Rathi Super Steel Ltd., Delhi V. Addl. CIT, New Delhi

ITA 5858/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87052 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 24-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Capital asset; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND S HRI A.T. VARKEY, JM ITA NO. 5858 /DEL/20 1 2 ASSESSMENT YEAR : 200 9 - 10 RATHI SUPER STEEL LTD., S - 210, ADITYA PLAZA, 2 ND FLOOR, COMMUNITY CENTRE, KARKARDOOMA, DELHI. PAN: AAACR0182H VS. ADDL. CIT, RANGE - 15, NEW DELHI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI VED JAIN, ADVOCATE DEPARTMENT BY : S HRI VIKRAM SAHAY, SR. DR DATE OF HEARING : 24.03.2015 DATE OF PRONOUNCEMENT : 25 .03.2015 ORDER PER R.S. SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 20.09.2012 IN RELATION TO THE ASSESSMENT YEAR 200 9 - 10 . ITA NO.5 858 /DEL/201 2 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST NOT ALLOWING DEPRECIATION ON E NERGY SAVING FURNACE AT HIGHER RATE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED TO HAVE INSTALLED A REHEATING FURNACE DURING THE YEAR AND CAPITALIZED A SUM OF RS.14,51,02,418/ - ON THAT SCORE. DEPRECIATION @ 80% WAS CLAIMED BY T REATING IT AS E NERGY SAVING DEVICE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO, WITH SOME MATHEMATICAL EXERCISE, OBSERVED THAT THERE WAS NO DEC LINE IN THE CONSUMPTION OF FUEL AND POWER BY VIRTUE O F THE INSTALLATION OF THE SAID R EHEATING FURNACE. ON BEING CALLED UPON TO EXPLAIN THE REASONS AS TO WHY DEPRECIATION ON THIS CAPITAL ASSET SHOULD NOT BE ALLOWED AT NORMAL RATE INSTEAD OF A HIGHER RATE, THE ASSESSEE REITERATED THAT THE R EHEATING FURNACE WORKS AS AN ENERGY SAVING DEVICE AND, HENCE, ELIGIBLE FOR DEPRECIATION AT A HIGHER RATE . REJECTING THE ASSESSEE S CONTENTION, THE AO DISALLOWED DEPRECIATION CLAIMED @ 40% OF THIS ASSET TO THE TUNE OF RS.7.23 CRORE AND ALLOWED @ 15% AMOUNTING TO RS.2. 71 CRORE, WHICH RESULTED INTO DISALL OWANCE IN THE CLAIM FOR DEPRECIATION TO THE EXTENT OF RS.4.52 CRORE. THE ASSESSEE CONTENDED ITA NO.5 858 /DEL/201 2 3 BEFORE THE LD. CIT(A) THAT THE ASSET INSTALLED WAS A NEW R EHEATING FURNACE WHICH WAS COMMISSIONED SOMEWHERE IN THE MONTH OF FEBRUARY/MARCH, 2009 AND, HENCE, THE DEDUCTION ON ACCOUNT OF DEPRECIATION ALLOWANCE OUGHT TO HAVE BEEN ALLOWED AT HIGHER RATE. THE LD. CIT(A) OBSERVED THAT THERE WAS NO EVIDENCE TO SUBSTANTIATE THE ASSESSEE S CLAIM ABOUT THE NEW ASSET FALLING IN THE CATEGORY OF E NERGY SAVING DEVICE. HE, T HEREFORE, REJECTED THE ASSESSEE S CONTENTION. APART FROM THAT, HE ALSO DIRECTED THE AO TO MAKE RECTIFICATION BY ALLOWING DEPRECIATION @ 7.5% INSTEAD OF 15% ALLOWED IN THE ASSESSMENT ORDER BECAUSE THE MACHINERY WAS IN USE FOR LESS THAN 180 DAYS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY DISPUTE IS ABOUT THE RATE AT WHICH DEPRECIATION SHOULD BE ALLOWED ON THE NEW ASSET. NEW APPENDIX - I TO THE INCOME - TAX RULES, EFFECTIVE FROM ASSESSMENT YEAR 2006 - 07 ONWARDS, IS A T ABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE. ITEM III OF THIS T ABLE IS MACHINERY AND P LANT PROVIDING FOR GENERAL RATE OF DEPRECIATION @ 15%. ITEM (8) UNDER THE BROADER HEAD III . MACHINERY AND P LANT HAS ITA NO.5 858 /DEL/201 2 4 THIRTEEN CLAUSES. C LAUSE (IX) IS ENERGY SAVING DEVICES. ITEM A UNDER THIS CLAUSE IS SPECIALISED BOILERS AND F URNACES WITH SUB - ITEM (B) AS F LAMELESS FURNACES AND CONTINUOUS PUSHER TYPE FURNACES WITH THE ADMISSIBLE DEPRECIATION RATE OF 80%. THE CASE OF THE ASSESSEE IS THAT A SUM OF RS.14.51 CRORE INCURRED DURING THIS YEAR IS IN RESPECT OF C ONTINUOUS PUSHER TYPE FURNACES . 5. WE FIND FROM THE ASSESSMENT ORDER THAT THE CLAIM OF THE ASSESSEE HAS BEEN REJECTED BY THE AO ON THE PREMISE THAT THERE WAS NO REDUCTION IN THE CONSUMPT ION OF FUEL AND POWER WITH THE INSTALLATION OF THIS MACHINERY. AU CONTRAIRE , I T CAN BE SEEN FROM THE IMPUGNED ORDER THAT THE ASSESSEE CATEGORICALLY STATED THAT THE REHEATING FURNACE WAS COMMISSIONED IN FEBRUARY/MARCH 2009 AND, AS SUCH, HALF OF THE ELIGIBL E DEPRECIATION RATE SHOULD BE ALLOWED AT 40%. IN OUR CONSIDERED OPINION, THE REDUCTION IN CONSUMPTION OF FUEL AND POWER WOULD BE PALPABLE ONLY FROM THE SUCCEEDING YEAR WITH THE REGULAR USE OF R EHEATING FURNACE FOR THE FULL YEAR. BE THAT AS IT MAY, W HAT IS RELEVANT FOR ALLOWING DEPRECIATION AT THE HIGHER RATE IN THE EXTANT CIRCUMSTANCES IS THAT THE ITA NO.5 858 /DEL/201 2 5 ASSET SHOULD BE IN THE NATURE OF ` ENERGY SAVING DEVICE , BEING C ONTINUOUS PUSHER TYPE FURNACE. THE FACT AS TO WHETHER THERE HAS BEEN, IN FACT, REDUCTIO N IN CONSUMPTION OF FUEL AND POWER IS SECONDARY AND NOT CONCLUSIVE IN THE DETERMINATION OF THE NATURE OF THE ASSET , BEING AN ENERGY SAVING DEVICE. UNDER SUCH CIRCUMSTANCES, THE IMPUGNED ORDER CANNOT BE UPHELD. 6. THERE IS NOTHING DECISIVE IN THE ASSESSMENT OR THE IMPUGNED ORDER TO DEMONSTRATE THAT THE ASSET IN QUESTION IS , IN FACT, AN ENERGY SAVING DEVICE, WHICH IS A PRE - REQUISITE CONDITION FOR CLAIMING DEPRECIATION AT A HIGHER RATE. ON A SPECIFIC QUERY, THE LD. AR COULD NOT FURNISH THE DETAIL OF TOTAL AMOUNT OF RS.14.51 CRORE AND ODD CLAI MED TO HAVE BEEN INCURRED ON RE HEATING FURNACE. IN OUR CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO. WE ORDER ACCO RDINGLY AND DIRECT THE AO TO VERIFY THE DETAILS OF THE TOTAL SUM CAPITALIZED AT RS.14.51 CRORE WITH A VIEW TO ASCERTAIN IF THE ENTIRE AMOUNT CAPITALIZED IS TOWARDS RE HEATING FURNACE AS CLAIMED BY THE ASSESSEE . ONCE THIS DETAIL IS CHECKED UP, THEN ITA NO.5 858 /DEL/201 2 6 THE ONUS WOULD BE ON THE ASSESSEE TO ADDUCE SOME TECHNICAL EXPERT S OPINION ETC. DIVULG ING THE TRUE NATURE OF THE ASSET PRODUCED , BEING A R EHEATING FURNACE OR OTHERWISE. THE AO, IF NOT SATISFIED WITH THE EXPERT S REPORT FURNISHED BY THE ASSESSEE , MAY A LSO SEEK AN EXPERT OPINION AT HIS OWN END. IF THE ASSESSEE S CONTENTION IS FOUND TO BE CORRECT THAT THE CAPITAL ASSET IS NOTHING BUT AN ENERGY SAVING DEVICE, THEN DEPRECIATION SHOULD BE ALLOWED AT THE HIGHER RATE. THE MERE FACT THAT THE CONSUMPTION OF FUE L AND POWER HAS NOT WITNESSED A DECLINING TREND IN THAT YEAR, CANNOT BE A CRITERIA TO JUDGE THE ALLOWABILITY OR OTHERWISE OF DEPRECIATION AT HIGHER RATE. 7 . IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES . THE ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 . 0 3 .201 5 . S D / - S D / - [ A.T. VARKEY ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 2 5 T H MARCH, 201 5 . DK ITA NO.5 858 /DEL/201 2 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.