Devashree Ispat (P) Ltd., Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH: KOLKATA [Before Shri P. K. Bansal, AM & Shri Mahavir Singh, JM]

I.T.A No.1470-1472/Kol/2012 Assessment Years: 2006-07 to 2008-09 Income-tax Officer, Wd-3(4), Kolkata Vs. M/s. Devashree Ispat Pvt. Ltd. (PAN: AACCD 0753E) (Appellant) (Respondent) Date of hearing: 29.06.2015 Date of pronouncement: 27.07.2015

For the Revenue: Shri Debashis Roy, JCIT, Sr. DR For the Assessee: Shri S.L.Kochar, Advocate & Shri Anil Kochar, Advocate

ORDER

Per Shri Mahavir Singh, JM:

These three appeals by revenue are arising out of order of CIT(A)-I, Kolkata in Appeals No. 397, 496CIT(A)-1/3(4)/08-09/09-10 & 235/CIT(A)- 1/3(4)/10-11dated 09.07.12 and 16.07.2012. Assessments were framed by ITO, Ward-3(4), Kolkata u/s. 143(3)(ii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Years 2006-07 to 2008-09 vide their orders dated 31.12.2008, 31.12.2009 and 15.12.2010 respectively.

First we take up ITA No. 1470/Kol/2012

2. At the outset, it is seen that this appeal by Revenue is barred by limitation of 5 days and Revenue has filed condonation petition stating the reasons along with affidavits. It is seen that 6th & 7th October, 2012 being Saturday and Sunday respectively. The factual delay is only for three days. When a query was put to Ld. counsel for assessee fairly conceded 'yes' delay can be condoned due to smallness of delay. In terms of above, we condone the delay and admit the appeal.

3. The only issue in this appeal of Revenue is against the order of CIT(A) in directing the Assessing Officer to allow additional depreciation on Moulds and electrical installations. For this, Revenue has raised following four grounds:-

"(1) The Ld. CIT(A) grossly erred in allowing assessee's appeal and directing the AO to allow additional depreciation for a total amount of Rs.8,,96,436/-

towards electrical installation' and 'Moulds' without any verification.

2 ITA No.1470-1472/K/2012 M/s Devashree Ispat (P) Ltd. AY 2006-07 to 2008-09

2. The Ld. CIT(A) erred in expressing his disputed explanation about 'Moulds' as a part of plant & machinery for the AY 2007-08 without any technical expert opinion and allowed entire claim of additional depreciation in respect of moulds involving an amount of Rs.6,21,409/-, without verifying the nature of operation of the moulds and number of such moulds actually put in operation to be eligible for depreciation.

3. The Ld. CIT(A) erred in considering the entire cost of electrical installations of Rs.2,75,027/- for allowing additional depreciation without verifying whether the installation was exclusively related towards the installation of new plant& machineries or not.

4. The Ld. CIT(A) grossly erred in not asking for a Remand Report from the AO to cross verify the entire issues involving the claim of additional depreciation for the other assets other than the pure Plant & Machinery category, which may be allowed depending upon its nature and purpose and real use."

4. Briefly stated facts are that the assessee-company was engaged in manufacturing of ingots etc. During the assessment proceedings the Assessing Officer observed that the assessee had claimed additional depreciation u/s. 32(1)(iia) of the Act. The AO has observed that the relevant conditions as noted in the Sec. 32(1)(iia) are that the assessee must engaged in manufacture/production of any article or thing, so a new plant & machinery should be acquired and installed after 31.03.2005 and that it should be eligible plant & machinery. The AO further found that it is a case of new plant & machinery and that the assessee is engaged in the manufacture/production of article or things and that the acquisition of new plant & machinery is eligible for the same. However, the A O found from the records that for electric installation and moulds required for the newly acquired plant & machinery that assessee had claimed additional depreciation as well which in the opinion of the AO were not plant & machinery on which additional depreciation could be claimed. Accordingly, the AO disallowed an amount of R.8,96,436/-. Aggrieved, assessee preferred appeal before CIT(A), who deleted the disallowance by observing as under:

"8. I have gone through the facts and the details submitted by the A/R. Relevant provisions of Sec. 32(1)(iia) have also been taken note of. I find that the words acquisition of new plant & machinery is also followed by the words 'installed'. Therefore, in such circumstances, installation expenses incurred by an assessee to have use of the new plant & machinery has to be taken note of and such installation expenses and the moulds and the cost of plant & machinery would be considered as the total capital outlay in the acquisition and installation of new plant & machinery. I am, therefore, of the considered opinion that the claim of the appellant for deduction of additional depreciation in respect of new plant & machinery and 3 ITA No.1470-1472/K/2012 M/s Devashree Ispat (P) Ltd. AY 2006-07 to 2008-09

installation expenses as claimed are to be taken as the capital outlay for the new plant & machinery and additional depreciation will thus be allowable to the appellant. Accordingly, I allow this ground of the appellant."

Aggrieved, revenue preferred appeal before Tribunal.

5. We have heard rival submissions and gone through facts and circumstances of the case. We find that the provisions of section 32(1)(iia) of the Act speak of acquisition as well as installation of new plant & machinery. That the plant & machinery should be new is definitely a requirement which is fulfilled in the case of the assessee. Now, the point is what about installation of such plant & machinery? It is the in-built provision in Section 32(1)(iia) of the Act itself that any new machinery or plant which has been acquired and installed would quantify for additional depreciation. Now one cannot conceive a situation that a new plant & machinery which is acquired can be installed without proper electrical installation and moulds. These two are essential part of the plant & machinery. It is because of this necessity that the word 'installed' has been specifically noted in the provisions of Sec. 32(1)(iia) of the Act. The facts are that a plant & machinery cannot be taken note of for undertaking manufacturing unless proper electric installations are provided to have its use. Further, machinery cannot be taken note of as having been ready for use unless there are relevant moulds. In the line of business which the assessee is pursuing one has to conceive a situation where a new plant worth Rs.1,69,54,533/- is acquired along with electrical installation of the cost of Rs.13,75,133/- and of moulds of Rs.19,72,920/-. These are essential part of the plant & machinery and these have to be taken note of to make the same as a new plant & machinery. Where a plant & machinery cannot be segregated from the electrical installation and relevant moulds which from necessary part and parcel of the plant & machinery. It is new plant & machinery to be taken note of and depreciation as claimed have to be allowed. Further reference was made by assessee to the provisions contained in Section 32(1))(iia) specifically state 'in the case of any new machinery or plant which has been acquired and installed ... from where it is thus clear that the provisions do take note of acquisition as well as installation of new machinery or plant'. Thus, it will be seen that there is a specific provision in the Income Tax act itself relating to claim for depreciation in 4 ITA No.1470-1472/K/2012 M/s Devashree Ispat (P) Ltd. AY 2006-07 to 2008-09

respect of new machinery or plant where it is specifically stated that which has been acquired and installed. Installation covers all the fittings electrical and others and all those moulds which essentially form part of the new plant & machinery and, therefore, the AO has rightly been directed to recompute the depreciation allowable to the assessee in respect of the new plant & machinery which is acquired and installed by CIT(A). We find no infirmity in the order of CIT(A) and hence, the same is confirmed in all the three years.

6. The facts and circumstances and issue involved is exactly identical in all the years, hence, taking a consistent view, these three appeals of revenue are dismissed.

7. In the result, the appeals of revenue are dismissed.

8. Order is pronounced in the open court on 27.07.2015

Sd/- Sd/-

(P. K. Bansal) (Mahavir Singh) Accountant Member Judicial Member

Dated : 27th July, 2015

*Dkp-P.S.

Copy of the order forwarded to:

1. ASSESSEE - M/s Devashree Ispat (P) Ltd. 11/B J.M. Avenue, , Kol-06

2 Revenue - ITO Wd-3(4), 8/2 Esplanade East, Dwarlie House, Kolkata-

700 069

3. The CIT(A), Kolkata

4. CIT Kolkata

5. DR, Kolkata Benches, Kolkata

/True Copy, By order,

Asstt. Registrar.