SA TISFIED. THE A.O., HOWEVER, CONSIDERED THAT THE REFERENCE TO THE INDUS TRIAL UNDERTAKING WAS TO THE BUSINESS AS WHOLE BUT NOT UNIT-WISE OF THE INDU STRIAL UNDERTAKING AND, THEREFORE, HE COMPARED THE INSTALLED CAPACITY OF TH E WHOLE BUSINESS OF THE ASSESSEE AND CAME TO THE CONCLUSION THAT CAPACITY W AS INCREASED ONLY BY 4.5%. ACCORDINGLY, HE DID NOT ALLOW THE ADDITIONAL DEPRECIATION. 4. BEFORE THE CIT(A) IT WAS CONTENDED THAT THE REFEREN CE TO INDUSTRIAL UNDERTAKING IS TO BE CONSIDERED AS UNIT-WISE AND NO T BUSINESS AS A WHOLE AND, THEREFORE, THE A.O. ERRED IN COMPARING THE INS TALLED CAPACITY OF THE WHOLE OF THE BUSINESS WHEN ASSESSEE CLAIMED ADDITIO NAL DEPRECIATION ONLY ON ONE UNIT WHICH SATISFIES THE CONDITIONS. ASSESSEE P LACED RELIANCE ON THE DECISION OF IN THE CASE OF ASSOCIATED CEMENT COMPAN IES LTD. 118 ITR 406 (BOM) AND VTM LTD. 229 CTR 70 (MAD). IT WAS SUBMITT ED THAT THE INSTALLED CAPACITY OF THE INDUSTRIAL UNDERTAKING SITUATED AT WALUJ, AURANGABAD WAS 23,000 NUMBERS WHICH WAS INCREASED TO 32500 NUMBERS . THEREFORE THERE WAS INCREASE OF MORE THAN 10% OF CAPACITY. IT WAS F URTHER SUBMITTED THAT THE CLAIM OF ADDITIONAL DEPRECIATION WAS IN ACCORDA NCE WITH PROVISIONS OF ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 3 SECTION 32(1)(IIA) BASED ON THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT IN FORM NO.3AA AS PRESCRIBED UNDER RULE 3A. 5. THE CIT(A), HOWEVER, DID NOT AGREE WITH THE CONTENT IONS. HE SUPPORTED THE ORDER OF THE A.O. WHO OBSERVED THAT THE INSTALL ED CAPACITY HAS TO BE CONSIDERED OF THE BUSINESS AS A WHOLE WHILE ASSESSE E CLAIMED INSTALLED CAPACITY ON A UNIT SITUATED AT AURANGABAD. HE WAS O F THE OPINION THAT PROVISIONS OF SECTION 32(1)(IIA) DOES NOT REFER TO THE INSTALLED CAPACITY OF ANY PARTICULAR UNIT OF THE INDUSTRIAL UNDERTAKING BUT T O THE INDUSTRIAL UNDERTAKING IN RESPECT OF AN ASSESSEE ENGAGED IN TH E BUSINESS OF MANUFACTURER OR PRODUCTION. HE ACCORDINGLY CONFIRME D THE ORDER. 6. LEARNED COUNSEL SUBMITTED THAT ASSESSEE HAD UNITS A T FOUR DIFFERENT PLACES AND THE MIDC UNIT AT WALUJ, AURANGABAD HAS I NCREASED ITS CAPACITY BY INSTALLING NEW MACHINERY AND THE ADDITIONAL DEPR ECIATION CLAIMED WAS ONLY WITH REFERENCE TO THAT UNIT ALONE. HE THEN REF ERRED TO THE PROVISIONS OF SECTION 32(1)(IIA), THE CERTIFICATE ISSUED BY THE C HARTERED ACCOUNTANT AND REFERRED TO THE INDUSTRIAL UNDERTAKING AND NEW I NDUSTRIAL UNDERTAKING AS PER THE PROVISIONS. HE ALSO REFERRED TO THE PROFORM A PRESCRIBED TO SUBMIT THAT THERE IS A DISTINCTION BETWEEN ASSESSEE AS A W HOLE AND A NEW INDUSTRIAL UNDERTAKING OR EXISTING INDUSTRIAL UNDERTAKING REFE RRED TO IN THE PROVISIONS. RELYING ON THE PROVISIONS OF THE ACT AND PRINCIPLES OF LAW ON THE ISSUE, IT WAS HIS SUBMISSION THAT ADDITIONAL DEPRECIATION WAS ALL OWABLE QUA INDUSTRIAL UNDERTAKING PER SE, I.E. UNIT, IF IT SATISFIES THE CONDITIONS AND NOT QUA BUSINESS OF THE ASSESSEE. 7. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE CIT UNDER SECTION 263 AND A.O. AND THE CIT(A) IN THE CONSEQUE NTIAL PROCEEDINGS. HIS CONTENTION THAT ASSESSEE HAVING BEEN IN THE BUSINES S OF MANUFACTURING, THE ENHANCED CAPACITY CAN ONLY BE CONSIDERED WITH REFER ENCE TO OVERALL INSTALLED CAPACITY OF THE COMPANY AND NOT WITH ONE SINGLE UNI T. 8. WE HAVE CONSIDERED THE ISSUE, THE RIVAL CONTENTIONS AND PROVISIONS OF THE ACT AND RELEVANT CASE LAW. IT IS ON RECORD THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING VARIOUS PRODUCTS SUCH AS NEEDLE RO LLERS, NEEDLE BUSHES, NEEDLE ROLLER CAGES, NEEDLE ROLLER BEARINGS, CYLIND RICAL ROLLER, SPHERICAL ROLLERS, ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 4 NEEDLE ROLLER BALL AND TAPER ROLLER BEARINGS. ALL T HESE PRODUCTS ARE BEING MANUFACTURED AT DIFFERENT LOCATIONS AS STATED EARLI ER. ASSESSEE INSTALLED ADDITIONAL MACHINERY AT ITS PLANT SITUATED AT MIDC WALUJ, AURANGABAD. THE INSTALLED CAPACITY OF THE SAID UNIT WAS INCREASED F ROM 23000 NUMBERS TO 32500 NUMBERS AS ON 31 ST MARCH 2005. THIS UNIT WAS ORIGINALLY SET UP IN 1990. ASSESSEE FURNISHED FORM NO. 3AA JUSTIFYING TH E CLAIM OF ADDITIONAL DEPRECIATION GIVING THE DETAILS OF INSTALLED CAPACI TY AND INCREASE IN INSTALLED CAPACITY. THE CLAIM WAS ORIGINALLY ALLOWED BY THE A O. THE A.O. IN THE ORDER CONSEQUENT TO REVISED PROCEEDINGS UNDER SECTION 263 VIDE PARA 4 DID NOT ACCEPT THE CONTENTIONS BY STATING THAT AS PER SECTI ON 32(1)(IIA) INCREASE IN THE INSTALLED CAPACITY SHOULD BE OF THE INDUSTRIA L UNDERTAKING AS A WHOLE AND NOT A UNIT-WISE INDUSTRIAL UNDERTAKING. HE DID NOT MENTION ANY OF THE DETAILS OF THE INSTALLED CAPACITY AND EXPANSION OF CAPACITY BUT NOTICED THAT INSTALLED CAPACITY OF THE WHOLE BUSINESS HAS INCREA SED BY 4.5%. THE DISPUTE IS AS TO WHETHER THE CONDITIONS UNDER SECTION 32(1) (IIA) ARE SATISFIED FOR GRANTING ADDITIONAL DEPRECIATION IN THIS CASE. 9. THE PROVISIONS OF SECTION 32(1)(IIA) ARE AS UNDER: - (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AF TER THE 31ST 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 PER CENT OF THE ACTUAL COST OF SUCH MACH INERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II) : PROVIDED THAT SUCH FURTHER DEDUCTION OF FIFTEEN PER CENT SHA LL BE ALLOWED TO (A) A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIO US YEAR IN WHICH SUCH UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE A NY ARTICLE OR THING ON OR AFTER THE 1ST DAY OF APRIL, 2002; OR (B) ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THE 1ST DAY OF APRIL, 2002, DURING ANY PREVIOUS YEAR IN WHICH IT ACHIEVES THE SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALL ED CAPACITY BY NOT LESS THAN [TEN] PER CENT: PROVIDED FURTHER THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTA LLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSON; 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 ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 5 (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICL ES; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUA L COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIAT ION OR OTHER-WISE) IN COMPUTING THE INCOME CHARGEABLE UNDE R THE HEAD PRO-FITS AND GAINS OF BUSINESS OR PROFESSION OF A NY ONE PREVIOUS YEAR: PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UNDER CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B), OF THE FIRST PR OVISO UNLESS THE ASSESSEE FURNISHES THE DETAILS OF MACHINERY OR PLAN T AND INCREASE IN THE INSTALLED CAPACITY OF PRODUCTION IN SUCH FORM, AS MAY BE 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 CLAUSE. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (1) NEW INDUSTRIAL UNDERTAKING MEANS AN UNDERTAK ING WHICH IS NOT FORMED, (A) BY THE SPLITTING UP, OR THE RECONSTRUCTION, O F A BUSINESS ALREADY IN EXISTENCE; OR (B) BY THE TRANSFER TO A NEW BUSINESS OF MACHINER Y OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; (2) INSTALLED CAPACITY MEANS THE CAPACITY OF PRO DUCTION AS EXISTING ON THE 31ST DAY OF MARCH, 2002 AS SEEN FROM THE ABOVE, ADDITIONAL DEPRECIATION AT 15% OF THE CLAIM SHALL BE ALLOWED; (A) TO A NEW INDUSTRIAL UNDERTAKING WHICH BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING ON OR AFTER 1 ST APRIL 2002. ASSESSEES CASE DOES NOT FALL UNDER CLAUSE (A) AS IT HAS NOT CLAIMED AS NEW INDUSTRIAL UNDERTAKING. VIDE CLAUSE (B) OF SUBSECTION (II) ANY INDUSTRIAL U NDERTAKING EXISTING BEFORE THE 1 ST DAY OF APRIL 2002 ACHIEVES A SUBSTANTIAL EXPANSION BY WAY OF INCREASED INSTALLED CAPACITY AT NOT LESS THAN TEN P ER CENT, ADDITIONAL DEPRECIATION IS ALLOWABLE. THERE IS NO DOUBT WITH R EFERENCE TO SATISFYING THE REQUIREMENT OF FURNISHING DETAILS OF MACHINERY OR P LANT AND INCREASE IN INSTALLED CAPACITY OF PRODUCTION IN SUCH FORM AS PR ESCRIBED. THE ONLY ISSUE WHICH IS CONTENDED IS THAT THE INCREASED CAPACITY H AS TO BE WITH REFERENCE TO THE WHOLE OF THE BUSINESS AND NOT OF THE UNIT ALONE . 10. THIS ARGUMENT OF THE A.O. CANNOT BE ACCEPTED FOR VA RIOUS REASONS. ONE REASON IS THAT THE NEW INDUSTRIAL UNDERTAKING A S PER THE DEFINITION MEANS AN UNDERTAKING WHICH IS NOT FORMED BY SPLITTI NG UP OR TRANSFER FROM EXISTING BUSINESS. THIS IS NOT A CASE HERE. HOWEVER , THE ASSESSEE WOULD HAVE ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 6 BEEN ELIGIBLE FOR ADDITIONAL DEPRECIATION HAD THIS MACHINERY BEEN TREATED AS A SEPARATE INDUSTRIAL UNDERTAKING IF THERE IS FINAN CIAL INDEPENDENCE. THE HON'BLE BOMBAY HIGH COURT WHILE EXAMINING THE DEFIN ITION OF NEW INDUSTRIAL UNDERTAKING IN THE CASE OF CIT VS. ASSOCIATED CEMEN T COMPANIES LTD. 118 ITR 406 HELD AS UNDER: - THAT FROM THE CERTIFICATE OF THE ENGINEER IT WAS Q UITE CLEAR THAT THE NEW KILN AT EACH FACTORY WORKED INDEPENDENTLY OF THE OL D KILNS AND IF ON ACCOUNT OF LACK OF DEMAND, PRODUCTION HAD TO BE CUR TAILED, ANY OF THE KILNS, WHETHER OLD OR NEWLY ERECTED, COULD BE STOPP ED. THE CERTIFICATE ALSO SPECIFIED THE MAIN AUXILIARY MACHINERY INSTALL ED TOGETHER WITH THE KILN SUCH AS CRUSHER, RAW MILL, COAL MILL, CEMENT M ILL, COMPRESSORS, TRANSFORMERS AND QUARRY MACHINERY. FURTHER, THE CER TIFICATE ALSO DISCLOSED THAT WHEREAS IN RESPECT OF THE KILNS AT B HUPENDRA, KISTNA, CHAIBASA AND SHAHABAD, THE CAPACITY OF NEW KILNS WA S STATED TO BE 1,00,000 TONNES, 1,65,000 TONNES, 1,00,000 TONNES A ND 1,00,000 TONNES, RESPECTIVELY, IN RESPECT OF THE NEWLY ERECT ED KLIN AT KISTNA, THE CAPACITY OF THE NEWLY CONSTRUCTED KILN ALONE WAS MU CH MORE THAN THE CAPACITY OF THE ENTIRE FACTORY WHICH HAD BEEN SHOWN TO BE ONLY 90,000 TONNES. THE CERTIFICATE ALSO SHOWED THAT SEVERAL AM OUNTS RUNNING INTO SEVERAL LAKHS WERE SPENT IN CONSTRUCTION OF BUILDIN G, PURCHASE OF PLANT AND MACHINERY, CONSTRUCTION OF WATER WORKS AND RAIL WAY SIDING AND TRAM LINES, PURCHASER OF ROLLING STOCK AND EXPENSES OF ELECTRIC INSTALLATION WHICH WERE NECESSITATED BY THE CONSTRU CTION OF THE NEW KILNS AT EACH OF THE FOUR FACTORIES HAD RESULTED IN AN EXPANSION OF THE FACTORY ITSELF, YET THE NEW KILNS WERE COMPLETELY I NTEGRATED UNITS WHICH COULD BE PUT INTO PRODUCTION INDEPENDENTLY OF THE O THER UNITS OR PRODUCTION THEREFROM COULD CEASE WITHOUT AFFECTING THE PRODUCTION FROM THE OTHER KILNS. MOREOVER, ALL THE FOUR KILNS AT TH E FOUR DIFFERENT FACTORIES HAD BEEN ESTABLISHED WITH THE PLANT AND M ACHINERY NEWLY PURCHASED AND REQUIRED EXCLUSIVELY FOR THE PURPOSES OF THE NEW KILNS. THEREFORE, EVEN THOUGH THE BUSINESS OR THE INDUSTRI AL ESTABLISHMENT AS A WHOLE HAD BEEN EXPANDED BY THE ADDITION OF A NEW KILN, EACH NEW KILN BY ITSELF CONSTITUTED A NEW INDUSTRIAL UNDERTA KING WITHIN THE MEANING OF S. 15C OF THE INDIAN I.T. ACT, 1922. THE TRIBUNAL WAS, THEREFORE, RIGHT IN HOLDING THAT THE ASSESSEE WAS E NTITLED TO THE BENEFIT OF S.15C OF THE ACT. IT WAS CONSIDERED THAT ESTABLISHMENT OF A NEW INDUS TRIAL UNIT AS PART OF AN ALREADY EXISTING INDUSTRIAL ESTABLISHMENT MAY RESUL T IN AN EXPANSION OF THE INDUSTRY OR THE FACTORY BUT IF THE NEWLY ESTABLISHE D UNIT IS ITSELF AN INTEGRATED INDEPENDENT UNIT IN WHICH NEW PLANT AND MACHINERY IS PUT UP AND IS ITSELF INDEPENDENT OF THE WHOLE UNIT, CAPABL E OF PRODUCTION OF GOODS THEN IT WOULD BE CLASSIFIED AS A NEW ESTABLISHED IN DUSTRIAL UNDERTAKING. THUS THE NEW INDUSTRIAL UNDERTAKING IS TO BE CONSID ERED DIFFERENT FROM THE ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 7 EXISTING BUSINESS OF THE ASSESSEE, IF IT SATISFIES THE CONDITIONS. IN ASSESSEES CASE EVEN THOUGH THEY ARE IN THE MANUFACTURING OF S IMILAR AUTOMOBILE COMPONENTS, EACH OF THE UNIT WAS LOCATED DIFFERENT PLACES, ARE INDEPENDENT OF ITS EXISTENCE AND IS NOT DEPENDENT ON OTHER BUSI NESS UNITS IN ITS MANUFACTURING ACTIVITY. ACCORDINGLY, EACH UNIT CAN BE CONSIDERED AS AN INDEPENDENT INDUSTRIAL UNDERTAKING AS FAR AS THE UN IT IS CONCERNED. 11. ANOTHER REASON FOR TREATING THE UNIT AS SEPARATE IN DUSTRIAL UNDERTAKING WAS THE FACT THAT ADDL. DEPRECIATION WAS CLAIMED ON ONLY ONE UNIT. ASSESSEE HAS INCREASED THE CAPACITY IN THE UNIT AT MIDC WALU J, AURANGABAD, THE FACT OF WHICH IS NOT IN DISPUTE AND ADDITIONAL DEPRECIATION WAS NOT CLAIMED ON ANY OTHER UNITS EXCEPT FOR THIS UNIT IN WHICH THERE IS AN INCREASE IN CAPACITY. HAD THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION ON THE ENTIRE ASSETS OF ALL INDUSTRIAL UNITS THEN COMPARISON OF INCREASED CAPAC ITY WITH REFERENCE TO THE EARLIER CAPACITY, AS MADE OUT BY THE A.O., WOULD BE JUSTIFIED. BUT ASSESSEE HAS CLAIMED ONLY ADDITIONAL DEPRECIATION OF THE UNIT AT WALUJ, AHMEDABAD. AS ALREADY STATED THIS UNIT WAS INDEPENDENTLY ESTABLIS HED IN 1990. THEREFORE ASSESSING OFFICERS ACTION IN COMPARING INCREASED C APACITY WITH REFERENCE TO THE WHOLE OF THE BUSINESS WHEN ASSESSEE CLAIMED ADD ITIONAL DEPRECIATION ON ONLY ONE UNIT IS NOT CORRECT. 12. EVEN IF ONE WERE TO CONSIDER THAT THE CAPACITY OF T HE ENTIRE BUSINESS HAS TO BE CONSIDERED, THIS IS NOT PRACTICABLE IF AS SESSEE IS MANUFACTURING DIFFERENT PRODUCTS. CONSIDER AN EXAMPLE OF A COMPAN Y WHICH IS MANUFACTURING TOOTH PASTE, TOOTH BRUSH, SOAP, COSME TICS, ETC. THE ENTIRE BUSINESS MAY HAVE DIFFERENT UNITS AND DIFFERENT FAC TORIES MANUFACTURING DIFFERENT PRODUCTS AT DIFFERENT PLACES. IF THAT COM PANY INSTALLS ADDITIONAL MACHINERY WITH REFERENCE TO PRODUCTION OF TOOTH BRU SHES AND CLAIMS ADDITIONAL DEPRECIATION IT IS NOT POSSIBLE TO COMPA RE THE INCREASED CAPACITY WITH REFERENCE TO OTHER PRODUCTS AS DIFFERENT PARAM ETERS EXISTS. ONE CAN ONLY COMPARE SIMILAR PRODUCTS IN A GIVEN SITUATION. THUS EXAMINATION OF A CONDITION FOR GRANTING ADDITIONAL DEPRECIATION TO A N EXISTING UNIT PROVIDED IT INCREASED INSTALLED CAPACITY BY NOT LESS THAN 10% C AN ONLY BE WITH REFERENCE TO THE PRODUCTS MANUFACTURED IN THAT PART ICULAR UNDERTAKING. AS RIGHTLY SUBMITTED BY THE ASSESSEE THIS UNIT AT MIDC WALUJ, AURANGABAD IS ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 8 MANUFACTURING NEEDLE ROLLERS BUSHES & CAGES, BALL A ND ROLLER BEARINGS AND AUTOMOBILE COMPONENTS, WHICH HAS BEEN INCREASED BY 11.33%, 38.09% AND 70% RESPECTIVELY AND IT HAS CLAIMED ADDI TIONAL DEPRECIATION ON THESE MACHINERIES IN THAT UNIT ONLY. IT SO HAPPENED THAT ASSESSEE IS MANUFACTURING SIMILAR PRODUCTS AT DIFFERENT PLACES BUT THAT DOES NOT MEAN THAT COMPARISON HAS TO BE MADE WITH PRODUCTION IN D IFFERENT UNITS WHEN ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION ONLY W ITH REFERENCE TO ONE UNIT IN WHICH IT HAS INCREASED THE CAPACITY. CONSID ERING THE SCHEME OF THE ACT AND THE INTENTION IN GRANTING ADDITIONAL DEPREC IATION BY WAY OF A BENEFIT, AOS ACTION CANNOT BE JUSTIFIED IN CONSIDE RING THE INCREASED CAPACITY WITH REFERENCE TO WHOLE OF THE BUSINESS AS SUCH WHEN IN FACT ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION WITH R EFERENCE TO ONLY ONE UNIT. 13. ASSESSEE RELIED ON THE DECISION OF THE HON'BLE MAD RAS HIGH COURT IN THE CASE OF CIT VS. VTM LTD. 229 CTR 70 WHERE ADDIT IONAL DEPRECIATION WAS CLAIMED ON NEW INDUSTRIAL UNIT. THAT ASSESSEE WAS I N THE TEXTILE MANUFACTURING BUSINESS AND WAS ENGAGED IN MANUFACTU RING OF TEXTILE GOODS. IT HAS INSTALLED NEW WINDMILL AND CLAIMED ADDITIONA L DEPRECIATION. THE HON'BLE MADRAS HIGH COURT CONSIDERED THE CLAIM OF T HE ASSESSEE AND HELD AS UNDER: - WHEN THE TRIBUNAL BY THE IMPUGNED ORDER HAS APPLIE D S. 32(1)(IIA) TO THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE AND HAS FOUND THAT THE ASSESSEE IS ENTITLED FOR THE ADDITIONAL DEPRECIATIO N CLAIMED UNDER THE SAID PROVISION, IT CANNOT BE HELD THAT SIMPLY BECAU SE CO-ORDINATE BENCH OF THE TRIBUNAL HAD EARLIER TAKEN A DIFFERENT VIEW, THE TRIBUNAL ON THIS OCCASION ALSO OUGHT TO HAVE FOLLOWED THE SA ME. WHEN IT IS FOUND THAT THE TRIBUNAL HAS APPLIED THE LAW CORRECT LY IN THE IMPUGNED ORDER, THERE IS NO GAIN SAYING THAT THERE WAS AN EA RLIER ORDER BY THE CO-ORDINATE BENCH AND THEREFORE, FOR THAT REASON, T HIS TIME ALSO THE TRIBUNAL SHOULD HAVE BLINDLY FOLLOWED ITS OWN EARLI ER DECISION EVEN IF SUCH EARLIER DECISION DID NOT REFLECT THE CORRECT P OSITION OF LAW. IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED I N THE BUSINESS OF MANUFACTURE OF TEXTILE GOODS. AS FAR AS APPLICATION OF S. 32(1)(IIA) IS CONCERNED, WHAT IS REQUIRED TO BE SATISFIED IN ORDE R TO CLAIM THE ADDITIONAL DEPRECIATION IS THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31 ST MARCH, 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSI NESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE SAID PROVISION ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 9 DOES NOT STATE THAT THE SETTING UP OF THE NEW MACHI NERY OR PLANT, WHICH WAS ACQUIRED AND INSTALLED UPTO 31 ST MARCH, 2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THIN G THAT WAS ALREADY BEING MANUFACTURED BY THE ASSESSEE. THEREFORE, THE CONTENTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO DO WIT H THE INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS ETC. IS TOTALLY NO T GERMANE TO THE SPECIFIC PROVISION CONTAINED IN S. 32(1)(IIA). IT C ANNOT ALSO BE SAID THAT SETTING UP OF A WINDMILL WILL NOT FALL WITHIN THE E XPRESSION SETTING UP OF A NEW MACHINERY OR PLANT. THERE IS NO ERROR IN T HE CONCLUSION OF THE TRIBUNAL. AS FAR AS APPLICATION OF SECTION 32(1)(IIA) IS CONC ERNED, WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE ADDITIONAL DEPRECIA TION IS THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIR ED AND INSTALLED AFTER 31 ST MARCH 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THIN G. THE SAID PROVISION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLANT, WHICH WAS ACQUIRED AND INSTALLED UPTO 31 ST MARCH 2002 SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREA DY BEING MANUFACTURED BY THE ASSESSEE. 14. IT IS A WELL SETTLED PRINCIPLE OF STATUTORY INTERP RETATION THAT THE WORDS OR EXPRESSIONS USED BY THE LEGISLATURE SHOULD BE GI VEN THE NORMAL MEANING. CLAUSE (IIA) TO SEC. 32(1) AS APPLICABLE TO THE A.Y . 2005-06 WAS INSERTED BY FINANCE (NO.2) ACT, 2002 W.E.F. 1.04.2003 AND THE S AME WAS AMENDED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 1.04.2005. FOR GIV ING THE BENEFIT OF ADDITIONAL DEPRECIATION, THE LEGISLATURE HAS MADE T HE CLASSIFICATION KEEPING THE LINE OF DEMARCATION AS NEW UNDERTAKING, WHICH BEGINS TO MANUFACTURE OR PRODUCE ARTICLE OR THING ON OR AFTER 1.04.2002 O R ANY EXISTING INDUSTRIAL UNDERTAKING BEFORE THE ABOVE DATE ACHIEVES SUBSTANT IAL EXPANSION BY WAY OF INCREASE IN THE INSTALLED CAPACITY NOT LESS THAN 10 %. THE EXPRESSION INDUSTRIAL UNDERTAKING IS SPECIFICALLY USED TO CR EATE AN IDENTITY FROM THE ENTIRE BUSINESS OF THE ASSESSEE. THE ASSESSEES BU SINESS MAY COMPRISE A DIFFERENT INDUSTRIAL UNDERTAKING BUT THE INDUSTRIAL UNDERTAKING WHICH FULFILS THE CONDITION, AS CONTEMPLATED IN THE PROVISO, IS E LIGIBLE FOR ADDITIONAL DEPRECIATION. IT IS TO PERTINENT TO NOTE HERE THAT ALL THE CLAUSES TO SEC. 31(1) HAVE BEEN DIFFERENTLY WORDED TO ACHIEVE A PARTICULA R OBJECT I.E. CLAUSE (I), CLAUSE (II), CLAUSE (IIA) AND CLAUSE (III) TO SEC. 32(1), HENCE, IN OUR HUMBLE ITA NO. 4775/MUM/2010 M/S. NRB BEARINGS LTD. 10 OPINION, THE INTERPRETATION CANVASSED BY THE LD. CO UNSEL IS CORRECT. AN EXPANSION IN THE INSTALLED CAPACITY IS TO BE CONSID ERED UNDERTAKING-WISE. WE MAKE IT CLEAR THAT THERE IS NO OTHER DISPUTE IN RESPECT OF INTERPRETATION OF TERM INDUSTRIAL UNDERTAKING. 15. CONSIDERING THE ABOVE PRINCIPLES TO THE GIVEN SET O F FACTS, WE ARE OF THE OPINION THAT ASSESSEES INCREASE IN CAPACITY CA NNOT BE EXAMINED WITH REFERENCE TO OPERATIONAL ACTIVITY OF THE UNITS WHIC H ARE ALREADY BEEN SET UP EARLIER BY THE ASSESSEE. THE INTENTION OF THE LEGIS LATURE IS ONLY TO EXAMINE THE INCREASE IN CAPACITY BY AN UNDERTAKING IN WHICH THE ADDITIONAL MACHINERY WAS INSTALLED ON WHICH ADDITIONAL DEPRECI ATION WAS CLAIMED. SINCE THE MIDC WALUJ, AURANGABAD UNIT BEING AN INDE PENDENT UNIT AND HAS INCREASED CAPACITY OF MORE THAN 10% SAID UNDERT AKING SATISFIED THE CONDITIONS OF SECTION 32(1)(IIA). THEREFORE WE DIRE CT THE A.O. TO ALLOW THE ADDITIONAL DEPRECIATION AS CLAIMED ON THE MIDC WALU J, AURANGABAD UNIT. GROUNDS RAISED BY ASSESSEE ARE ALLOWED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH SEPTEMBER 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH SEPTEMBER 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) V, MUMBAI 4. THE CIT II, MUMBAI CITY 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.