Dy. Commissioner of Income Tax-6, Kanpur V. M/s J.K Cement Ltd., Kanpur

ITA 513/LKW/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100426 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation
• Section: 32; 154; 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.513 & 514/LKW/2015 ASSESSMENT YEARS 2008-09 & 2007-08 M/S J.K. CEMENT, KAMLA TOWER, DWARIKADHEESH ROAD, KANPUR 208001 PAN AABCJ 0355 R VS DY. COMMISSIONER OF INCOME TAX-6, KANPUR (RESPONDENT) (APPELLANT) DR. A.K. SINGH CIT , DR APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY 09/09/2015 DATE OF HEARING 16/ 10 /2015 DATE OF PRONOUNCEMENT O R D E R PER SUNIL KUMAR YADAV, JM. 1. THESE APPEALS ARE PREFERRED BY THE REVENUE AGAIN ST THE RESPECTIVE ORDERS OF THE LD. CIT(A) FOR AYS 2008-09 & 2007-08. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CON SOLIDATED ORDER. ACCORDINGLY, THESE APPEALS ARE BEING DISPOSED OF ONE AFTER THE O THER. ITA NO. 514/LKW/2015 (AY 2007-08) 2. IN THIS APPEAL, THE REVENUE HAS ASSAILED THE ORD ER OF LD. CIT(A) ON SOLITARY GROUND THAT THE CIT(A) HAS ERRED IN LAW AND ON FACT S IN ALLOWING THE RELIEF OF RS.46,39,905/- BY WAY OF GIVING DIRECTION TO THE AO THAT WHILE COMPUTING THE TAX, FIRST GIVE CREDIT OF MAT AND THEREAFTER CHARGE THE SURCHARGE & EDUCATION 2 CESS WITHOUT APPRECIATING THE FACTS AND MERITS OF T HE CASE BROUGHT ON RECORD BY THE AO IN THE ORDER. 3. THE FACTS IN BRIEF BORN OUT FROM RECORD ARE THAT THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 09.11.2009 AND INCOME WA S ASSESSED AT RS.2,69,50,00,991/-, WHICH WAS SUBSEQUENTLY REVISED U/S 251 AND U/S 154 AND ASSESSED INCOME WAS FINALLY COMPUTED AT RS.1,97,27, 51,880/-. THE TAX PAYABLE WAS CALCULATED BY THE AO AFTER GIVING MAT CREDIT U/ S 115JAA (INCLUSIVE SURCHARGE & EDUCATION CESS) AND THEREAFTER, ON THE RESULTANT FIGURE, THE SURCHARGE & EDUCATION CESS WAS LEVIED. HOWEVER, VIDE ORDER PASS ED U/S 154/251 DATED 13.11.2011, THE TAX WAS CALCULATED AFTER GIVING MAT CREDIT WITHOUT SURCHARGE & EDUCATION CESS AND THEREAFTER, FROM THE RESULTANT F IGURES, THE SURCHARGE & EDUCATION CESS WAS LEVIED. THIS METHOD OF TAX CALCU LATION WAS ADOPTED IN THE SUBSEQUENT ORDER PASSED BY AO U/S. 154/251 DATED 31 .01.2014 ALSO. 4. SUBSEQUENTLY, THE APPELLANT WAS SERVED WITH A N OTICE U/S. 154 DATED 24.07.2014 PROPOSING TO RECTIFY THE FOLLOWING MISTA KE POINTED OUT IN THE SAID NOTICE:- 'IT HAS BEEN NOTICED FROM THE ITNS- 150 THAT MAT CR EDIT HAS BEEN ALLOWED BEFORE CHARGING OF SURCHARGE & EDUCATION CE SS WHEREAS, THE SAME SHOULD HAVE BEEN ALLOWED AFTER CHARGING SURCHA RGE & EDUCATION CESS. THEREFORE, THE SAME HAVE BEEN REQUI RED TO ALLOW AS PER PROVISIONS OF THE ACT.' 5. IN RESPONSE TO THE NOTICE OF AO DATED 24.07.201 4, THE APPELLANT HAD FILED ITS REPLY DATED 04.08.2014 WHEREBY, THE APPELLANT H AD INVITED THE ATTENTION OF AO REGARDING CALCULATION OF TAX PAYABLE AND CREDIT OF MAT, AS PRESCRIBED IN ITR -6 RELATING TO ASSESSMENT YEAR 2007-08. 6. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND HE REVISED THE ORDER DATED 31.01.2014 BY GIVING MAT CREDIT AFTER CHARGING OF SURCHARGE AND EDUCATIONAL CESS. 3 7. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) WITH THE SUBMISSION THAT THE SURCHARGE AND EDUCATIONAL CESS IS LEVIABLE ONLY AFTER GIVING CREDIT FOR MAT AND THEREAFTER THE TAX COMPUTATION M ADE BY THE AO IN ITNS-7 ATTACHED WITH THE IMPUGNED ORDER DATED 27.11.2014, IS NOT A CORRECT WAY OF TAX CALCULATION. IN SUPPORT OF THIS CONTENTION, HE PLAC ED RELIANCE UPON THE FOLLOWING JUDGMENTS:- 1. CITVS. VACMENT INDIA [ (2014) 369 ITR, 304 (A LLD. HC) ] 2. UNIVERSAL MEDICARE P, LTD., BOMBAY VS. ACIT - LTU, MUMBAI (ITAT 'F BENCH, MUMBAI) (IN ITA NO. 839/MUM/2012 - A.Y. 2007-08) 7.1 HE ALSO STATED THAT AS PER DECISION OF VARIOUS HIGH COURTS AS WELL AS SUPREME COURT, HE MISTAKE U/S. 154 CANNOT BE RECTIF IED ON A POINT WHERE TWO VIEWS ARE POSSIBLE AND PLACED RELIANCE ON THE FOLLO WING CASES :- KESARWANI ZARDA BHANDAR VS. CIT [ 349 ITR, 519 (ALL D)] T.S. BALARAM, INCOME TAX OFFICER, COMPANY CIRCLE -I V, BOMBAY VS. VOLKART BROTHERS & OTHERS [ 82 ITR, 50 (SC) ] 8. THE CIT(A) REEXAMINED THE CONTENTION OF THE ASSE SSEE AND HAVING FOLLOWED THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VOCMENT INDIA (SUPRA) DIRECTED THE AO THAT WHILE CO MPUTING THE TAX, FIRST GIVE CREDIT OF MAT AND THEREAFTER, CHARGE THE SURCHARGE & EDUCATION CESS. 9. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TR IBUNAL AND HAS PLACED RELIANCE ON THE ORDER OF THE AO. 10. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT CORRECT MODE OF COMPUTATION OF TAX IS TO FIRST GIVE CREDIT OF MAT AND THEREAFTER, CHARGE THE SURCHARGE & EDUCATIONAL CESS. 11. HAVING CAREFULLY EXAMINED THE ORDER OF LOWER AU THORITY, WE FIND THAT CIT(A) HAS CORRECTLY UNDERSTOOD THE MODE OF COMPUTA TION OF TAX AND ISSUED CORRECT DIRECTION TO THE AO THAT WHILE COMPUTING TH E TAX, FIRST GIVE CREDIT OF MAT 4 AND THEREAFTER, CHARGE THE SURCHARGE & EDUCATION CE SS. SINCE WE DO NOT FIND ANY INFIRMITY IN THE DIRECTION OF THE CIT(A) WE CONFIRM THIS ORDER. ITA NO.513/LKW/2015 (AY 2008-09) 12. IN THIS APPEAL, THE REVENUE HAS ASSAILED THE OR DER OF LD. CIT(A) ON SOLITARY GROUND THAT THE CIT(A) HAS ERRED IN LAW AND ON FACT S IN ALLOWING THE RELIEF OF RS.31,53,46,771/- ON ACCOUNT OF ADDITIONAL DEPRECIA TION U/S 31(1)(IIA) OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE POWER GENERATING PLANT AND MACHINERY INSTALLED BY THE ASSESSEE COMPA NY IS NOT A PART OF BUSINESS OF MANUFACTURING OR PRODUCING OR ANY ARTICLE OR THI NG WHICH INCREASE THE INSTALLED CAPACITY OF PRODUCTION OF CEMENT AS REQUIRED FOR CL AIMING SUCH ADDITIONAL DEPRECIATION. 13. THE FACTS IN BRIEF BORN OUT FROM THE RECORD ARE THAT THE ASSESSEE INSTALLED AND PUT TO USE POWER GENERATING UNITS AT BAMANIA & NIMBAHERA. THE POWER PLANTS WERE FOR CAPTIVE USE AND POWER SO GENERATED WAS MAINLY IN MANUFACTURING OF CEMENT AT UNITS AT BOMANIA & NIMBAHERA. SINCE TH E POWER PLANTS WERE FOR CAPTIVE USE AND POWER SO GENERATED WAS USED IN MANU FACTURING OF CEMENT, THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION UNDER CLAU SE (IIA) OF SECTION 32 OF THE ACT BEING THE ADDITIONAL DEPRECIATION ATTRIBUTABLE TO SAID POWER GENERATING UNITS AND THE SAID ADDITIONAL DEPRECIATION WAS ALLOWED IN THE ASSESSMENT PROCEEDING VIDE ORDER DATED 24.12.2010. 14. SUBSEQUENTLY, THE ASSESSEE WAS SERVED WITH A NO TICE DATED 18-02-2015 U/S 154 OF THE ACT, THROUGH WHICH THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY ADDITIONAL DEPRECIATION ALLOWED EARLIER VIDE AS SESSMENT ORDER DATED 24-12- 2010, UNDER CLAUSE (IIA) OF SECTION 32 OF RS.31,53, 44,771/- ATTRIBUTABLE TO THE POWER GENERATING BE UNITS NOT WITHDRAWN ON THE GROU ND THAT 'UNDER SECTION 32(L)(IIA) OF THE ACT, ADDITIONAL DEPRECIATION ON P LANT & MACHINERY HAS TO BE 5 GRANTED TO THE ASSESSEE WHO IS ENGAGED IN THE MANUF ACTURING OR PRODUCTION OF ANY ARTICLE OR THING. SINCE THE ELECTRICITY BEING N OT AN ITEM WHICH HAS TO BE TERMED AS MANUFACTURING OR PRODUCTION OF ANY ARTICL E OR THING HENCE, ADDITIONAL DEPRECIATION GRANTED ON PLANT AND MACHINERY USED FO R GENERATION OR DISTRIBUTION OF POWER IS NOT ALLOWABLE.' FURTHER, AS PER SECTION 32(L)(IIA), THE WORD '[OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01-04-2013, THEREFO RE, ADDITIONAL DEPRECIATION ON POWER GENERATION UNITS DURING THE YEAR UNDER CONSID ERATION IS NOT ALLOWABLE. 15. THE ASSESSEE FILED A REPLY THAT THE ADDITIONAL DEPRECIATION ON POWER UNITS WAS RIGHTLY ALLOWED AND IT DID NOT CALL FOR ANY INT ERFERENCE IN U/S 154 OF THE ACT. BUT, THE A.O. WAS NOT CONVINCED WITH IT AND DISALLO WED THE ADDITIONAL DEPRECIATION OF RS.31,53,46,771/-. 16. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WITH THE SUBMISSION THAT GENERATION OF ELECTRICITY IS AKIN TO MANUFACTU RING OF A PRODUCT. THE ELECTRICITY WHICH MAY NOT BE SEEN WITH EYES, BUT ITS EFFECT CAN BE SEEN AND FEEL AND ELECTRICITY CAN BE TRANSFERRED, DELIVERED, STORED, PROCESSED ETC. HE PLACED RELIANCE UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN T HE CASE OF CST VS. MADHYA PRADESH ELECTRICITY BOARD REPORTED IN (1970) 25 57C 188 (SC). THE CIT(A) RE- EXAMINED THE CLAIM OF THE ASSESSEE AND BEING CONVIN CED WITH THE EXPLANATION, HE HELD THAT ASSESSEE COMPANY IS ENTITLED FOR ADDIT IONAL DEPRECIATION, THEREFORE, IT WAS RIGHTLY ALLOWED IN THE ORIGINAL ASSESSMENT. THE CIT(A) HAS ALSO HELD THAT THE ADDITIONAL DEPRECIATION CANNOT BE DENIED U/S 15 4 OF THE ACT AND HE ACCORDINGLY DELETED THE ADDITION. THE RELEVANT OBSE RVATION OF THE CIT(A) IS AS UNDER:- I HAVE GONE THROUGH THE FACTS OF THE CASE AND ALSO PERUSED THE ORDER PASSED BY A.O. AS WELL AS CASE LAWS REFERRED BY ID. A.R. OF THE APPELLANT. 6 THE A.O. HAS DISALLOWED THE CLAIM OF ADDITIONAL DEP RECIATION ON POWER UNITS ON THE GROUND THAT ELECTRICITY BEING NOT AN I TEM WHICH HAS TO BE TERMED AS MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE VIEW TAKEN BY THE A.O. IS NOT CORRECT. THE HON'BLE SUPRE ME COURT IN THE CASE OF CST VS M.P, ELECTRICITY BOARD CLEARLY HELD THAT ELECTRIC ENERGY HAS ALL TRAPPING OF AN ARTICLE OR THING. THE PROCES S OF ITS GENERATION IS ALSO AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTICL E OF THING. THIS VIEW HAS ALSO BEEN FOLLOWED BY THE HON'BLE ITAT, DELHI B ENCH IN THE CASE OF N.T.P.C. LTD. VS. BY. COMMISSIONER OF INCOME TAX. F URTHER, HON'BLE MADRAS HIGH COURT AND GUJARAT HIGH COURT IN THE JUD GMENT AS CITED ABOVE HAVE CLEARLY HELD THAT IF AN ASSESSEE IS ENGA GED IN MANUFACTURING OF ANY ARTICLE OR THING APART FROM GE NERATION OF POWER, HE IS ENTITLED FOR ADDITIONAL DEPRECIATION UNDER SE CTION 32(L)(IIA) OF THE ACT ON POWER GENERATING UNITS. IN SO FAR AS THE AMENDMENT TO THE PROVISIONS OF SEC TION 32(L)(IIA) TO INCLUDE THE BUSINESS OF GENERATION OR GENERATION AN D DISTRIBUTION OF POWER W.E.F. 01-04-2013, THE BASIC CONCEPT FOR CLAI M OF ADDITIONAL DEPRECIATION REMAIN THE SAME. AS FAR AS APPLICATION OF SECTION 32(L)(IIA) OF THE ACT IS CONCERNED, WHAT IS REQUIRED TO BE SAT ISFIED IN ORDER TO CLAIM OF ADDITIONAL DEPRECIATION IS THAT THE ASSESS EE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY 'ARTIC LE' OR 'THING'. THUS, TAKING INTO CONSIDERATION ALL THESE ASPECTS A ND AFTER FOLLOWING ABOVE JUDICIAL PRONOUNCEMENTS, I AM OF THE VIEW THA T CLAIM OF ASSESSEE COMPANY OF ADDITIONAL DEPRECIATION IS WELL JUSTIFIED AND IT WAS RIGHTLY ALLOWED VIDE ASSESSMENT ORDER DATED 24.12.2 010, HENCE THE SAME CANNOT BE DENIED U/S. 154, ACCORDINGLY, THE DI SALLOWANCE IS HEREBY DELETED. FURTHER, GROUND NO. 4 & 5 RELATES T O THE JURISDICTION OF SECTION 154 WHICH IS CLEAR AND OBVIOUS THAT THE ISS UE IS DEBATABLE AND REQUIRES APPLICATION OF MIND, THEREFORE, THE ISSUE CANNOT BE DECIDED U/S.154 BY THE AO. ACCORDINGLY, ALL THE GROUNDS OF APPEAL STAND ADJUDICATED. 17. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL AND SIMPLY PLACED RELIANCE ON THE ORDER OF THE AO. 18. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND HAS PLACED RELIANCE UPON THE ORDER OF THE CIT(A). BESIDES, IT WAS ALSO CONTE NDED THAT SINCE THE CLAIM OF DEPRECIATION OF THE ASSESSEE DEPENDS UPON THE INTER PRETATION OF ARTICLE OR THING AND IS A DEBATABLE ISSUE, IT CANNOT BE WITHDRAWN U/ S 154 OF THE ACT. 7 19. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWE R AUTHORITY IN THE LIGHT OF RIVAL SUBMISSION, WE FIND THAT IN THE ORIGINAL ASSE SSMENT THE CLAIM OF ADDITIONAL DEPRECIATION WAS ALLOWED BY THE AO AND LATER ON U/S 154 OF THE ACT, THE ASSESSING OFFICER MADE A RECTIFICATION IN THE ORDER BY MAKING THE WITHDRAWAL OF ADDITIONAL DEPRECIATION EARLIER ALLOWED TO THE ASSE SSEE. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGMENT OF THE ITAT DELHI BENCH IN TH E CASE OF NTPC LTD. VS. DCIT IN WHICH THE DEFINITION OF ARTICLE, THING OR G OODS WAS EXAMINED IN THE LIGHT OF JUDGMENT OF THE APEX COURT IN THE CASE OF INDIAN CINE AGENCY, CST VS. MP ELECTRICITY BOARD (SUPRA) AND STATE OF MADHYA PRADE SH VS. NTPC AND HAS TAKEN A VIEW THAT THE ADDITIONAL DEPRECIATION CANNOT BE DEN IED TO THE ASSESSEE MERELY ON THE GROUND THAT ELECTRICITY IS NOT A ARTICLE OR THI NG. SINCE THE ISSUE IS HIGHLY DEBATABLE, A VIEW TAKEN BY THE AO WHILE COMPUTING T HE ASSESSMENT CANNOT BE REVISED U/S 154 OF THE ACT. WE THEREFORE, FIND NO J USTIFICATION TO INTERFERE WITH THE ORDER OF LD. CIT(A) AS HE HAS RIGHTLY ADJUDICAT ED THE ISSUE. WE ACCORDINGLY CONFIRM THE ORDER OF LD. CIT(A). 20. IN THE RESULT APPEALS OF THE REVENUE ARE DISMIS SED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (A.K. GARODIA ) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/10/2015 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASST T. REGISTRAR