M/S COLD STEEL CORPORATION, ALWAR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, ALWAR

ITA 687/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1825 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NO. 687/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 M/S COLD STEEL CORPORATION, E-39A, M.I.A., ALWAR. CUKE VS. D.C.I.T., CIRCLE-1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAFC 6767 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/12/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 15/12/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A), ALWAR DATED 24/07/2017 FOR THE A.Y. 2 009-10. 2. THE ASSESSING OFFICER MADE ADDITION OF RS. 3,43,3 18/- BY DISALLOWING DEPRECIATION AND ADDITIONAL DEPRECATION ON ELECTRIC AL INSTALLATION. IT IS CLAIMED THAT THESE WERE TO RUN THE PLANT AND MACHINE RY, THEREFORE, THE DEPRECIATION SHOULD BE ALLOWED AS PROVIDED FOR PLANT AND MACHINERY IN DEPRECIATION SCHEDULE. 3. THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASS ESSEE BY HOLDING AS UNDER: ITA 687/JP/2017_ COLD STEEL CORPORATION VS DCIT 2 5.3 I HAVE CONSIDERED THE ORDER PASSED BY THE A.O. AND SUBMISSIONS FILED BY THE APPELLANT. I HAVE CONSIDERED THE FACTS OF THE CASE. THE ASSESSEE HIMSELF HAS PUT THE BLOCK OF ASSETS IN QUE STION UNDER ELECTRIC INSTALLATIONS. THE ONUS OF PROVING THAT TH E ELECTRIC INSTALLATIONS ARE PART OF PLANT AND MACHINERY LIES ON THE ASSESSEE. NEITHER AT THE ASSESSMENT LEVEL NOR AT THE APPELLAT E LEVER THE ASSESSEE HAS SUBMITTED ANY EVIDENCES TO PROVE THAT SUCH ELECTRIC INSTALLATIONS ARE PART OF PLANT AND MACHINERY. THER EFORE, THE A.O. IS JUSTIFIED IN ALLOWING THE DEPRECIATION @ 10%. ACCOR DINGLY, THE ADDITION OF RS. 3,43,318/- IS SUSTAINED AND THE APP ELLANTS GROUND OF APPEAL ON THE ISSUE IS DISMISSED. 4. BEFORE THE BENCH, THE LD AR OF THE ASSESSEE HAS SUBMITTED AS UNDER: 1. ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTU RE, SUPPLY & ERECTION OF COMPLETE STEEL STRUCTURE FOR INDUSTRIAL BUILDING. DURING THE YEAR, IT CLAIMED DEPRECIATION (INCLUDING ADDITI ONAL DEPRECIATION) OF RS.5,46,407/- ON ELECTRICAL INSTALLATION @ 15%. AO OBSERVED THAT DEPRECIATION ON ELECTRICAL INSTALLATION & FITTINGS IS ALLOWABLE @ 10% WHICH COMES TO RS.2,03,089/-. ACCORDINGLY, HE DISAL LOWED EXCESS DEPRECIATION OF RS.3,43,318/- (5,46,407-2,03,089). 2. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY HOL DING THAT THE ONUS OF PROVING THAT THE ELECTRICAL INSTALLATIONS ARE PA RT OF PLANT & MACHINERY LIES ON THE ASSESSEE. NEITHER AT THE ASSE SSMENT LEVEL NOR AT THE APPELLATE LEVEL ASSESSEE HAS SUBMITTED ANY E VIDENCE TO PROVE THAT SUCH ELECTRIC INSTALLATIONS ARE PART OF PLANT & MACHINERY. 3. FROM THE DETAILS OF ADDITION MADE TO ELECTRICAL INSTALLATION AND PHOTOCOPIES OF BILLS (PB 6-29), IT CAN BE NOTED THAT ELECTRICAL INSTALLATION COMPRISES OF HT ELECTRICAL CABLE, LT C OPPER CABLES, HT PANEL, LT PANELS, POWER CAPACITORS, TRANSFORMERS, M CBS BOXES, ITA 687/JP/2017_ COLD STEEL CORPORATION VS DCIT 3 MAIN SWITCHES, PVC WIRE, THIMBLE COPPER & WIRE, BAC K LIGHT SHEET, ETC. THESE ELECTRICAL INSTALLATIONS ARE IN CONNECTI ON WITH PLANT & MACHINERY USED FOR MANUFACTURING STEEL STRUCTURES W ITHOUT WHICH MACHINE COULD NOT RUN/FUNCTION. THESE ARE NOT ELECT RICAL FITTINGS BUT ARE ELECTRICAL INSTALLATIONS. THE DEPRECATION RATE OF 10% IS PRESCRIBED FOR FURNITURE & FITTINGS INCLUDING ELECTRICAL FITTI NGS. THIS RATE IS NOT APPLICABLE WHERE THE ELECTRICAL INSTALLATION IS WIT H REFERENCE TO THE PLANT & MACHINERY WHICH ACCORDING TO THE FUNCTIONAL TEST IS ELIGIBLE FOR THE RATE OF DEPRECIATION AS PRESCRIBED FOR PLAN T & MACHINERY, I.E. 15%. THE LD. CIT(A) IN HOLDING THAT ASSESSEE HAS NO T SUBMITTED ANY EVIDENCE TO PROVE THAT SUCH ELECTRIC INSTALLATIONS ARE PART OF PLANT & MACHINERY HAS IGNORED THE FACT THAT DURING THE YEAR UNDER CONSIDERATION THERE IS AN ADDITION OF RS. 1,21,20,2 74/- IN PLANT & MACHINERY ON WHICH ASSESSEE INCURRED EXPENDITURE OF RS. 12,80,090/- ON ELECTRICAL INSTALLATION (PB 5) AND FOR SAME THE BILLS WERE FILED BEFORE THE LOWER AUTHORITIES (PB 2). 4. IT MAY BE SUBMITTED THAT IN THE DEPRECIATION CHART AS PER BOOKS OF ACCOUNTS, ELECTRICAL INSTALLATION IS MENTIONED AS A SEPARATE ITEM WHICH IS COMING FROM EARLIER YEARS AND IN EARLIER Y EARS DEPRECIATION WAS ALLOWED @ 15%. HOWEVER, UNDER THE BLOCK CONCEPT OF DEPRECIATION, THE SAME IS MADE PART OF THE BLOCK OF PLANT & MACHINERY AND THEREFORE ALSO, ONCE THE ELECTRICAL I NSTALLATION HAS FORMED PART OF BLOCK OF PLANT & MACHINERY, IT CANNO T BE TAKEN OUT FROM THAT BLOCK. 5. RELIANCE IN THIS CONNECTION IS PLACED ON THE FOL LOWING CASES:- MADHU INDUSTRIES LTD. VS. ITO (2010) 43 DTR 23 (AHD .) (TRIB.) ELECTRICAL INSTALLATION THAT CONSISTS OF ELECTRICAL WIRES, SWITCHES, PLUGS, CABLES, MCB BOX AND ELECTRICAL ITEMS, WHICH CANNOT FUNCTION ITA 687/JP/2017_ COLD STEEL CORPORATION VS DCIT 4 INDEPENDENTLY, RATHER, THIS IS A PART OF PLANT AND MACHINERY AND IT CANNOT BE CLASSIFIED UNDER FURNITURE AND FITTINGS. THEREFORE, ASSESSEE IS ELIGIBLE FOR DEPRECIATION UNDER THE BLOCK OF PLA NT AND MACHINERY @ 25 PER CENT. CIT VS. SUBRATA DUTTA CHOUDHARY (2009) 33 DTR 259 (P&H) (HC) TRANSFORMER, CONTROL PANELS, FAX MACHINE AND CCTV SYSTEMS WHICH ARE BEING USED IN THE BUSINESS OF THE ASSESSEE ARE TO BE TREATED AS PART AND PARCEL OF PLANT AND MACHINERY AND NOT AS O FFICE FURNITURE AND THEREFORE, SAME ARE ENTITLED TO DEPRECIATION @ 25 PER CENT. CIT VS. OSWAL WOOLLEN MILLS LTD. (2006) 289 ITR 26 1 (P&H) (HC) FINDING OF FACT RECORDED BY TRIBUNAL THAT THE ELEC TRIC INSTALLATIONS IN THE FULLY FASHIONED UNIT OF THE ASSESSEE ARE INTEGR AL PART OF THE MACHINERY AND CANNOT BE SEPARATED FROM IT. THEREFOR E, DEPRECIATION IS ALLOWABLE TREATING THE ELECTRIC INSTALLATIONS AS PART OF THE MACHINERY. CIT VS. BHARAT RADIATORS PVT. LTD. (2000) 239 ITR 608 (BOM.) (HC) ASSESSEE IS ENTITLED TO INVESTMENT ALLOWANCE IN RE SPECT OF PATTERNS AND DIES AND ELECTRICAL INSTALLATIONS AS THEY FALL WITHIN THE DEFINITION OF 'PLANT'. CIT VS. TRIBENI TISSUES LTD. (1994) 206 ITR 92 (CA L.) (HC) ANY MACHINERY OR PLANT HAVING A LINK, HOWEVER MINO R, IN THE TOTAL PROCESS OF THE OPERATIONAL INTEGRATION SHOULD BE TA KEN AS MACHINERY OR PLANT PERTAINING TO THE MANUFACTURING PROCESS. M OTORS, ELECTRICAL INSTALLATIONS, UNDERGROUND CABLES, OVERHEAD CABLES AND AIR- CONDITIONING MACHINERY INSTALLED AND USED BY ASSESS EE AS INTEGRAL PARTS OF THE CHAIN OF MANUFACTURING PROCESS OF TISS UE PAPER. THESE ITA 687/JP/2017_ COLD STEEL CORPORATION VS DCIT 5 ARE THEREFORE, PART AND PARCEL OF PLANT AND MACHINE RY USED FOR MANUFACTURING TISSUE PAPER AND ENTITLED TO INVESTME NT ALLOWANCE. IN VIEW OF ABOVE, AO BE DIRECTED TO ALLOW THE DEPR ECIATION U/S 32(1) ON ELECTRICAL INSTALLATION @ 15% AND ALSO THE ADDIT IONAL DEPRECIATION U/S 32(L)(IIA). THE LD AR OF THE ASSESSEE FURTHER PLEADED THAT THESE WERE THE ELECTRIC EQUIPMENTS, WHICH WERE NECESSARY TO RUN THE PLANT AN D MACHINERY, THEREFORE, DEPRECIATION SHOULD HAVE BEEN ALLOWED AS PROVIDED FOR PLANT AND MACHINERY AND ALSO DESERVE FOR ADDITIONAL DEPRECIAT ION. 5. ON THE OTHER HAND, THE LD SR. DR HAS RELIED ON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE LD. CIT(A) HAS CATEGORICALLY MENTIONED THAT NEITHER AT THE ASSESSMENT LEVEL NOR AT THE APPELLATE LEVEL, THE ASSESSEE HAS SUBMITTED ANY EVIDENCE TO PROVE TH AT SUCH ELECTRIC INSTALLATIONS ARE PART OF PLANT & MACHINERY. THE LD AR OF THE ASSESSEE SUBMITTED THAT BILLS AND VOUCHERS HAVE BEEN SUBMITT ED IN THE PAPER BOOK AND ON THAT BASIS, THE ELECTRIC ITEMS PURCHASED MAY BE CONSIDERED FOR DECIDING THE ISSUE. 6. AFTER HEARING BOTH THE SIDES, THE BENCH IS OF TH E VIEW THAT THERE IS NO CONCRETE FINDING IN FAVOUR OF THE ASSESSEE OR AGAIN ST THE ASSESSEE WHETHER THESE ELECTRIC INSTALLATIONS WERE TO RUN THE PLANT A ND MACHINERY OR THESE WERE THE PART AND PARCEL OF THE BUILDING AS THE ASSE SSEE HAS ALSO ITA 687/JP/2017_ COLD STEEL CORPORATION VS DCIT 6 CONSTRUCTED BUILDING DURING THE YEAR, WHICH IS EVIDE NT FROM DEPRECIATION CHART AVAILABLE AT PAGE NO. 5 OF THE PAPER BOOK, TH EREFORE, TO ASCERTAIN THE CORRECT NATURE OF THESE ELECTRIC INSTALLATIONS, THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE DENOVO. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 15/12/2017. SD/- SD/- FOT; IKY JKO HKKXPAN (VIJAY PAL RAO) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15 TH DECEMBER, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S COLD STEEL CORPORATION, ALWAR. 2. IZR;FKHZ @ THE RESPONDENT- THE D.C.I.T., CIRCLE-1, ALWAR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 687/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR