M/s Nagarjuna Agrichem Limited, Hyderabad V. Addl.CIT, Range-16, Hyderabad

ITA 975/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5583 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.975/HYD/2013 ASSESSMENT YEAR 2009-2010 M/S. NAGARJUNA AGRICHEM LTD. HYDERABAD PAN AAACN 6932H VS. ADDL. CIT, RANGE-16, HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.1026/HYD/2013 ASSESSMENT YEAR 2009-2010 DCIT, CIRCLE-16 (1), HYDERABAD. VS. M/S. NAGARJUNA AGRICHEM LTD. HYDERABAD PAN AAACN 6932H (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. C.P. RAMA SWAMY FOR REVENUE : MR. D.SUDHAKAR RAO CIT/DR DATE OF HEARING : 17.02.2014 DATE OF PRONOUNCEMENT : 19.02.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS-APPEALS BY ASSESSEE AND REVENUE AGAINST THE ORDERS OF THE LEARNED CIT(A)-V, HYDERABAD DATED 13.03.2013. ASSESSEE IS AGGRIEVED ON THE DISALLOWANC E OF IN- HOUSE RESEARCH AND DEVELOPMENT ACTIVITIES AND CAPIT AL EXPENDITURE OF R & D AMOUNTING TO RS.57,38,293/- WHERE AS, REVENUE IS AGGRIEVED ON ALLOWING THE AMOUNT OF 100% DEPRECIATION ON POLLUTION CONTROL EQUIPMENT AMOUNTING TO RS.1,41,19,671/-. ITA.NO.975 & 1026/HYD/2013 M/S. NAGARJUNA AGRICHEM LTD. HYD. 2. WE HAVE HEARD LEARNED COUNSEL FOR THE ASSESSEE AND LEARNED D.R. LEARNED COUNSEL ALSO PLACED ON RECORD THE DETAILS OF POLLUTION CONTROL EQUIPMENT WHICH WERE PLACED BEFORE THE AUTHORITIES ALONG WITH THE CERTIFICATE ISSUED BY C HEMICAL ENGINEER AND CHARTERED ENGINEER, WHICH WAS PLACED BEFORE THE LEARNED CIT(A) IN SUPPORT OF CLAIM ON POLLUTION CONTROL EQUIPMENT. 2.1. BRIEFLY STATED, ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF PESTICIDES. IT CLAIMED INTER ALIA, DEDUCTION OF RS.57,38,293/- IE. R & D EXPENDITURE INCU RRED TO THE EXTENT OF RS.45,96,143/- AND CAPITAL EXPENDITURE OF R & D TO THE EXTENT OF RS.11,42,150/-. IN THE COURSE OF ASSESS MENT PROCEEDINGS, ASSESSEE WAS ASKED TO FURNISH COPIES OF 3CM A ND 3CL FORMS, DETAILS OF EXPENDITURE, NATURE OF RESEARCH AND DEVELOPMENT WITH RESPECT TO THE ABOVE CLAIM. ON NOTICIN G THAT NO COPY OF APPROVAL FROM THE PRESCRIBED AUTHORITY WAS FURNISHED IN FORM 3CM, THE A.O. DID NOT ALLOW THE EXPEN DITURE UNDER SECTION 35(2AB) OR UNDER SECTION 35(1)(II). HOWEVER , IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FIL ED LETTER CLAIMING FURTHER WEIGHTED DEDUCTION ALONG WITH COPIES OF FORM 3CM AND 3CL. ON NOTICING THAT THESE FORMS ARE SIGNED B Y SCIENTIST-G FOR AND ON BEHALF OF SECRETARY, DSIR, THE A.O. WAS OF THE OPINION THAT HE IS NOT THE PRESCRIBED AUTHORITY TO S IGN AND ACCORDINGLY, THE REVISED CLAIM WAS DISALLOWED. 2.2. THE OTHER ISSUE CONSIDERED BY AO IS THE CLAIM OF DEPRECIATION AT 100% ON POLLUTION CONTROL EQUIPMENT. THE ASSESSEE CLAIMED 100% DEPRECIATION ON EQUIPMENT CAPI TALIZED BEFORE 30 TH SEPTEMBER TO AN EXTENT OF RS.1,06,13,958/- AND 50% CLAIM ON THE ASSETS CAPITALIZED AFTER 30 TH SEPTEMBER ON ITA.NO.975 & 1026/HYD/2013 M/S. NAGARJUNA AGRICHEM LTD. HYD. RS.2,14,249/- ALONG WITH 50% CLAIM ON ASSETS CAPITALIZ ED IN THE FINANCIAL YEAR 2007-08 TO AN EXTENT OF RS.58,90,29 6/-. THE A.O. WAS OF THE OPINION THAT ASSESSEE DID NOT FURNISH RELEVANT DOCUMENTS FOR ESTABLISHING THE POLLUTION CONTROL EQUIPME NT. ACCORDINGLY, HE ALLOWED ONLY 15% DEPRECIATION BY RE-WO RKING OUT THE DISALLOWANCE. THE EXCESS CLAIM OF DEPRECIATION WAS ARRIVED AT RS.1,41,19,671/-. 3. BEFORE THE CIT(A), THE ASSESSEE CONTESTED THE ISSUES. LEARNED CIT(A) WHILE ALLOWING THE CLAIM OF DEPRE CIATION AT 100% ON THE POLLUTION CONTROL EQUIPMENT HOWEVER, DID NOT ALLOW THE CLAIM UNDER SECTIONS 35(2AB)/ 35(1)(II) OF TH E ACT HOLDING THAT A.O. CORRECTLY DISALLOWED THE CLAIM. 4. AT THE OUTSET, LEARNED COUNSEL FOR THE ASSESSEE AND LEARNED D.R. FAIRLY ADMITTED THAT THE ISSUE OF CLA IM UNDER SECTION 35(2AB) WAS CONSIDERED BY THE ITAT IN EARLIER YE AR AND THE CLAIM WAS ALLOWED. FURTHER, IT WAS FAIRLY ADMITTED T HAT IN THE EARLIER YEAR, THE CERTIFICATE WAS NOT FURNISHED BEF ORE THE AUTHORITIES AND THEREFORE, THE MATTER WAS REMITTED TO TH E AUTHORITIES FOR VERIFICATION WHEREAS, IN THIS YEAR, TH E CERTIFICATE WAS FURNISHED BEFORE THE AUTHORITIES. FURTHER, IT WAS P OINTED OUT THAT UNDER THE RULES OF DELEGATION, SCIENTIST-G WA S CONSIDERED AS SECRETARY AND HIS CERTIFICATE IS A VALI D CERTIFICATE UNDER THE PROVISIONS OF THE ACT. 5. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE CONTENTIONS. AS FAR AS THE RELEVANT FORM 3CM AND FO RM 3CL, IN THE ASSESSMENT ORDER UNDER CONSIDERATION, THERE IS NO DISPUTE THAT DSIR CERTIFICATE WAS GRANTED BY WAY OF ORDE R OF APPROVAL OF IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY U NDER SECTION 35(2AB) OF THE I.T. ACT BY LETTER DATED 31 ST OCTOBER, ITA.NO.975 & 1026/HYD/2013 M/S. NAGARJUNA AGRICHEM LTD. HYD. 2011 WHICH WAS FILED BEFORE THE AUTHORITIES. THESE FORM S ALSO INDICATE THAT THE COPY WAS SENT TO DIRECTOR GENERAL INC OME TAX (EXEMPTION), NEW DELHI FOR FAVOUR OF INFORMATION. THUS, THE RE IS NO DISPUTE WITH REFERENCE TO THE ISSUANCE OF RELEVANT CERTIFICATE BY THE DSIR. WHAT THE A.O. IS DISPUTING IS THAT IT WAS SIGNED BY SCIENTIST-G FOR AND ON BEHALF OF SECR ETARY, DSIR. AS PER THE POWERS AND DUTIES OF THE EMPLOYEES SCI ENTISTS B TO G LEVEL ARE ENTRUSTED WITH WORK RELATED TO POLICY MAK ING FORMULATION AND IMPLEMENTATION OF PLAN SEGMENTS IN THE FIELD OF SCIENTIFIC AND INDUSTRIAL RESEARCH AND SCIENTIST-G I S SPECIFICALLY DELEGATED FOR EXERCISING POWERS OF HEAD OF TH E DEPARTMENT AS THE SECRETARY. ACCORDINGLY, WE DO NOT SEE ANY REASON NOT TO ACCEPT THE CERTIFICATE GIVEN BY SCIENTIS T-G JUST BECAUSE IT IS NOT SIGNED AS SECRETARY, DSIR. UNDER TH E DELEGATION OF BUSINESS RULES. SCIENTIST-G IS EMPOWERED TO ACT AS SECRETARY, DSIR. THEREFORE, THE AUTHORITIES ARE DIRECTE D TO ACCEPT THE CERTIFICATE AND ALLOW THE CLAIM AS MADE BY THE ASSESSEE. TO THAT EXTENT, ASSESSEES GROUNDS ARE ALLOWED AND A.O. IS DIRECTED TO WORK-OUT THE DEDUCTION AS CLAIMED A ND ALLOW THE SAME. 6. AS FAR AS THE ISSUE OF 100% DEPRECIATION ON POLLUTION CONTROL EQUIPMENTS, THE FINDINGS OF THE LEARN ED CIT(A) IS AS UNDER : 8.2. I HAVE GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND THE EVIDENCES FILED. IT IS THE CLAIM OF THE APPELLANT THAT THEIR MANUFACTURING PROCESS AND EFFLUENT TREATMENT WAS UNDER STRICT VIGILANCE FR OM POLLUTION ANGLE FROM THE POLLUTION MONITORING AGENCY AN D TO COMPLY WITH THE NORMS SET, THEY HAVE TO INCLUDE CERTA IN ITA.NO.975 & 1026/HYD/2013 M/S. NAGARJUNA AGRICHEM LTD. HYD. EQUIPMENT FOR POLLUTION CONTROL. THE CONSENT FOR OPERA TIONS CERTIFICATE ISSUED BY APPCB INDICATES THE VARIOUS TREATMENTS/NORMS TO BE FOLLOWED FOR AIR/SOLID WASTE/ LIQUID WASTE BY THE APPELLANT. THE INSTALLATION CERTIFICATE I SSUED BY THE CHARTERED ENGINEER CERTIFIES THAT THE APPELLANT H AD PUT TO USE THE POLLUTION CONTROL EQUIPMENT PURCHASED DURING THE YEAR. EXPRESSING DOUBTS OVER THE CLAIM OF THE APPELL ANT, THE A.O. REFERRED TO NON-FURNISHING OF THE PERMISSIONS OBTAINED AND THE INSTALLATION OF THE POLLUTION CONTROL EQUIPME NT. AS ALL THE DOUBTS RAISED BY THE A.O. IN THE ASSESSMENT ORD ER OVER THE POLLUTION CONTROL EQUIPMENT WERE CLEARED BY THE APPELLANT, I FIND NO REASON TO RESTRICT THE CLAIM OF DEPRECIATION TO 15% AND I DIRECT THE A.O. TO ALLOW 100% DEPRECIATION CLAIMED AT RS.1,66,11,378/- ON THE POLLU TION CONTROL EQUIPMENT BOUGHT AND USED DURING THE YEAR UN DER CONSIDERATION AND ALSO ON THE EQUIPMENT PURCHASED D URING THE PREVIOUS ASSESSMENT YEAR, WHERE ONLY 50% OF DEPRECIATION WAS ALLOWED DURING THAT YEAR. 7. AFTER CONSIDERING THE RELEVANT DETAILS OF EQUIPMENTS PLACED ON RECORD ALONG WITH THE CERTIFICATE BY THE CHEMICAL ENGINEER AND CHARTERED ENGINEER, WE AFFIRM THE FINDINGS OF THE LEARNED CIT(A). SINCE THE ASSESSEE HAS INSTALLED POLLUTION CONTROL EQUIPMENT, AS PER APPENDIX-II I OF THE NEW DEPRECIATION SCHEDULE, ASSESSEE IS ENTITLED FOR DEPRECIATION AT 100% ON THE ASSETS CAPITALIZED BEFOR E 30 TH SEPTEMBER AND 50% ON THE BALANCE OF THE CAPITALIZED IN STALLED AFTER 30 TH SEPTEMBER. AS FAR AS THE CLAIM OF POLLUTION CONTROL EQUIPMENT OF 50% INSTALLED IN THE FINANCIAL YEAR 200 7-2008 ARE CONCERNED, IT WAS ALREADY ALLOWED AT 50% IN THE EARLIE R YEAR. ITA.NO.975 & 1026/HYD/2013 M/S. NAGARJUNA AGRICHEM LTD. HYD. THEREFORE, A.O. SHOULD NOT HAVE TAKEN A DIFFERENT VIE W IN THIS YEAR, BEING A CONSEQUENTIAL DEPRECIATION CLAIM. THE ORDER OF THE CIT(A) IS CONFIRMED AND REVENUES GROUNDS ON THESE I SSUES ARE DISMISSED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 19 TH FEBRUARY, 2014 VBP/- COPY TO : 1. M/S. NAGARJUNA AGRICHEM LTD. PLOT NO.12-A, C B LOCK, LAKSHMI TOWERS, NAGARJUNA HILLS, PANJAGUTTA, HYDERABAD C/O. DR. C.P. RAMASWAMI, ADVOCATE, FLAT NOS. 102 & 303, GITANJ ALI APTS., PLOT NO.108, SRINAGAR COLONY, HYDERABAD 073. 2. ADDL. CIT, RANGE-16, HYDERABAD. 3. CIT(A)-V, HYDERABAD 4. C IT - IV , HYDERABAD 5. D.R. ITAT, B BENCH, HYDERABAD.