Commissioner Of Income Tax, Faridabad v. M/S Hemla Embroidery Mills (P) Ltd

ITA No. 15 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 15 of 2009 Date of Decision: 5.4.2011 Commissioner of Income Tax, Faridabad ....Appellant. Versus M/s Hemla Embroidery Mills (P) Ltd. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 15 and 23 of 2009 asaccording to the learned counsel for the appellant the substantialquestion of law involved in both the appeal is identical. For brevity, thefacts are being extracted from ITA No. 15 of 2009. 2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 10.7.2008 passed by the Income Tax AppellateTribunal, Delhi Bench “C”, New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 4251/D/07 for the assessment year 2004-05,claiming the following substantial question of law:- “Whether, on the facts and in the circumstances ofthe case, the Hon'ble ITAT is right in law inconfirming the order of the Ld. CIT(A) in allowingdepreciation at the rate of 25% on electric installations, Air Conditioners and electric fan etc.fitted in the building of a Mill treating these as Plantinstead of treating part of the block of furniture andfittings on which depreciation is allowable at the rate of 15% as per Income Tax Rules?” 3.The facts, in brief, necessary for adjudication as pleaded inthe appeal are that the assessee filed its return on 29.10.2004 declaringan income of Rs.27,65,470/-. The assessment was completed on11.12.2006 at a total income of Rs.35,97,740/- against which theassessee filed an appeal before the Commissioner of Income Tax(Appeals) [in short “the CIT(A)”]. The CIT(A) vide order dated14.8.2007 partly allowed the appeal deleting the disallowance made onaccount of depreciation on electric installation, air conditioners andelectric fan and coolers by treating it as part of the plant and machinery.Feeling aggrieved, the department took the matter in appeal before theTribunal who vide order dated 10.7.2008 upheld the order of the CIT(A)and dismissed the appeal of the revenue which gave rise to the revenueto approach this Court by way of instant appeal. 4.We have heard learned counsel for the appellant. 5.Learned counsel for the revenue submitted that the CIT(A)as well as the Tribunal were not right in allowing depreciation at the rateof 25% on electric installations, air conditioners and electric fan etc.fitted in the building of a Mill treating these as plant instead of treatingpart of the block of furniture and fittings on which depreciation wasadmissible at the rate of 15% under the Income Tax Rules. Learnedcounsel referred to the order of the Assessing Officer, wherein it was so held. However, the CIT(A) while reversing the order of the AssessingOfficer which were affirmed by the Tribunal had held that the aforesaidappliances formed part of the plant and machinery of the assessee and,therefore, were entitled to depreciation at the rate of 25%. The findingsrecorded by the Tribunal to this effect are as under:- held. However, the CIT(A) while reversing the order of the AssessingOfficer which were affirmed by the Tribunal had held that the aforesaidappliances formed part of the plant and machinery of the assessee and,therefore, were entitled to depreciation at the rate of 25%. The findingsrecorded by the Tribunal to this effect are as under:- “7.Learned CIT(A) noted that in the assessmentyear 2005-06, the Assessing Officer has alloweddepreciation on various assets mentioned therein atthe rate of 15%, on tempo at 20% as against theclaim of the assessee at the rate of 25% on theseassets and 40% on tempo and thus disallowed theexcess depreciation charged by the assessee. It wassubmitted before learned CIT(A) that electricinstallations, air conditioners and electric fans areitems which constituted the part of plant on whichdepreciation is to be allowed at the rate of 25%. Itwas submitted that the concept of plant cannot belimited to actual installation of machinery whichproduces goods by itself. Anything which is used forthe purpose of business including any installationwhich facilitates the production or increase theefficiency of the business will be plant. It was,therefore, submitted that air conditioner, electric fansinstalled in the business are plant. Similarly electricalinstallations are plant. The learned CIT(A) acceptedthe contention of the assessee and held that the above assets form part of the plant and, therefore,entitled to depreciation at the rate of 25%. 8.Learned DR conceded that the issue iscovered in favour of the assessee and against therevenue by the decision of Hon'ble Supreme Court inthe case of CIT Vs. Taj Mahal Hotel (82 ITR 44) inwhich it was held, “that the sanitary and pipelinefittings fell within the definition of “plant” in section 10(5) and the respondent was entitled to developmentrebate in respect thereof under section 10(2)(vib).The fact that the respondent claimed depreciation onthe basis that the sanitary and pipeline fittings fellunder “furniture and fittings” in rule 8(2) of theIncome-tax Rules, 1962, did not detract from thisposition. The intention of the legislature was to givethe word “plant” a wide meaning.” 6.In view of the aforesaid findings which have not beenshown to be perverse in any manner, the assets on which depreciationwas allowed were held to be the part of plant and, therefore, the rate of25% was rightly applied. 7.Consequently, the substantial question of law is answeredagainst the revenue. The appeals stand dismissed. (AJAY KUMAR MITTAL) JUDGE April 5, 2011gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 15 of 2009 -5- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 23 of 2009 Date of Decision: 5.4.2011 Commissioner of Income Tax, Faridabad Versus M/s Hemla Embroidery Mills (P) Ltd. ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the order of even date recorded in ITA No. 15 of 2009 (Commissioner of Income Tax, Faridabad v. M/sHemla Embroidery Mills (P) Ltd). (AJA Y KUMAR MITTAL) JUDGE April 5, 2011gbs (ADARSH KUMAR GOEL) JUDGE