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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER: is an appeal filed by the assessee for assessment year 1997-98. In fact, this appeal was disposed of earlier by an order dated 7th April, 2017. The assessee filed a Miscellaneous Petition in M.P. No.192/Chny/2017 on the ground that the depreciation claimed in respect of Cross Belt Analyser and Magnetic Separator was not disposed of by this Tribunal. Therefore, this Tribunal by an order dated 26.04.2019 refixed the appeal for the purpose of disposal of claim of depreciation in respect of Cross Belt Analyser and Magnetic Separator. Accordingly the appeal was posted for disposal of claim of depreciation in respect of the above two machines.
Shri J. Prabhakar, the Ld. representative for the assessee, submitted that Cross Belt Analyser is nothing but a bulk material analyser. According to the Ld. representative, this analyses the entire quantity of limestone mined and crushed. Cross Belt Analyser is installed in the belt conveyor that carries the crushed limestone from the mines to the factory. According to the Ld. representative, Cross Belt Analyser analyses the high grade and low grade mining results. This enables the assessee to recover the resource for manufacturing cement. According to the Ld. representative, it is also recycling the solid waste, hence, the assessee is eligible for depreciation at the rate of 100% as provided in Old Appendix I, Part A under the heading “III. Machinery And Plant” in (vi)(b) of the Income-tax Rules, 1962.
On the contrary, Dr. M. Srinivasa Rao, the Ld. Departmental Representative, submitted that admittedly, Cross Belt Analyser is analysing the quality of limestone mined and crushed. In a conventional sampling method, according to the Ld. D.R., an auto sampler will be installed in the belt carrying limestone to the factory.
The auto sampler will collect samples at periodical intervals. Due to lacunae in the conventional method, the Cross Belt Analyser was installed in the belt to analyse the limestone which is required for manufacturing cement. According to the Ld. D.R., there are several grades in the cement which would depend upon the quality of limestone used for manufacturing. The Cross Belt Analyser is analysing the quality of limestone which is used as raw material for manufacturing cement. Therefore, according to the Ld. D.R., the Cross Belt Analyser is neither recycling the solid waste nor recovering any resource. It is nothing but a analyser of the raw material while transmitting the cement to the factory from the mine.
We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, Cross Belt Analyser is installed in the belt conveyor that carries the crushed limestone from the mines to the factory. It is not in dispute that various grades of cement were manufactured using the different quality of raw material which is nothing but limestone.
Cross Belt Analyser is a new technique adopted by the manufacturer to analyse the quality of limestone which was carried from mines to the factory. As rightly submitted by the Ld. D.R., it is neither recycling the solid waste nor recovering of any resource. It is nothing but a testing tool to identify the quality limestone which was carried in the conveyor belt from mines to the factory.
Therefore, this Tribunal is of the considered opinion that the Cross Belt Analyser cannot be construed as solid waste recycling or resource recovery system.
During the course of hearing, the Ld. representative for the assessee has also brought to the notice of the Bench the letter said to be received from the Department of Scientific and Industrial Research recommending to consider for 100% depreciation. This Tribunal is of the considered opinion that Income-tax Act is a special enactment, therefore, the recommendation of the other Department in the Ministry of Science & Technology may be one of the factor to be considered in accordance with the Income-tax Act. If the Income-tax Act does not permit 100% depreciation, the recommendation of Ministry of Science & Technology may not grant depreciation at the rate of 100%. Therefore, the recommendation of the Ministry of Science & Technology cannot be a basis for allowing 100% depreciation unless the Cross Belt Analyser qualifies itself as a solid waste recycling and resource recovery system for 100% depreciation. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Now coming to Magnetic Separator, the assessee claims 100% depreciation for Magnetic Separator on the ground that it is a solid waste recycling and resource recovery system.
After hearing the Ld. representative for the assessee and the Ld. D.R., this Tribunal is of the considered opinion that as in the case of Cross Belt Analyser, Magnetic Separator is used for separating the raw material depending upon its quality, therefore, it cannot be construed as solid waste recycling and resource recovery system. This Tribunal is of the considered opinion that Magnetic Separator is neither recycling the solid waste nor recovering any resource, hence, it is also not eligible for 100% depreciation.
Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
It is made clear that the other part of order dated 07.04.2017 in respect of other issues shall remain the same without any modification.
Now coming to the assessee’s appeal for assessment year 1998-99 in the first issue arises for consideration is 100% depreciation in respect of Surface Miner, Cross Belt Analyser and Magnetic Separator. This Tribunal for the assessment year 1997-98 in the assessee's own case in I.T.A.
No.1121/Mds/2001 dated 07.04.2017 found that Surface Miner is not a solid waste control equipment. It was only a machine used for excavation in the mine layer by layer. With regard to Cross Belt Analyser and Magnetic Separator, in the earlier part of this order, we have considered the same and found that it was used as analyser of quality of the limestone, therefore, it cannot be considered as solid waste recycling and resource recovery system.
In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Now coming to next ground of appeal with regard to prospecting expenses.
During the course of hearing, Shri J. Prabhakar, the Ld. representative for the assessee, very fairly submitted that this issue was decided against the assessee for the assessment year 1996-
We have carefully gone through the order of this Tribunal for assessment year 1996-97. At paras 27, 28 & 29, the issue was discussed elaborately by this Tribunal and found that there was no infirmity in the order of the CIT(Appeals) confirming the disallowance. Since, admittedly, the issue is identical to the nature, by following the order of this Tribunal for assessment year 1996-97 and the reason stated therein, the disallowance is confirmed.
Now coming to computation of income under Section 115JA of the Income-tax Act, 1961 (in short 'the Act').
Shri J. Prabhakar, the Ld. representative for the assessee, submitted that under Section 115JA(2)(iv) of the Act, the amount of profit derived from industrial undertaking from the business of generation or generation and distribution of power has to be reduced from the book profit computed. According to the Ld. representative, the Assessing Officer instead of reducing the profit derived from generation and distribution of power, found that there was a depreciation which was not taken into account. According to the Ld. representative, if the depreciation was taken into account, there was no profit. Hence, nothing is available for deduction.
According to the Ld. representative, what is to be reduced is the profit derived from industrial undertaking, therefore, the question of depreciation does not arise for consideration.
We heard Dr. M. Srinivasa Rao, the Ld. D.R. also. Section 115JA(2)(iv) of the Act clearly says that the amount of profit derived from industrial undertaking from the business of generation or distribution of power has to be reduced from book profit. The assessee now claims that depreciation should not be taken into account. According to the Ld. representative, the depreciation shall be ignored and what is to be taken is only the profit. From the perusal of the order of the CIT(Appeals) it is very clear that the Assessing Officer has not allowed any depreciation since no depreciation was available on the book profit. We have also carefully gone through the assessment order. The Assessing Officer found that if the depreciation is reduced, there will be no profit under the business of generation of power. Therefore, the CIT(Appeals) is not correct in saying that the Assessing Officer has not allowed depreciation. In fact, the Assessing Officer allowed depreciation and reduced from book profit and found that there was no profit under the business of generation of power.
The language employed by the Parliament in Section 115JA(2)(iv) of the Act is very clear that what is to be reduced from book profit is the amount of profit derived from industrial undertaking, i.e. generation of power. Therefore, profit as computed under the provisions of Income Tax Act has to be reduced. In other words, while computing profit, all permissible deduction and allowance including depreciation shall be allowed. What is to be reduced is only profit. Profit is computed after allowing depreciation. It is not in dispute that after allowing depreciation, there is no profit. Therefore, this Tribunal do not find any reason to interfere with orders of authorities below. Accordingly, the same is confirmed.
Now coming to Revenue’s appeal in I.T.A.
No.1112/Mds/2001, the first ground of appeal is with regard to depreciation on Fly Ash Handling System.
We heard Dr. M. Srinivasa Rao, the Ld. D.R. and Shri J.
Prabhakar, the Ld. representative for the assessee. It was brought to the notice of the Bench that for the earlier assessment year, 100% was allowed by this Tribunal for Fly Ash Handling System.
Since this Tribunal has already allowed 100% for the same Fly Ash Handling System, we are of the opinion that the CIT(Appeals) has rightly allowed the same. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
The next issue arises for consideration is cost of construction of Vallalar causeway.
We heard Dr. M. Srinivasa Rao, the Ld. D.R. and Shri J. Prabhakar, the Ld. representative for the assessee. This issue was considered by this Tribunal in the assessee's own case for assessment year 1997-98. This Tribunal, after considering the entire facts and circumstances of the case, found that the cost of construction of Vallalar causeway has to be allowed as revenue expenditure. Since the very same expenditure was allowed as revenue expenditure for the assessment year 1997-98, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, the assessee’s appeals is dismissed & 1122/Mds/2001 is partly allowed. However, the Revenue’s appeal in I.T.A. No.1112/Mds/2001 is dismissed.