M/S.lakshmi Card Clothing Mfg.co.(P)Ltd v. The Assistant Commissioner Of Income Taxcompany Circle-Iv(1)Coimbatore-641 037

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.03.2019 CORAM THE HONOURABLE DR.JUSTICE VINEET KOTHARIANDTHE HONOURABLE MR.JUSTICE C.V.KARTHIKEYAN Tax Case Appeal No.1252 of 2009 M/s.Lakshmi Card Clothing Mfg.Co.(P)Ltd.#1089, Avanashi RoadPappanaickenpalayamCoimbatore-641 037. ...Appellant Vs. The Assistant Commissioner of Income TaxCompany Circle-IV(1)Coimbatore-641 037. ... Respondent Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 against the orders of the Income Tax AppellateTribunal, 'A' Bench in ITA No.206/Mds/2008 dated 29.12.2008,against the order of the Commissioner of Income Tax (Appeals )I,Coimbatore dated 18/12/2007 made in AS.No.7/07-08, r/wsec.147 ofthe I.T.Act. Against the order of the Deputy Commissiner ofIncome Tax, Company Circle -IV(1) Coimbatore, dated 14/03/2005u/sc.143(3) for the assessment year 2003-04. For Appellant : Mr.M.P.Senthilkumar for Mr.Philip George For Respondent : Mrs.K.G.Usha Rani, Junior Standing Counsel JUDGMENT (Delivered by DR.VINEET KOTHARI, J.) The assessee has filed this appeal under Section 260A ofthe Income Tax Act, raising the following substantial questionsof law arising out of the order of the Income Tax AppellateTribunal, 'A' Bench in ITA No.206/Mds/2008 dated 29.12.2008 forthe Assessment Year 2003-2004, by which the learned Tribunaldismissed the assessee's appeal. “(a)Whether on the facts and in the circumstancesof the case, the Tribunal was right in holding that https://hcservices.ecourts.gov.in/hcservices/ the appellant was not entitled to additionaldepreciation u/s.32(1)(iia) of the Income Tax Act, inrespect of windmill? (b)Whether on the facts and in the circumstancesof the case, the Tribunal was right in law in holdingthat the word “Article” does not include within itsambit “Power Generation”?” 2.The relevant findings of the learned Tribunal, wherebythe Tribunal disallowed the claim of the assessee for additionaldepreciation of 15% on the investment made by the assessee inthe two windmills, under Section 32(1)(iia) of the Act, arequoted below for ready reference: “We have heard the rival submissions. As per theprescription of Section 32(1)(iia) additionaldepreciation at the rate of 15 per cent of the actualcost of the machinery or plant is available in thecontext of any new machinery or plant which isacquired or stalled after the 31[st] day of March, 2002by an assessee engaged in the business of manufactureor production of any article or thing. We find thatthis issue stands covered by the decision of the C-Bench of this Tribunal rendered in the case of TamilNadu Chlorates vs. JCIT, 98 ITD 1. The Tribunal heldin the context of Section 80HH that the word 'article'does not include within its ambit power generation.Similar view was taken by the D-Bench of this Tribunalin the case of M/s.Texmo Industries vs. ACIT in ITANo.2107(Mds)/2006 dated 25-6-2008. No contrarydecision of binding nature was brought before us. We,therefore, respectfully following the precedentsdecide this issue in favour of the Revenue and againstthe assessee.” 3.The present appeal was admitted by a Co-ordinate Bench ofthis Court on 24.11.2009, on the above substantial questions lawraised by the appellant / assessee. 4.The learned counsel for the assessee has submitted thatthe assessee's case is covered by two decisions of this Court inthe case of Commissioner of Income Tax v. Hi Tech Arai Limited,in (2010) 321 ITR 477 (Mad) and in the case of Commissioner ofIncome Tax v. Texmo Precision Castings, in (2010) 321 ITR 481(Mad). Both these decisions were rendered in a short period oftwo months. Relevant portions from these judgments are quotedbelow for ready reference: (i)Commissioner of Income Tax v. Hi Tech Arai Limited, in(2010) 321 ITR 477 (Mad). https://hcservices.ecourts.gov.in/hcservices/ 3.The present appeal was admitted by a Co-ordinate Bench ofthis Court on 24.11.2009, on the above substantial questions lawraised by the appellant / assessee. 4.The learned counsel for the assessee has submitted thatthe assessee's case is covered by two decisions of this Court inthe case of Commissioner of Income Tax v. Hi Tech Arai Limited,in (2010) 321 ITR 477 (Mad) and in the case of Commissioner ofIncome Tax v. Texmo Precision Castings, in (2010) 321 ITR 481(Mad). Both these decisions were rendered in a short period oftwo months. Relevant portions from these judgments are quotedbelow for ready reference: (i)Commissioner of Income Tax v. Hi Tech Arai Limited, in(2010) 321 ITR 477 (Mad). https://hcservices.ecourts.gov.in/hcservices/ “In the case on hand, the assessee is stated tohave set up two wind mills in addition to the alreadyexisting four wind mills and thereby increased itspower generation capacity by above 50 per cent. It istrue that the assessee is a company engaged in thebusiness of manufacture of oil seeds, moulded rubberparts, reed value assemblies apart from generation ofpower. After the installation of the additional windmills, both prior to as well as after the installationof the additional wind mills, the assessee was usingwind energy for generating power for its captiveconsumption apart from selling the surplus powergenerated to the Tamil Nadu Electricity Board. As faras application of Section 32(1)(iia) of the Act isconcerned, what is required to be satisfied in orderto claim the additional depreciation is that thesetting up of a new machinery or plant should havebeen acquired and installed after March 31, 2002 by anassessee, who was already engaged in the business ofmanufacture or production of any article or thing. Thesaid provision does not state that the setting up of anew machinery or plant, which was acquired andinstalled up to March 31, 2002, should have anyoperational connectivity to the article or thing thatwas already being manufactured by the assessee.Therefore, the contention that the setting up of awind mill has nothing to do with the power industry,namely, manufacture of oil seeds etc. is totally notgermane to the specific provision contained in Section32(1)(iia) of the Act. In such circumstances, we are not able toappreciate the contention of the learned standingcounsel for the appellant on the ground that the orderof the Commissioner of Income-tax (Appeals) asconfirmed by the Tribunal should be interfered with.It cannot also be said that setting up of a wind millwill not fall within the expression setting up of anew machinery or plant. We do not find any error inthe conclusion of the Tribunal in confirming the orderof the Commissioner of Income-tax (Appeals). We,therefore, do not find any question of law much lesssubstantial question of law to entertain theseappeals. These appeals fail and the same aredismissed. Consequently, M.P.No.1 of 2009 is alsodismissed.” (ii)Commissioner of Income Tax v. Texmo Precision Castings,in (2010) 321 ITR 481 (Mad): “The assessee was carrying on the business ofcastings for export and also generating and sellingelectricity from windmills. For the assessment year2003-04, the assessee claimed additional depreciationon new windmills installed under Section 32(1)(iia) ofthe Income-tax Act, 1961. The Assessing Officer and theCommissioner of Income-tax (Appeals) disallowed theclaim of the assessee. The Tribunal held in favour ofthe assessee. On appeal: Held, dismissing the appeal, that the Tribunalwas right in granting additional depreciation on thewindmills installed by the assessee. CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad)followed.CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad) (para 5) referred to.” “The assessee was carrying on the business ofcastings for export and also generating and sellingelectricity from windmills. For the assessment year2003-04, the assessee claimed additional depreciationon new windmills installed under Section 32(1)(iia) ofthe Income-tax Act, 1961. The Assessing Officer and theCommissioner of Income-tax (Appeals) disallowed theclaim of the assessee. The Tribunal held in favour ofthe assessee. On appeal: Held, dismissing the appeal, that the Tribunalwas right in granting additional depreciation on thewindmills installed by the assessee. CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad)followed.CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad) (para 5) referred to.” 5.The provisions of Section 32(1)(iia) of the Act, prior toits substitution by the Finance Act 2005, with effect from01.04.2006 as it stood in the relevant year, ie., AssessmentYear 2003-2004, is quoted below for ready reference: “Substituted by the Finance Act, 2005, w.e.f. 1-4-2006. Clause (iia), was originally inserted by theFinance (No. 2) Act, 1980, w.e.f. 1-4-1981 and omittedby the Taxation Laws (Amendment and MiscellaneousProvisions) Act, 1986, w.e.f. 1-4-1988. Prior to itssubstitution, clause (iia) as inserted by the Finance(No. 2) Act, 2002, w.e.f. 1-4-2003 and amended by theFinance (No. 2) Act, 2004, w.e.f. 1-4-2005, read asunder : ‘(iia) in the case of any new machinery or plant (otherthan ships and aircraft), which has been acquired andinstalled after the 31st day of March, 2002, by anassessee engaged in the business of manufacture orproduction of any article or thing, a further sum equalto fifteen per cent of the actual cost of suchmachinery or plant shall be allowed as deduction underclause (ii) : Provided that such further deduction of fifteen percent shall be allowed to—(A) a new industrial undertaking during anyprevious year in which such undertaking begins tomanufacture or produce any article or thing on or afterthe 1st day of April, 2002; or (B) any industrial undertaking existing before the1st day of April, 2002, during any previous year inwhich it achieves the substantial expansion by way of increase in installed capacity by not less than ten percent: Provided further that no deduction shall be allowed inrespect of—(a) any machinery or plant which, before itsinstallation by the assessee, was used either within oroutside India by any other person; or (b) any machinery or plant installed in any officepremises or any residential accommodation, includingaccommodation in the nature of a guest house;or (c) any office appliances or road transportvehicles; or(d) any machinery or plant, the whole of theactual cost of which is allowed as a deduction (whetherby way of depreciation or otherwise) in computing theincome chargeable under the head “Profits and gains ofbusiness or profession” of any one previous year: Provided also that no deduction shall be allowed underclause (A) or, as the case may be, clause (B), of thefirst proviso unless the assessee furnishes the detailsof machinery or plant and increase in the installedcapacity of production in such form, as may beprescribed along with the return of income, and thereport of an accountant, as defined in the Explanationbelow sub-section (2) of section 288 certifying thatthe deduction has been correctly claimed in accordancewith the provisions of this clause. (See rule 5A andForm No.3AA.) Explanation.—For the purposes of this clause,—(1) “new industrial undertaking” means anundertaking which is not formed,—(a) by the splitting up, or the reconstruction, ofa business already in existence; or(b) by the transfer to a new business of machineryor plant previously used for any purpose; (2) “installed capacity” means the capacity ofproduction as existing on the 31[st] day of March,2002;’” Explanation.—For the purposes of this clause,—(1) “new industrial undertaking” means anundertaking which is not formed,—(a) by the splitting up, or the reconstruction, ofa business already in existence; or(b) by the transfer to a new business of machineryor plant previously used for any purpose; (2) “installed capacity” means the capacity ofproduction as existing on the 31[st] day of March,2002;’” 6.Having heard the learned counsel for the parties and uponperusal of the aforesaid case laws and the provisions of thestatute, viz. Section 32(1)(iia), we are of the opinion that theappeal in hand is covered by the aforesaid two decisions of theCo-ordinate Bench of this Court. Since the assessee satisfiedthe conditions for claiming additional depreciation on the https://hcservices.ecourts.gov.in/hcservices/ addition of a capacity of windmills by 750 kW as against the1000 kW installed prior to 01.04.2002, the assessee is entitledto the said additional depreciation under the said provisions ofthe Act. 7.Accordingly, the appeal of the assessee is allowed andthe questions of law framed are answered in favour of theassessee and against the Revenue. No costs. Sd/- Assistant Registrar(CS-III) //True copy//Sub Assistant RegistrarKMTo1.The Income Tax Appellate Tribunal, Chennai 'A' Bench.2. The Assistant Commissioner of Income Tax, Company Circle IV(i), Coimbatore3. The Commissioner of Income Tax (Appeals) I, Coimbatore4. The Deputy Commissioner of Income Tax, Company Circle IV(I) Coimbatore.+1cc to Mr.Philip George, Advocate SR.No.25462+1cc to Mr.T.R.Senthilkumar, Advocate SR.No.25919Tax Case Appeal No.1252 of 2009 GP(CO)GMY(10/05/2019)