JT. CIT. CIR.RG.8(2)(OSD), MUMBAI V. M/S. LOTUS ENERGY (INDIA) LTD., MUMBAI

ITA 7530/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3367 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 7530 /MUM/2011 ( / ASSESSMENT YEAR : 2006-07) JT. CIT CIR. 8(2), R. NO. 216-A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -. / V. M/S LOTUS ENERGY (INDIA) LTD., 214, LAXMI PLAZA, LAXMI INDUSTRIAL ESTATE, ANDHERI (W), MUMBAI 53. ./ PAN : AABCL 0119K ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY SHRI GANESH BARE (SR.DR) ASSESSEE BY SHRI RUSHABH MEHTA / DATE OF HEARING : 21-01-2016 / DATE OF PRONOUNCEMENT : 30-03-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 7 530/MUM/2011, IS DIRECTED AGAINST THE ORDER DATED 29-08-2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 17, MUMBAI (HEREINAFTER CA LLED THE CIT(A) ), FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE REVENUE IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING ADDITIONAL DEPRECIATION AMO UNTING TO RS. 83,55,387/- TO THE ASSESSEE WITHOUT APPRECIATING THE FAC TS OF THE CASE ITA 7530/MUM/2011 2 THAT THE PLANT AND MACHINERY WAS NOT ELIGIBLE FOR ADDITIO NAL DEPRECIATION AS THEY HAD BEEN ACQUIRED BEFORE 31/03 /2005 THEREBY VIOLATING THE CONDITION LAID DOWN IN THE RELEVANT CLA USE (IIA) OF SECTION 32 OF THE I.T. ACT, 1961. 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WITH R EGARD TO ALLOWABILITY OF ADDITIONAL DEPRECIATION AMOUNTING TO RS. 83,55,387/ - U/S 32(1) (IIA) OF THE INCOME TAX ACT, 1961(HEREINAFTER CALLED THE ACT). 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LEARNED ASSESSING OFFICER (HEREINA FTER CALLED THE A.O.) OBSERVED THAT THE ASSESSEE COMPANY HAS MADE A CLAIM FOR ALLOWABILITY OF ADDITIONAL DEPRECIATION FOR WHICH THE MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31-3-2005. HOWEVER, F ROM THE ACCOUNTS OF THE ASSESSEE COMPANY, THE AO NOTED THAT EVEN THOUGH TH E PLANT AND MACHINERY IN QUESTION WAS INSTALLED AFTER 31-3-2005, BUT A LA RGE PART OF THE ACQUISITIONS OF THE MACHINERIES WERE MADE BEFORE 31 ST MARCH 2005. THE ASSESSEE COMPANY DID NOT RESPOND TO THE SHOW CAUSE NOTICE IS SUED BY THE A.O., HENCE, THE A.O. DISALLOWED THE CLAIM OF ADDITIONAL DEPRECI ATION U/S 32(1)(IIA) OF THE ACT , AMOUNTING TO RS.83,55,387/-. 5. AGGRIEVED BY THE DECISION OF THE A.O., THE ASSES SEE COMPANY PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY I.E. TH E CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE COMPANY DID NOT DENY THAT THE COMPANY HAS STARTED INSTALLATION OF PLANT AND MACHINERY FR OM THE FINANCIAL YEAR 2004- 05, HOWEVER THE PLANT BECAME OPERATIONAL ONLY IN TH E FINANCIAL YEAR 2005-06. IN THE BALANCE SHEET FOR THE FINANCIAL YEAR 2004-05 , THE PLANT AND MACHINERY IN QUESTION WAS SHOWN UNDER THE HEAD CAPITAL WORK-I N-PROGRESS WHICH WAS EVIDENCED BY THE BALANCE SHEETS OF THE ASSESSEE CO MPANY FOR THE TWO YEARS. IT WAS FURTHER SUBMITTED BY THE ASSESSEE COMPANY BE FORE THE CIT(A) THAT THE ITA 7530/MUM/2011 3 AO HAS MISINTERPRETED THE PROVISIONS OF THE SECTION 32(1)(IIA) OF THE ACT BY HOLDING THAT BOTH THE ACQUISITION AND INSTALLATION OF PLANT AND MACHINERY SHOULD HAVE TAKEN PLACE AFTER 31-3-2005. IN THIS R EGARD , THE ASSESSEE COMPANY PLACED RELIANCE UPON THE DECISION OF AHMEDA BAD BENCH OF THE ITAT IN THE CASE OF KADILLAC CHEMICALS PVT. LTD. V. ACIT (ITA NO. 4127/AHD./2007). THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE COMPANY AND FINDINGS OF THE A.O. OBSERVED THAT THE AHMEDABAD BE NCH OF THE TRIBUNAL IN THE CASE OF KADILLAC CHEMICALS PVT. LTD. (SUPRA) OB SERVED AS UNDER:- 'WE NOTED THAT AS PER THE PROVISIONS OF THIS SECTI ON THE ASSESSEE HAS TO ACQUIRE AND INSTALL THE PLANT AND MACHINERY AFTER 31.3.2002. IF THE PLANT AND MACHINERY ARE ACQUIRED AND INSTALLED AFTER 31.3.2002, THE ASSESSEE WILL BE ENTITLED FOR THE ADDITIONAL DEPRECIATION SUBJECT TO THE FULFILLMENT OF THE COND ITIONS REGARDING THE SUBSTANTIAL EXPANSION IN THE INSTALLED CAPACITY . SINCE THE WORDS USED ARE 'ACQUIRED AND INSTALLED', THEREFORE, BOTH THE CONDITIONS MUST BE SATISFIED FOR THE CLAIM OF ADDIT IONAL DEPRECIATION. THE MACHINERIES MUST HAVE BEEN ACQUIR ED AS WELL AS INSTALLED. THE MACHINERY CAN BE SAID TO HAVE BEE N ACQUIRED AND INSTALLED AFTER 31.3.2002 IF THE MACHINERY IS I NSTALLED AFTER 31.3.2002. THERE IS NO DISPUTE SO FAR AS THE MACHIN ERY WORTH RS. 98,67,031/ ARE CONCERNED. THE MACHINERY HAS BEEN PU RCHASED BY THE ASSESSEE AFTER 31.3.2002 AND INSTALLED AFTER 31.3.2002. THE MACHINERY OF RS. 75,44,577/- THOUGH PURCHASED B Y THE ASSESSEE BEFORE 31.3.2002 BUT SINCE INSTALLED AFTER 31.3.2002, THE LAST CONDITION OF INSTALLATION OF THE MACHINERY IS COMPLIED WITH ONLY AFTER 31.3.2002 AND, THEREFORE, IN OUR OPINION , THE ASSESSEE WILL BE ENTITLED FOR THE ADDITIONAL DEPRECIATION.' SINCE THE FACTS AND CIRCUMSTANCES IN THE INSTANT CA SE ARE SIMILAR, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF KADILLA C CHEMICALS PVT. LTD. (SUPRA), THE CIT(A) DIRECTED THE A.O. TO ALLOW CLAI M OF ADDITIONAL DEPRECIATION OF THE ASSESSEE COMPANY AMOUNTING TO RS. 83,55,387/ - U/S 32(1) (IIA) OF THE ACT. ITA 7530/MUM/2011 4 THE CIT(A) HELD THAT THE PROVISIONS OF SECTION 32(I IA) OF THE ACT, AS AMENDED BY FINANCE ACT, 2005, ARE PARI-PASSU TO THE PRE-AME NDED PROVISIONS, AS FAR AS THE CONDITION OF 'ACQUIRED AND INSTALLED' IS CONCER NED. ONLY THE DATE OF ACQUIRED AND INSTALLED HAS CHANGED FROM 31.3.2002 T O 31.3.2005. IN THE CIRCUMSTANCES, THE RATIO OF THE ABOVE CITED DECISIO N, IN THE ABSENCE OF ANY CONTRADICTORY DECISION IS BINDING AND HAS TO BE FOL LOWED. THUS, CIT (A) VIDE ORDERS DATED 29-08-2011 ALLOWED THE APPEAL OF THE A SSESEE COMPANY. 7.AGGRIEVED BY THE ORDERS DATED 29-08-2011 OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. D.R. SUBMITTED THAT AS PER PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT, THE NEW PLANT AND MACHINERY ARE REQUIRED TO BE ACQUIRED AND INSTALLED AFTER 31-3-2005 , AS IN THE INSTANT THE SAME WAS AL SO ACQUIRED PRIOR TO 31-03- 2005 BUT INSTALLED AFTER 31-3-2005, HENCE, ADDITION AL DEPRECIATION WAS NOT ALLOWABLE BECAUSE THE CONDITIONS STIPULATED U/S 32( 1)(IIA) OF THE ACT WITH RESPECT TO ACQUISITION OF NEW PLANT AND MACHINERIES PRIOR TO 31-03-2005 IS NOT FULFILLED BY THE ASSESSEE COMPANY , AS BOTH THE CONDITIONS SHOULD BE FULFILLED SIMULTANEOUSLY THAT THE ASSESSEE COMPANY SHOULD ACQUIRE THE NEW PLANT AND MACHINERY AFTER 31-03-2005 AND ALSO INSTA LLED THE SAME AFTER 31- 03-2005 , BUT IN THE INSTANT CASE THE ASSESSEE COMP ANY HAS ACQUIRED THE NEW PLANT AND MACHINERY PARTLY BEFORE 31-03-2005 AND PA RTLY AFTER 31-03-2005, ALTHOUGH SAID NEW PLANT AND MACHINERIES WERE INSTAL LED AFTER 31-03-2005 AND IN THIS CASE, THE A.O. HAS RIGHTLY DISALLOWED THE A DDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY. LD. DR RELIED UPON DECISION OF DELHI BENCHES OF TRIBUNAL IN THE CASE OF INTERNATIONAL CA RS AND MOTORS LIMITED V. ITO IN ITA NO. 860/DEL/2012 , ORDERS DATED 21-12-20 12 9. THE LD. COUNSEL FOR THE ASSESSEE COMPANY, ON THE OTHER HAND, SUBMITTED THAT THE FINANCE BILL 2005 CLEARLY STIPULATES THAT SECTION 32(1)(IIA) OF THE ACT IS ITA 7530/MUM/2011 5 AMENDED IN ORDER TO ENCOURAGE INVESTMENT , THE INIT IAL DEPRECIATION ON NEW MACHINERY AND PLANT WAS PROPOSED TO INCREASE TO 20% , FROM THE EXISTING LEVEL OF 15%. THUS, THERE WAS ALREADY PROVISION IN THE A CT FOR GRANTING ADDITIONAL DEPRECIATION AND AMENDED PROVISION BROUGHT TO ENCOU RAGE NEW INVESTMENT, THE INITIAL DEPRECIATION ON NEW MACHINERY AND PLANT WAS PROPOSED TO BE INCREASED TO 20 PER CENT FROM THE EXISTING LEVEL OF 15 PERCENT AND CONSEQUENTLY THE INITIAL DEPRECIATION WILL BE AVAIL ABLE TO ALL NEW PLANT AND MACHINERIES EXCEPT THOSE REFERRED TO IN THE PROVISO TO CLAUSE (IIA) OF SECTION 32 OF THE ACT. THE REQUIREMENT OF CREATING A MINIMUM I NCREASE OF 10% IN INSTALLED CAPACITY FOR AVAILING THE INITIAL DEPRECI ATION WAS PROPOSED TO BE ELIMINATED. THE LD. COUNSEL ALSO SUBMITTED THAT THE NEW PLANT AND MACHINERIES WERE PURCHASED PRIOR TO 31-03-2005 AS A LSO AFTER 31-03-2005 FOR WHICH DETAILS SUCH AS AUDITED ACCOUNTS, COPIES OF L EDGER ACCOUNTS ARE PLACED IN THE PAPER BOOK FILED WITH THE TRIBUNAL TO SUBSTA NTIATE THE SAME. IT IS SUBMITTED BY THE LD COUNSEL THAT THE INSTALLATION OF THE PLANT AND MACHINERY WHICH STARTED IN FINANCIAL YEAR 2004-05 WAS FINALL Y COMPLETED AFTER 31-03- 2005 AND COMMERCIAL PRODUCTION STARTED AFTER 31-3-2 005 WHICH WAS EVIDENT FROM THE AUDITED ACCOUNTS FOR THE YEAR ENDED 31-03- 2005 AND 31-03-2006, WHICH IS ALSO AN ADMITTED POSITION BY THE REVENUE. THE LD. COUNSEL DREW OUR ATTENTION TO THE AUDITED ACCOUNTS ENDING 31-03-2005 AND 31-3-2006 TO SUBSTANTIATE HIS CONTENTIONS THAT PLANT AND MACHINE RIES WERE ACQUIRED PRIOR TO 31-03-2005 AS ALSO POST 31-03-2005 BUT THE INSTA LLATION OF NEW PLANT AND MACHINERIES WHICH COMMENCED IN FINANCIAL YEAR 2004- 05 WAS COMPLETED AFTER 31-3-2005 AND COMMERCIAL PRODUCTION STARTED POST 31 -03-2005 . THE LD COUNSEL PRAYED THAT THE CLAIM OF ADDITIONAL DEPREC IATION SHOULD BE ALLOWED. THE LD COUNSEL RELIED UPON DECISION OF MUMBAI BENCH ES OF THE TRIBUNAL IN THE CASE OF EURO PRATIK ISPAT PRIVATE LIMITED V. ACIT I N ITA NO 1682/MUM/2011 , VIDE ORDERS DATED 02-04-2014. ITA 7530/MUM/2011 6 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT SECTION 32(1)(IIA) OF THE ACT WAS AMENDED BY FINANCE ACT, 2005 . IT IS STATED IN THE MEMORANDUM TO THE FINANCE BILL 2005 THAT THE PROVISIONS ARE AMENDED I N ORDER TO ENCOURAGE NEW INVESTMENT, THE INITIAL DEPRECIATION ON NEW MACHINE RY AND PLANT WAS PROPOSED TO BE INCREASED TO 20 PER CENT FROM THE EX ISTING LEVEL OF 15 PERCENT AND CONSEQUENTLY THE INITIAL DEPRECIATION WILL BE A VAILABLE TO ALL NEW PLANT AND MACHINERIES EXCEPT THOSE REFERRED TO IN THE PROVISO TO THE CLAUSE (IIA) OF SECTION 32 OF THE ACT. THE REQUIREMENT OF CREATIN G A MINIMUM INCREASE OF 10 PERCENT IN INSTALLED CAPACITY FOR AVAILING THE INIT IAL DEPRECIATION IS ALSO PROPOSED TO BE ELIMINATED. WE HAVE ALSO OBSERVED T HAT SECTION 32(1)(IIA) OF THE ACT STIPULATES THAT NEW MACHINERY AND PLANT SHO ULD BE ACQUIRED AND INSTALLED AFTER 31-3-2005 BY AN TAX-PAYER AND A FU RTHER SUM EQUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLA NT SHALL BE ALLOWED AS DEDUCTION. PROVISIONS OF SECTION 32(1)(II) OF THE ACT ARE A PI ECE OF BENEFICIAL LEGISLATION BEING INCENTIVE PROVISION IS A PIECE OF BENEFICIAL LEGISLATION IS TO BE LIBERALLY CONSTRUED TO GRANT THE BENEFIT TO THE TAX-PAYER TO FULFILL THE MANDATE OF LEGISLATION WHICH IS TO PROMOTE INVESTMENT IN BUSIN ESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINE SS OF GENERATION OR GENERATION OR DISTRIBUTION OF POWER, RATHER THAN I N THE MANNER WHICH MAY FRUSTRATE THE OBJECT . REFERENCE CAN BE DRAWN TO TH E FOLLOWING OBSERVATIONS OF HONBLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LI MITED V. CIT (1992) 196 ITR 188(SC) : THE PROVISION IN A TAXING STATUTE GRANTING INCENTI VES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALL Y; SINCE THE PROVISION FOR PROMOTING ECONOMIC GROWTH HAS TO BE I NTERPRETED LIBERALLY , ITA 7530/MUM/2011 7 RESTRICTIONS ON IT TOO HAS TO BE CONSTRUED SO AS T O ADVANCE THE OBJECTIVE OF THE PROVISIONS AND NOT TO FRUSTRATE IT. THE WORDS USED U/S 32(1)(IIA) OF THE ACT ARE ACQUI RED AND INSTALLED AFTER 31 ST DAY OF MARCH 2005. THE ASSESSEE COMPANY DID PURCHA SED NEW MACHINERIES AND PLANT PRIOR TO 31-03-2005 AS WELL AFTER 31-03-2 005 FOR THE COKE PRODUCTION PLANT BEING SET UP BY THE ASSESSEE COMPA NY BUT THE INSTALLATION OF THE ENTIRE NEW PLANT AND MACHINERIES AS AN INTEGRA TED ACTIVITY FOR SETTING UP INDUSTRIAL PROJECT FOR COKE PRODUCTION PLANT WHICH STARTED IN FINANCIAL YEAR 2004-05 WERE COMPLETED AFTER 31-03-2005 AND COMMERC IAL PRODUCTION OF THE NEW COKE PRODUCTION PLANT BEING SET UP BY THE ASSES SEE COMPANY STARTED IN APRIL 2005 I.E. IN FINANCIAL YEAR 2005-06 WHEN THE NEW COKE PRODUCTION PLANT SET UP BY THE ASSESSEE COMPANY BECAME OPERATIONAL , WHICH IS AN ADMITTED POSITION BY THE REVENUE. THE ASSESSEE COMPANY WAS I NCORPORATED ON 2 ND SEPTEMBER 2004 I.E. IN THE FINANCIAL YEAR 2004-05 , AND WAS ENGAGED IN SETTING UP NEW INDUSTRIAL UNIT BEING COKE PRODUCTIO N PLANT FOR THE SETTING UP OF WHICH NEW PLANT AND MACHINERIES WERE ACQUIRED BY THE ASSESSEE COMPANY STARTING FROM FINANCIAL YEAR 2004-05 , WHICH PROCES S OF ACQUIRING PLANT AND MACHINERIES ALSO CONTINUED IN THE FINANCIAL YEAR 20 05-06 AS AN INTEGRATED ACTIVITY WITH THE SOLE AND COMMON OBJECTIVE FOR SET TING UP NEW INDUSTRIAL UNIT OF COKE PRODUCTION PLANT AND FINALLY CONCLUDED WITH THE COMPLETION OF INSTALLATION OF THE SAID NEW PLANT AND MACHINERIES IN APRIL 2005 AND COMMENCEMENT OF THE COMMERCIAL PRODUCTION OF LAM CO KE IN APRIL 2005 I.E. FINANCIAL YEAR 2005-06 WHEN NEW COKE PRODUCTION PLA NT BECAME OPERATIONAL. ONCE A NEW INDUSTRIAL PROJECT IS INITIATED BY AN EN TERPRISE TO BE SET UP, THEN THE ENTIRE COMPOSITE PLANT AND MACHINERIES WHICH AR E ACQUIRED AND INSTALLED ARE AN INTEGRATED ACTIVITIES AS THE SAID PLANT AND MACHINERIES CAN ONLY FUNCTION WHEN THEY ARE INTEGRATED TOGETHER AS PER T ECHNICAL REQUIREMENTS AND SPECIFICATIONS WHICH CAN THERE-AFTER LEAD TO SUCCES SFUL COMMISSIONING OF THE PROJECT TO PRODUCE OR MANUFACTURE THE DESIRED PRODU CTS/ARTICLES. THE PLANT ITA 7530/MUM/2011 8 AND MACHINERIES SO ACQUIRED CANNOT BE VISUALIZED AN D SEEN IN THE INDIVIDUAL AND ITEMIZED CONTEXT AS THEY ARE IN-CAPABLE OF PROD UCTION OR MANUFACTURE OF DESIRED PRODUCTS/ARTICLES UNLESS THESE ITEMIZED PLA NT AND MACHINERIES ARE INTEGRATED TOGETHER AS PER TECHNICAL REQUIREMENTS A ND SPECIFICATIONS TO ACHIEVE THE MANUFACTURING OR PRODUCTION OF DESIRED PRODUCTS . SINCE, THE ASSESSEE COMPANY WAS ENGAGED IN SETTING UP NEW COKE PRODUCTION PLANT WHICH ACTIVITY OF SETTING UP NEW INDUSTRIAL UNIT ST ARTED IN FINANCIAL YEAR 2004- 05 AND CONCLUDED IN FINANCIAL YEAR 2005-06, THE ENT IRE SET OF NEW MACHINERIES AND PLANT WERE ACQUIRED BY THE ASSESSEE COMPANY AS AN INTEGRATED ACTIVITY WITH THE SOLE AND COMMON OBJECTIVE TOWARDS THE SETT ING UP OF NEW COKE PRODUCTION PLANT WHICH WAS CARRIED OUT IN FINANCIAL YEAR 2004-05 AND IN FINANCIAL YEAR 2005-06 , WITH THE INSTALLATION OF S AID NEW PLANT AND MACHINERIES GETTING COMPLETED IN APRIL 2005 WITH TH E COMMENCEMENT OF COMMERCIAL PRODUCTION OF LAM COKE IN APRIL 2005 WHE N THE SAID NEW PLANT BECAME OPERATIONAL AND ACQUISITION OF SAID MACHINER IES AND PLANT CANNOT BE SEEN AND VISUALIZED IN ITEMIZED MANNER AS UNLESS TH ESE NEW PLANT AND MACHINERIES ARE INTEGRATED TOGETHER THEY WILL NOT A CHIEVE THE DESIRED RESULTS. THE ASSESSEE COMPANY HAS FINALLY INSTALLED THE ENTI RE NEW PLANT AND MACHINERIES IN APRIL 2005 I.E. AFTER 31-3-2005 AND ASSESSEE COMPANY IS ENTITLED TO THE BENEFIT U/S 32(1)(IIA) OF THE ACT F OR CLAIMING ADDITIONAL DEPRECIATION IN THE IMPUGNED ASSESSMENT YEAR BECAUS E WHAT IS RELEVANT IS THAT NEW MACHINERIES AND PLANT WHICH WERE ACQUIRED BEFORE 31-03-2005 AND ALSO POST 31-03-2005 WERE ALL PURCHASED AS AN INTEG RATED ACTIVITY CONNECTED WITH THE COMMON AND SOLE OBJECTIVE DIRECTED TOWARD S ACTIVITY OF THE ASSESSEE COMPANY TO SET UP NEW COKE PRODUCTION PLANT WHICH B ECOME OPERATIONAL IN FINANCIAL YEAR 2005-06 WITH COMPLETION OF INSTALLAT ION OF THESE NEW PLANT AND MACHINERIES IN APRIL 2005 WHEN ALL THESE MACHINERIE S AND PLANT WERE PUT TO USE AFTER INSTALLATION WITH START OF COMMENCEMENT O F COMMERCIAL PRODUCTION OF LAM COKE IN APRIL 2005 WHEN THE NEW COKE PRODUCT ION PLANT BECOME OPERATIONAL AND THEIR ACQUISITION WHICH CONCLUDED I N FINANCIAL YEAR 2005-06 ITA 7530/MUM/2011 9 IS TO BE SEEN IN COMPOSITE MANNER RATHER THAN IN IT EMIZED MANNER AS IN AN ITEMIZED CAPACITY SAID NEW PLANT AND MACHINERIES AR E NOT CAPABLE OF PRODUCING THE DESIRED ARTICLES /PRODUCTS BEING LAM COKE. IT IS PERTINENT TO MENTION THAT ON PERUSAL OF THE BALANCE SHEET FOR FI NANCIAL YEAR 2004-05 AND 2005-06 (PLACED IN PAPER BOOK) WILL REVEAL THAT THE ASSESSEE COMPANY HAS PURCHASED NEW PLANT AND MACHINERY IN FINANCIAL YEAR 2004-05 WHICH IS UNDISPUTED AND THE SAME WAS SHOWN IN THE BALANCE SH EET AS AT 31-03-2005 UNDER THE HEAD CAPITAL WORK IN PROGRESS AND THE S AME WAS CAPITALIZED IN FINANCIAL YEAR 2005-06 ALONG WITH THOSE NEW PLANT A ND MACHINERIES WHICH WERE ACQUIRED IN FINANCIAL YEAR 2005-06 AND THE ASS ESSEE COMPANY HAS NOT CLAIMED ANY DEPRECIATION IN THE FINANCIAL YEAR 2004 -05 ON THESE NEW PLANT AND MACHINERIES SO ACQUIRED IN FINANCIAL YEAR 2004- 05. THUS, ACQUISITION OF THE ENTIRE SET OF NEW MACHINERIES AND PLANT WHETHE R ACQUIRED PRIOR TO OR POST 31-03-2005 WAS AN INTEGRATED EVENT IN THE CHAIN OF ACTIVITY UNDERTAKEN WITH COMMON AND SOLE GOAL OF SETTING UP NEW COKE PRODUCT ION PLANT BY THE ASSSESSEE COMPANY WHICH PROCESS GOT COMPLETED IN AP RIL 2005 I.E. FINANCIAL YEAR 2005-06 WITH THE COMPLETION OF INSTALLATION OF THE ENTIRE NEW MACHINERIES AND PLANT AS COMPOSITE , SO ACQUIRED BY THE ASSESSEE COMPANY WHETHER PRE OR POST 31-03-2005 WITH THE COMMENCEMEN T OF THE PRODUCTION OF COKE PRODUCTION PLANT BECOMING OPERATIONAL IN APRIL 2005. WE FIND THAT THE CONDITIONS AS STIPULATED U/S 32(1)(IIA) OF THE ACT ARE DULY COMPLIED WITH BY THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY CANNOT BE DENIED THE BENEFIT OF THE CLAIM OF ADDITIONAL DEPRECIATION MERELY BECAUSE NEW PLANT AND MACHINERY WAS ACQUIRED PARTLY PRIOR TO 31-3-2005 AND PARTLY P OST 31-03-2005 AS THE ENTIRE ACTIVITY OF ACQUISITION OF NEW PLANT AND MAC HINERY WAS AN INTEGRATED AND COMPOSITE ACTIVITY IN THE CHAIN OF EVENTS WITH THE COMMON AND SOLE OBJECTIVE OF SETTING UP NEW COKE PRODUCTION PLANT B Y THE ASSESSEE COMPANY, AS THE INSTALLATION OF NEW MACHINERY AND PLANT WHIC H STARTED IN FINANCIAL YEAR 2004-05 GOT COMPLETED AFTER 31-3-2005 WITH THE COMM ENCEMENT OF COMMERCIAL PRODUCTION STARTING IN FINANCIAL YEAR 2 005-06 I.E. POST 31-03- ITA 7530/MUM/2011 10 2005 WITH THE PLANT BECOMING OPERATIONAL. THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE COMPANY IS ENTITLED FOR CLAIM OF ADDITIONA L DEPRECIATION U/S 32(1)(IIA) OF THE ACT AMOUNTING TO RS.83,55,387/- DURING THE A SSESSMENT YEAR 2006-07. OUR VIEW IS FORTIFIED BY THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF KADILLAC CHEMICALS PVT. LTD. (SUPRA) WH ICH OBSERVED AS UNDER:- 'WE NOTED THAT AS PER THE PROVISIONS OF THIS SECTI ON THE ASSESSEE HAS TO ACQUIRE AND INSTALL THE PLANT AND MACHINERY AFTER 31.3.2002. IF THE PLANT AND MACHINERY ARE ACQUIRED AND INSTALLED AFTER 31.3.2002, THE ASSESSEE WILL BE ENTITLED FOR THE ADDITIONAL DEPRECIATION SUBJECT TO THE FULFILLMENT OF THE COND ITIONS REGARDING THE SUBSTANTIAL EXPANSION IN THE INSTALLED CAPACITY . SINCE THE WORDS USED ARE 'ACQUIRED AND INSTALLED', THEREFORE, BOTH THE CONDITIONS MUST BE SATISFIED FOR THE CLAIM OF ADDIT IONAL DEPRECIATION. THE MACHINERIES MUST HAVE BEEN ACQUIR ED AS WELL AS INSTALLED. THE MACHINERY CAN BE SAID TO HAVE BEE N ACQUIRED AND INSTALLED AFTER 31.3.2002 IF THE MACHINERY IS I NSTALLED AFTER 31.3.2002. THERE IS NO DISPUTE SO FAR AS THE MACHIN ERY WORTH RS. 98,67,031/ ARE CONCERNED. THE MACHINERY HAS BEEN PU RCHASED BY THE ASSESSEE AFTER 31.3.2002 AND INSTALLED AFTER 31.3.2002. THE MACHINERY OF RS. 75,44,577/- THOUGH PURCHASED B Y THE ASSESSEE BEFORE 31.3.2002 BUT SINCE INSTALLED AFTER 31.3.2002, THE LAST CONDITION OF INSTALLATION OF THE MACHINERY IS COMPLIED WITH ONLY AFTER 31.3.2002 AND, THEREFORE, IN OUR OPINION , THE ASSESSEE WILL BE ENTITLED FOR THE ADDITIONAL DEPRECIATION.' RELIANCE WAS PLACED BY THE ASSESSEE COMPANY ON THE THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF EURO PR ATIK ISPAT PVT. LTD. V. ACIT IN ITA NO. 1682/MUM/2011 FOR ASSESSMENT YEAR 2 006-07 VIDE ORDERS DATED 2-4-2014 WHEREIN THE TRIBUNAL ALLOWED THE CLA IM OF THE TAX-PAYER ON IDENTICAL GROUND AS UNDER: 2.3.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL BEFORE US. EARLIER THE ADDITIONAL DEPRECIATION WAS ALLOWED IN THE CASE OF A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIOUS YE AR IN WHICH IT WOULD ITA 7530/MUM/2011 11 START MANUFACTURING OR PRODUCING ANY ARTICLE OR THI NG ON OR AFTER THE 01.04.2002 OR TO ANY INDUSTRIAL UNDERTAKING EXISTIN G BEFORE THAT DATE IF IT ACHIEVED SUBSTANTIAL EXPANSION DURING THE PREVIOUS YEAR BY WAY OF INCREASE IN ITS INSTALLED CAPACITY BY NOT LESS THAN TEN PER CENT. HOWEVER, IN ORDER TO ENCOURAGE INVESTMENT, BY INSERTING A NE W SECTION, AD WAS ALLOWED TO THE INDUSTRY ON THE CONDITION THAT THE A SSETS SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31.3.2005. IN OUR OPIN ION, PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT, DO NOT REQUIRES THAT THE P&M HAS TO BE PUT INTO USE IN THE YEAR IN WHICH IT IS ACQUIRED FOR TH E PURPOSE OF CLAIMING AD. FROM THE READING THE EXPLANATORY NOTES; WITH REGARD TO INTRODUCTION OF THE SECTION IN THE RELEVANT YEAR; IT IS EVIDENT THAT WH AT IS IMPORTANT AND MATERIAL IS THE YEAR OF ACQUISITION IN THE CASE OF SHIPS OR AIRCRAFT AND THE YEAR OF INSTALLATION IN THE CASE OF MACHINERY OR PL ANT. IF THE INSTALLATION OF A PLANT IS SPREAD OVER MORE THAN A YEAR,THE RELEVAN T YEAR FOR THE GRANT OF ALLOWANCE WOULD BE THE YEAR IN WHICH THE INSTALLATI ON IS COMPLETED.AS IN THE CASE OF INVESTMENT ALLOWANCE, SO ALSO IN THE CA SE OF AD,THE MATERIAL DATE IS THE DATE OF INSTALLATION AND NOT THE YEAR O F ACQUISITION.OUR VIEWS ARE BASED ON THE JUDGMENT OF THE HONBLE CALCUTTA H IGH COURT,DELIVERED IN THE CASE OF SURAMA TUBES(P.)LTD. (201ITR124).IN THE CASE UNDER CONSIDERATION, AD HAS BEEN DISALLOWED BY THE FAA ON THE GROUND THAT P&M WERE ACQUIRED BEFORE 31.03.2008.IN OUR OPINION MACHINERY WAS INSTALLED IN THE AY. UNDER APPEAL, THOUGH ACQUISITI ON OF THE P&M HAD STARTED IN THE EARLIER AY. TILL A MACHINE IS NOT AS SEMBLED IN A MANNER THAT IT COULD BE USED TO MANUFACTURE, IT CANNOT BE HELD THAT IT HAD BEEN INSTALLED. MERE PURCHASING OR SHIFTING IT TO FACTOR Y PREMISES IS NOT ENOUGH. ASSESSEE HAD CLAIMED AD @10%,AS THE P &M HAD WORKED FOR A PERIOD LESS THAN ONE YEAR.IT IS A COMMON PHENOMENON THAT I N BIG PROJECTS,INSTALLATION OF MACHINERY TAKES VERY LONG TIME BECAUSE OF THE SHEER VOLUME OF THE WORK TO BE CARRIED OUT.IF AN AS SESSEE IS NOT SUCCESSFUL IN INSTALLING P&M IN ONE YEAR AND CARRIE S FORWARD THE ITA 7530/MUM/2011 12 INSTALLATION WORK IN SUBSEQUENT YEAR/YEARS IT CANNO T BE DENIED ANY BENEFIT ON THE GROUND THAT IT HAD ACQUIRED THE P &M IN EARLIER YEAR.THE INTENT OF THE LEGISLATURE WAS TO ATTRACT INVESTMENT ,SO IN OUR OPINION THE SECTION CAN BE TERMED AS BENEVOLENT PROVISION.IN TH E CASE UNDER CONSIDERATION PRODUCTION STARTED FROM 01.01.2006.BE FORE THAT FABRICATION AND COMPLETION OF P&M WAS GOING ON.TREATMENT GIVEN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS TO THE P&M WAS IN ACCORDANCE WITH THE ACCOUNTING STANDARDS (AS)AND THE AO/FAA HAS NOT DENIED THE FAC T THAT THE ASSESSEE WAS FOLLOWING AS.THEREFORE,IN OUR OPINION, ASSESSEE WAS ENTITLED TO CLAIM AD @OF 10%.REVERSING THE ORDER OF THE FAA,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASS ESSEE. OUR VIEW IS FURTHER FORTIFIED BY JUDGMENT OF HONB LE CALCUTTA HIGH COURT IN THE CASE OF SURAMA TUBES(P.)LTD. 201 ITR 124(CAL. H C.), WHEREBY HONBLE CALCUTTA HIGH COURT WHILE DEALING WITH THE ALLOWABI LITY OF BENEFITS OF INVESTMENT ALLOWANCE AND ADDITIONAL DEPRECIATION HE LD AS UNDER : IF THE INSTALLATION OF A PLANT IS SPREAD OVER MORE THAN A YEAR, THE RELEVANT YEAR FOR THE GRANT OF ALLOWANCE WOULD BE T HE YEAR IN WHICH THE INSTALLATION IS COMPLETED. AS IN THE CASE OF INVEST MENT ALLOWANCE, SO ALSO IN THE CASE OF ADDITIONAL DEPRECIATION, THE MATERIA L DATE IS THE DATE OF INSTALLATION AND NOT THE YEAR OF ACQUISITION. THE T RIBUNAL CATEGORICALLY FOUND ON A PERUSAL OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEARS 1980-81 AND 1981-82 AND THE RELEVANT BALANCE-SHEETS OF THE ASSESSEE- COMPANY THAT THE MACHINES IN QUESTION WERE SHOWN AS MACHINES UNDER INSTALLATION IN THE PREVIOUS YEARS IN THE FIXED ASS ETS SCHEDULE ANNEXED TO THE BALANCE-SHEET. THESE MACHINES HAVE BEEN ONLY TR ANSFERRED TO THE MACHINES ACCOUNT DURING THE YEAR UNDER REFERENCE. N O DEPRECIATION WAS CLAIMED BY THE ASSESSEE ON THESE MACHINES AND DEPRE CIATION WAS ONLY ITA 7530/MUM/2011 13 CLAIMED ON THE MACHINES WHICH WERE SHOWN AS MACHINE S OF THE ASSESSEE IN THE FIXED ASSETS SCHEDULE. TWO THINGS WOULD, THE REFORE, BE CLEAR ; FIRSTLY, THESE MACHINES WERE NEW AND THEY WERE UNDE R INSTALLATION AND THE INSTALLATION WAS COMPLETED DURING THE YEAR UNDE R REFERENCE ; AND SECONDLY, NO DEPRECIATION WAS EVER CLAIMED BY THE A SSESSEE PRIOR TO THIS ASSESSMENT YEAR ON THESE MACHINES. THIS FINDING OF THE TRIBUNAL HAS NOT BEEN CHALLENGED. THE TRIBUNAL ALSO FOUND THAT THE M ACHINES, ALTHOUGH ACQUIRED EARLIER, COULD NOT BE INSTALLED IN VIEW OF THE CHANGE OF MANAGEMENT TWICE. THE MACHINES WERE LYING IDLE AND WERE KEPT FOR INSTALLATION AND THE INSTALLATION WAS COMPLETED IN THE YEAR UNDER REFERENCE. IN OUR VIEW, THEREFORE, NEITHER SECTION 32(1)(IIA) NOR SECTION 32A REQUIRES THAT THE MACHINERY OR PLANT HAS TO BE PUT INTO USE IN THE YEAR IN WHICH IT IS ACQUIRED FOR THE PURPOSE OF CLAIMING ADDITIONAL DEPRECIATION ALLOWANCE OR INVESTMENT ALLOWANCE. OUR ATTENTION HAS BEEN DRA WN TO THE DECISION OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CI T V. JAIDEEP INDUSTRIES [1989] 180 ITR 81 , WHERE IT HAS BEEN HELD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTION 32A, IF THE MACH INERY OR PLANT IS INSTALLED AFTER APRIL 1, 1976. FOR THE REASONS AFORESAID, WE ANSWER THE FIRST QUES TION IN THIS REFERENCE IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. THE LD DR ON THE OTHER HAND HAS RELIED UPON THE DEC ISION OF DELHI BENCHES OF THE TRIBUNAL IN THE CASE OF INTERNATIONAL CARS AND MOTORS LIMITED (SUPRA) WHICH WAS DELIVERED ON 21-12-2012 BUT IN OUR CONSID ERED VIEW , THE LATER DECISION OF JURISDICTIONAL TRIBUNAL BENCHES OF MUMB AI IN THE CASE OF EURO ITA 7530/MUM/2011 14 PRATIK ISPAT PRIVATE LIMITED(SUPRA) DELIVERED ON 02 -04-2014 , IN OUR RESPECTFUL SUBMISSION , IS TO BE PREFERRED BASED ON OUR DETAIL ED DISCUSSIONS AND REASONING KEEPING IN VIEW THE PECULIAR FACTS AND C IRCUMSTANCES IN THE CASE OF THE ASSESSEE COMPANY WHICH HAS BEEN DETAILED BY US IN PRECEDING PARAS. THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE COMPANY IS ENTITLED FOR CLAIM OF ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT A MOUNTING TO RS.83,55,387/- DURING ASSESSMENT YEAR 2006-07 WHICH WE ALLOW AND WE DO NOT FIND ANY INFIRMITY IN THE ORDERS DATED 29-08-2011 PASSED BY THE CIT(A) AND WE UPHOLD THE SAME. WE ORDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO. 7530/MUM/2011 FOR THE ASSESSMENT YEAR 2006-07 IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH, 2016. # $% &' 30-03-2016 ( ) SD/- SD/- (AMIT SHUKLA) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 30-03-2016 [ ITA 7530/MUM/2011 15 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI A BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI