ACIT, Coimbatore V. M/s. Precot Mills Ltd., Coimbatore

ITA 966/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61293 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 01-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VI KRAMADITYA
• Assessee Lawyers: K RAVI
• Keywords: Depreciation; Additional depreciation; Procedural lapse
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 966/MDS/2012 (ASSESSMENT YEAR : 2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), COIMBATORE. (APPELLANT) V. M/S PRECOT MILLS LTD. (NOW M/S PRECOT MERIDIAN LTD.), NO.737, GREEN FIELDS, COIMBATORE 641 045. PAN : AABCP3038K (RESPONDENT) APPELLANT BY : SHRI VIKRAMADITYA, JCIT RESPONDENT BY : SHRI K. RAVI, ADVOCATE DATE OF HEARING : 12.07.2012 DATE OF PRONOUNCEMENT : 19.07.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANC E IS THAT THE CIT(APPEALS) ALLOWED ADDITIONAL DEPRECIATION ON THE WINDMILL INSTALLED BY THE ASSESSEE. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, ENGAGED I N THE BUSINESS OF MANUFACTURE AND SALE OF YARN FABRIC AND GENERATION OF POWER, HAD FILED 2 I.T.A. NO. 966MDS/12 ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARI NG A LOSS OF ` 2,50,78,870/- UNDER THE NORMAL TAX PROVISIONS AND ` 8,27,27,438/- UNDER SECTION 115JB INCOME-TAX ACT, 1961 (IN SHORT 'THE A CT'). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY T HE ASSESSING OFFICER THAT ASSESSEE HAD MADE A CLAIM OF ADDITIONA L DEPRECIATION OF ` 78,84,645/-. THIS CLAIM WAS WITH REGARD TO PLANT A ND MACHINERY IN ITS WEAVING UNIT. HOWEVER, THE ASSESSEE HAD NOT FILED ALONG WITH THE RETURN OF INCOME AUDIT REPORT IN FORM 3AA, AS PRESC RIBED IN THIRD PROVISO TO SECTION 32(1)(IIA) OF THE ACT AS IT STOOD AT THE RELEVANT POINT OF TIME. WHEN PUT ON NOTICE, ASSESSEE CLAIMED THAT THERE WAS AN ADDITION OF 40 LOOMS IN ITS WEAVING DIVISION RESULTING IN AN INCREASE IN THE CA PACITY BY 83.33%. WHILE CALCULATING INCREASED CAPACITY, ASSE SSEE CONSIDERED ONLY ITS WEAVING DIVISION. ASSESSING OFFICER WAS O F THE OPINION THAT THE CLAIM COULD NOT ALLOWED FOR TWO REASONS. FIRST WAS THAT ASSESSEE HAD NOT FILED REQUIRED AUDIT REPORT FOR CLAIMING ADDITI ONAL DEPRECIATION, ALONG WITH RETURN OF INCOME. SECOND WAS THAT INCREASE IN CAPACITY WAS CONSIDERED BY THE ASSESSEE IN A RESTRICTIVE MANNER LIMITED TO A DIVISION, WHEREAS, THE TERM INDUSTRIAL UNDERTAKING MENTIONE D IN SECTION 32(1)(IIA) HAD A WIDE MEANING. ACCORDING TO A.O., THE CLAIM OF ADDITIONAL DEPRECIATION COULD BE ALLOWED ONLY IF THE INDUSTRIA L UNDERTAKING ITSELF ACHIEVED SUBSTANTIAL EXPANSION BY WAY OF INCREASE I N INSTALLED CAPACITY 3 I.T.A. NO. 966MDS/12 OF NOT LESS THAN 10%. AS PER THE A.O., INSTALLED C APACITY OF THE ENTIRE COMPANY HAD TO BE TAKEN INTO ACCOUNT AND NOT THAT O F A PARTICULAR UNIT OR PLANT. IF THE INSTALLED CAPACITY OF ENTIRE COMPANY WAS TAKEN INTO ACCOUNT, ASSESSEE SHOULD HAVE INSTALLED 10% MORE NUMBER OF M ACHINES AS COMPARED TO THE MACHINES AVAILABLE WITH IT AS ON 31 .3.2002. SINCE THE NUMBER OF MACHINES AVAILABLE WITH THE ASSESSEE AS O N 31.3.2002 WAS 1,22,928, AS PER THE A.O., UNLESS AND UNTIL 12293 M ACHINES WERE ADDED, INSTALLED CAPACITY WOULD NOT INCREASE BY 10%. THUS , HE DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT FAILURE TO FILE FORM 3AA ALONG WITH RETURN OF INCOME, COULD NOT RESULT IN DENIAL OF THE ADDITIONAL DEPRECIATION. AS PER T HE ASSESSEE, IT HAD FILED SUCH REPORT DURING THE COURSE OF ASSESSMENT PROCEED INGS AND IN VIEW OF THE DECISION OF HONBLE KERALA HIGH COURT IN THE CA SE OF PARRY AGRO INDUSTRIES LTD. V. ITO (284 ITR 353), SUCH A PROCED URAL LAPSE COULD NOT BE A REASON FOR DENYING THE CLAIM OF ADDITIONAL DEP RECIATION. INSOFAR AS THE VIEW OF THE ASSESSING OFFICER THAT THE WEAVING UNIT COULD NOT BE CONSIDERED AS A SEPARATE UNDERTAKING, ARGUMENT OF T HE ASSESSEE WAS THAT THE NUMBER OF LOOMS IN ITS WEAVING DIVISION HA D BEEN INCREASED BY 40 NUMBERS RESULTING IN CAPACITY OF SUCH DIVISION G ETTING INCREASED BY 83.33%. ACCORDING TO ASSESSEE, THE TERM UNDERTAKI NG COULD NOT BE 4 I.T.A. NO. 966MDS/12 UNDERSTOOD IN SUCH A LIMITED MANNER THAT INSTALLED CAPACITY HAD TO BE CONSIDERED FOR THE WHOLE OF THE COMPANY. AS PER TH E ASSESSEE, WEAVING UNIT WAS HAVING INDEPENDENT FUNCTIONING AND COULD SURVIVE INDEPENDENTLY. THE WORD UNDERTAKING COULD NOT BE EQUATED WITH A LEGAL ENTITY. JUST BECAUSE THE HEAD OFFICE COSTS W ERE ALLOCATED TO WEAVING UNIT, IT COULD NOT BE STATED THAT IT WAS NO T A SEPARATE UNDERTAKING HAVING INDEPENDENT EXISTENCE. FURTHER, AS PER THE ASSESSEE, THE ASSESSING OFFICER HAD CONSIDERED THE NUMBER OF MACHINES AS A CRITERIA AND MADE A MISTAKE BECAUSE, TYPE OF MACHINES USED IN DIFFERENT DIVISIONS WERE ENTIRELY DIFFERENT AND NOT AT ALL COMPARABLE. 4. CIT(APPEALS) WAS APPRECIATIVE OF THE CONTENTIONS OF THE ASSESSEE. ACCORDING TO HIM, DECISION OF HONBLE KERALA HIGH C OURT IN THE CASE OF PARRY AGRO INDUSTRIES LTD. (SUPRA) WAS CLEAR IN THA T A PROCEDURAL LAPSE LIKE FILING OF AUDIT REPORT BELATEDLY WOULD NOT NEG ATE THE CLAIM ITSELF. ACCORDING TO HIM, THE WEAVING UNIT OF THE ASSESSEE WAS A SEPARATE UNDERTAKING AND HAD SEPARATE EXISTENCE. ANNUAL ACC OUNTS OF THE ASSESSEE MENTIONED SPINDEALAGE CAPACITY, ROTOR CAPA CITY AND LOOM CAPACITY SEPARATELY. LOOM CAPACITY PERTAINED TO WE AVING DIVISION ALONE. CLOTH PRODUCED WITH 48 LOOMS WAS 7776 METERS, WHERE AS, WITH 88 LOOMS, THE PRODUCTION CAPACITY INCREASED WAS 14656 METERS AND 5 I.T.A. NO. 966MDS/12 THEREFORE, THERE WAS A CAPACITY INCREASE OF 80%. I N THIS VIEW OF THE MATTER, HE WAS OF THE OPINION THAT THE CLAIM OF ADD ITIONAL DEPRECIATION HAD TO BE ALLOWED. 5. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THE UNDERTAKING HAD TO BE CONSIDERED AS A WHOLE AND NOT DIVISION WISE. ACCORDING TO HIM, ONL Y THE LOOM CAPACITY HAD INCREASED, WHEREAS, CAPACITIES IN OTHER DIVISIO NS REMAINED SAME. THEREFORE, ACCORDING TO HIM, ASSESSEE COULD NOT SAT ISFY THE CONDITIONS SPECIFIED UNDER SECTION 32(1)(IIA) FOR JUSTIFYING T HE CLAIM OF ADDITIONAL DEPRECIATION. ACCORDING TO LEARNED D.R., CIT(APPEA LS) FELL IN ERROR WHEN HE ALLOWED THE CLAIM OF THE ASSESSEE. 6. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDER OF CIT(APPEALS). 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN THE FIRST PLACE, WE FIND THAT THE ISSUE IS NOT REGA RDING ADDITIONAL DEPRECIATION ON WINDMILL BUT, ADDITIONAL DEPRECIATI ON ON MACHINERY INSTALLED IN THE WEAVING UNIT. ADMITTEDLY, ASSESSE E WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF YARN FABRIC. ASSESSEE W AS HAVING THREE DIVISIONS, NAMELY, SPINDEALAGE DIVISION, COTTON DIV ISION AND WEAVING DIVISION. THE CAPACITY OF EACH OF THESE DIVISIONS WERE ADMITTEDLY MENTIONED IN ASSESSEES ANNUAL ACCOUNTS. THE QUEST ION BEFORE US IS 6 I.T.A. NO. 966MDS/12 WHETHER EACH OF THESE DIVISIONS CAN BE CONSIDERED I NDEPENDENTLY FOR THE PURPOSE OF GIVING ADDITIONAL DEPRECIATION UNDER SEC TION 32(1)(IIA) OF THE ACT. THE SAID CLAUSE IS REPRODUCED HEREUNDER:- (IIA) IN THE CASE OF ANY MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2002,BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO FIFTEEN PER CENT OF T HE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II): PROVIDED THAT SUCH FURTHER DEDUCTION OF FIFTEEN PER CENT SH ALL BE ALLOWED TO- (A) A NEW INDUSTRIAL UNDERTAKING DURING ANY PREVIOUS YE AR IN WHICH SUCH UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ANY AR TICLE OR THING ON OR AFTER THE 1 ST DAY OF APRIL, 2002; OR (B) ANY INDUSTRIAL UNDERTAKING EXISTING BEFORE THE 1 ST DAY OF APRIL, 2002, DURING ANY PREVIOUS YEAR IN WHICH IT ACHIEVES THE SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALLED CAPACITY B Y NOT LESS THAN TEN PER CENT; PROVIDED FURTHER THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF- (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATI ON BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; O R (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COS T OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIAT ION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OF AN Y PREVIOUS YEAR; PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UN DER CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B), OF THE FIRST PROVISO UN LESS THE ASSESSEE FURNISHES THE DETAILS OF MACHINERY OR PLANT AND INC REASE IN THE INSTALLED 7 I.T.A. NO. 966MDS/12 CAPACITY OF PRODUCTION IN SUCH FORM, AS MAY BE PRES CRIBED ALONG WITH THE RETURN OF INCOME, AND THE REPORT OF AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 CERTIF YING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF THIS CLAUSE. EXPLANATION- FOR THE PURPOSES OF THIS CLAUSE,- (1) NEW INDUSTRIAL UNDERTAKING MEANS A UNDERTAKING WH ICH IS NOT FORMED,- (A) BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BU SINESS ALREADY IN EXISTENCE; OR (B) BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR P LANT PREVIOUSLY USED FOR ANY PURPOSE; (2) INSTALLED CAPACITY MEANS THE CAPACITY OF PRODUCTI ON AS EXISTING ON THE 31 ST DAY OF MARCH 2002 CLAUSE (B) IN FIRST PROVISO ABOVE CLEARLY MENTIONS THAT IN THE CASE OF EXISTING INDUSTRIAL UNDERTAKING THERE HAS TO BE AN INCREASE OF INSTALLED CAPACITY BY NOT LESS THAN 10%. ASSESSING OFFICER W AS OF THE OPINION THAT THE NUMBER OF MACHINES USED BY ASSESSEE SHOULD GO U P BY 10% FOR SATISFYING THIS PROVISO. EXPLANATION (2) CLEARLY M ENTIONS THAT INSTALLED CAPACITY MEANS CAPACITY OF PRODUCTION. THE NATURE OF THE PROCESSING AND MANUFACTURE AND COMPOSITION OF A TEXTILE MILL W AS CLEARLY ANALYSED BY HONBLE APEX COURT IN THE CASE OF CIT V SARAVANA SPINNING MILLS P. LTD. (2007) 293 ITR 201 (SC) THOUGH, IT WAS IN RELA TION TO THE CLAIM OF THE ASSESSEE THAT REPLACEMENT OF CERTAIN MACHINES HAD T O BE CONSIDERED AS CURRENT REPAIRS. RELEVANT PARAS 9 AND 10 OF THE JU DGMENT ARE REPRODUCED HEREUNDER, FOR BREVITY:- 8 I.T.A. NO. 966MDS/12 9. BEFORE ANALYZING S. 31(I) OF THE IT ACT, WE MUST L OOK AT THE PROCESS OF MANUFACTURE AND THE COMPOSITION OF A TEXT ILE MILL IN THE BROAD SENSE. BROADLY, A TEXTILE MILL MANUFACTURES D IFFERENT VARIETIES OF YARNS, NAMELY, COTTON YARN, MLANGE YARN, COLOUR MLANGE, POLYSTER VISCOSE YARN AND THE PROCESS OF MANUFACTURE GOES TH ROUGH VARIOUS SEGMENTS/DIVISIONS. THE FIRST SEGMENT IS THE BLOW ROOM. THE FUNCTION OF THE BLOW ROOM IS TO CLEAN THE RAW COTTO N THOROUGHLY BEFORE IT IS FED TO THE CARDING DEPARTMENT. THE FU NCTION OF THE CARDING DEPARTMENT IS TO REMOVE THE WASTE IN THE CO TTON RECEIVED FROM THE BLOW ROOM. IN THE CARDING DEPARTMENT THERE ARE INDIVIDUAL CARDING MACHINES. THEY ARE EQUIPPED WITH AUTOLEVEL ERS TO PRODUCE SILVER. THE CARDING MACHINE REMOVES NEPS FORMED IN THE BLOW ROOM LINE DURING THE PROCESS. THE CARDING MACHINE PRODU CES SILVER FOR BETTER QUALITY OF YARN. THE SILVER PRODUCED IN THE CARDING DEPARTMENT IS CARRIED TO THE COMBING DEPARTMENT, FO R MANUFACTURING COMBED YARN. AFTER THE CARDING OPERA TION, THE IMPURITIES PRESENT IN THE SILVER WILL BE REMOVED IN THE COMBING DEPARTMENT. THAT SILVER WHICH IS PRODUCED IN THE C OMBING DEPARTMENT WILL PASS THROUGH THE DRAW FRAMES USED I N THE DRAWING DEPARTMENT IN ORDER TO OBTAIN PARALLEL FIBERS. THE SE PARALLEL FIBERS GO THROUGH SPEED FRAMES IN THE ROVING DEPARTMENT IN ORDER TO COVERT THE SILVER INTO THINNER FORMS CALLED AS ROVE S WHICH ROVES ARE THEREAFTER SENT TO THE SPINNING DEPARTMENT. IN THE SPINNING DEPARTMENT WE HAVE WHAT IS CALLED AS THE RING FRAME S (MACHINES) WHICH ARE USED TO SPIN THE ROVES RECEIVED FROM THE ROVING DEPARTMENT. THE RING FRAMES ARE MACHINES, WHICH AR E EQUIPPED WITH CLEANERS, REMOVES THE ACCUMULATED DIRT. THE RING F RAMES PLAY AN IMPORTANT ROLE IN PRODUCING QUALITY YARN. THEREAFT ER, THE YARN OBTAINED FROM THE SPINNING DEPARTMENT GOES TO THE W INDING DEPARTMENT. IN THE FINDING DEPARTMENT WE HAVE AUTO CONERS IN ORDER TO PRODUCE FAULT-FREE YARN. 10. FROM THE ABOVE FACTS, IT IS CLEAR THAT BLOW ROOM , CARDING, COMBING, DRAWING, ROVING, SPINNING AND WINDING ARE DIFFERENT DEPARTMENTS/DIVISIONS IN A TEXTILE MILL. IN EACH DE PARTMENT/DIVISION THERE ARE SEVERAL MACHINES. EACH OF THE ABOVE DEPARTMENTS/DIVISIONS PERFORM DIFFERENT FUNCTIONS A ND THE FUNCTIONING OF EACH DEPARTMENT/DIVISION PRODUCES A DIFFERENT OUTPUT WHICH IS CARRIED FORWARD TO THE NEXT DEPARTMENT/DIVI SION HAVING DIFFERENT MACHINES THEREIN. FOR EXAMPLE, IN THE BLO W ROOM THERE ARE 9 I.T.A. NO. 966MDS/12 DIFFERENT BEATERS (MACHINES) WHICH OPEN THE RAW COT TON AND REMOVE THE DIRT THEREFROM. THAT COTTON IS FORWARDED TO TH E CARDING DEPARTMENT IN WHICH THERE ARE CARDING MACHINES EQUI PPED WITH AUTOLEVELERS WHICH PRODUCES SILVER WHICH IS THEN CA RRIED FORWARD TO THE COMBING DEPARTMENT. IT IS IMPORTANT TO NOTE TH AT EACH DEPARTMENT HAS DIFFERENT ITEMS OF MACHINES, FOR EXAM PLE, IN THE BLOW ROOM WE HAVE MACHINES CALLED AS BEATERS. SIMI LARLY, IN THE CARDING DEPARTMENT WE HAVE CARDING MACHINES WITH AU TOLEVELERS. IF THE AUTOLEVELER FAILS, THE CARDING MACHINE BECOMES NON-FUNCTIONAL. IF AN AUTOLEVELER IS TO BE REPAIRED THEN THAT REPAI R WOULD COME WITHIN THE CONNOTATION OF THE WORD CURRENT REPAIRS BECAUSE IT IS A PART OF THE CARDING MACHINE. EVEN IF IN A GIVEN CA SE, REPLACEMENT OF AN AUTOLEVELER COULD COME WITHIN THE CONNOTATION OF THE WORD CURRENT REPAIRS IF THE OLD PART IS NOT AVAILABLE IN THE MARKET. IT IS A CURRENT REPAIR BECAUSE THE CARDING MACHINE REMA INS AS AN ASSET WITHOUT ANY CHANGE EVEN AFTER REPAIR OR REPLACEMENT OF THE AUTOLEVELER. TO GIVEN AN EXAMPLE, A COMPRESSOR IS A N IMPORTANT PART OF AN AIR-CONDITION MACHINE. REPAIR OF THE COMPRES SOR WILL COME IN THE CONNOTATION OF THE WORD CURRENT REPAIRS IN S. 31(I) OF THE SAID ACT BECAUSE THE ASSESSEE DOES NOT REPLACE THE AIR-C ONDITION MACHINE. AT THE HIGHEST, HE REPLACES A PART OF THE AIR-CONDI TION MACHINE. SO IS IN THE CASE OF THE PICTURE TUBE IN A TELEVISION SET, WHEN THE PICTURE TUBE IS REPLACED THE TELEVISION SET IS NOT REPLACED , THEREFORE, SUCH REPAIRS ALONE CAN COME WITHIN THE CONNOTATION OF TH E WORD CURRENT REPAIRS IN S. 31(I) OF THE SAID ACT AS IT STOOD AT THE MATERIAL TIME. THEY ARE EFFECTED TO PRESERVE AND MAINTAIN THE ASSE T, VIZ., AIR- CONDITIONER OR CARDING MACHINE. LASTLY, IT CANNOT BE SAID THAT THE TEXTILE MILL CONSTITUTES A PLANT AS IT IS ONE CONTIN UOUS PROCESS OF MANUFACTURE BEGINNING FROM BLOW ROOM TO THE WINDING SECTION. AS STATED ABOVE, DIFFERENT OUTPUTS FLOW FROM DIFFERENT SEGMENTS OF PRODUCTION LIKE BLOW ROOM, CARDING, COMBING, ROVING , WINDING ETC. IN THE CASE OF A TEXTILE MILL THERE IS NO PROCESS WHER EBY RAW MATERIAL IS FED ON ONE END AND THE FINISHED PRODUCT COMES OUT A T THE OTHER END WITHOUT INTERVENTION IN BETWEEN. FOR EXAMPLE, IN TH E CASE OF CONTINUOUS CASTING MACHINE IN THE STEEL INDUSTRY WE HAVE ONE CONTINUOUS INTEGRATED PROCESS UNDER WHICH SCRAP (RA W MATERIAL) IS PUT IN AND WHAT COMES OUT IS STEEL OR IRON OR ALUMI NIUM. ANOTHER EXAMPLE, IN THE CASE OF PASTEURIZATION PLANT WE HA VE THREE CHAMBERS AND DUCTS. IN THE FIRST MILK IS COLLECTED , IN THE SECOND IT IS HEATED AND IN THE THIRD IT IS COOLED. DUCT CARRIES HOT AND COLD WATER. THE RAW MATERIAL IS RAW MILK, THE END PRODUCT IS TH E PASTEURIZED MILK. 10 I.T.A. NO. 966MDS/12 IN THE HEAT CHAMBER THERE IS THE HEATER. IN THE CO OLING CHAMBER WE HAVE COOLING PLANT WHICH HAS A CONCEPT SIMILAR TO A IR-CONDITION PLANT. SUCH A PROCESS IS ONE INTEGRATED PROCESS. THEREFOR E, THE TRIBUNAL AND THE HIGH COURT ERRED IN HOLDING THAT THE MANUFA CTURING PROCESS IN THE TEXTILE MILL IS ONE CONTINUOUS INTEGRATED PRO CESS. 8. IT IS CLEAR FROM THE ABOVE OBSERVATIONS OF THEIR LORDSHIP WHICH SUCCINCTLY SUMMARISES THE PROCESSES UNDERTAKEN BY A TEXTILE MILL, THAT A TEXTILE MILL CANNOT BE COMPARED WITH A MANUFACTURIN G UNIT WHICH WAS HAVING AN INTEGRATED PROCESS OF PRODUCTION. A TEXT ILE MILL CANNOT BE CONSIDERED AS A SIMPLE PLANT WITH CONTINUOUS PROCES S OF MANUFACTURE. DIFFERENT OUTPUTS COME FROM DIFFERENT SEGMENTS OF P RODUCTION OR IN OTHER WORDS, EACH OF SEGMENT CAN BE CONSIDERED AS INDEPEN DENT AND PRODUCTION FROM EACH SEGMENT BECOMES INPUT OF THE N EXT SEGMENT FOR FURTHER PROCESSING. EACH OF THE SEGMENT IS HAVING SEPARATE CAPACITIES. THEREFORE, GIVING A VERY NARROW INTERPRETATION TO T HE TERM INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF INTERPRETATION OF S ECTION 32(1)(IIA), IN OUR OPINION, WOULD NOT BE DESIRABLE, IN THE CASE OF TEX TILE MILLS. IF THE WEAVING DIVISION IS CONSIDERED INDEPENDENTLY, UNDIS PUTEDLY, THE CAPACITY HAD INCREASED BY ALMOST 80%. IN THE NATURE OF BUSI NESS OF THE ASSESSEE, AS MENTIONED ABOVE, WE ARE OF THE OPINION THAT THE WEAVING DIVISION CAN BE CONSIDERED AS A SEPARATE UNDERTAKIN G. ITS EXPANSION HAVING RESULTED IN INSTALLED CAPACITY BY GOING UP M ORE THAN 10%, ADDITIONAL DEPRECIATION WAS INDEED ALLOWABLE. AS F OR THE VIEW OF THE 11 I.T.A. NO. 966MDS/12 A.O. THAT NON FILING OF AUDIT REPORT IN FORM 3AA FA TALLY EFFECTED THE CLAIM OF THE ASSESSEE, WE ARE UNABLE TO APPRECIATE. IT I S FOR THE REASON THAT ADMITTEDLY IT WAS FILED DURING THE COURSE OF ASSESS MENT PROCEEDINGS THOUGH BELATEDLY. AS HELD BY HONBLE KERALA HIGH C OURT IN THE CASE OF PARRY AGRO INDUSTRIES LTD. (SUPRA), NON PRODUCTION OF AUDIT REPORT CAN ONLY BE CONSIDERED AS PROCEDURAL LAPSE AND ASSESSEE HAVING CURED THE LAPSE BEFORE COMPLETION OF ASSESSMENT, A DISALLOWAN CE COULD NOT BE MADE FOR THIS REASON. IN TAKING THIS VIEW, WE ARE ALSO FORTIFIED BY THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CA SE OF M/S NRB BEARINGS LTD. V. DCIT IN I.T.A. NO. 4775/MUM/2010 D ATED 20 TH SEPTEMBER, 2011 REPORTED IN 133 ITD 306. IN THE NU TSHELL, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT( APPEALS). 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 19 TH OF JULY, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH JULY, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-I, COIMBATORE / CIT-I, COIMBATORE/D.R./GUARD FILE