Commissioner Of Income Tax,Chennai v. M/S.tvs Motors Limited,Jayalakshmi Estates

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 23.01.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case (Appeal) No.316 of 2011 Commissioner of Income Tax,Chennai. ... Appellant/Appellant -vs- M/s.TVS Motors Limited,Jayalakshmi Estates,No.8, Haddows Road,Chennai.... Respondent/Respondent Tax Case (Appeal) filed under Section 260A of the Income-taxAct, 1961 against the order dated 16.03.2011, made inI.T.A.No.1016/Mds/2009, for the assessment year 2002-03 on thefile of the Income-tax Appellate Tribunal, Chennai Bench 'C'.and against the order of Commissioner of Income Taz (Appeals)-III Chennai in ITA.No.801/06-07/A-111 dt:26/02/09 and againstthe order of Income Tax officer (OSD) Company circle 111(2),Chennai dt:11/12/2006 in AAACS7032D/G1 No.32024T. For Appellant:Mrs.V.Pushpa,Junior Standing Counsel For Respondent :Mr.R.Venkata Narayanan,for M/s.Subbaraya Aiyar,Padmanabhan and Ramamani. JUDGMENT(Delivered by T.S.Sivagnanam, J.)This appeal, by the Revenue has been filed under Section260A of the Income-tax Act, 1961 (hereinafter referred to as“the Act”) challenging the order passed by the Income-taxAppellateTribunal,ChennaiBench'C',inI.T.A.No.1016/Mds/2009, dated 16.03.2011, for the assessmentyear 2002-03. https://hcservices.ecourts.gov.in/hcservices/ 2.The above appeal was admitted, on 09.08.2011, on thefollowing substantial questions of law:- “(i) Whether on the facts and in thecircumstances of the case, the Appellate Tribunalwas right in holding that dies and moulds areentitled to depreciation at 100%? (ii) Whether on the facts and in thecircumstances of the case, the Appellate Tribunalwas right in holding that the assessee is entitled for 100% depreciation on civil works connectedwith Reverse Osmosis Plant and TET Plant?” 3.Heard Mrs.V.Pushpa, learned Junior Standing Counsel forthe appellant/Revenue; and Mr.R.Venkata Narayanan, learnedcounsel for the respondent/assessee. 4.So far as the first substantial question of law isconcerned, the same is covered against the Revenue, in the lightof the decision in the assessee's own case in CIT vs. TVS MotorsLimited, (2014) 364 ITR 0001 (Mad). The operative portion ofthe said decision reads as follows:- “31. Applying the ratio of the decision citedabove, when we look into the facts of the abovecases, it is evident that with regard to themoulds and dies attached to the machinery likepress designs specification, moulds and dies arenot independent of the plant and machinery, butare parts of the machinery. Once the dies are wornout, the machines cannot turn out the product tothe business specifications and this has to beobtained only on a replacement of the dies andmoulds, a fact which is not refuted by therevenue. It is no doubt true that the assesseeclaimed depreciation on dies and moulds. Yet inthe decision in the case of CIT Vs. MahalakshmiTextile Mills Ltd., reported in (1967) 66 ITR 710(SC), the Apex Court pointed out that allquestions whether of law or of fact, which relateto the assessment year of the assessee could beraised in any year under consideration before theOfficer as well as before the Income Tax AppellateTribunal too and if, for reasons recorded by thedepartmental authorities in rejecting a contentionraised by the assessee, the grant of relief to anassessee is justified on another ground, theRevenue is bound to consider such claim ofgranting the relief. The Apex Court pointed outthat the right of the assessee to the relief isnot restricted to the plea raised by him. On the facts before us, when the dies and moulds wereattached to the machine to manufacture thedesigned product, we have no hesitation to acceptthe plea of the assessee that the claim would fallfor consideration only under Section 31 of theAct. facts before us, when the dies and moulds wereattached to the machine to manufacture thedesigned product, we have no hesitation to acceptthe plea of the assessee that the claim would fallfor consideration only under Section 31 of theAct. 5.Following the above, the first substantial question of lawis answered against the Revenue. 6.So far as the second substantial question of law isconcerned, the Tribunal in the impugned order pointed out that,in the assessee's own case for the earlier assessment years,viz., 2000-01 and 2005-06, in I.T.A.Nos.679 & 757/Mds/2009(assessee's appeals) and I.T.A.Nos.976 & 1017/Mds/2009(Revenue's appeals), dated 22.12.2010, both the substantialquestions of law were decided in favour of the assessee. 7.So far as the appeals filed by the Revenue against thoseorders, which were numbered as T.C.(A) Nos.173 and 174 of 2009[(2014) 364 ITR 0001 (Mad)], are concerned, five substantialquestions of law were framed for consideration and there was nochallenge with regard to the claim for depreciation in respectof the Reverse Osmosis Plant and TET Plant. Thus, the Revenuehaving not questioned the finding, the matter should put to restand the Revenue cannot reopen the matter in the presentproceedings. Thus, we are required to answer the secondsubstantial question of law against the Revenue. 8.We may add that identical question was considered by theHon'ble Supreme Court in the case of Assistant Commissioner ofIncome Tax vs. Victory Aqua Farm Ltd., (2015) 379 ITR 0335 (SC).In the said case, the assessee was doing business of 'AquaCulture', it grows prawns in specially designed ponds and inincome tax returns filed by the assessee, the assessee claimeddepreciation in respect of those ponds by raising plea thatthese ponds are tools to the business of the assessee andtherefore, they constituted 'plant' within the meaning ofSection 32 of the Act. The Hon'ble Supreme Court held that theponds were specially designed for rearing/breeding of the prawnsand they have to be treated as tools of the business of theassessee and depreciation was admissible on these ponds. 9.Insofar as the case on hand is concerned, the AssessingOfficer restricted the claim of depreciation to 10%. However,he did not assign any reason for doing so. On appeal, theCommissioner of Income-tax (Appeals)-III, Chennai (for brevity“the CIT(A)”), while considering the issue, took note of thesubmission of the assessee as regards the civil works done atReverse Osmosis Plant, concrete tanks, pump beds, filter unit beds and after taking note of the decision in the case of Addl.CIT vs. Madras Cements Ltd., 110 ITR 281, held that the 'plant'comprehends buildings employed in carrying on trade or otherindustrial business and hence, the special reinforced concretefoundation for the purpose of locating or installing the rotarykiln in the assessee's factory, would come within the scope ofthe expression 'plant' and entitled to depreciation anddevelopment rebate. Further, on seeing the note furnished aboutthe Reverse Osmosis System and the TET Plant, it was observedthat there is no doubt that the civil structures are part of theentire plant, without which, the plant cannot function. Theconcrete tanks, pump beds, filter unit beds are specialrequirements to hold water or motor and pump in a sturdyposition at required height and without this, the ReverseOsmosis cannot function properly and therefore, the CIT(A)directed the Assessing Officer to treat the civil structures aspart of the 'plant and machinery' and allow depreciation at thesame rates, at which, the relevant plants were allowed. 10.We are in full agreement with the view expressed by theCIT(A), which order was confirmed by the Tribunal. Theobservations made by the CIT(A) are in tune with the judgment ofthe Hon'ble Supreme Court in the case of Victory Aqua Farm Ltd.,(supra). Thus, for the above reasons, the second substantialquestion of law is also answered against the Revenue. 11.In the result, the appeal filed by the Revenue standsdismissed and the substantial questions of law are answeredagainst the Revenue. No costs. To Sd/- Assistant Registrar(CS III) //True Copy// Sub Assistant Registrar 1.The Income-tax Appellate Tribunal, Chennai Bench 'C'. Chennai Bench 'C'. 2.The Commissioner of Income Tax,(Appeals)-III, 121, Mahatma Gandhi Road,Chennai. 3.The Income Tax Officer(OSD),Company Circle III(2), Chennai-34.Company Circle III(2), Chennai-34. +1cc to Mr.M.Swaminathan, Advocate, S.R.No.5122 +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No.5619 T.C.(A) No.316 of 2011 SJ(CO)SRG(13/03/2019)