M/s Adarsh Steel Rolling Mills, Mandi Gobindgarh V. DCIT, Mandi Gobindgarh

ITA 523/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73476 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 523/CHD/2013 ASSESSMENT YEAR : 2008-09 ADARSH STEEL ROLLING MILLS VS. D.C.I.T. MANDI GOBI DGARH G.T. ROAD MANDI GOBINDGARH AACFA 5164 F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ASHWANI KUMAR RESPONDENT BY: SHRI MANJIT SINGH DATE OF HEARING 19.2.2014 DATE OF PRONOUNCEMENT 26 .2.2014 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 20. 3.2013 OF THE LD CIT(A), PATIALA. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUND: THAT ORDER PASSED U/S 250(6) OF INCOME -TAX ACT, 1 961 BY THE LD. CIT(A) PATIALA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE DISALLOWANCE OF AD DITIONAL DEPRECIATION AMOUNTING TO RS. 5,55,899/- CLAIMED B Y THE APPELLANT ON ADDITION OF ROLLS UNDER THE HEAD PLANT & MACHIN ERY. 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 80% ON THE ROL LS ON ENQUIRY IT WAS CLAIMED THAT DEPRECIATION WAS CLAIME D AS PER PROVISIONS OF SECTION 32(1)(IIA) AND SINCE ROLLS A RE ALSO A PART OF MACHINERY THEREFORE ADDITIONAL DEPRECIATION WAS ALLOWABLE. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE SUB MISSIONS BECAUSE HE NOTED THAT FOR ALLOWING ADDITIONAL DEPRE CIATION U/S 32(1)(IIA) THE ADDITIONAL DEPRECIATION CAN BE CLAIM ED IF THE 2 MACHINERY HAS BEEN ACQUIRED AND INSTALLED. SINCE T HE ASSESSEE WAS ALREADY RUNNING STEEL MILL, THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS ACQUIRED NEW MACHINERY A ND INSTALLED THE SAME. FURTHER THE ROLLS ITSELF CANNO T BE CALLED MACHINERY. IN THIS BACKGROUND ADDITIONAL DEPRECIAT ION WAS DISALLOWED. 4 ON APPEAL THE SUBMISSIONS MADE BEFORE THE ASSESSI NG OFFICER WERE REITERATED. IT WAS FURTHER CONTENDED THAT THERE IS A CIRCULAR ISSUED BY THE BOARD BY CIRCULAR NO. 8 OF 2 008 DATED 27.8.2002 VIDE PARA 3.6 THE REQUIREMENT OF INCREASE IN THE CAPACITY HAS BEEN REMOVED FOR CLAIMING OF ADDITIONA L DEPRECIATION. HOWEVER, THE LD. CIT(A) DID NOT FIND FORCE IN THE SAME AND DECIDED THE ISSUE AGAINST THE ASSESSEE VID E PARA 4.2 WHICH IS AS UNDER: I HAVE GONE THROUGH THE SUBMISSION MADE. THE ENTIRE DISCUSSION HINGES AROUND THE ONLY ISSUE WHETHER NEW MACHINERY HAS BEE N ACQUIRED OR INSTALLED FOR CLAIM OF DEPRECIATION U/S 32(1)(IIA). IN THE ROLLING BUSINESS THE ROLLS ARE USED AS PART OF ONE MACHINERY THROUGH WHICH THE INGOTS ARE PRESSED AND MOVED TO GET FINAL PRODUCT. THESE ARE C ONSUMABLE ITEMS AND KEEP ON GETTING REPLACED AS AND WHEN WORN OUT W HILE THE MAIN MACHINERY IS INTACT. THE ROLLS DO NOT CONSTITUTE A MACHINERY AS IT IS OF NO USE WITHOUT THE ATTENDANT SET OF ITEMS USED TO MAKE THE ROLLING MACHINE I.E TO SAY THAT THE ROLLS CAN NOT BE CONSIDERED AS MACHINERY TO BE USED IN CONJUNCTION WITH OTHER MACHINERY AS THE ROLLS IN IT SELF CAN NOT BE USED FOR ANY MANUFACTURING ACTIVITY INDEPENDENTLY. IN MY OPI NION THEREFORE THE ROLLS IN ITSELF CANNOT BE CATEGORIZED AS NEW MACHIN E ENTITLED TO ADDITIONAL DEPRECIATION. THEREFORE, THE CLAIM OF THE APPELLANT IS REJECTED AND THIS GROUND OF APPEAL IS DISMISSED. AS REGARDS THE CASE LAWS CITED, THOSE ARE DISTINGUISHABLE ON FACT. THE DECISION IN THE CASE O F ARUNA ALI (SUPRA) IS ON THE ISSUE OF DEVELOPMENT REBATE AND ALSO IN RELA TION TO A DIFFERENT SET OF MACHINE. 5 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REFER RED TO PROVISIONS OF SECTION 32(1)(IIA). HE ALSO REFERRE D TO CIRCULAR NO. 8 OF 2008 (COPY OF WHICH IS PLACED AT PAGE 18 O F THE PAPER BOOK) WHICH CLEARLY POINTS OUT THAT THE CONDITION O F ALLOWING ADDITIONAL DEPRECIATION ONLY TO NEW INDUSTRIAL UNDE RTAKING HAS BEEN DISPENSED WITH. IT WAS ALSO CONTENDED THAT TH E ROLLS ARE PART OF THE MACHINERY, THEREFORE DEPRECIATION MAY B E ALLOWED. 3 6 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND LD. C IT(A). 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT SEC 32(1)(IIA) READS AS UNDER: [(IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT ( OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF M ARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING 41 [OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER] , A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II) : PROVIDED 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 BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATUR E OF A GUEST-HOUSE; OR (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 DEPRECIATION OR OTHERW ISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR;]. THE ABOVE CLEARLY SHOW THAT WHEREVER ANY NEW MACHIN ERY IS ACQUIRED AND INSTALLED AFTER 31 ST MAR 1985 THEN ADDITIONAL DEPRECIATION HAS TO BE ALLOWED. FURTHER PARA 3.6 O F THE CIRCULAR READS AS UNDER: 3.6 ENHANCEMENT OF THE RATE OF ADDITIONAL DEPRECIAT ION ON NEW MACHINERY AND PLANT AND WITHDRAWAL OF CERTAIN CONDI TIONS. UNDER THE EXISTING PROVISIONS OF CLAUSE (IIA) OF SU B-SECTION (1) OF SECTION 32, ADDITIONAL DEPRECIATION IS ALLOWED AT THE RATE OF FIFTEEN PER CENT. OF THE ACTUAL COST OF THE NEW MACHINERY AND PLANT (OTH ER THAN SHIPS AND AIRCRAFT) ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2002. ADDITIONAL DEPRECIATION IS ALLOWED IN THE CASE OF A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIOUS YEAR IN WHICH IT BE GINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING ON OR AFTER THE 1 ST DAY OF APRIL, 2002 OR TO ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THAT DAT E IF IT ACHIEVES SUBSTANTIAL EXPANSION DURING THE PREVIOUS YEAR BY W AY OF INCREASE IN ITS INSTALLED CAPACITY BY NOT LESS THAN TEN PER CENT. IN ORDER TO ENCOURAGE INVESTMENT, THE FINANCE ACT, 2005 HAS AMENDED SECTION 32 TO INCREASE THE RATE OF ADDITIONAL DEPRE CIATION TO TWENTY PER CENT. ON NEW MACHINERY AND PLANT OTHER THAN SHIPS A ND AIRCRAFT, ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005, AND DISPENSED WITH THE CONDITION OF ADDITIONAL DEPRECIATION TO BE ALLOWED TO A NEW INDUSTRIAL UNDER TAKING AND THE CONDITION OF EXPANSION IN INST ALLED CAPACITY. DEPRECIATION RATES HAVE BEEN MODIFIED THROUGH A NOT IFICATION DATED 28 TH FEBRUARY, 2005. THE MODIFIED DEPRECIATION RATES ARE EFFECTIVE FROM THE 4 ASSESSMENT YEAR 2006-07. AMONG OTHER THINGS, THE RA TE OF DEPRECIATION ON PLANT AND MACHINERY HAS BEEN REDUCED FROM 25% TO 15%. THE ABOVE CLEARLY SHOW THAT WHEN EVER NEW PLANT & M ACHINERY IS ACQUIRED OR INSTALLED, ADDITIONAL DEPRECIATION I S TO BE ALLOWED. THE CONDITIONS RELATING TO ALLOWANCE OF A DDITIONAL DEPRECIATION IN THAT CASE OF NEW INDUSTRIAL UNDERTA KING HAS BEEN DISPENSED WITH FINANCE ACT, 2005 W.E.F. 1.4.20 05. IT CANNOT BE DOUBTED THAT ROLLS ARE PART OF MACHINERY THAT IS WHY NORMAL DEPRECIATION OF 80% HAS BEEN ALLOWED BY THE ASSESSING OFFICER, THEREFORE IN OUR OPINION, THE ASSESSEE WAS ALSO ENTITLED TO ADDITIONAL DEPRECIATION IN TERMS OF SEC 32(1)((I IA) PARTICULARLY IN THE LIGHT OF PARA 3.6 OF CIRCULAR N O. 8 OF 2008. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A ) AND DIRECT THE ASSESSING OFFICER TO ALLOW ADDITIONAL DEPRECIAT ION. 8 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.2.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26.2.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR