Taxman 16(Sc), In The Case Of Commissioner Of Income-Tax v. Sesa Goa Ltd

1 txa21-14 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 21 OF 2014. COMMISSIONER OF INCOME TAX “Aaykar Bhavan”, Patto, Panai, Goa. …... Appellant. V E R S US V.M. SALGAONKAR & BROTHERS PRIVATE LIMITED, Salgaonkar House, Vasco-da-Gama, Mormugao, Goa …... Respondent. Ms. Asha Dessai, Advocate for the appellant. Shri. A. F. Diniz, Advocate for the respondent. CORAM :- F.M. REIS & Z.A. HAQ, JJ. Date : - 28[th] April, 2014. ORAL ORDER : (PER F.M. REIS, J.) Heard Ms. Asha Desai, learned Counsel appearing for the appellant and Shri. A. F. Diniz, learned Counsel appearing for the respondent. The above appeal challenges the order passed by the 2 txa21-14 Income Tax Appellate Tribunal in ITA No.63/PNJ/2013 dated 8[th ]August, 2013. 3.Ms. Asha Dessai, learned Counsel appearing for the appellant has pointed out that the Tribunal exceeded its jurisdiction in going into the merits of the dispute, when such an exercise was not permissible in such an appeal. The learned Counsel has taken us through the impugned order passed by the ITAT and pointed out that there is a jurisdictional error committed by the Tribunal to go into the merits of the dispute. The learned Counsel as such points out that there is a substantial question of law which arises for consideration in this appeal on that count. 4.On the other hand, Shri A.F. Diniz, learned Counsel appearing for the respondent has pointed out that the only issue which arises, is whether the activity carried out by the respondent-Company is a manufacturing activity falling within the provisions of Section 32(1)(iia) of the Income Tax Act, 1961 to avail of additional depreciation. The learned Counsel further submits that this issue has been decided by the Apex Court in the Judgment reported in [2005] 3 txa21-14 142 TAXMAN 16(SC), in the case of Commissioner of Income-tax vs. Sesa Goa Ltd. 5.We have considered the submissions of the learned Counsel appearing for the parties and gone through the record. Upon hearing the learned Counsel, we find that it is not in dispute that the only aspect to be examined by this Court is whether the activity which has been carried out by the respondent -Company is falling within the meaning of the provisions of Section 32(1)(iia) of the Income Tax Act. 6.The Apex Court in the Judgment reported in [2005] 142 TAXMAN 16(SC) in the case of CIT vs. Sesa Goa Ltd., has observed in paras 9 and 12 thus : “9. The reasoning given by the High Court, in the decisions noted by us earlier, is, in our opinion, unimpeachable. This court had, as early as in 1961, in Chrestian Mica Industries Ltd. v. State of Bihar (1961) 12 STC 150, defined the word "production", albeit, in connection with the Bihar Sales Tax Act, 1947. The definition was adopted from the meaning ascribed to the word in the Oxford English Dictionary as meaning "amongst other things that which is produced; a thing that results from any 4 txa21-14 action, process or effort, a product; a product of human activity or effort". From the wide definition of the word "production", it has to follow that mining activity for the purpose of production of mineral ores would come within the armpit of the word "production" since ore is "a thing", which is the result of human activity or effort. It has also been held by this court in CIT v. N. C. Budharajaand Co.: [1993]204 ITR 412 (SC) that the word “production" is much wider than the word "manufacture". It was said : 4 txa21-14 action, process or effort, a product; a product of human activity or effort". From the wide definition of the word "production", it has to follow that mining activity for the purpose of production of mineral ores would come within the armpit of the word "production" since ore is "a thing", which is the result of human activity or effort. It has also been held by this court in CIT v. N. C. Budharajaand Co.: [1993]204 ITR 412 (SC) that the word “production" is much wider than the word "manufacture". It was said : "The word production has a wider connotation than the word 'manufacture'. While every manufacture can be charaterised as production, every production need not amount to manufacture. The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods." 12. We are, therefore, of the opinion that extraction and processing of iron ore amounts to "production" within the meaning of the word in section 32A(2)(b)(iii) of the act and, consequently, the assessee is entitled to the benefit of section 32A(1) of the Act. 5 txa21-14 The question whether the High Court was correct in holding that the activity did not amount to "manufacture" is left open.” 7.Considering the said observations, as it is not disputed by the appellant that the respondents are engaged in the business of processing of iron ore in the plant and generation of windmill energy which is held to be a manufacturing activity within the said provision of Section 32(1)(iia) of the Income Tax Act, the observations of the Apex Court in the decision cited supra, are thus clearly applicable to the facts of the present case. The ITAT in the impugned order dated 8[th ] August, 2013 has rightly observed at para 8 thus : “8. We are of the opinion that the AO has examined the claim of assessee regarding additional depreciation on machinery and windmill and allowed the claim in the year under consideration. We are of the opinion that the ITO acted in accordance with the law and makes an assessment the same cannot be branded as erroneous by CIT simply because according to him the order have been not written elaborately. This view is also supported by the decision of Bombay High Court in the case of Gabriel Indian Limited 203 ITR 108. We are also of a view that when AO has made the inquiry and 6 txa21-14 allowed the additional depreciation on machinery and windmill. An order cannot be termed as erroneous unless it is not in accordance with the law. We find that assessee is entitle to additional depreciation on machinery as per the decision of Hon'ble Supreme Court in the case of CIT vs. Sesa Goa Ltd, 271 ITR 331 as well as assessee is entitle additional depreciation on windmill operation as per the decision of Madras High Court in the case of CIT vs. V T M Limited, 319 ITR 336. When AO has taken one of the possible view the power of revision u/s. 263 cannot be exercised. This view is supported by the decision of Hon'ble Supreme Court in the case of Max India Ltd, 295 ITR 282. In view of these decisions we allow the appeal of the assessee in the year under consideration.” 8.In such circumstances, we find that there is no substantial question of law which arises in the present case for consideration. 9.The appeal stands, accordingly, rejected. Z.A. HAQ, J. F.M. REIS, J. ssm.