DCIT, Yamunanagar V. M/S Kamal Encon Industires Ltd, Yamunanagar

ITA 817/CHANDI/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9149 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 18-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 817/CHD/2015 (ASSESSMENT YEAR : 2006-07) THE D.C.I.T., VS. M/S KAMAL ENCON INDUSTRIES LTD., YAMUNA NAGAR CIRCLE, (FORMERLY KEC INDUSTRIES LTD.) YAMUNA NAGAR. 56, INDUSTRIAL ESTATE, YAMUNA NAGAR. PAN: AAACK4706E AND C.O.NO.37CHD/2015 IN ITA NO.817/CHD/2015 (ASSESSMENT YEAR : 2006-07) M/S KAMAL ENCON INDUSTRIES LTD., VS. THE D.C.I.T., (FORMERLY KEC INDUSTRIES LTD.) YAMUNA NAGAR CIRCLE, 56, INDUSTRIAL ESTATE, YAMUNA NAGAR. YAMUNA NAGAR. PAN: AAACK4706E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TEJ MOHAN SINGH DEPARTMENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 03.08.2016 DATE OF PRONOUNCEMENT : 09.08.2016 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX 2 (APPEALS), PANCHKULA DATED 4.9.2015 FOR ASSESSMENT YEAR 2006-07. 2. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THE CROSS OBJECTION, HENCE THE SAME IS DISMIS SED AS WITHDRAWN. 3. THE REVENUE IN THE DEPARTMENTAL APPEAL HAS CHALLENGED THE ORDER OF THE LEARNED CIT (APPEALS) I N DELETING THE ADDITION OF RS.93,99,919/- ON ACCOUNT OF ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY ACQU IRED FOR NEW WIND MILL IN MAHARASHTRA. 4. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT THE COMPANY HAS ITS MANUFACTURING UNIT F OR MANUFACTURING OF HEAVY MACHINERIES AT YAMUNA NAGAR. IN ADDITION, THE COMPANY WAS ENGAGED IN GENERATION OF POWER THROUGH WIND MILLS, ONE IN TAMIL NADU AND THE OTHER IN THE STATE OF MAHARASHTRA. WIND POWER GENERATED FROM THESE WIND MILLS WAS SOLD TO THE RESPECTIVE STATE G RIDS. THE WIND MILL IN TAMIL NADU WAS ALREADY IN EXISTENC E WHEREAS THE WIND MILL AT MAHARASHTRA WAS ESTABLISHE D DURING THE FINANCIAL YEAR 2005-06 RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE WIND M ILL AT MAHARASHTRA AN ADDITION OF RS.9,39,99,190/- WAS MAD E IN THE PLANT AND MACHINERY. THE PLANT AND MACHINERY WA S CLAIMED TO HAVE PUT TO USE FOR PRODUCTION ON 4.2.20 06. THE DEPRECATION INCLUDING ADDITIONAL DEPRECIATION W AS 3 CLAIMED ON WIND MILL PLANT AND MACHINERY AT MAHARAS HTRA @ 50%. 5. THE ASSESSING OFFICER REFERRED TO THE PROVISION S OF SECTION 32(1)(IIA) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) AND OBSERVED THAT THE ASSESSEE WAS NOT E NTITLED TO ADDITIONAL DEPRECIATION AS IT WAS AVAILABLE ONLY IN THE CASE OF NEW PLANT AND MACHINERY ACQUIRED BY AN ASSE SSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF ANY ARTICLE OR THING. THE NEW PLANT AND MACHINERY SHOULD HAVE BEEN PURCHASED BY AN EXISTING ASSESSEE FOR ADD ITION IN FIXED ASSETS FOR THE EXISTING BUSINESS OF MANUFA CTURING OR PRODUCTION OF ANY ARTICLE OR THING. HOWEVER, THE NEW PLANT AND MACHINERY WAS INSTALLED IN RESPECT OF NEW WIND MILL IN MAHARASHTRA. THE NEW PLANT AND MACHINERY WA S NOT ACQUIRED FOR ITS EXISTING BUSINESS; NEITHER FOR GENERATION OF POWER FOR MANUFACTURING UNIT AT YAMUN A NAGAR NOR FOR ITS WIND MILL IN TAMIL NADU. AFTER CONSIDERING THE ASSESSEE' S REPLY AND COURT JUDGMEN TS, THE ASSESSING OFFICER CONCLUDED THAT THE POWER GENERATE D FROM THE WIND MILLS WAS SOLD TO THE STATE ELECTRICITY BO ARD AND THE SAME WAS NOT UTILIZED FOR OWN BUSINESS, THE WIN D MILL WAS ESTABLISHED AS INDEPENDENT UNIT AND NOT AS ADDI TION TO THE EXISTING INFRASTRUCTURE. THUS, THE ADDITIONA L DEPRECIATION CLAIMED BY THE ASSESSEE ON PLANT & MACHINERY FOR NEW WIND MILL IN MAHARASHTRA AMOUNTIN G TO RS.93,99,919/- WAS NOT ALLOWED. 4 6. DURING THE APPELLATE PROCEEDINGS, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 32(L)(IIA) OF THE ACT STANDS AMENDED BY FINANCE ACT, 2005 W.E.F. 1.4.2006 I.E. THE ASSESSMENT YEAR UNDER CONSIDERATION. THE FIRST PROVISO OF PRE-AMENDED SECTION HAS BEEN DELETED. THE DELETI ON OF CLAUSE (A) OF THE FIRST PROVISO EFFECTED THE REQUIR EMENT OF START OF MANUFACTURE AND INSTALLATION OF MACHINERY BY AN 'UNDERTAKING' HAS BEEN REPLACED WITH THE 'ASSESSEE' AND OF CLAUSE (B) CONDITION OF INCREASE IN CAPACITY HAS BE EN DELETED. THEREBY, THE ADDITIONAL DEPRECIATION TO TH E ASSESSEE PURCHASING THE NEW MACHINERY IRRESPECTIVE OF THE UNDERTAKING IN WHICH SAID MACHINERY IS BEING INSTAL LED AND THE ADDITIONAL DEPRECIATION HAS BEEN MADE AVAIL ABLE TO ALL NEW PLANTS AND MACHINERY EXCEPT THOSE REFERR ED TO IN THE PROVISO TO SECTION 32(IIA) OF THE ACT. THERE FORE, THERE IS NO CONDITION THAT THE NEW MACHINERY IS TO BE INSTALLED IN THE EXISTING MANUFACTURING UNIT; THE E LIGIBILITY CONDITION IS TO BE FULFILLED BY THE ASSESSEE AND NO T BY THE UNDERTAKING AND THERE IS NO CONDITION THAT THE PROD UCT OF NEW MACHINERY IS TO BE UTILIZED IN THE EXISTING BUS INESS OF THE ASSESSEE. FOR ALLOWANCE OF ADDITIONAL DEPRECIA TION THE ASSESSEE FULFILLS THE CONDITIONS THAT IT SHOULD BE ENGAGED IN MANUFACTURE OR PRODUCTION OF ANY ARTICLE OF THIN G; INSTALL NEW MACHINERY OR PLANTS AFTER 31.03.2005 AN D THE MACHINERY INSTALLED MUST NOT BE COVERED UNDER SUB CLAUSES (A) TO (D) OF THE PROVISO TO SECTION 32(L)( IIA) OF THE ACT. 5 7. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE WAS FACTUALLY AS WELL AS JUDICIOUSLY CORRE CT IN CLAIMING ADDITIONAL DEPRECIATION ON WIND MILL INSTA LLED IN MAHARASHTRA IN VIEW OF THE PROVISIONS OF SECTION 32 (IIA) OF THE ACT AMENDED BY THE FINANCE ACT, 2005 W.E.F. 01.0.2006 ASSESSMENT YEAR 2006-07 AND CLARIFICATORY CLAUSE INSERTED BY THE FINANCE ACT, 2012 AS SUPPORT ED BY THE JUDGMENTS. THE ASSESSEE ALSO RELIED ON THE FOLL OWING DECISIONS :- I) CIT VS. HI-TECH ARAI LTD. 321 ITR 447 (MAD) II) SARAVANA SYNTHETIC AND COTTON MILLS LTD. VS. DEPARTMENT OF INCOME TAX I.T.A. NO.556/MDS/2010 III) ACIT VS. M/S SURYA SPINNING MILLS IN ITA NO. 557/MDS/ 2010 IV) CIT VS. TEXMO PRECISION CASTINGS (2010) 321 ITR 481 (MAD) VI DEPARTMENT OF INCOME TAX VS. M/S THE HUTTI GOLD MINES CO. LTD. ITA NO. 832/BANG/2012 (ITAT BANGALORE), VI) CIT VS. M/S VTM LTD. 319 ITR 336 (MAD). 8. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF VARIOUS JUDGMENTS DELETED THE ADDITION AND ALLOWED THE APPE AL OF THE ASSESSEE. HIS FINDINGS IN PARAS 4.4 AND 4.5 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 4.4 I HAVE GONE THROUGH THE FACTS OF THE CASE, WRIT TEN SUBMISSIONS FILED BY THE APPELLANT AND THE ASSESSME NT RECORD. ON THE FACTS OF THE CASE, THE ISSUE IS WHETHER OR NOR THE APPELLANT ENGAGED IN MANUFACTURE OF MACHINERY IN EXISTING BUS INESS IN HARYANA IS ENTITLED TO ADDITIONAL DEPRECIATION U/S 32(L)(IIA) OF THE ACT ON NEW WIND .INSTALLED IN MAHARASHTRA. THE AO IS OF VIEW THAT POWER GENERATED FROM THE WIND MILLS WAS SOLD TO THE STATE 6 ELECTRICITY BOARD AND NOT UTILIZED FOR ITS OWN BUSI NESS. ALSO THE WIND MILL WAS ESTABLISHED AS INDEPENDENT UNIT AND N OT AS ADDITION TO THE EXISTING INFRASTRUCTURE FOR MANUFAC TURE OR PRODUCTION OF ANY ARTICLE OR THING. 4.5 AFTER CONSIDERING THE FACTS AND SUBMISSION, I F IND THAT THE AMENDMENT BROUGHT IN SECTION 32(L)(IIA) BY FINANCE ACT, 2005 EFFECTIVE FROM THE A. Y. 2006-07 HAD DELETED THE CL AUSES (A) & (B) OF PROVISO RELATED TO NEW INDUSTRIAL UNDERTAKING. AS P ER SECTION 32(IIA), THE ADDITIONAL DEPRECIATION IS AVAILABLE I N THE CASE OF ANY NEW MACHINERY OR PLANT ACQUIRED AND INSTALLED AFTER 31.03.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTU RE OR PRODUCTION OF ANY ARTICLE OR THING. IN THE INSTANT CASE, THE NEW MACHINERY AND PLANT HAS BEEN ADDED AFTER 31.03.2005 BY THE APPELLANT WHO IS ENGAGED IN THE BUSINESS OF MANUFAC TURE OR PRODUCTION OF HEAVY MACHINERY AND GENERATION OF ELE CTRICITY THROUGH WIND POWER. THE SECTION DOES NOT PROVIDE AN Y CONDITION THAT THE NEW MACHINERY IS TO BE INSTALLED IN THE EX ISTING MANUFACTURING UNIT AND THERE IS NO CONDITION THAT T HE PRODUCT OF NEW MACHINERY IS TO BE UTILIZED BY THE EXISTING BUS INESS. THEREFORE, THE APPELLANT FULFILLS THE ELIGIBILITY C ONDITIONS APPLICABLE TO ASSESSEE. SUCH ELIGIBILITY CONDITIONS ARE SPECIFIED FOR THE ASSESSEE AND NOT FOR ANY INDEPENDENT UNIT O F ASSESSEE. FURTHER, THE DECISIONS OF HON'BLE ITAT BANGALORE BE NCH IN THE CASE OF THE HUTTI GOLD MINES CO. LTD. (SUPRA), OF H ON'BLE ITAT CHENNAI BENCH IN THE CASE OF SARAVANA SYNTHETIC & C OTTON MILLS (SUPRA) AND OF HON'BLE MADRAS HIGH COURT IN THE CAS E OF VTM LTD. (SUPRA) ARE APPLICABLE ON THE FACTS AND ISSUE OF TH E INSTANT CASE. THEREFORE, IN VIEW OF THE APPLICABLE JUDGMENT S AND FULFILLMENT OF ELIGIBILITY CONDITION FOR AVAILING T HE ADDITIONAL DEPRECIATION AS PER SECTION 32(L)(IIA), I AM OF VIE W THAT THE ADDITIONAL DEPRECIATION AS CLAIMED BY THE APPELLANT IS ALLOWABLE. THUS, THESE GROUNDS OF APPEAL ARE ALLOWED. 7 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE LEARNED CIT (APPEALS) RIGHTLY CONSIDERING THE AMEND MENT BROUGHT IN SECTION 32(1)(IIA) BY THE FINANCE ACT, 2 005 EFFECTIVE FROM ASSESSMENT YEAR 2006-07 HAD DELETED THE CLAUSES (A) & (B) OF PROVISO RELATED TO NEW INDUSTR IAL UNDERTAKING. THE LEARNED CIT (APPEALS), THEREFORE, RIGHTLY HELD THAT AS PER SECTION 32(1)(IIA) OF THE ACT, THE ADDITIONAL DEPRECIATION IS AVAILABLE IN THE CASE OF ANY NEW MACHINERY OR PLANT ACQUIRED AND INSTALLED AFTER 31. 3.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTU RE OR PRODUCTION OF ANY ARTICLE OR THING. IN THE CASE O F THE ASSESSEE, NEW MACHINERY AND PLANT HAS BEEN ADDED AF TER 31.3.2005 BY THE ASSESSEE, WHO IS ENGAGED IN THE BU SINESS OF MANUFACTURE OR PRODUCTION OF HEAVY MACHINERY AND GENERATION OF ELECTRICITY THROUGH WIND MILL. THIS SECTION DOES NOT PROVIDE ANY CONDITION THAT THE NEW MACHINE RY IS TO BE INSTALLED IN THE EXISTING MANUFACTURING UNIT AND THERE IS NO CONDITION THAT THE PRODUCT OF NEW MACHI NERY IS TO BE UTILIZED BY THE EXISTING BUSINESS. THE ASSE SSEE, THEREFORE, FULFILLED THE CONDITIONS FOR GRANT OF AD DITIONAL DEPRECIATION. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT (APPEALS) FOLLOWED T HE ORDER OF I.T.A.T., BANGALORE BENCH IN THE CASE OF THE HUTTI GOLD MINES CO. LTD. (SUPRA), WHICH HAS BEEN CONFIRMED BY THE HON'BLE KARNATAKA HIGH COURT IN IT A NO.8 OF 2014, DATED 16.9.2014. COPY OF THE JUDGMEN T IS PLACED ON RECORD AT PAGE 100 OF THE PAPER BOOK. TH E 8 ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF V TM LTD. (SUPRA). THE LEARNED D.R. DID NOT POINT OUT A NY ERROR IN THE ORDER OF THE CIT (APPEALS) IN GRANTING ADDIT IONAL DEPRECIATION TO THE ASSESSEE. WE, THEREFORE, DO NO T FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCORDINGLY, DISMISSED. 10. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRASHANT MAHARISHI) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH AUGUST, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH