The Commissioner Of Income Tax Madurai v. M/S.hi Tech Arai Limited

In the High Court of Judicature at Madras Dated : 01.09.2009 Coram :- THE HONOURABLE MR.JUSTICE F.M.IRBRAHIM KALIFULLAandTHE HONOURABLE MRS.JUSTICE R.BANUMATHI Tax Case (Appeal) Nos.670 and 671 of 2009 The Commissioner of Income TaxMadurai. .. Appellant in boththe appeals. vs. M/s.Hi Tech Arai LimitedNo.2, V.P.Ratnasamy Nadar RoadNorth Chokkikulam .. Respondent in bothMadurai 625 014. the appeals. Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961, against the common orderof the Income Tax Appellate Tribunal Madras 'B' Bench, Chennai dated 12.12.2008 passed in ITANos.325 & 1793/Mds/2007. For Appellant : Mr.T.RavikumarStanding Counsel for Income-tax--- COMMON JUDGMENT(Judgment of the Court was delivered by F.M.IBRAHIM KALIFULLA,J.) The Revenue has come forward with the above appeals raising the following substantial questions oflaw: "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal isright in holding that the assessee is entitled to additional depreciation on the purchase of Wind Millseven though the main business of the assessee is not producing or generating of electricity?2. Whether on the facts and circumstances of the case, the Tribunal was right in allowing additionaldepreciation under Section 32(1)(iia) on wind mill amounting to Rs.33,29,562/- and Rs.37,28,824/-respectively for assessment years 2003-2004 and 2004-2005 was proper? 3. Whether the Tribunal was right in not considering the judgment of a Co-ordinate Chennai Benchpassed in ITA 2107/Mds/06 dated 25.06.2008 in the case of Texmo Industries which is binding on itand in favour of the revenue as it against the ratio of the judgment of the Constitution Bench of theSupreme Court reported in AIR 1989 SC 1933? 4. Whether the new machinery or plant purchased is eligible for additional depreciation or onlythose plant and machinery purchased and used in its main business the exemption contemplatedunder Section 32(1)(iia) is to be given? 2. We heard Mr.T.Ravikumar, learned Standing Counsel for the appellant. The learned counsel in hissubmissions contended that the Tribunal under similar circumstances earlier disallowed theadditional depreciation claimed under Section 32(1)(iia) of the Income Tax Act, whereas by theimpugned order, the Tribunal has taken a diametrically opposite view and on this ground itself theorder is liable to be set aside. The learned counsel then contended that the additional depreciationwas claimed on the setting up of wind mills for generation of power and inasmuch as the assessee isonly engaged in the manufacture of oil seeds etc., the setting up of a wind mill has absolutely noconnection for the manufacture of oil seeds, which is a power industry and therefore, the assesseewas not entitled to claim the additional depreciation as allowed under Section 32(1)(iia) of the Act. 3. We are not in a position to appreciate either of the contentions of the learned counsel for the petitioner. As far as the first contention is concerned, when the Tribunal by the impugned order hasapplied Section 32(1)(iia) of the Act, to the facts involved in the case of the assessee and has foundthat the assessee is entitled for the additional depreciation claimed under the said provision, itcannot be held that simply because a Co-ordinate Bench of the Tribunal had earlier taken a differentview, the Tribunal on this occasion also ought to have followed the same. When we find that theTribunal has applied the law correctly in the impugned order, there is no gain saying that there wasan earlier order by the Co-ordinate Bench and therefore, for that reason, this time also the Tribunalshould have blindly followed its own earlier decision even if such earlier decision did not reflect thecorrect position of the law. 4. As far as the contention based on Section 32(1)(iia) of the Act, is concerned, the assessment yearspertain to 2003-2004 and 2004-2005. The provision, which is relevant for our purpose, reads asunder: 4. As far as the contention based on Section 32(1)(iia) of the Act, is concerned, the assessment yearspertain to 2003-2004 and 2004-2005. The provision, which is relevant for our purpose, reads asunder: (iia) in the case of any new machinery or plant (other than ships and aircraft), which has beenacquired and installed after the 31st day of March, 2002, by an assessee engaged in the business ofmanufacture or production of any article or thing, a further sum equal to fifteen per cent of theactual cost of such machinery or plant shall be allowed as deduction under clause (ii):Provided that such further deduction of fifteen per cent shall be allowed to:- (A) a new industrial undertaking during any previous year in which such undertaking begins tomanufacture or produce any article or thing on or after the 1st day of April 2002; or(B) any industrial undertaking existing before the 1st day of April 2002, during any previous year inwhich it achieves the substantial expansion by way of increase in installed capacity by not less thanten per cent." 5. In the case on hand, the assessee is stated to have set up two wind mills in addition to the alreadyexisting four wind mills and thereby increased its power generation capacity by above 50%. It is truethat the assessee is a company engaged in the business of manufacture of oil seeds, moulded rubberparts, reed value assemblies apart from generation of power. After the installation of the additionalwind mills, both prior to as well as after the installation of the additional wind mills, the assesseewas using wind energy for generating power for its capitative consumption apart from selling thesurplus power generated to the Tamil Nadu Electricity Board. As far as application of Section32(1)(iia) of the Act, is concerned, what is required to be satisfied in order to claim the additionaldepreciation is that the setting up of a new machinery or plant should have been acquired andinstalled after 31st March 2002 by an assessee, who was already engaged in the business ofmanufacture or production of any article or thing. The said provision does not state that the settingup of a new machinery or plant, which was acquired and installed upto 31.03.2002 should have anyoperational connectivity to the article or thing that was already being manufactured by the assessee.Therefore, the contention that the setting up of a wind mill has nothing to do with the powerindustry, namely, manufacture of oil seeds etc. is totally not germane to the specific provisioncontained in Section 32(1)(iia) of the Act. 6. In such circumstances, we are not able to appreciate the contention of the learned standingcounsel for the appellant on the ground that the order of the Commissioner of Income-tax (Appeals)as confirmed by the Tribunal should be interfered with. It cannot also be said that setting up of awind mill will not fall within the expression setting up of a new machinery or plant. We do not findany error in the conclusion of the Tribunal in confirming the order of the Commissioner of Income-tax (Appeals). We, therefore, do not find any question of law much less substantial question of law toentertain these appeals. These appeals fail and the same are dismissed. Consequently, M.P.No.1 of2009 is also dismissed. ATR To1. The SecretaryCentral Board of Direct TaxesNew Delhi. 2. Income Tax Appellate TribunalMadras 'B' BenchMadras. 3. The Commissioner of Income Tax (Appeals)-IMadurai. 4. The Assistant Commissioner of Income TaxCircle � 1,Madurai