M/S.ramco Industries Ltd v. The Deputy Commissioner Of Income Tax, Corporate Circle-2 Madurai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 04.03.2020 THE HONOURABLE MR. JUSTICE M. SATHYANARAYANANANDTHE HONOURABLE MR. JUSTICE ABDUL QUDDHOSETCA.Nos.833 & 835 of 2018 M/s.Ramco Industries Ltd.No.47, P.S.K Nagar, Rajapalaym-626117. .. Appellant inboth appealsVersus The Deputy Commissioner ofIncome Tax, Corporate Circle-2Madurai. .. Respondent inboth appeals COMMON PRAYER:-Tax Case Appeals filed under Section 260-A ofthe Income Tax Act, 1961, to set aside the orders of theTribunal in ITA.Nos.1675/Chny/2017 Assessment Year 2012-13 and1711/Chny/2017 Assessment Year 2012-13 dated 27.04.2018 andallow the appeals against the order of the Commissioner ofIncome Tax(Appeals), Madurai in PAN: dated 5.4.17 inITA No.00047/16-17 against the Assessment order for theAssessment year 2012-13 on the file of the Deputy Commissionerof Income Tax corporate circle-2 No.2, V.P.Rathinasamy NadarRoad Bibikulam Madurai. For Appellant in bothAppeals:Mr.P.J.Rishikesh For Respondent in both Appeals: COMMON JUDGMENT :Mrs.V.Pushpa [Judgment of the Court was delivered by M.SATHYANARAYANAN,J.,] (1)By consent, both the Tax Case Appeals are taken up togetherfor final hearing and are disposed of by this common judgment.for final hearing and are disposed of by this common judgment. https://hcservices.ecourts.gov.in/hcservices/ (2)The facts narrated in brief, for the purpose of disposal ofthese appeals, are as follows:-these appeals, are as follows:- 1.The Assessee company is the appellant herein and it iscarrying on the business of building products like asbestosetc., and it filed its return of income for the AssessmentYear 2012-13 on 21.09.2012 with a returned income ofRs.38,22,56,810/- and the same was processed under Section143[1] of the Income Tax Act, 1961, [in short ''the IT Act'']on 21.08.2014 and it was selected for scrutiny. A noticeunder Section 143[2] of the IT Act was issued on 08.08.2013and thereafter, it was heard on various occasions. The issueonly pertains to the claim of depreciation with regard tomachineries used by the appellant/assessee Company forPollution Control Measures.carrying on the business of building products like asbestosetc., and it filed its return of income for the AssessmentYear 2012-13 on 21.09.2012 with a returned income ofRs.38,22,56,810/- and the same was processed under Section143[1] of the Income Tax Act, 1961, [in short ''the IT Act'']on 21.08.2014 and it was selected for scrutiny. A noticeunder Section 143[2] of the IT Act was issued on 08.08.2013and thereafter, it was heard on various occasions. The issueonly pertains to the claim of depreciation with regard tomachineries used by the appellant/assessee Company forPollution Control Measures. 2.The appellant/assessee Company before the Assessing Officer,has produced the Certificate of the Chartered Engineer toclaim depreciation of cent percent on the ground that themachineries used, are under operation for Pollution Controlmeasures. However, the Assessing Officer has disallowed theclaim of cent percent and 80% claim of depreciation andrestricted to the level of ordinary claim of 15% for thefirst quarter as allowed under the Income Tax Act and furtherdepreciation has been allowed to the extent of 20%, videAssessment Order dated 31.03.2016.has produced the Certificate of the Chartered Engineer toclaim depreciation of cent percent on the ground that themachineries used, are under operation for Pollution Controlmeasures. However, the Assessing Officer has disallowed theclaim of cent percent and 80% claim of depreciation andrestricted to the level of ordinary claim of 15% for thefirst quarter as allowed under the Income Tax Act and furtherdepreciation has been allowed to the extent of 20%, videAssessment Order dated 31.03.2016. 3.The appellant/assessee Company, aggrieved by the AssessmentOrder, filed an appeal before the Commissioner of Income Tax[Appeals]-I, at Madurai [in short ''CIT [Appeals]''] and theAppellate Authority, vide order dated 05.04.2017, dealt withthe claim of depreciation and affirmed the order of theAssessing Officer.Order, filed an appeal before the Commissioner of Income Tax[Appeals]-I, at Madurai [in short ''CIT [Appeals]''] and theAppellate Authority, vide order dated 05.04.2017, dealt withthe claim of depreciation and affirmed the order of theAssessing Officer. 4.The appellant/assessee Company, challenging the legality ofthe order passed by the CIT [Appeals], filed further appealsin ITA.Nos.1675 & 1676/Chny/2017 and the Revenue also filedappeals in ITA.Nos.1711 & 1903/Chny/2017 [for the AssessmentYears 2012-13 & 2103-14] before the Income Tax AppellateTribunal, ''B'' Bench, at Chennai [in short ''ITAT''].the order passed by the CIT [Appeals], filed further appealsin ITA.Nos.1675 & 1676/Chny/2017 and the Revenue also filedappeals in ITA.Nos.1711 & 1903/Chny/2017 [for the AssessmentYears 2012-13 & 2103-14] before the Income Tax AppellateTribunal, ''B'' Bench, at Chennai [in short ''ITAT'']. 5.The ITAT has passed a common order dated 27.04.2018 and whiledealing with the issue relating to depreciation, afterextracting the relevant portion of the order passed by CIT[Appeals], has placed reliance upon the Google study in orderto have an idea about the air pollution control equipments.The ITAT, based on the Google search study, had concluded asfollows:-7.From the above, it is clear that the AirPollution Control devices or equipments,specified in the depreciation table, supra,are a series of devices which would prevent avariety of different pollutants, both gaseousdealing with the issue relating to depreciation, afterextracting the relevant portion of the order passed by CIT[Appeals], has placed reliance upon the Google study in orderto have an idea about the air pollution control equipments.The ITAT, based on the Google search study, had concluded asfollows:-7.From the above, it is clear that the AirPollution Control devices or equipments,specified in the depreciation table, supra,are a series of devices which would prevent avariety of different pollutants, both gaseous and solid, from entering the atmosphere,mainly the exhaust gases passing through theIndustrial stacks. These systems [in theindustrial parlance, a group of integratedplant and machinery for an independent sub-function], if they are installed in the plantin the exhaust pipes or stacks which led themto atmosphere, they would reduce the airpollution significantly. However, from thenature and the functions of the impugnedequipments, as extracted from the order ofthe CIT[A], supra, the Pneumatic conveyingsystem is a single deck vibrating screen forcollection of foreign particles which issuitable for manual slitting and dumping ofbags. Bag opening device and shredder isonly bag opening device, stirrers and cuttingknife is nothing but a machine, i.e., astirrer and cutting knife, the Fabricationand Erection of silo tanks is nothing but asilo fabricated for storage of cement and theABT Meter is nothing but an electrical meterto take reading of electrical units and theyare not part of any of the Air PollutionControl Devices or systems or equipments, butlike any other plant or machinery or tools ora tank performing other functions and hencethe CIT[A] is correct in concluding that theengineer is not correct in certifying them asdust collector system etc., and in confirmingthe action of the Assessing Officer indenying higher depreciation. Correspondingappeal grounds of the assessee fail.8.In the result, the assessee's appeal for AY2012-13 is treated as partly allowed and theappeal for AY 2013-14 is treated asallowed.''8.The Assessee Company, aggrieved by the impugned common orderof ITAT, has filed the present Tax Case Appeals and it wasadmitted/entertained on 27.11.2018 on the followingsubstantial questions of law :- 1)Whether the Income Tax Appellate Tribunalis justified in relying on an evidence,which was never a part of its record? 2)Does not the order of the Income TaxAppellate Tribunal violate the principlesof natural justice, when it has notafforded an opportunity to this appellant to rebut fresh evidence, especially whenthe said evidence based on 'google study'is the reason for dismissing the appeal ofthe appellant? 4)Is not pulveriser, duct collector and ballmill, air pollution controlling equipmentas per R-6-III-machinery and plant-3[viii][c] and hence, entitled for 100%depreciation? and 6)Whether the equipments are air pollutioncontrol devices or systems, which areentitled for higher depreciation? 1)Whether the Income Tax Appellate Tribunalis justified in relying on an evidence,which was never a part of its record? 2)Does not the order of the Income TaxAppellate Tribunal violate the principlesof natural justice, when it has notafforded an opportunity to this appellant to rebut fresh evidence, especially whenthe said evidence based on 'google study'is the reason for dismissing the appeal ofthe appellant? 4)Is not pulveriser, duct collector and ballmill, air pollution controlling equipmentas per R-6-III-machinery and plant-3[viii][c] and hence, entitled for 100%depreciation? and 6)Whether the equipments are air pollutioncontrol devices or systems, which areentitled for higher depreciation? (3)Mr.P.J.Rishikesh, learned counsel for the appellant/assesseeCompany has invited the attention of this Court to paragraphNos.6 and 7 of the impugned common order passed by ITAT andwould submit that ITAT, in paragraph No.6, has extracted therelevant portion of the order passed by CIT [Appeals] and inorder to reach the conclusion that the machineries used forpollution control measures are like any other plant ormachinery or tools or a tank performing other functions andthereby, confirmed the findings of the CIT [Appeals], is perse unsustainable for the reason that for the purpose ofreaching the said conclusion, primordial reliance has beenplaced upon the Google study done by ITAT, that too, withoutputting either the assessee or the Revenue on notice. Thelearned counsel for the appellant/assessee Company has alsoinvited the attention of this Court to the provisions ofSection 255 of the IT Act, 1961 as well as Rules 18 and 29 ofthe Income Tax [Appellate Tribunal] Rules, 1963 and wouldsubmit that the substantial provision as well as thesubordinate legislation do not expressly exclude theapplicability of the principles of natural justice and wouldfurther add that under sub-section [6] of Section 255 of IT Act''the Appellate Tribunal shall, for the purpose of dischargingits functions, have all the powers which are vested in theIncome Tax Authorities referred to in Section 131....'' . Thelearned counsel, further drawing the attention of this Court toSection 131, would submit that as per sub-section [1] ofSection 131, the authorities meant for the purpose of IncomeTax Act, have the same powers as are vested in a Court underthe Code of Civil Procedure, 1908, when trying a suit inrespect of the following matter, viz., [a]discovery andinspection ; [b]enforcing the attendance of any person,including any officer of a banking company and examining him onoath ; [c]compelling the production of books of account and other documents ; and [d] issuing commissions and assuming forthe sake of argument, the report of the Chartered Engineerproduced before the Assessing Officer which was also referredto by CIT [Appeals], lack necessary particulars and anopportunity should have been afforded to the appellant/assesseeto take out an application for appointment of an ExpertCommission or the Tribunal, suo motu appointed some otherExpert to go into that aspect and without affording anyopportunity, whatsoever, the ITAT suo motu rendered itsfindings based upon the Google study and therefore, prays forremanding of the matters insofar as substantial questions oflaw Nos.1 and 2 are concerned. other documents ; and [d] issuing commissions and assuming forthe sake of argument, the report of the Chartered Engineerproduced before the Assessing Officer which was also referredto by CIT [Appeals], lack necessary particulars and anopportunity should have been afforded to the appellant/assesseeto take out an application for appointment of an ExpertCommission or the Tribunal, suo motu appointed some otherExpert to go into that aspect and without affording anyopportunity, whatsoever, the ITAT suo motu rendered itsfindings based upon the Google study and therefore, prays forremanding of the matters insofar as substantial questions oflaw Nos.1 and 2 are concerned. (4) Per contra, Mrs.V.Pushpa, learned Standing counselappearing for the respondent/Revenue has invited the attentionof this Court to the Order of Assessment, the Order passed byCIT [Appeals] as well as the impugned common order passed byITAT and would submit that the Report of the Chartered Engineeris bereft of any material particulars / details and theauthorities below as well as the Tribunal had taken intoconsideration, the Report of the Chartered Engineer as well asthe bills pertain to the purchase of the said machineries andhad rightly reached the conclusion that the machineries are notmeant exclusively for pollution control measures and thefindings rendered are concurrent in nature and further, thereare no substantial questions of law arise for adjudication inthese appeals and prays for dismissal of the same.appearing for the respondent/Revenue has invited the attentionof this Court to the Order of Assessment, the Order passed byCIT [Appeals] as well as the impugned common order passed byITAT and would submit that the Report of the Chartered Engineeris bereft of any material particulars / details and theauthorities below as well as the Tribunal had taken intoconsideration, the Report of the Chartered Engineer as well asthe bills pertain to the purchase of the said machineries andhad rightly reached the conclusion that the machineries are notmeant exclusively for pollution control measures and thefindings rendered are concurrent in nature and further, thereare no substantial questions of law arise for adjudication inthese appeals and prays for dismissal of the same. (5)This Court paid its best attention to the rival submissionsand also perused the materials placed before it.and also perused the materials placed before it. (6)Sub-section [6] of Section 255 of the Income Tax Act, 1961,in turn, refers to Section 131 of the Act and under Sub-section[1] of Section 131 of the Act, the authorities have the samepowers that are vested in a Court under the Code of CivilProcedure, 1908 - the details of which, have been enumeratedin the earlier paragraphs. in turn, refers to Section 131 of the Act and under Sub-section[1] of Section 131 of the Act, the authorities have the samepowers that are vested in a Court under the Code of CivilProcedure, 1908 - the details of which, have been enumeratedin the earlier paragraphs. (5)This Court paid its best attention to the rival submissionsand also perused the materials placed before it.and also perused the materials placed before it. (6)Sub-section [6] of Section 255 of the Income Tax Act, 1961,in turn, refers to Section 131 of the Act and under Sub-section[1] of Section 131 of the Act, the authorities have the samepowers that are vested in a Court under the Code of CivilProcedure, 1908 - the details of which, have been enumeratedin the earlier paragraphs. in turn, refers to Section 131 of the Act and under Sub-section[1] of Section 131 of the Act, the authorities have the samepowers that are vested in a Court under the Code of CivilProcedure, 1908 - the details of which, have been enumeratedin the earlier paragraphs. (7)Rule 29 of the Income Tax [Appellate Tribunal] Rules, 1963also speaks about the production of additional evidence andRule 30 speaks about the mode of taking additional evidence andit is relevant to extract the same:-Rule 29:-Production of additional evidence before theTribunal:-The parties to the appeal shall not be entitled toproduce additional evidence either oral or documentarybefore the Tribunal, but if the Tribunal requires anydocuments to be produced or any witness to be examinedalso speaks about the production of additional evidence andRule 30 speaks about the mode of taking additional evidence andit is relevant to extract the same:-Rule 29:-Production of additional evidence before theTribunal:-The parties to the appeal shall not be entitled toproduce additional evidence either oral or documentarybefore the Tribunal, but if the Tribunal requires anydocuments to be produced or any witness to be examined or any affidavit to be filed to enable it to pass ordersor for any other substantial cause, or, if the income-tax authorities have decided the case without givingsufficient opportunity to the assessee to adduceevidence either on points specified by them or notspecified by them, the Tribunal, for reasons to berecorded, may allow such document to be produced orwitness to be examined or affidavit to be filed or mayallow such evidence to be adduced.Rule 30-Mode of taking additional evidence:-Such document may be produced or such witness examinedor such evidence adduced either before the Tribunal orbefore such income-tax authority as the Tribunal maydirect. (8)A perusal and consideration of paragraph No.7 of the impugnedcommon order passed by ITAT would disclose that the Tribunal,for reaching the conclusion to confirm the order of theAssessing Officer, has also done its part by doing someresearch on Google Study. Admittedly, the research done byITAT in the form of Google study was not put either to theappellant/assessee Company or to the said Revenue. As alreadypointed out by this Court in the earlier paragraphs, in theabsence of any specific rule including the applicability of thenatural justice, it is a well settled position of law thatadherence to the principles of natural justice, is implied inany legislation.common order passed by ITAT would disclose that the Tribunal,for reaching the conclusion to confirm the order of theAssessing Officer, has also done its part by doing someresearch on Google Study. Admittedly, the research done byITAT in the form of Google study was not put either to theappellant/assessee Company or to the said Revenue. As alreadypointed out by this Court in the earlier paragraphs, in theabsence of any specific rule including the applicability of thenatural justice, it is a well settled position of law thatadherence to the principles of natural justice, is implied inany legislation. (9)As rightly pointed out by the learned counsel for theappellant/assessee with regard to the study or research done byITAT, the appellant/assessee was not put on notice. Hence, onthis sole ground, the impugned common order warrantsinterference.appellant/assessee with regard to the study or research done byITAT, the appellant/assessee was not put on notice. Hence, onthis sole ground, the impugned common order warrantsinterference. (10)The Substantial Questions of Law Nos.1 and 2 are answered inaffirmative and in favour of the appellant/assessee Company.affirmative and in favour of the appellant/assessee Company. (11)In the result, the Tax Case Appeals are PARTLY ALLOWED andthe impugned common order of ITAT insofar as ITANos.1675/Chny/2017 and 1711/Chny/2017 [Assessment Year 2012-13]are set aside and the said appeals are remanded to the Tribunalfor fresh consideration and adjudication.the impugned common order of ITAT insofar as ITANos.1675/Chny/2017 and 1711/Chny/2017 [Assessment Year 2012-13]are set aside and the said appeals are remanded to the Tribunalfor fresh consideration and adjudication. (12)In the light of the said appeals are being remanded forfresh adjudication, there is no necessity to answer thesubstantial questions of law Nos.3 and 4. The Income TaxAppellate Tribunal, ''B'' Bench, Chennai, is directed toaccord priority and dispose of ITA Nos.1675/Chny/2017 andfresh adjudication, there is no necessity to answer thesubstantial questions of law Nos.3 and 4. The Income TaxAppellate Tribunal, ''B'' Bench, Chennai, is directed toaccord priority and dispose of ITA Nos.1675/Chny/2017 and 1711/Chny/2017 [Assessment Year 2012-13] as expeditiously aspossible. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar AP To 1.The Income Tax Appellate Tribunal ''B' Bench, Chennai.2.The Deputy Commissioner of Income Tax, Corporate Circle-2 Madurai.+2cc to MR.P.J.Rishikesh, Advocate SR.19161+1cc to Mr.M.Swaminathan, Advocate SR.19788TCA.Nos.833 & 835 of 2018KS(CO)CB(27/05/2020) 7