Income Tax Appellate Tribunal - Ahmedabad
Diamines & Chemicals Ltd.,, Baroda vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
Before Shri G.C.Gupta, Vice President and
Shri Anil Chaturvedi, Accountant Member
ITA No. 409/Ahd/2013
Assessm ent Year :2007-08
The DCIT, V/s. M/s Diamines and Chem icals Ltd.
Cir. 1(1), Baroda Plot No. 13 P.C.C. Area
Petrochemicals, Dist. Baroda -
391346
P AN No. AAACD5356R
(Appellant) .. (Respondent)
अपीलाथȸ कȧ ओर से Shri T. Sankar, Sr. D.R.
By Appellant
ू×यथȸ कȧ ओर से/By Respondent Shri Sanjay R. Shah, A.R.
सुनवाई कȧ तारȣख/Date of Hearing
16.04.2013
घोषणा कȧ तारȣख/Date of Pronouncement 10.05.2013
ORDER
PER : Anil Chaturvedi, Accountant Member
This appeal is filed by the Revenue against the order of ld. CIT(A)-I, Baroda, dated 12.11.2011 for the assessment year 2007-08.
2. The facts as culled out from the orders are as under:
3. The assessee is a company mainly engaged in the business of manufacture and sale of various speciality chemicals. It has its manufacturing plant in the petrochemicals area near Baroda and has also installed various windmills for generation of electricity. The assessee filed its return of income on 16.11.2007 declaring total income of Rs.11,21,743/- under normal provisions of the Act. Thereafter, a revised return of income was filed on 24.03.2009 declaring a loss of Rs.33,13,525/-. The return was selected for I T A No . 4 09 / Ah d /2 0 13 A . Y. 0 7- 0 8 Page 2 scrutiny and thereafter assessment was framed u/s.143(3) vide order dated 03.11.2009 and the loss returned by the assessee was accepted. Thereafter, the assessment was reopened and assessment was framed u/s.143(3) r.w.s. 147 of the Act, vide order dated 05.12.2011 and the total income was determined at Rs.86,17,396/-. Aggrieved by the order of the A.O., the assessee carried the matter before the CIT (A). CIT (A), vide his order dated 12.11.2011, granted partial relief to the assessee. Aggrieved by the aforesaid order of the CIT(A), the Revenue is now in appeal before us and raised following effective ground:
"1. On the facts and in the circumstances of the case and in law, the ld.CIT (Appeals) erred in deleting addition of Rs.1,17,98,030/- on account of disallowance of additional depreciation on wind electric generator without appreciating that the wind electric generator does not result into manufacture or production or article or thing, but it is used to generate electricity and that the basic criteria to get additional depreciation under clause (iia) of section 32 of the Act is that the plant and machinery should be covered under clause (ii) of section 32 of the Act, whereas wind electric generator is classified as per clause (i) of section 32 of the Act."
4. The A.O. noticed that the assessee has claimed additional depreciation on wind electric generator amounting to Rs.1,17,98,030/-. The assessee was asked to justify its claim. The assessee, inter alia, submitted that the additional depreciation is available to the assessee who is engaged in manufacture and production of any article or thing subject to conditions mentioned in the proviso to Clause iia of Sub-section 1 of Section 32 of the Act. It was, accordingly, submitted that the assessee was eligible for I T A No . 4 09 / Ah d /2 0 13 A . Y. 0 7- 0 8 Page 3 additional depreciation on wind electric generator installed for the purpose of wind mill / power generation undertaking. The contention of the assessee was not found acceptable to the A.O. as he was of view that wind electric generator does not result into manufacture or production of article or thing. Further, the wind electric generator was used to generate electricity and hence the claim of additional depreciation was not acceptable. He was further of the view that the assessee was covered by the Clause (i) of Section 32 of the Act and therefore, the assessee was not entitled to claim additional depreciation as the basic criteria to get additional depreciation under Clause iia of Section 32 was that the plant and machinery should be governed under clause ii of Section 32 of the Act. He, accordingly, worked out the excess depreciation claimed by way of additional depreciation of Rs.1,17,98,030/- and disallowed the same.
5. Aggrieved by the order of the A.O., the assessee carried the matter before CIT(A). The CIT(A), after considering the submissions of the assessee and relying upon the decision in the case of CIT vs. VTM Ltd. 319 ITR 336 (Mad), CIT v. Texmo Precision Castings 321 ITR 481 (Mad) & CIT v. Hi Tech Arai Ltd. 321 ITR 477 (Mad), held that the issue was covered in favour of the assessee and accordingly, directed to delete the addition.
6. Aggrieved by the aforesaid order of CIT(A), the Revenue is now in appeal before us.
7. Before us, the ld. Sr. D.R. relied upon the order of the A.O., on the other hand, ld. A.R. submitted that the benefit of additional depreciation is available to assessee engaged in the business of manufacture and production of any I T A No . 4 09 / Ah d /2 0 13 A . Y. 0 7- 0 8 Page 4 article or thing. The assessee is engaged in the business of manufacturing of various speciality chemicals which finds application in industries like pharmaceuticals, agro-chemicals etc. The assessee also entered into generation of wind power and has installed wind electric generators in the States of Gujarat and Maharashtra. Thus, the assessee fulfills the criteria of being "an assessee engaged in the business of manufacture or production of any article or thing" which is the requirement of Section32(1)(iia) to avail the benefit of additional depreciation. It was further submitted that the benefit of additional depreciation is available to the assessee who is engaged in the business of manufacture and production of any article or thing irrespective of the fact that whether particular asset results into production or manufacture of article or thing or not. Ld. A.R. placed reliance upon the decision in case of CIT vs. VTM Ltd. 319 ITR 336 (Mad), CIT v. Texmo Precision Castings 321 ITR 481 (Mad) & CIT v. Hi Tech Arai Ltd. 321 ITR 477 (Mad). Ld. A.R. further submitted that if the assessee is engaged in manufacture and production of any article or thing and the conditions mentioned in proviso to Clause (iia) is fulfilled then the assessee would be eligible to claim additional depreciation. Clause (iia) does not require the asset to fall under Clause (ii) of Section 32(1) but it only states that deduction in respect of additional depreciation at the specified rate shall be allowed under clause (ii), if conditions specified in Clause (iia) r.w. proviso to the said clause are satisfied. Thus, the ld. A.R. supported the order of CIT(A).
8. We have heard the rival submissions and perused the material on record. The dispute in the present case is whether the assessee is entitled to I T A No . 4 09 / Ah d /2 0 13 A . Y. 0 7- 0 8 Page 5 claim of additional depreciation of wind electric generator. It is the undisputed fact that the assessee is engaged in the business of manufacturing of speciality chemicals and also generation of wind power. The date of installation of wind power generator is not in dispute. The A.O. has disallowed the claim of additional depreciation for the reason that the wind power generator does not result into the manufacture or production of article or thing. Before us, the assessee relied upon the decision of CIT v. Hi Tech Arai Ltd. (supra) and also placed on record the copy of the decision. On perusal of the aforesaid decision, we find that the question before the Hon'ble High Court was whether the assessee was entitled to additional depreciation on purchase of wind mills even though the main business of the assessee was not producing or generating of electricity. The Hon'ble Madras High Court has decided in favour of assessee by holding as under:
"5. In the case on hand, the assessee is stated to have set up two wind mills in addition to the already existing four wind mills and thereby increased its power generation capacity by above 50%. It is true that the assessee is a company engaged in the business of manufacture of oil seeds, moulded rubber parts, reed value assemblies apart from generation of power. After the installation of the additional wind mills, both prior to as well as after the installation of the additional wind mills, the assessee was using wind energy for generating power for its capitative consumption apart from selling the surplus power generated to the Tamil Nadu Electricity Board. As far as application of Section 32(1)(iia) of the Act, is concerned, what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after 31st March 2002 by an I T A No . 4 09 / Ah d /2 0 13 A . Y. 0 7- 0 8 Page 6 assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed upto 31.03.2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a wind mill has nothing to do with the power industry, namely, manufacture of oil seeds etc. is totally not germane to the specific provision contained in Section 32(1)(iia) of the Act."
In the case of CIT vs. VTM Ltd.(supra), one of the issue before Hon'ble Madras High Court was whether the assessee what right in claiming additional depreciation u/s.32(iia) Hon'ble Madras High Court has decided the issue in assessee's favour by holding as under:
"5. In the case on hand, the assessee is stated to have set up a wind mill at a cost of Rs.5,85,60,000. It is true that the assessee is a company engaged in the business of manufacture of textile goods. As far as application of section 32(1)(iia) of the Act, is concerned, what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after 31-3-2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed up to 31-3-2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a wind mill has nothing to do with the power industry, namely, manufacture of oil seeds etc. is totally not germane to the specific provision contained in section 32(1)(iia) of the Act."
I T A No . 4 09 / Ah d /2 0 13 A . Y. 0 7- 0 8 Page 7 We find that the issue before us in the present appeal is directly covered in favour of the assessee by the aforesaid decisions of High Courts. Further, the Revenue has not brought on record before us any contrary decision of any other High Court or Jurisdictional Court in its support. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A). Thus, this ground of Revenue is dismissed.
9. In the result, the Revenue's appeal is dismissed.
This Order pronounced in open Court on 10.05.2013
Sd/- Sd/-
(G.C.Gupta) (Anil Chaturvedi)
Vice President Accountant Member
True Copy
S.K.Sinha
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।