Dhanalaxmi Iron Industries Private Limited, Hyderabad, Hyderabad V. ACIT, Circle-17(1), Hyderabad, Hyderabad

ITA 665/HYD/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8311 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-06-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K GOPALAKRISHNA
• Assessee Lawyers: SANJAY KUMAR SHARDA ARS
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 665/HYD/17 2012-13 M/S. DHANLAXMI IRON INDUSTRIES PVT. LIMITED, HYDERABAD [PAN: AABCD0679C] ASST. COMMISSIONER OF INCOME TAX, CIRCLE-17(1), HYDERABAD 1570/HYD/17 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-17(1), HYDERABAD FOR ASSESSEE : SHRI SUNIL KUMAR JAIN & SHRI SANJAY KUMAR SHARDA, ARS FOR REVENUE : SHRI K. GOPALA KRISHNA, DR DATE OF HEARING : 17-09-2018 DATE OF PRONOUNCEMENT : 03-10-2018 O R D E R PER S. RIFAUR RAHMAN, A.M. : THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)5, HYDERABAD, DATED 27-02-2017 & 27-06-201 7 FOR THE AYS. 2012-13 & 2013-14 RESPECTIVELY. SINCE THE IS SUE IS COMMON IN THESE APPEALS, WE HAVE HEARD TOGETHER AND ADJUDICATED BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, THE FACTS FOR THE AY. 2012-13 HAVE BEEN TA KEN FOR CONSIDERATION. ITA NOS. 665 & 1570/HYD/2017 :- 2 -: 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPANY , DHANLAXMI IRON INDUSTRIES PRIVATE LIMITED HAVING ITS REGISTERED OFFICE AT D.NO. 15-9-358/9, MUKTYARGUNJ, HYDERABAD IS ENGAGED IN THE BUSINESS OF MANUFACTURING CTD/TMT BAR S. IN ASSESSING THE TOTAL INCOME FOR THE AY. 2012-13, THE ASSE SSING OFFICER HAS MADE THE FOLLOWING ADDITIONS: I. ASSESSING OFFICER HAS DISALLOWED ADDITIONAL DEPRECIA TION CLAIMED ON PLANT & MACHINERY TO THE EXTENT OF RS. 14,00,891/-; II. ASSESSING OFFICER HAS DISALLOWED WORK EXECUTION EXPE NSES TO THE EXTENT OF RS. 5,14,596/-; 2.1. AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). AFTER ANA LYSING THE FACTS OF THE CASE AND GROUNDS OF APPEAL RAISED BY ASS ESSEE, CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 2.2. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE ASSESS EE FILED AN APPEAL BEFORE US WITH THE FOLLOWING GROUND(S) OF APPEAL: 1. IN COMPUTING THE TOTAL INCOME FOR THE A.Y. 2012-13, A. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF ADDITIONAL DEPRECIATI ON MADE BY THE ASSESSING OFFICER ON PLANT & MACHINERY TO THE E XTENT OF RS. 14,00,891/-; GROUND NO. 2 IS GENERAL IN NATURE. ITA NOS. 665 & 1570/HYD/2017 :- 3 -: 3. LD.AR SUBMITTED THAT ASSESSEE HAS CLAIMED REGULAR DEPRECIATION U/S. 32 AND ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE INCOME TAX ACT [ACT]. IN THE DEPRECIATION SCHEDU LE AS PER INCOME TAX RULES, THESE NEW ASSETS WERE PURCHASED DURING THE YEAR AND INSTALLED AS NEW MACHINERY AND THE ASSES SING OFFICER HAS ACCEPTED THE ADDITION ON THE NEW MACHINERY AND ALLOWED THE REGULAR DEPRECIATION U/S. 32, BUT REFUSED TO ALLOW THE ADDITIONAL DEPRECIATION AS THE ADDITION OF NEW PLA NT & MACHINERY DURING THIS ASSESSMENT YEAR IS NOTHING BUT PA RTS AND SPARES OF PLANT & MACHINERY. HE SUBMITTED THAT ALL THE BILLS AND VOUCHERS RELATING TO THE ABOVE ADDITIONS WERE ALREADY SUBMITTED BEFORE THE ASSESSING OFFICER. 3.1. FURTHER, HE SUBMITTED THAT LD.CIT(A) VERIFIED ALL TH E SUBMISSIONS SUBMITTED BY THE ASSESSEE AND HE HIMSELF I N HIS ORDER EXPRESSED CONTRADICTORY VIEW AT PG. NO.8 OF HIS ORDER. HE MENTIONED THAT THERE CAN BE NO DISPUTE THAT THE ORDINARY MEANING OF MACHINERY INCLUDES THE WORKING PARTS O F MACHINERY WHICH ARE UTILISED OR THE COMPONENT PART OF A MACHI NERY OR PLANT. BUT THAT IS NOT DECISIVE OF THE MATTER, SINCE WE HA VE TO CONSTRUE THE WORD WITH REFERENCE TO THE LANGUAGE OF THE CLAU SES AND THE SCHEME OF THE SECTION. WITH REGARD TO CLAUSE (IIA) , THERE ARE ALSO CERTAIN SIGNIFICANT FEATURES WHICH SUPPORT THE OPIN ION THAT THE ADDITIONAL DEPRECIATION ALLOWANCES ARE NOT PERMISSI BLE IN REGARD TO PARTS OF A MACHINERY. ACCORDINGLY, HE UPHELD THE VIEW OF THE ASSESSING OFFICER BY THE FOLLOWING WORDS: IN ORDER THAT ADDITIONAL DEPRECIATION SHOULD BE AL LOWABLE ON PLANT AND MACHINERY, IT MUST BE A SELF-CONTAINED UNIT CAP ABLE OF BEING PUT ITA NOS. 665 & 1570/HYD/2017 :- 4 -: TO USE IN THE BUSINESS, PROFESSION OR VOCATION FOR THE BENEFIT OF WHICH IT IS INSTALLED. 3.2. SINCE THE LD.CIT(A) BROUGHT ON RECORD A NEW DEFI NITION THAT THE ADDITIONAL DEPRECIATION CAN BE ALLOWED ONLY ON SELF- CONTAINED UNIT, CAPABLE OF BEING PUT TO USE IN THE BUSIN ESS. IN THIS REGARD, HE RELIED ON THE FOLLOWING CASE LAW TO SU PPORT THE VIEW THAT THE SPARE PARTS ALSO FORMING PART OF THE ADDITI ONS MADE TO THE MACHINERY. I. MRS. GEORGE MATHEW VS. CIT [43 ITR 535] (1961) (KERA LA HIGH COURT); II. MANGALORE GANESH BEEDI WORKS VS. CIT [52 ITR 615] (MYSORE HIGH COURT); 4. ON THE OTHER HAND, LD.DR RELIED ON THE ORDERS OF TH E REVENUE AUTHORITIES AND IN PARTICULAR, HE SUBMITTED THAT LD.CIT(A) HAS CLEARLY INDICATED THAT THE ADDITIONS WERE NOTHING BUT SPARE PARTS. ASSESSEE CANNOT CLAIM ADDITIONAL DEPR ECIATION ON SPARE PARTS. 5. CONSIDERED THE RIVAL SUBMISSIONS AND FACTS ON RECO RD. WE NOTICED THAT THE ASSESSEE HAS PURCHASED NEW MACHINERY AND CLAIMED DEPRECIATION AND ADDITIONAL DEPRECIATION DURIN G THIS ASSESSMENT YEAR. THE ASSESSING OFFICER AND LD.CIT(A ) HAS NO ISSUE WITH ALLOWING THE REGULAR DEPRECIATION U/S. 32 O F THE ACT, WHEREAS THE SAME ADDITIONS WERE NOT ACCEPTED TO ALLOW THE ADDITIONAL DEPRECIATION. LD.CIT(A) HAS DISTINGUISHED THE DEFINITION OF THE PLANT & MACHINERY TO SAY THAT TO CLAI M THE ADDITIONAL DEPRECIATION, THE PLANT & MACHINERY MUST BE A ITA NOS. 665 & 1570/HYD/2017 :- 5 -: SELF-CONTAINED UNIT, CAPABLE OF BEING PUT TO USE IN THE BUSINESS, PROFESSION OR OCCASION FOR THE BENEFIT OF W HICH IT IS INSTALLED. HE CONCLUDED THAT THE ADDITIONS WERE NOTHING BUT SPARE PARTS, WHEREAS HE ALSO ALLOWED THE REGULAR DEPR ECIATION U/S. 32 ON THE SAME ADDITION, WHICH MAY COMPRISE ALL SPARE PARTS. IN OUR CONSIDERED OPINION, THERE IS ONLY ONE DEFINITION GIVEN UNDER THE INCOME TAX ACT RELEVANT TO PLANT & MAC HINERY. THERE CANNOT BE TWO SEPARATE SET OF DEFINITIONS TO CLA IM THE REGULAR DEPRECIATION AS WELL AS THE ADDITIONAL DEPRECI ATION. WHEN TAX AUTHORITIES INTEND TO DISALLOW THE SET OF ASSETS , TREATING THE SAME AS NOT ELIGIBLE TO CLAIM ADDITIONAL DEPRECIATION, THEY CANNOT ALLOW REGULAR DEPRECIATION. IN OUR VIEW, LD.CIT(A) CANNOT BRING IN A NEW SET OF DEFINITI ON TO DISALLOW THE ADDITIONAL DEPRECIATION AND ALLOW REGULA R DEPRECIATION. WE ARE IN AGREEMENT WITH THE LD.AR THAT T HE ADDITIONS MADE TO PLANT & MACHINERY WHICH ARE ROLLS A ND ENERGY SAVING DEVICES, WHICH CAN BE CLASSIFIED AS S ELF-CONTAINED UNITS, WHICH CAN BE INSTALLED INDEPENDENTLY AND ALSO H E BROUGHT TO OUR NOTICE, RATES OF DEPRECIATION CHART WHI CH HAS A SEPARATE CLASSIFICATION FOR IRON AND STEEL INDUSTRY - ROLLING MILL ROLLS AND ENERGY SAVING DEVICES. THEREFORE, ASSESSEE CANN OT BE DENIED THE BENEFIT OF CLAIMING ADDITIONAL DEPRECIATION ON THE SAME MACHINERY WHEN THE SAME MACHINERY IS ACCEPTED A S ADDITIONS DURING THE YEAR AND ALLOWED THE REGULAR DEPR ECIATION AND DENIED THE ADDITIONAL DEPRECIATION. THEREFORE, WE ALLOW THE ADDITIONAL DEPRECIATION CLAIMED BY ASSESSEE DURING THI S ASSESSMENT YEAR. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER ITA NOS. 665 & 1570/HYD/2017 :- 6 -: TO ALLOW THE ADDITIONAL DEPRECIATION AND SET ASIDE THE O RDER OF THE LD.CIT(A). GROUND OF APPEAL IN THIS REGARD IS AL LOWED. 5.1. COMING TO THE APPEAL FOR THE AY. 2013-14, SINCE FACTS ARE ALSO IDENTICAL, AS DISCUSSED IN THE EARLIER PARAGRAPH S HEREIN ABOVE AND AS PER THE DIRECTIONS GIVEN FOR THE AY.2012- 13, THE APPEAL FOR THE AY. 2013-14 IS ALSO ALLOWED. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD OCTOBER, 2018 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMA N) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 3 RD OCTOBER, 2018 TNMM ITA NOS. 665 & 1570/HYD/2017 :- 7 -: COPY TO : 1. M/S. DHANLAXMI IRON INDUSTRIES PVT. LIMITED, 15-9-358/9, MUKTYAR GUNJ, HYDERABAD. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE-17(1), HYDERABAD. 3. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-17(1), HYDERABAD. 4. CIT(APPEALS)-5, HYDERABAD. 5. PR.CIT-5, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.