M/S. JSW STEEL PROCESSING CENTRES LTD., V. THE DEPUTY COMMISSIONER

ITA/479/2018

AI Insights

The case involves M/S. JSW Steel Processing Centres Ltd., the appellant, contesting the disallowance of additional depreciation claimed under Section 32(1)(iia) of the Income Tax Act, 1961 for the assessment year 2013-14. The primary contention was whether the appellant's activities constituted 'manufacture or production' which is a prerequisite for claiming additional depreciation. The Assessing Officer initially disallowed the claim on the grounds that the appellant's activities amounted to job work rather than manufacturing. This decision was upheld by the CIT(A) and partially by the ITAT, which acknowledged the activities as falling within the meaning of 'manufacture' but did not conclusively determine the eligibility for additional depreciation due to lack of evidence on the purchase and installation of new machinery in the relevant year. The High Court of Karnataka, upon reviewing the case, found inconsistencies in the ITAT's findings and remitted the matter back for a detailed examination.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 732805 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-09-2022
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax 1, Mum. Vs. Hindustan Petroleum Corpn. Ltd.
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Additional depreciation; Disallowance; Manufacture or Production; New plant and machinery
• Section: 143(3); 32(1)(iia); 260-A

Judgement Text

" - 1 - ITA No. 479 of 2018 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF SEPTEMBER, 2022 PRESENT THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR AND THE HON'BLE MR. JUSTICE UMESH M. ADIGA INCOME TAX APPEAL NO. 479 OF 2018 BETWEEN: M/S. JSW STEEL PROCESSING CENTRES LTD. NO. 121, \"THE ESTATE\" DICKENSON ROAD BENGALURU-560 042. REPRESENTED BY ITS DIRECTOR SRI. UMESH RAI AGED ABOUT 53 YEARS SON OF SRI. HARI NARAIN RAI. …APPELLANT (BY SHRI. S. PARTHASARATHI, ADVOCATE) AND: THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4 (1)(1), BMTC BUILDING 80 FEET ROAD, KORAMANGALA BANGALORE-560 095. …RESPONDENT (BY SHRI. K.V. ARAVIND, ADVOCATE) THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:07.03.2018 PASSED IN ITA NO.2001/BANG/2017, FOR THE ASSESSMENT YEAR 2013-14, VIDE ANNEXURE-A, PRAYING FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ETC. Digitally signed by YASHODHA N Location: HIGH COURT OF KARNATAKA - 2 - ITA No. 479 of 2018 THIS INCOME TAX APPEAL, COMING ON FOR HEARING, THIS DAY, P.S. DINESH KUMAR J., DELIVERED THE FOLLOWING: JUDGMENT This appeal by the assessee, directed against the order dated 07.03.2018 in ITA No.2001/Bang/2017 passed by the ITAT1, Bengaluru Bench, for the A.Y.2013-14, has been admitted to consider following questions of law: \"1) Whether the Tribunal was justified in upholding the disallowance of additional depreciation under Section 32(1)(iia) of the Act after having convinced that the Appellant was carrying on business of manufacture or production of article or thing only on the ground that the Appellant had not established the purchase and installation of new plant and machinery in the relevant year for the activity on which additional depreciation had been claimed? 2) When purchase and installation and user of new plant and machinery in the relevant year having not been doubted by the assessing officer while passing the assessment order and having disallowed the claim only on the ground that the Appellant was not a manufacturer or producer of article or thing, whether the appellate authorities were right in holding that the Appellant did not prove the purchase and installation of new machinery in 1 Income tax Appellate Tribunal, Bengaluru Bench - 3 - ITA No. 479 of 2018 the relevant year without affording an opportunity to the Appellant to establish the purchase and installation of new plant and machinery for eligibility to make the claim under Section 32(1)(iia) of the Act? \" 2. Brief facts of the case are, assessee claimed additional depreciation of Rs.46,63,950/- under Section 32(1)(iia) of the Income Tax Act, 19612 for the assessment year 2013-14. The A.O.,3 vide order dated 23.11.2015 under Section 143(3) of the Act, has held that assessee's activity was a job work and therefore, assessee was not entitled for the depreciation. On appeal, the CIT(A)4 has upheld A.O's finding that assessee was not a manufacturer. In addition, he has recorded a finding that assessee has not produced relevant bills pertaining to new machinery/plant. 3. On further appeal, the ITAT, in the impugned order, has recorded in para 11 that assessee's activity does not form part of manufacturing, but falls within the meaning of 'manufacture'. 2 'the Act' for short), 3 Assessing Officer 4 Commissioner of Income Tax (Appeals) - 4 - ITA No. 479 of 2018 4. Shri S. Parthasarathi, learned advocate for the assessee contended that assessee's activity falls within the definition of 'manufacture or production'. There was no dispute with regard to the new plant and machinery installed in the relevant year. The CIT (A) has recorded a finding with regard to the bills pertaining to the new machinery/plant when that issue was not under consideration before him. Further, the ITAT has recorded two distinct findings but in the concluding paragraph, it has held that assessee's activities falls within the domain of manufacture. Accordingly, he prayed for allowing this appeal. 5. Shri K.V.Aravind, learned Senior Standing Counsel for the Revenue placing reliance on a decision in Commissioner of Income Tax 1, Mum. Vs. Hindustan Petroleum Corpn. Ltd.5 submitted that assessee undertakes only job work of cutting steel sheets. Therefore, the activity cannot be considered either as production or manufacture. With regard to finding recorded by the CIT (A) about the bills, he submitted that proceedings before the CIT (A) are continuation of the 5 [2017]84 taxmann.com 215(SC) paras 15 to 17 - 5 - ITA No. 479 of 2018 proceedings before the Assessing officer and hence, CIT (A) has noticed that there were no bills produced. Therefore, its finding does not suffer from any legal infirmity. 6. We have carefully considered rival submissions and perused the records. 7. Additional depreciation is permissible in terms of Section 32(1)(iia) of the Act, which reads as follows: \"32(1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; xxx (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 manufacture or production of any article or thing or in the business of generation, transmission or 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): Provided that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and - 6 - ITA No. 479 of 2018 aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect, as if for the words \"twenty per cent\", the words \"thirty-five per cent\" had been substituted\" 8. The Assessing Officer has disallowed the claim on the ground that assessee undertakes only job work. The CIT (A) has upheld the said finding and further added that relevant bills were not produced. Shri Parthasarathi submits that assessee is ready to produce all the bills before the ITAT. The ITAT has held at one breath that assessee's activities amounts to manufacture and in other breath, it does not. 9. In view of two distinct findings recorded by the ITAT, in our opinion, this is a fit case to remit the matter to the file of ITAT. Hence, the following: ORDER i) The appeal is allowed; ii) Order dated 07.03.2018 in I.T.A.No.2001/Bang/2017 passed by the Income Tax Appellate Tribunal, Bengaluru Bench 'B', Bengaluru, is set aside and the matter is - 7 - ITA No. 479 of 2018 remitted on the file of ITAT to record a categorical finding with regard to the aspect whether assessee's activity falls within the definition of 'manufacture or not'. The ITAT shall also examine the veracity of bills to be produced before it; iii) Since we are remanding the matter on the file of ITAT, the questions raised in this appeal do not call for any answer. No costs. Sd/- JUDGE Sd/- JUDGE YN List No.: 1 Sl No.: 23 "