DCIT 2(2)(1), MUMBAI vs. KISHCO LTD, MUMBAI

Aforesaid appeal by revenue for Assessment Year [AY] 2009-10 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-5 [CIT(A)], Mumbai, Appeal No. IT-212/15-16/141/16-17 dated 29/09/2016 qua certain relief provided to the assessee on account of assessee’s Kishco Limited Assessment Year-2009-10 additional depreciation claim against windmill. The assessment for impugned AY was framed by Ld. Addl. Commissioner of Income Tax- Range 2(2), Mumbai [AO] on 27/12/2011 determining the loss at Rs.69.76 Lacs. The said assessment order has subsequently been rectified u/s 154 vide order dated 13/03/2015 wherein, inter-alia, additional depreciation of Rs.170.15 Lacs as claimed by the assessee against windmill has been disallowed and the same has converted the determined loss to profit of Rs. 118.21 Lacs. The addition has been made keeping in view the fact that additional depreciation against windmill was available only from AY 2013-14 in terms of Finance Act, 2012. The Ld. CIT(A) has allowed the claim of the assessee by following the decision of this Tribunal rendered in Vinod Kumar Jain Vs. ACIT [ITA No. 916/Mum/2015 dated 29/06/2016] which , in turn has placed reliance on the judgments of Hon’ble Madras High Court rendered in Atlas Export Enterprise [373 ITR 414] & the decision of Hon’ble Gujarat High Court rendered in Diamines and Chemicals Limited [42 Taxmann.com 193]. Aggrieved, the revenue is in further appeal before us. During the impugned AY, the assessee was engaged in the business of manufacturing of cutlery & kitchenware items.

The Ld. Departmental Representative [DR], Sh. Rajat Mittal submitted that the additional depreciation was available to the assessee only with effect from AY 2013-14 in terms of amendment made by Finance Act, 2012. Per Contra, Ld. Authorized Representative for Assessee [AR], Sh. Paresh Shaparia, supported the view taken by Ld. first appellate authority by drawing our attention to the subsequent Kishco Limited Assessment Year-2009-10 judgment of Hon’ble Bombay High Court rendered in CIT Vs. R.B.Seth, Shriram Narsingdas [ITA No. 21 & 22 of 2011 dated 18/07/2017].

We have heard the rival contentions and perused relevant material on record. As rightly pointed out by Ld. AR, we find that as of now the issue stood squarely covered in assessee’s favor by the subsequent cited judgment of Hon’ble Bombay High Court wherein Hon’ble court, after considering the catena of judgment, concluded the matter in the following manner:- 8. For proper appreciation of the controversy, it would be useful to reproduce Section 32(1)(iia) of the Act which at the relevant time reads as under:- "Section 32 (1) In respect of depreciation of- (i) buildings, machinery, plant or.............. (ii) …....................... owned, wholly or partly by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed:- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed; Provided …................ (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to fifteen per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause(ii): Provided........................................................."

At the very out set Mr. Dewani, learned counsel for the respondent- assessee points out that the S.L.P. CC Nos. 17111-17112/2010 from the order dated 01.09.2009 filed by the Revenue against the decision of the Madras High Court in Hi Tech Arai Ltd. (supra) had been dismissed by the Apex Court on 16.12.2010. Thus he submits that the issue now on merits stands concluded in favour of the respondent- assessee as the entire exercise by the Commissioner of Income Tax in passing the order dated 9.7.2010 in exercise of his powers under Section 263 of the Act was only because the order of Madras High Court in Hi Tech Arai Ltd. (supra) is pending before Supreme Court.

Mr. Parchure, learned counsel appearing for the Revenue in support of the appeal submits that on plain reading of Section 32(1)(iia) of the Act as in force at the relevant time, the respondent- assessee is not entitled to additional depreciation as the words "in the business of generation or generation and distribution" came to be added only subsequently with effect from 2012. This itself would indicate that prior to Kishco Limited Assessment Year-2009-10 2012, the respondent- assessee would not be entitled to additional depreciation on the acquisition and installation of windmills.

We note that the view of the Madras High Court in Hi Tech Arai Ltd. (supra), has been concurrd with by Karnataka High Court in CIT .vs. The Hutti Gold Mines Co. Ltd. (Income Tax Appeal No.8 of 2014 decided on 16.09.2014) and the Gujarat High Court in Commissioner of Income Tax .vs. Diamines and Chemicals Ltd. - (2014) 109 DTR 0062. We note that the Madras High Court in Hi Tech Arai Limited (supra) on an analysis of Section 32(1)(iia) of the Act as existing before 2012 has held that where the plant and machinery (Including a windmill) has been acquired and installed after the cut off date 31.03.2002, would satisfy the requirement of Section 32(1)(iia) of the Act of setting up a new machinery or plant by an assessee who was already engaged in the business of manufacture or production of any article or thing. It is not necessary that the setting up of windmills acquired or installed on or before 31.03.2002 should have any operational connectivity to the article or thing which has already been manufactured by the assessee.

In the present case, it is not disputed by the Revenue that the respondent- assessee was engaged in the manufacture/processing of iron ore. Thus the requirements of the Section 32(1)(iia) of the Act are complied with by the respondent- assessee. In spite of being specifically asked, Mr. Parchure, learned counsel appearing for the revenue was not able to distinguish or point out as to why the decisions rendered by the Madras High Court in Hi Tech Arai Ltd. (supra), Karnataka High Court in the Hutti Gold Mines Co.Ltd. (supra) and Gujarat High Court in Diamines and Chemicals Ltd. (supra) should be departed from by us. However, all that Mr. Parchure states is that prior to 2012 the acquisition and installation of a plant for generation of power would not be entitled to the benefit of windmills. This does not appeal to us. In fact the bare reading of the provisions as held by the Madras High Court the only requirement under Section 32(1)(iia) of the Act is that the assessee should be engaged in the business of manufacture or production of article or thing, to claim additional depreciation on installing of plant or machinery on or after the cut off date i.e. 31.03.2002. The setting up of new plant and or machinery need not have the operational connectivity to the article or thing which has been manufactured by the assessee. The further contention on behalf of the appellant-Revenue is that the respondent – assessee is not in the business of generation of power and, therefore, not entitled to the benefit of additional depreciation. This submission completely overlooks the order of the Assessing Officer which clearly records that the assessee is in the business of wind power energy. This fact is not disputed either by the Commissioner of Income Tax or the Tribunal. Therefore, the question as framed that the windmills have no connection with the business activity of the assessee is factually incorrect. In view of the fact that Madras, Gujarat and Karnataka High Courts have taken a view that additional depreciation on windmills acquired and installed prior to 31.03.2002 is available under Section 32(1)(iia) of the Act. All that is required for allowing additional depreciation is that the assessee must be engaged in the manufacture or production of any article or thing, and such an assessee would on the setting up of a new machinery or plant would be entitled to additional depreciation on the new plant and or machinery under Section 32(1)(iia) of the Act. There is no requirement in Section 32(1)(iia) of the Act that additional depreciation on the new plant or machinery would be available only if the plant or machinery has some nexus/connection with the Kishco Limited Assessment Year-2009-10 article or thing being manufactured by the respondent-assessee. To accept the Revenue's contention would require reading words into Section 32(1)(iia) of the Act which is not permissible.

Therefore, question no.(I) is answered in the affirmative i.e. in favour of the respondent-assessee and against the appellant- Revenue. The revenue has not disputed the fact that the windmill has been installed by the assessee during impugned AY. Further, no contrary judgment has been brought on record. Evidently, the assessee has fulfilled the conditions as prescribed u/s 32(1)(iia) to claim additional depreciation in terms of the above observation of Hon’ble court. Hence, respectfully following the binding judicial precedent of our jurisdictional High Court, we dismiss revenue’s appeal.

Resultantly, the revenue’s appeal stand dismissed. Order pronounced in the open court on 04th July, 2018.