Gujarat High Court
Commissioner Of Income Tax I vs Gujarat Alkalies And ... on 20 January, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/942/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 942 of 2013
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COMMISSIONER OF INCOME TAX I....Appellant(s)
Versus
GUJARAT ALKALIES AND CHEMICALSLTD....Opponent(s)
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Appearance:
MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1
MR MANISH J SHAH, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 20/01/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 27.5.2013 raising following questions of law for our consideration:-
"A. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in law in considering the 'toners' as 'gas cylinders' and accordingly directing the Assessing Officer to allow depreciation @ 60% in chlorine toners instead of 15% applicable to plant and machinery of Caustic Chlorine Plant?"
B(i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in deleting the disallowance of additional depreciation of Page 1 of 9 O/TAXAP/942/2013 ORDER Rs.32,29,051/- on computers installed in the factory premises, without appreciating that the computers are office appliances only whether installed in factory or office?
B(ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in not appreciating the facts that if the computers were the part of the machinery and plant eligible for additional depreciation u/s 32(1)(iia) of the Act, then allowable depreciation on computers would be 15% instead of 60% as claimed by the assessee?"
2. Two issues presented for our consideration pertain to depreciation on toners and on computers, which were installed by the assessee in his factory premises.
3. With respect to the first issue the stand of the assessee was that the toners were gas cylinders, and therefore, qualified for depreciation at the rate of 60%. The Assessing Officer, however, believed that the toners cannot be categorized as gas cylinders and granted depreciation at the rate of 15% considering them to be part of plant and machinery.
4. The assessee approached the Appellate Commissioner and contended that the chlorine toners are used for transportation of chlorine gas generated in the caustic soda plant of the assessee. Reliance was placed on certificate issued by Executive Director Page 2 of 9 O/TAXAP/942/2013 ORDER of Gujarat Alkalies & Chemicals Ltd., a Government Company in support of the contentions. CIT(Appeals), accepted the assessee's contentions and held that chlorine toners were nothing but gas cylinders.
5. Revenue approached the Tribunal, which confirmed the view of CIT(Appeals) making following observations:-
"9. In support of appeal, the Ld. Departmental Representative relied upon the findings recorded in the assessment order. He submitted that chlorine toners were not gas cylinders and therefore were not eligible for depreciation at the rate of 60% as claimed by the assessee.
10. In reply, the Ld Authorized Representative for the assessee supported the order passed by the Ld CIT(A). He also submitted pictures of the cylinders being used for the purpose. These pictures show that chlorine toners look exactly like cylinders. He also filed a certificate dated 09.11.2011 signed by Shri G.K.Agarwal, Executive Director(R) in the assessee-company in which it has been certified that Chlorine Cylinders are being used for transportation of compressed Chlorine Gas generated/produced in the Caustic Soda Plant of the assessee-company. He has also certified that Chlorine Cylinders are capable of being filled up by 900 kgs net weight of Compressed Chlorine Gas. He has also certified that Chlorine Toners being used are technically gas cylinders. The Ld Authorized Representative for the assessee has also filed a copy of Gas Cylinders Rules, 1981 in which "Gas Cylinder" or "Cylinder" has been defined as any closed metal container having a volume exceeding 500millitre but not exceeding 1000 liters intended for the storage and transport of compressed gas, including liquefied petroleum gas(LPG) container fitted to a motor Page 3 of 9 O/TAXAP/942/2013 ORDER vehicle as its fuel tank but not including any other such container fitted to a special transport or under carriage.
11. Relying upon the aforesaid Certificate and the definition of "Gas Cylinder or Cylinder"
under Gas Cylinder Rules, 1981, the Ld Authorized Representative for the assessee submitted that the Ld.CIT(A) has rightly allowed the depreciation at the rate of 60% as claimed by the assessee treating chlorine gas toners as gas cylinders.
12. We have heard both the parties and carefully considered their submissions. Perusal of Appendix-I to the Income-tax Rules as applicable in the assessment year under appeal shows that gas cylinders including valves and regulators were entitled to depreciation at the rate of 60%. The short question here is whether the chlorine toners used by the assessee were gas cylinders. We have seen the pictures of chlorine toners submitted by the Ld Authorized Representative for the assessee. They are in the nature of cylinders. There is no doubt that chlorine is compressed gas. Therefore any vessel that contains such gas and is used either for transportation or storage would satisfy the requirement of being a gas cylinder. In our considered view, chlorine toners used by the assessee are essentially and in substance nothing but gas cylinders. The Ld.CIT(A) has rightly treated them as gas cylinders and accordingly allowed depreciation at the rate of 60%. In this view of the matter, his order in this behalf is confirmed. Resultantly the appeal filed by the Revenue is dismissed."
6. Having heard learned counsel for the parties and having perused the materials on record, we see no reason to interfere. Admittedly, the toners are being used for storage and transportation of chlorine gas Page 4 of 9 O/TAXAP/942/2013 ORDER generated in the plant of the assessee. Certificate of the experts also indicated that the same was a gas cylinder. Reference is also made to the Gas Cylinders Rules where the term " Gas Cylinder" has been defined as closed metal container having volume exceeding 500 millilitre but not less than 1000 litres intended for storage and transportation of compressed gas including Liquefied Petroleum Gas (LPG).
7. We notice that such an issue was considered by two High Courts of the country and held in favour of the assessee. Reference in this regard may be made to the decision of the Delhi High Court in the case of Commissioner of Income-Tax vs. Goyal MG Gases Ltd. reported in [2008]296 ITR 72 (Delhi), where it was observed that "if we interpret the expression "gas cylinder" to mean "cooking gas cylinder", we will be really adding words to the statute which is not permissible.". Relying on the said decision of the Delhi High Court in the case of Commissioner of Income-Tax vs. Goyal MG Gases Ltd.(supra), the Division Bench of Madras High Court in the case of Commissioner of Income-Tax vs. Chemplast Sanmar Ltd.
reported in [2008] 296 ITR 81 (Mad), held that
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O/TAXAP/942/2013 ORDER
chlorine toners are gas cylinders. It was held as under:-
"8. The above view of ours is also supported by the decision of the Delhi High Court in CIT v. Goyal MG Gases Ltd.[2008] 296 ITR 72, which the Appellate Tribunal has relied upon. In the case before the Delhi High Court, the contention of the assessee therein was that the containers/tankers were nothing but big cylinders as they had all the attributes of a cylinder, which was rejected by the Revenue on the ground that since the so-called cylinders were merely containers and were mounted on trucks, the assessee therein was entitled to depreciation at the rate of 25 per cent as eligible to "plant and machinery". While deciding the issue whether the item claimed by the assessee therein is gas cylinders or machinery, the Division Bench has found that there is no dispute that the item in question was gas cylinder, though no doubt a big one and that the expression "gas cylinders" used in Appendix I to the Income-tax Rules does not mention the size of the gas cylinders nor does it say that gas cylinders should be only for cooking purpose or for any other particular purpose and any interpretation of the expression "gas cylinders" to mean "cooking gas cylinder", would be really adding words to the statute which is not permissible. Accordingly, the Division Bench of the Delhi High Court held that gas cylinders are entitled to depreciation at 100 per cent."
8. Learned counsel for the assessee also stated that till the stage of Assessment Year 2004-05 such claim of the assessee for higher depreciation was even accepted by the Revenue.
9. Under the circumstances, we do not find that the Page 6 of 9 O/TAXAP/942/2013 ORDER CIT(Appeals) and the Tribunal committed any error in this respect. Such question, therefore is not required to be considered.
10. Coming to the second question, facts are that during the previous year relevant to the Assessment Year 2007-08 the assessee installed certain computers in its factory premises and claimed depreciation available to computers. The Assessing Officer, however, held that the computers should be treated either as office appliances failing which they would form part of the plant and machinery. In either case, right of depreciation would be 20% and and not 60% as claimed by the assessee. The assessee carried the matter in appeal. CIT(Appeals) reversed the decision of the Assessing Officer. In further appeal by the Revenue before the Tribunal, decision of the CIT(Appeals) was confirmed in following terms:-
"50. We have heard both the parties in our opinion, the Ld CIT(A) has correctly analyzed the facts and decided the issue in the light of applicable law. It cannot be said as a universal proposition of law that computers are always used only in offices and not for manufacturing activities. The finding of fact recorded by the Ld CIT(A) has not been rebutted before us. We are in agreement with the view taken by the Ld.CIT(A) in this regard. His order in this behalf therefore confirmed. Ground NO.2 taken by the Department is Page 7 of 9 O/TAXAP/942/2013 ORDER dismissed."
11. We cannot find any fault with the observations of the Tribunal while confirming the view of CIT(Appeals) that there cannot be universal preposition of law that computers are used only in offices and not for manufacturing activities. The insistence of the Assessing Officer that the same should therefore be treated as office appliance cannot be countenanced. Perhaps if it was shown that the computers formed part of the integrated manufacturing process, his stand that the same would form part of the plant and machinery may have some basis. In the present case, no such material was available on record. It is not as if that in factory premises, computers cannot be installed for direct use in manufacturing activity; thereby forming part of machinery used in such activity. There may be number of ways in which installation of a computer may enhance and improve the efficiency. There is nothing on record to suggest that the computers were part of the plant and machinery.
12. We are not oblivion to the decision of this Court in the case of Commissioner of Income-Tax vs. Statronics and Enterprises P.Ltd. reported in [2007] Page 8 of 9 O/TAXAP/942/2013 ORDER 288 ITR 455(Guj), where computers were treated as part of plant and machinery, and therefore, held entitled to additional depreciation under section 32A of the Act. It was,however, a case where the computers were installed in the office premises. The Revenue's contention, therefore, was that being part of office appliances would not qualify for such additional depreciation. The Court found that the computers were used for data processing and, therefore, for manufacturing process. It was in this background the above finding was given.
13. In that view of the matter, CIT(Appeals) and the Tribunal treating the same as simplicitor computers and granting depreciation at the rate prescribed under the law calls for no interference. In the result, Tax Appeal is dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) SUDHIR Page 9 of 9