Central UP Gas Limited, Kanpur V. Joint Commissioner of Income Tax, Special Range, Kanpur

ITA 64/LKW/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0883 (ITAT-LUCKNOW)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation

Judgement Text

I.T.A. NO.64/LKW/2018 ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.64/LKW/2018 ASSESSMENT YEAR:2013-14 M/S CENTRAL UP GAS LIMITED, 7 TH FLOOR, UPSIDC COMPLEX, A-1/4, LAKHANPUR, KANPUR. PAN:AACCC 5883 A VS. JT.C.I.T., SPECIAL RANGE, KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LEARNED CIT(A)-III, KANPUR DATED 28/11/2017 PERTAINING TO A SSESSMENT YEAR 2013- 2014. THE ONLY ISSUE RAISED IN THIS APPEAL IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAS CONFIRMED THE DISALLOWANCE OF RS.6, 52.960/- WHICH THE ASSESSEE HAD CLAIMED AS ADDITIONAL DEPRECIATION WH ICH THE ASSESSING OFFICER HAD DENIED BY HOLDING THAT THE ASSESSEE WAS NOT ENG AGED IN THE MANUFACTURING OF CNG. LEARNED A. R., AT THE OUTSET , SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE E ARLIER ORDER OF HON'BLE TRIBUNAL FOR THE ASSESSMENT YEAR 2010-11 WHEREIN TH E HON'BLE TRIBUNAL FOLLOWING THE ORDERS OF HON'BLE HIGH COURT HAD DECI DED THE ISSUE IN FAVOUR OF THE ASSESSEE. APPELLANT BY SHRI SAURABH GUPTA, DY. MANAGER (F&A) RESPONDENT BY S HRI C. K. SINGH, D. R. DATE OF HEARING 12/11/2018 DATE OF PRONOUNCEMENT 16 / 11 /201 8 I.T.A. NO.64/LKW/2018 ASSESSMENT YEAR:2013-14 2 2. LEARNED D. R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSEE IS A PUBL IC LIMITED COMPANY PROMOTED JOINTLY BY BPCL AND GAIL AND IT IS ENGAGED IN THE BUSINESS ACTIVITIES OF COMPRESSING AND SELLING OF NATURAL GA S. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION TO THE EXTENT OF RS .6,52,960/-. THE ASSESSING OFFICER RELYING ON THE ORDER OF THE TRIBU NAL FOR ASSESSMENT YEAR 2008-09 DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIA TION. HOWEVER, WE FIND THAT THE ORDER OF THE TRIBUNAL DISALLOWING THE CLAI M OF ADDITIONAL DEPRECIATION TO THE ASSESSEE HAS BEEN OVERRULED BY HON'BLE ALLAH ABAD HIGH COURT AND FOLLOWING THE JUDGMENT OF HON'BLE ALLAHABAD HIGH CO URT FOR ASSESSMENT YEAR 2008-09, THE HON'BLE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2010-11 HAS ALL OWED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS ACTIVITIES OF COMPRESSING A ND SELLING OF CNG AND PIPED NATURAL GAS AND HAD CLAIMED ADDITIONA L DEPRECIATION AGAINST THE INVESTMENT IN NEW PLANT & MACHINERY. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION BY HOLDING THAT THE ASSESSE E WAS NOT ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF ANY ARTICLE OR THING AND HAS FURTHER HELD THAT IN ASSES SEES OWN CASE FOR ASSESSMENT YEAR 2008-09 THE CIT(A) HAS CONFIRME D THE DISALLOWANCE MADE ON THE SAME ISSUE. THE CIT(A) HA S ALSO UPHELD THE DECISION OF ASSESSING OFFICER RELYING ON HIS OWN ORDER. HOWEVER, HON'BLE ALLAHABAD HIGH COURT VIDE ITS JUDGMENT DATED 08/12/2016 IN THE CASE OF THE ASSESS EE ITSELF FOR ASSESSMENT YEAR 2008-09 HAS HELD THAT ASSESSEE WAS ENGAGED IN THE MANUFACTURING PROCESS AND THEREFORE, IT ANSWERED THE QUESTION IN FAVOUR OF ASSESSEE. THE F INDINGS OF HON'BLE COURT ARE REPRODUCED BELOW: I.T.A. NO.64/LKW/2018 ASSESSMENT YEAR:2013-14 3 FROM A READING OF THE FACTS ABOVE AND THE TRIBUNAL 'S ORDER AND OTHER MATERIAL ON RECORD, IT COMES TO THE FORE THAT NATURAL GAS WHICH COMES THROUGH PIPELINES IN I TS NATURAL FORM CANNOT BE USED FOR THE SAME PURPOSES A S COMPRESSED NATURAL GAS THAT IS TO BE USED AS AUTOMO BILE FUEL. THE APPELLANT ON THE OTHER HAND CONTENDS THAT IT IS MANUFACTURED COMPRESSED NATURAL GAS WHICH IS USED F OR THE AUTOMOBILE FUEL, WHICH IS PREPARED BY A PROCESS OF MANUFACTURE, BY WHICH THE NATURAL GAS IS PUT THROUG H A PLANT/MACHINERY FOR COMPRESSION AND WHEN THE COMPRESSED GAS COMES OUT IN ITS NEW FORM IT IS USED FOR THE AUTOMOBILE FUEL. AFTER UNDERGOING THE PROCESS OF COMPRESSION, NATURA L GAS ACQUIRES A NEW FORM BY THE NAME OF COMPRESSED NATUR AL GAS. IT HAS A DISTINCT USE AS AUTOMOBILE FUEL AND A DIST INCT COMMERCIAL NAME. THE PROVISIONS OF SECTION 2 (29BA) DEFINES 'MANUFACTURE 1 AS HEREUNDER: '(29BA)- MANUFACTURE WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR ARTICLE OR THING- (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USED; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICA L COMPOSITION OR INTEGRAL STRUCTURE;' LEARNED COUNSEL FOR THE APPELLANT HAS PLACED RELIAN CE ON THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INCO ME TAX OFFICER VSARIHANT TILES AND MARBLES P. LTD. REP ORTED IN 2010 320 ITR 79 (SC) IN SUPPORT OF HIS CASE. ON THE FACE OF IT, IT APPEARS THAT COMPRESSED NATUR AL GAS IS A COMMODITY HAVING A DISTINCT NAME, CHARACTER AN D USE AND THEREFORE, THE TEST TO DETERMINE WHETHER 'MANUFACTURE' HAS TAKEN PLACE IS SATISFIED. I.T.A. NO.64/LKW/2018 ASSESSMENT YEAR:2013-14 4 WITHOUT UNDERGOING THE PROCESS OF COMPRESSION NATUR AL GAS IN ITS ORIGINAL FORM CANNOT BE USED AS FUEL FOR THE AUTOMOBILE INDUSTRY. IT IS ONLY UPON UNDERGOING THE PROCESS OF COMPRESSION, IT IS CONVERTED INTO COMPRE SSED NATURAL GAS WHICH IS A COMMODITY, TO BE USED AS A F UEL FOR THE AUTOMOBILE INDUSTRY. THE TRIBUNAL HAS FAILED TO DISCUSS THIS ASPECT OF T HE MATTER COMPLETELY AND HAS IGNORED THE MATERIAL PLAC ED BY THE APPELLANT ON RECORD WHEREBY IT HAS SOUGHT TO SH OW THAT THE ENTIRE PROCESS BY WHICH NATURAL GAS IS COMPRESSED AND HAVING BEEN COMPRESSED ACQUIRES A NE W AND CHANGED NAME OF COMPRESSED NATURAL GAS ACQUIRES A NEW USE AND A DISTINCT COMMERCIAL IDENTITY. HAVING HEARD LEARNED COUNSEL FOR BOTH SIDES, WE ARE SATISFIED THAT COMPRESSED NATURAL GAS IN ITS COMPRE SSED FORM HAS A DISTINCT IDENTITY AND CHARACTER AND USE. IT IS SETTLED LAW OF THE APEX COURT AS WELL AS OF THIS CO URT THAT WHEN A COMMODITY ACQUIRES A DISTINCT NAME, USE AND COMMERCIAL IDENTITY, IT WOULD ACQUIRE THE TRAIT OF 'MANUFACTURE. IN VIEW OF ABOVE, THE QUESTION IS ANSWERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4.1 RESPECTFULLY FOLLOWING THE ABOVE ORDER OF HON'B LE HIGH COURT, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. 4. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF HON'BL E TRIBUNAL, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 16/11 /2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:16/11/2018 *SINGH I.T.A. NO.64/LKW/2018 ASSESSMENT YEAR:2013-14 5 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