Deputy Commissioner of Income Tax, Circle- 1 (1), Panaji., Panaji V. M/s D. B. Bandodkar & Sons Pvt. Ltd., Panaji

ITA 90/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1330 (ITAT-PANAJI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGNELO REMEDIOS
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 14A; 32; 10; 90; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO S . 90 & 91 /PNJ/201 5 (ASST. YEAR S : 20 1 0 - 1 1 & 2011 - 12 ) DCIT, CIRCLE - 1(1), PANAJI. VS. M/S. D.B. BANDODKAR & SONS ( P ) LTD. 2 ND FLOOR, ATMARAM COMMERCIAL COMPLEX, DR. A.B. ROAD, PANAJI GOA. PAN NO. AAACD 5984 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AGNELO REMEDIOS C A DEPARTMENT BY : SHRI PRASHANT GADEKAR - D R DATE OF HEARING : 17 / 1 1 /2015 . DATE OF PRONOUNCEMENT : 17 / 1 1 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER TH E S E ARE THE APPEAL S FILED BY THE REVENUE AGAINST THE SEPARATE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI - 1 , EACH DATED 19 / 12 /201 4 & 17/12/2014 FOR THE ASSESSMENT YEARS 2010 - 11 & 2011 - 12 RESPECTIVELY . 2. GROUND NOS. 1 & 6 IN BOTH THE APPEALS ARE GENERAL IN NATURE, HENCE, NO SEPARATE ADJUDICATION IS REQUIRED ON OUR PART. 3 . GROUND NO.2 OF THE APPEAL IN ASSESSMENT YEAR 2010 - 11 IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE ADDITION OF 36,70,712/ - OUT OF TOTAL DISALLOWANCE OF 55,14,148/ - ON ACCOUNT OF VALUATION OF CLOSING STOCK. 2 ITA NO S . 90 & 91 /PNJ/201 5 4 . WE HAVE HEARD RIVAL SUBMISSION OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD ADOPTED THE RATE OF 717/MT FOR VALUATION OF FINES . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FURNISHED ON 22/03/2013 WORKING OF PRODUCTION COST , ACCORDING TO WHICH THE TOTAL PRODUCTION COST WAS 8,69,87,328/ - FOR 1,21, 329/MT, WHICH WORKS OUT TO 717/MT. HE OBSERVED THAT THE ASSESSEE WHILE ADOPTING THIS RATE, DID NOT CONSIDER POWER CONSUMPTION EXPENSES OF 38,77,756/ - , EVEN THOUGH IT WAS DIRECTLY LINKED TO PRODUCTION AND OPERATION COST. THEREFORE, HE WORKED OUT THE PRODUCTION COST AS 749/MT , HENCE , HE MADE THE ADDITION OF 15,56,864/ - TO THE INCOME OF THE ASSESSEE. FURTHER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF 45,12,640/ - TOWARDS SCREENING AND WASHING CHARGES O N ORE PURCHASED FROM VARIOUS PARTIES OTHER THAN IT S OWN PRODUCTION. ACCORDING TO HIM, THE AVERAGE COST INCURRED PER MT WAS 11.50 WHICH WAS NOT CONSIDERED WHILE VALUING THE CLOSING STOCK OF LOCAL PURCHASES OF IRON ORE AND, THEREFORE, HE MADE ADDITION OF 17,07,888/ - TO THE INCOME OF THE ASSESSEE. 5. ON APPEAL , COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE CLAIMED TOTAL EXPENDITURE OF 45,12,640/ - TOWARDS SCREENING AND WASHING CHARGES AND THE ASSESSING OFFICER ADDED AN AMOUNT OF 17,07,888/ - , OUT OF THE ABOVE , IN THE VALUE OF CLO SING STOCK . THE ASSESSEE EXPLAINED THAT SCREENING AND WASHING CHARGES ARE DONE ONLY WHEN THE ORE IS EXPORTED . CLOSING STOCK IS NOT SUBJECTED TO THIS PROCESS AND ACCORDINGLY, HE DELETED THE ADDITION. FURTHER, THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR, THE ASSESSEE CLAIMED ELECTRICITY EXPENSES OF 38,77,756/ - . THE ASSESSING OFFICER FOUND THAT THE SAME WAS NOT TAKEN INTO CONSIDERATION WHILE VALUING THE CLOSING STOCK AND ACCORDINGLY, HE ADDED THE SAME TO THE VALUE OF THE CLOSING STOCK . HE OBSERVED THAT DURING THE APPELLATE PROCEEDINGS , THE ASSESSEE CLAIMED 3 ITA NO S . 90 & 91 /PNJ/201 5 THAT OUT OF THE ABOVE , 3,13,060/ - WAS SPENT TOWARDS ADMINISTRATIVE OFFICE AND THEREFORE, ON PROPORTIONATE BASIS, THE ASSESSING OFFICER HAS CHARGED 1,27,468/ - MORE TOWARDS VALUATION OF CLOSING STOCK. HE, THEREFORE, DELETED THE ADDITION OF 1,27,468/ - AND THEREBY ALLOWED A TOTAL RELIEF OF 18,35,356/ - TO THE ASSESSEE. 6 . BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7 . WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE ACCEPTING THE CLAIM OF THE ASSESSEE OBSERVED THAT ONLY WHEN ORES ARE EXPORTED , THEY ARE SUBJECTED TO SCREENING AND WASHING CHARGES, BUT HAS NOT GIVEN THE DETAILS OF EVIDENCES EXAMINED BY HIM WHILE DOING SO. IN OUR CONSIDERED OPINION, THE CLAIM OF THE ASSESSEE HAS TO BE EXAMINED WITH RESPECT TO THE SCREENING AND WASHING CHARGES INCURRED BY THE ASSESSEE TOWARDS MT OF ORES PURCHASED AND M T OF ORES EXPORTED. IF THE MT OF O RE EXPORTED TALLIES WI TH THE MT OF ORES SUBJECTED TO SCREENING AND WASHING CHARGES, THEN THE ENTIRE SCREENING AND WASHING CHARGES CLAIMED BY THE ASSESSEE ARE TO BE ALLOWED. OTHERWISE, PROPORTIONATE SCREENING AND WASHING CHARGES HAS TO BE TAKEN INTO CONSIDERATION WHILE VALUING THE CLOSING STOCK OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION ON THE BASIS OF MATCHING PRINCIPLE OF ACCOUNT A NCY . AS THIS EXERCISE HAS NOT BEEN CARRIED OUT EITHER BY THE ASSESSING OFFICER OR BY THE COMMISSIONER OF INCOME TAX (APPEALS), WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORIT I ES AND REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE - ADJU DI CATE THE ISSUE AFRESH INLINE OF THE DISCUSSIONS HEREINABOVE AFTER ALLOWING REASONABLE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSE E. THUS, THIS PART OF GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 8 . REGARDING THE DELETION OF DISALLOWANCE OF ELECTRICITY CHARGES OF 1,27,468/ - , WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE THAT OUT OF THE TOTAL ELECTRICITY EXPENSE OF 38,77,756/ - , THE AMOUNT OF 3,13,060/ - WAS 4 ITA NO S . 90 & 91 /PNJ/201 5 SPENT ON ADMINISTRATIVE OFFICE AND THEREFORE, ON PROPORTIONATE BASIS, THE ASSE SSING OFFICER HAS CHARGED 1,27,468/ - MORE TOWARDS VALUATION OF CLOSING STOCK, HAS NOT GIVEN THE BASIS OF ITS DOING SO . HENCE, IN OUR CONSIDERED OPINION, THE SAME NEEDS VERIFICATION FROM THE EVIDENCES AND WORKINGS OF THE ASSESSEE. WE, THEREFORE, SET ASI DE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION AFRESH AFTER ALLOWING REASONABLE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THIS PART OF GROUND OF APPEAL OF THE REVENU E IS ALSO ALLOWED FOR STATISTICAL PURPOSE. 9. GROUND NO.3 IN THE ASSESSMENT YEAR 2010 - 11 AND GROUND NO.2 IN THE ASSESSMENT YEAR 2011 - 12 ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE ADDITION OF 11,49,974/ - IN THE ASSESSMENT YEAR 2010 - 11 AND 15.06 LAC IN THE ASSESSMENT YEAR 2011 - 12 MADE BY THE ASSESSING OFFICER UNDER RULE 8D OF THE INCOME TAX RULES. 10 . WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME OF 56,82,778/ - IN THE ASSESSMENT YEAR 2010 - 11 AND 90,88,488/ - IN THE ASSESSMENT YEAR 2011 - 12 . HE FURTHER OBSERVED TH AT THE ASSESSEE HAS DETERMINED EXPENSES OF 1,1 3 ,928/ - IN THE ASSESSMENT YEAR 2010 - 11 AND 1,18,721/ - IN THE ASSESSMENT YEAR 2011 - 12 WHICH IS 2% OF EXEMPT INCOME EARNED AS EXPENSES RELATED TO EARNING OF EXEMPT INCOME AND SAME WAS SUO MOT O DISALLOWED. THE ASSESSING OFFICER OBSERVED THAT CORRECTNESS OF THE BASIS ADOPTED BY THE ASSESSEE IS NOT SATISFACTORY AND COMPUTED EXPENDITURE RELATED TO EARNING OF EXEMPT INCOME AS PER SEC. 14A READ WITH RULE 8D AND THEREBY MADE A DISALLOWANCE OF 11,11,989/ - IN THE ASSESSMENT YEAR 2010 - 11 AND 16,24,810/ - IN THE ASSESSMENT YEAR 2011 - 12 . 5 ITA NO S . 90 & 91 /PNJ/201 5 11 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AGREED FOR DISALLOWANCE @ 4% OF EXEMPT INCOME VIDE ORDER - SHEET ENTRY DATED 17/12/2014 AND ACCORDINGLY , THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE ADDITION TO THE EXTENT OF 1,13,298/ - IN THE ASSESSMENT YEAR 2010 - 11 AND 1,18,721/ - IN THE ASSESSMENT YEAR 2011 - 12, APART FROM THE SUO - MOTO DISALLOWANCE OF THE ASSESSEE IS CONFIRMED AND DELETED THE BALANCE AMOUNT OF DISALLOWANCE OF 10,36,676/ - IN THE ASSESSMENT YEAR 2010 - 11 AND 15,06,089/ - IN THE ASSESSMENT YEAR 2011 - 12. 12 DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER . 13 AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT BEFORE MAKING DISALLOWANCE, THE ASSESSING OFFICER HAS NOT RECORDED HIS SATISFACTION TO THE EXTENT THAT THE ASSESSEE H AD INCURRED ANY EXPENDITURE TOWARDS EARNING OF EXEMPT DIVIDEND INCOME AND, THEREFORE, THE DISALLOWANCE CANNOT BE SUSTAINED. 14 WE FIND THAT IN THE PRESENT CASE, THE ACCOUNTS OF THE ASSESSEE HAD NOT BEEN SCRUTINIZED BY THE ASSESSING OFFICER. THE SAME ASPE CT WAS NOT NOTICED BY THE COMMISSIONER OF INCOME TAX (APPEALS) . THE HONBLE DELHI HIGH COURT IN THE CASE OF MEXO PP INVESTMENT LTD. VS. CIT (2012) 3 4 7 ITR 272 (DELHI) OBSERVED THAT THE ASSESSING OFFICER HAS TO FIRST R E JECT THE CLAIM OF THE TAXPAYER WITH REGARD TO THE EXTENT OF EXPENDITURE BY CONSIDERING THE ACCOUNTS OF THE TAXPAYER AND SUCH REJECTION MUST BE FOR DISCLOSED COGENT REASONS. IT IS ONLY THEN THE QUESTION OF DETERMINATION OF SUCH EXPENDITURE OF DISALLOWANCE UNDER SEC. 14A WOULD ARISE. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE ISSUE AFRESH INLINE OF THE DISCUSSIONS MADE HEREINABOVE AFTER ALLOWING REASONABLE AND PROPER OPPORT UNITY OF 6 ITA NO S . 90 & 91 /PNJ/201 5 HEARING TO THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 15 GROUND NO.4 OF THE APPEAL IN ASSESSMENT YEAR 2010 - 11 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DELETING T HE ADDITION OF 3,65,84, 2 93/ - ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE TOWARDS RENEWAL OF MINING LEASE/AFFORESTATION CHARGES AS REVENUE EXPENDITURE. 16 WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN PAYMENT OF 3,65,84,293/ - FOR RENEWAL OF LEASE WHICH WAS CLAIMED AS REVENUE EXPENDITURE. ON A SHOW - CAUSE NOTICE ISSUED TO THE ASSESSEE, THE ASSESSEE SUBMITTED THAT THE HONBLE GOA BENCH OF THE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. DR. PRAFULLA R. HEDE AND ANOTHER IN TAX APPEAL NO. 15/2012 AND DCIT VS. TIMBLO PVT. LTD. IN TAX APPEAL NO. 66/2012 HAS DECIDED THAT THE EXPENDITURE INCURRED FOR AFFORESTATION IS COMMERCIAL EXPENDITURE AND SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE ON THE GROUND THAT THE DE PARTMENT HAD NOT ACCEPTED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN DR. PRAFULLA R. HEDE AND ANOTHER (SUPRA) AND HAD PREFERRED AN APPEAL BEFORE THE SUPREME COURT AND THEREFORE, HE DISALLOWED THE AMOUNT OF 3,65,84,293/ - . 17 ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE ISSUE IS COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT OF BOMBAY AT PANAJI IN FAVOUR OF THE ASSESSEE, WHEREIN IT HAS BEEN DECIDED THAT THE COMPENSATORY AFFORESTATION CHARGES ARE GOVERNMENT CESS AND FULLY ALLOWABLE. 7 ITA NO S . 90 & 91 /PNJ/201 5 18 THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 19 THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 20 WE FIND THAT THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PRAFULLA R. HEDE AND ANOTHER IN SLP (C) NO. 33057/2012, SLP (C) NO. 38496/2012, SLP (C) NO. 14310/2013 AND SLP (C) NO. 18063/2013 HAD DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT VIDE ORDER DATED 21/11/2014 . HENCE, WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 21 IN THE ASSESSMENT YEAR 2011 - 12 , THE GROUND NOS. 3 & 4 OF THE REVENUES APPEAL ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE DISALLOWANCE OF 6.03 LAC ON ACCOUNT OF ADDITIONAL DEPRECIATION IN RESPECT OF IRON ORE EXTRACTION AND PROCESSING . 22 WE HAVE HEARD RIVAL SUBMISSION S OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD . IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY CLAIMED ADDITIONAL DEPRECIATION OF 6 , 03 ,912/ - LAC ON THE GROUND THAT PLANT AND MACHINERY IS USED IN MANUFACTURE/PRODUCTION OF IRON ORE . HE OBSER VED THAT ACCORDING TO SEC. 2(29BA) INTRODUCED FROM 01/04/1999 , MANUFACTURING MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING , R ESULTING IN TRANSFORMATION OF THE OBJECTION OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE ; OR BRINING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL 8 ITA NO S . 90 & 91 /PNJ/201 5 COMPOSITION OR INTEGRAL STRUCTURE . ACCORDING TO THE ASSESSING OFFICER, SEC. 32 (IIA) OF THE ACT IN THE CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005 , BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION. ACCORDING TO THE ASSESSING OFFICER, TO CLAIM THE ADDITIONAL 20% DEPRECIATION AVAILABLE UNDER SEC. 32(IIA) , THE ASSESSEE SHOULD BE ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR TH ING. THE ASSESSEE IS IN THE BUSINESS OF MINING IRON ORE AND SELLING THEREOF AND THEREFORE, IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GEM INDIA MANUFACTURING COMPANY 249 ITR 307 (SC) HAS HELD THAT IN ABSENCE OF ANY MATERIAL TO SHOW THAT POLISHED DIAMOND IS A NEW ARTICLE OR THING WHICH IS THE RESULT OF MANUFACTURE OR PRODUCTION , SUBJECTING RAW UNCUT DIAMONDS TO A PROCESS OF CUTTING AND POLISHING, WHICH YIELDS TH E POLISHED DIAMOND, CANNOT BE SAID TO AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING, FOR THE PURPOSE OF OBTAINING THE BENEFIT OF DEDUCTION UNDER SEC. 80I OF THE INCOME TAX ACT, 1961 AND IN THE CASE OF LUCKY MINMAT PVT. LTD. VS. CIT 245 ITR 830 (SC) , THE HONBLE SUPREME COURT HELD THAT THE ASSESSEE HAD BUSINESS OF MINING OF LIMESTONE AND MARBLE BLOCKS AND THEREAFTER CUTTING AND SIZING THE SAME BEFORE BEING SOLD IN THE MARKET . THE CONVERSION INTO LIME AND LIME DUST OR CONCRETE BY STONE CRUSHERS COULD LEGITIMATELY BE CONSIDERED TO BE A MANUFACTURING PROCESS WHILE THE MERE MINING OF LIMESTONE AND MARBLE AND CUTTING THE SAME BEFORE IT WAS SOLD IN THE MARKET COULD NOT BE SO CONSIDERED AND THEREFORE, ASSESSEE WAS NOT ENTITLED TO DEDUCTION UNDER SEC. 8 0 I OF THE INCOME TAX ACT, 1961 . 23 ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM FOR ADDITIONAL DEPRECIATION TO THE ASSESSEE BY FOLLOWING THE ORDER 9 ITA NO S . 90 & 91 /PNJ/201 5 OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10 PASSED IN ITA NO. 376/PNJ/2013 ORDER DATED 23/05/2014 . 24 DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2009 - 10 ORDER PASSED ON 23/05/2014 IN ITA NO. 376/PNJ/2013 , HAS ALLOWED THE CLAIM FOR ADDITIONAL DEPRECIATION TO THE ASSESSEE AND FOLLOWING THE SAME, THE APPEAL OF THE REV E NUE SHOULD BE D ISMISSED. 25 WE FIND THAT IN THE ASSESSMENT YEAR 2009 - 10 WHILE ALLOWING THE CLA I M FOR ADDITIONAL DEPRECIATION , THE TRIBUNAL H AS HELD AS UNDER: - 3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS ENGAGED IN EXTRACTION AND PROCESSING OF IRON ORE. THIS ISSUE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS BENCH IN ITA NOS. 72/PNJ/2012 & 85/PNJ/2012 IN THE CASE OF SESA GOA VS. ACIT IN WHICH THIS TRIBUNAL VIDE ITS ORDER DT. 8.3.2012 HAS IN THE FOLLOWING PARAGRAPHS TAKEN A VIEW IN FAVOUR OF THE ASSESSEE: 46. GROUNDS NOS.10 & 11 IN ASSESSEE S APPEAL RELATE TO DISALL OWANCE OF DEPRECIATION CLAIMED U/S 32(1)(IIA). THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION AMOUNTING TO RS.10,91,79,435/ - AND RS.10,01,21,951/ - IN RESPECT OF IRON ORE DIVISION AND RS.90,57,484/ - FOR METALLURGICAL COKE DIVISION. THE AO TOOK THE VIEW THAT THE ASSESSEE WAS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THEREFORE, THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THE ASSESSEE 271 ITR 331 RELATING TO ADDITIONAL DEPRECIATION I S NOT APPLICABLE. THE SAID DECISION RELATE PRIOR TO 1.4.1999. ACCORDING TO HIM, THERE IS NO CHANGE EITHER IN THE NAME OR IN THE COMPOSITION OF THE IRON ORE BEFORE EXTRACTION AND AFTER EXTRACTION AND PROCESSING AND THE CONDITIONS AS LAID DOWN U/S 2(29BA) AR E NOT FULFILLED. SIMILARLY, IT WAS HELD THAT IN THE CASE OF CONVERSION OF COAL INTO COKE THERE IS NO DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE IN THE NEW ARTICLE AND IT HAS NO DIFFERENT CHARACTER AND USE. RELIANCE WAS PLACED ON THE DECISION OF T HE SUPREME COURT IN THE CASE OF CIT VS GEM INDIA 10 ITA NO S . 90 & 91 /PNJ/201 5 MANUFACTURING CO., 249 ITR 307(2001) AND LUCKY MINERALS (P) LTD., 116 TAXMAN 1(SC). THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) ALSO TOOK THE VIEW THAT THE ASSESSEE PRIMARILY ENGAGED IN THE PRO CESS OF CONVERTING COAL TO COKE ESSENTIALLY THERE IS NOT MUCH OF DIFFERENCE IN THE PHYSICAL AND CHEMICAL CHARACTERISTIC OF COAL AND COKE. THE DIVISION IS NOT ASSOCIATED WITH ANY KIND OF EXTRACTION OF COAL OR ANY OTHER ORE AS PART OF ITS BUSINESS ACTIVITY. IN THE CASE OF CIT VS SESA GOA LTD., 271 ITR 331(SC) THE HONBLE APEX COURT HELD THAT FOR AN ACTIVITY TO BE PRODUCTION, IT SHOULD COMPRISE OF BOTH EXTRACTION OF IRON ORE AND ITS PROCESSING. THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). IT WAS CONTENDED THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF EXTRACTION AND PROCESSING OF IRON ORE. THE ASSESSEE IS PROCESSING THE IRON ORE NOT ONLY ONE WHICH IS EXTRACTED OUT OF ITS OWN MINES, BUT ALSO THE ONE WHICH IS EXTRACTED FROM THE MINES WHICH ARE HIRED. THE HONBLE SUPREME COURT HAS CLEARLY HELD THAT THE EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO PRODUCTION. THERE IS NO SUBSEQUENT AMENDMENT IN THIS REGARD OR INTRODUCTION OF THE DEFINITION OF THE WORD PRODUCTION IN THE ACT. SEC.32(1)(IIA) USED BOTH THE WORD MA NUFACTURE OR PRODUCTION AND DOES NOT REQUIRE THAT THE ASSESSEE SHOULD BE ENGAGED IN THE MANUFACTURE AND PRODUCTION. SEC.2(29BA) OF THE ACT DEFINES THE WORD MANUFACTURE. THE CIT(A) TOOK THE VIEW THAT THE IRON ORE PROCESSING PLANT AT CODLI, AMONA AND CH ITRADURGA DO NOT AMOUNT TO EITHER MANUFACTURE OR PRODUCTION. THE REVENUE IS FULLY AWARE OF THAT IN THESE PLANTS, THE ASSESSEE HAS USED THE IRON ORE EXTRACTED FROM ITS MINES AND ALSO FROM OTHER MINES TAKEN ON LEASE FOR PROCESSING TO MAKE IT MARKETABLE F OR EXPORT. SEC.32(1)(IIA) ONLY REQUIRES THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THUS, THE ASSESSEE MUST BE ALLOWED INVESTMENT ALLOWANCE SO FAR AS IT RELATES TO PLANT AND MACHINERY USED IN IRON ORE DIVISION. IN RESPECT OF CLAIM OF THE ASSESSEE FOR THE ADDITIONAL DEPRECIATION FOR THE PLANT AND MACHINERY INSTALLED IN METALLURGICAL COKE DIVISION, THE ASSESSEE CONTENDED THAT SEC.32(1)(IIA) NOWHERE REQUIRES THAT THE NEW PLANT AND MACHINERY MUST BE AC QUIRED OR INSTALLED FOR MANUFACTURE OR PRODUCTION. THE ONLY CONDITION SUBJECT TO THE PROVISO THEREIN IS THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OR ARTICLE OR THING. THE LEARNED AR ALSO TRIED TO EXPLAIN THE PROCESS OF COKE DIVISION TO PROVE THAT THE COKE DIVISION IS ENGAGED IN THE PRODUCTION OF AN ARTICLE OR THING. THE LEARNED DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(A). 11 ITA NO S . 90 & 91 /PNJ/201 5 46.1 WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS ALONGWITH THE ORDER OF THE TAX AUTHORITIES. SEC.32(1)(IIA) LAID DOWN AS UNDER : - IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTU RE OR PRODUCTION OF ANY ARTICLE OR THING (OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER) A FURTHER SUM EQUAL TO TWENTY PERCENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE(II): PROVIDE D THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE; OR C) ANY OFFICE APPLIANCES O ROAD TRANSPORT VEHICLES; OR D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OF ANY ONE PREVIOUS YEAR. 46.2 FROM THE PROVISIONS OF THE SECTIO N, IT IS APPARENT THAT THE ASSESSEE IS ENTITLED IN THE CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED OR INSTALLED BY HIM AFTER 31.03.2005 FOR THE ADDITIONAL DEPRECIATION IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION O F ANY ARTICLE OR THING. PROVISO TO SECTION DENIES THE DEDUCTION TO AN ASSESSEE OF THE ADDITIONAL DEPRECIATION IN CERTAIN CASES. FROM THE BALANCE SHEET AND ALL OTHER EVIDENCES FILED BEFORE US IT IS APPARENTLY CLEAR THAT THE ASSESSEE IS ENGAGED PRIMARILY IN THE BUSINESS OF EXTRACTION OF ORE AND ITS PROCESSING. THE AUTHORITIES BELOW INTERPRETED THE PROVISIONS OF SECTION, CORRECTLY TAKING THE VIEW THAT THE PLANT AND MACHINERY SHOULD BE INSTALLED FOR THE PRODUCTION OF AN ARTICLE OR THING. THE ASSESSEE S PLANTS A T CODLI, AMONA AND CHITRADURGA WHETHER ENGAGED FOR THE MANUFACTURE OR PRODUCTION INDEPENDENTLY, IN OUR VIEW, IS NOT RELEVANT. THE RELEVANT CONSIDERATION IS THAT THE ASSESSEE MUST BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THI NG AND THE NEW PLANT AND MACHINERY MUST BE ACQUIRED 12 ITA NO S . 90 & 91 /PNJ/201 5 AND INSTALLED. THE ASSESSEE HAS EXTRACTED THE IRON ORE AND ALSO PROCESSED IT. THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN ASSESSEE S OWN CASE REPORTED IN 271 I TR 331(SC) (SUPRA). THIS SECTION USED THE WORD BUSINESS OF MANUFACTURE OR PRODUCTION NOT THE WORD MANUFACTURE AND PRODUCTION. WE DO NOT AGREE WITH THE REVENUE THAT THE CASE OF THE ASSESSEE IS NOT COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN ASSESSEE S OWN CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN ASSESSEE S OWN CASE, WE DELETE THE DISALLOWANCE AND ALLOW THE ADDITIONAL DEPRECIATION TO THE ASSESSEE AMOUNTING TO RS.10,91,75,435/ - . NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. DR. WE, THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THIS BENCH IN THE CASE OF SESA GOA (SUPRA) CONFIRM THE ORDER OF CIT(A) ALLOWING THE ADDITIONAL DEPRECIATION TO THE ASSESSEE. THUS, GROUND NO. 2 STANDS D ISMISSED. 26 THE DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY GOOD REASON TO NOT TO FOLLOW THE ABOVE QUOTED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2009 - 10. HENCE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE CLAIM FOR ADDITIONAL DEPRECIATION OF 6,03,912/ - TO THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 27 IN THE RESULT, APPEAL S OF THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY , THE 17 TH DAY OF NOVEMBER , 201 5 AT GOA . SD/ - SD/ - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH N O V E M B E R , 201 5 . VR/ - 13 ITA NO S . 90 & 91 /PNJ/201 5 COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 14 ITA NO S . 90 & 91 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 17 . 1 1 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 18 . 1 1 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 18 / 1 1 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 18 / 1 1 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 18 / 1 1 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 17 / 1 1 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 18 / 1 1 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER