DCIT CC 7(2), MUMBAI V. ANIK INDUSTRIES LTD, MUMBAI

ITA 993/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6738 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA LD DR
• Assessee Lawyers: BHUPENDRA SHAH LD
• Keywords: Depreciation; Additional depreciation
• Section: 143(3); 147

Judgement Text

ITA.NO.993/MUM/2016 ANIK INDUSTRIES LIMITED ASSESSMENT YEAR-2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. NO.993/MUM/2016 ( ASSESSMENT YEAR:2008-09) DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-7(2) ROOM NO.655 AAYKAR BHAVAN, M.K.ROAD MUMBAI-400 020 VS. ANIK INDUSTRIES LIMITED 610, TULSIANI CHAMBERS MUMBAI- 400 021 ! ' PAN/GIR NO. AAACM-2696-K ( !# APPELLANT ) : ( $%!# RESPONDENT ) ASSESSEE BY : BHUPENDRA SHAH, LD.AR REVENUE BY : N. HEMALATHA, LD. DR & DATE OF HEARING : 24/05/2018 '() / DATE OF PRONOUNCEMENT : 27/06/2018 O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2008-09 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-49 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-49/IT-35/2014-15 DATED 01/12/2015 QUA CERTAIN RELIEF PROVIDED TO THE ASSESSEE. THE ASSESS MENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX- ITA.NO.993/MUM/2016 ANIK INDUSTRIES LIMITED ASSESSMENT YEAR-2008-09 2 CENTRAL CIRCLE-40, MUMBAI [AO] U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 ON 24/02/2014 WHEREIN THE ASSESSEE HAS BEEN SADDLED WITH ADDITION OF RS.58 LACS ON ACCOUNT OF D EPRECIATION & ADDITIONAL DEPRECIATION ON BOILER. THE SOLE EFFECTI VE GROUND RAISED UNDER APPEAL READS AS UNDER:- ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN ALLOWING THE EXCESS CLAIM OF DEPRECIATION OF RS.39, 52,136/- RELYING ON THE DECISION OF THE ITAT (MP) IN THE CASE OF VIPPY SOLVEX PRODUC TS LTD. (2007) 8 ITJ 624 (MP) WITHOUT APPRECIATING THE FACT THAT THE ANCILLARY EQ UIPMENT & ACCESSORIES ARE NOT MENTIONED IN THE DEPRECIATION TABLE WHICH ENUMERATE S AND EXHAUSTS THOSE EQUIPMENTS FOR WHICH DEPRECIATION IS ADMISSIBLE AT HIGHER RATES. 2. FACTS QUA THE DISPUTE ARE THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTED THAT THE ASSESSEE CLAIMED HIGHER DEPRECIA TION @80% ON BOILERS TREATING THE SAME AS ENERGY SAVINGS DEVICES AS PER APPENDIX-I PRESCRIBING RATES OF DEPRECIATION ON VARIOUS ASSETS . IT WAS NOTED THAT THE ASSESSEE PURCHASED BOILERS FOR RS.68.16 LACS BUT CL AIMED DEPRECIATION ON RS.189.76 LACS BY INCLUDING THE EXPENDITURE ON CIVIL WORK, ANCILLARY EQUIPMENTS AND ACCESSORIES AND COST OF INSTALLATION OF THESE ITEMS. THE HIGHER DEPRECIATION ON SUCH ADDITIONAL EXPENDITURE, IN THE OPINION OF LD. AO, WAS NOT AVAILABLE TO THE ASSESSEE SINCE THE SAM E WAS AVAILABLE ONLY AGAINST SPECIFIC PLANT AND EQUIPMENTS AS PRESC RIBED IN APPENDIX-I. CONSEQUENTLY, THE HIGHER DEPRECIATION ON ADDITIONAL EXPENDITURE AS CLAIMED BY THE ASSESSEE AMOUNTING TO RS.39.52 LACS WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESS EE WAS ALLOWED NORMAL DEPRECIATION @15% AGAINST THESE ADDITIONAL C OSTS / EXPENDITURE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 01/12/2015 WHE REIN THE MATTER WAS DECIDED IN ASSESSEES FAVOR BY OBSERVING AS UND ER:- ITA.NO.993/MUM/2016 ANIK INDUSTRIES LIMITED ASSESSMENT YEAR-2008-09 3 4.3 DECISION I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE, TH E STAND TAKEN BY THE A.O IN THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL, THE WRITTE N SUBMISSIONS FILED BY THE APPELLANT DURING THE HEARING PROCEEDINGS. 4.4IN THIS REGARD, THE AO HAS TAKEN THE VIEW THAT H IGHER DEPRECIATION OF 80% CAN BE ALLOWED ON THE ITEMS OF EQUIPMENT NAMED IN THE DEPR ECIATION TABLE BEING ENERGY SAVING DEVICES. THUS, HE HAS ALLOWED DEPRECIATION A T HIGHER RATES ON THE COST OF IGNIFLUID/ FLUIDIZED BED BOILERS OF RS.68,16,465/- AND DEPRECIATION ON OTHER ANCILLARY EQUIPMENT AND ACCESSORIES, COST OF CIVIL WORK ON IN STALLATION OF THESE ITEMS, CAPITALIZED WITH BOILER HAS BEEN ALLOWED AT NORMAL RATE OF 15% APPLICABLE TO PLANT AND MACHINERY. THE AO HAS RELIED ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS ADYAR PRODUCTS CO. (2009) 314 ITR 38. IN THAT CASE THE DISPUTE WAS WHETHER HIGHER RATE OF DEPRECIATION WAS ALLOWABLE O N FLUID BED DRIER IN THE CATEGORY OF ENERGY SAVINGS DEVICES. THE HONBLE COURT HELD T HAT THE WORD BEING IN THE PHRASE ENERGY SAVING DEVICES BEING, SPECIALIZED BOI LERS AND FURNACES IMPLIED ENERGY SAVING DEVICES WHICH ARE THE DEVICES MENTI ONED THEREIN. THE APPELLANT HAS SUBMITTED THAT ADDITION OF RS.189 76883/- HAS BEEN MADE IN THE PERIOD OCTOBER TO MARCH FOR ITS ETAH UNIT AND DEPRE CIATION AT THE RATE OF 80% AND ADDITIONAL DEPRECIATION AT THE RATE OF 20% HAS BEEN CLAIMED AT RS.7580753/- AND RS.1897688/- RESPECTIVELY. THE BREAKUP OF THE CAPIT AL COST OF BOILER HAS BEEN FURNISHED WHICH IS AS UNDER: SR.NO. DESCRIPTION VALUE 1 PURCHASE OF BOILER FROM THERMAX 6509678 2 CIVIL JOB INCLUDING FOUNDATION FOR BOILER 1754157 3 REFRECTORY FOR BOILER 434850 4 CONVEYER FOR HUSK & ASH FOR BOILER 1705350 5 ELECTRICALS INCLUDING LIGHT FITTING FOR BOILER 561563 6 STEEL FOR FOUNDATION & STRUCTURE FOR BOILER 2020734 7 CHIMNEY FOR BOILER 772500 8 INSTALLATION & FABRICATION JOB FOR BOILER 2930834 9 IBR STEAM PIPE LINES FOR BOILER 723671 10 FREIGHT FOR BOILER 614299 11 INSULATION FOR STEAM PIPE LINES OF BOILER 129164 12 MATERIAL FOR BOILER START UP 226896 13 PRESSURE REDUCING STATION FOR STEAM 593187 TOTAL 18976883 I FIND THAT THE DISPUTE IN THIS CASE IS NOT WHETHER DEPRECIATION IS ALLOWABLE ON THE SPECIALIZED BOILER, INSTALLED BY THE APPELLANT. THE DISPUTE IS WHETHER DEPRECIATION ON OTHER ANCILLARY EQUIPMENT AND ACCESSORIES, COST OF CIVIL WORK ON INSTALLATION OF THESE ITEMS, CAPITALIZED WITH BOILER IS TO BE ALLOWED AT THE HIGHER RATE OF 80%. I FIND THAT THE CASE OF DCIT VS MS VIPPY SOLVEX PRODUCTS LTD. (2007 ) 8 ITJ 624 (MP) IS APPLICABLE TO THIS CASE WHERE IN THE ISSUE WAS WHETHER OTHER C OMPONENTS OF BOILER LIKE COAL CONTAINER, COAL CONVEYOR, BUCKET ELEVATOR, DUST COL LECTING SYSTEM CONSTITUTE INTEGRAL PART OF BOILER TO BE ENTITLED TO 100% DEPRECIATION. IN THE CASE OF VIPPY SOLVEX IT WAS HELD THAT THE TRIBUNAL DID NOT ERR IN EXTENDING BEN EFIT TO THE ASSESSEE TOWARDS DEPRECIATION AT THE RATE OF 100% ON THE AUTOMATIC C OAL SUPPLY SYSTEM, TREATING IT TO BE A PART AND PARCEL OF THE BOILER, AND THAT ON THE SE ITEMS THE ASSESSEE WAS NOT REQUIRED TO BE RESTRICT ITS CLAIM TO 25%. I AM OF THE CONSIDERED OPINION THAT THE ANCILLARY E QUIPMENT AND ACCESSORIES LIKE CHIMNEY FOR BOILER, CONVEYOR SYSTEMS FOR HUSK AND A SH FOR BOILER, IBR STEAM PIPELINE ELECTRICAL FITTINGS AND SUCH LIKE ITEMS ARE CLOSELY INTERCONNECTED AND LINKED AS TO FORM ITA.NO.993/MUM/2016 ANIK INDUSTRIES LIMITED ASSESSMENT YEAR-2008-09 4 THE COMMON PLANT. THE ANCILLARY EQUIPMENT AND ACCES SORIES FACILITATE THE EFFICIENT FUNCTIONING OF THE SPECIALIZED BOILER AND THESE CAN NOT HAVE INDEPENDENT EXISTENCE. THEREFORE, THE COST OF INSTALLATION OF THESE ITEMS, INCLUDING CIVIL JOBS HAVE RIGHTLY BEEN CAPITALIZED WITH THE COST OF BOILER AND THE AP PELLANT HAS RIGHTLY CLAIMED THE DEPRECIATION AT THE RATE OF 80% ON THESE ITEMS, INC LUDED IN THE COST OF BOILER AT RS.18976883/-. ACCORDINGLY, THE AO IS DIRECTED TO A LLOW THE CLAIM OF DEPRECIATION ON THE BOILER, CONSIDERING THE COST AT RS.1,89,76,883/ -. THE ADDITION OF RS.3952136/- ON ACCOUNT OF DEPRECIATION ON BOILER IS DELETED IN VIE W OF ABOVE DISCUSSION. THIS GROUND IS ALLOWED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE, MS. N.HEMALATHA , DEFENDED THE STAND OF LD. AO AND SUBMITTED THAT HIGHER DEPRE CIATION COULD BE ALLOWED ONLY AGAINST SPECIFIC PLANT AND MACHINERY I N TERMS OF APPENDIX-I . PER CONTRA, LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE, SH. BHUPENDRA SHAH , SUBMITTED THAT ADDITIONAL COST INCURRED BY THE AS SESSEE WERE INTEGRAL PART OF THE BOILERS AND THE FORMED PART AN D PARCEL OF THE PLANT & MACHINERY AND HAD NO SEPARATE INDEPENDENT EXISTENCE AND THEREFORE, THE STAND OF FIRST APPELLATE AUTHORITY WAS QUITE JU STIFIED IN THE CIRCUMSTANCES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED RELEVANT MATERIAL ON RECORD. UPON DUE CONSIDERATION, WE FIND THAT THE RELIEF HAS BEEN PROVIDED TO THE ASSESSEE BY LD. FIRST APPELLAT E AUTHORITY BY RELYING UPON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT RENDERED IN DCIT VS VIPPY SOLVEX PRODUCTS LIMITED [2007 8 ITJ 6 24]. THE CITED CASE, IN TURN, PLACES RELIANCE ON THE DECISION OF H ONBLE KERALA HIGH COURT RENDERED IN CIT VS. COCHIN REFINERIES LIMITED [1988 173 ITR 461 ]. IN BOTH THE CASES, HONBLE HIGH COURTS HAVE ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT ADDITIONAL PLANT & MACHI NERY HAD NO SEPARATE EXISTENCE AND COULD NOT BE UTILIZED FOR AN Y OTHER PURPOSE AND FORMED INTEGRAL COMPONENT OF THE BOILER AND THEREFO RE, ELIGIBLE FOR HIGHER ITA.NO.993/MUM/2016 ANIK INDUSTRIES LIMITED ASSESSMENT YEAR-2008-09 5 DEPRECIATION. SIMILAR OBSERVATION HAS BEEN MADE BY LD. FIRST APPELLATE AUTHORITY WHILE ARRIVING AT THE CONCLUSION. BEFORE US, THE REVENUE HAS NEITHER CONTROVERTED THE FACTUAL FINDINGS NOR ABLE TO BRING ON RECORD ANY CONTRARY JUDGMENT TO DEFEND ITS VIEWPOINT. THEREFOR E, LD. CIT(A), IN OUR OPINION, HAS CLINCHED THE ISSUE IN RIGHT / PROPER PERSPECTIVE AND PROVIDED RELIEF TO THE ASSESSEE WITH DUE APPLICATIO N OF MIND. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE SAME. 6. RESULTANTLY, THE REVENUES APPEAL STAND DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2018 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 27.06.2018 SR.PS:-THIRUMALESH 2 COPY OF THE ORDER FORWARDED TO : 1. 345 67 2 THE APPELLANT 2. ;<67 2 THE RESPONDENT 3. @A@ BCD345 E 2 THE CITDAE 4. @A@ BC 2 CIT CONCERNED 5. LMNO5;CPQ @A345 R3PQAS 2 DR ITAT MUMBAI 6. OTUV 2 GUARD FILE '# $ %'&/ BY ORDER (/%)'*+,-'& DDY.2ASSTT.REGISTRARE *&-.*/0&12 / ITAT2 MUMBAI