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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [AY] 2008-09 contest the order of Ld. Commissioner of Income-Tax (Appeals)-49 [CIT(A)], Mumbai, Appeal No.CIT(A)-49/IT-35/2014-15 dated 01/12/2015 qua certain relief provided to the assessee. The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax- ITA.No.993/Mum/2016 Anik Industries Limited Assessment Year-2008-09 Central Circle-40, Mumbai [AO] u/s 143(3) read with Section 147 of the Income Tax Act, 1961 on 24/02/2014 wherein the assessee has been saddled with addition of Rs.58 Lacs on account of depreciation & additional depreciation on boiler. The sole effective ground raised under appeal reads as under:-
On the fact and in the circumstances of the case and in law, the CIT(A) erred in allowing the excess claim of depreciation of Rs.39,52,136/- relying on the decision of the ITAT (MP) in the case of Vippy Solvex Products Ltd. (2007) 8 ITJ 624 (MP) without appreciating the fact that the ancillary equipment & accessories are not mentioned in the depreciation table which enumerates and exhausts those equipments for which depreciation is admissible at higher rates.
Facts qua the dispute are that during assessment proceedings it was noted that the assessee claimed higher depreciation @80% on boilers treating the same as Energy Savings Devices as per Appendix-I prescribing rates of depreciation on various assets. It was noted that the assessee purchased boilers for Rs.68.16 Lacs but claimed depreciation on Rs.189.76 Lacs by including the expenditure on civil work, ancillary equipments and accessories and cost of installation of these items. The higher depreciation on such additional expenditure, in the opinion of Ld. AO, was not available to the assessee since the same was available only against specific plant and equipments as prescribed in Appendix-I. Consequently, the higher depreciation on additional expenditure as claimed by the assessee amounting to Rs.39.52 Lacs was disallowed and added to the income of the assessee. The assessee was allowed normal depreciation @15% against these additional costs / expenditure.
Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 01/12/2015 wherein the matter was decided in assessee’s favor by observing as under:-
ITA.No.993/Mum/2016 Anik Industries Limited Assessment Year-2008-09 4.3 Decision I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order, the grounds of appeal
, the written submissions filed by the appellant during the hearing proceedings. 4.4In this regard, the AO has taken the view that higher depreciation of 80% can be allowed on the items of equipment named in the depreciation table being energy saving devices. Thus, he has allowed depreciation at higher rates on the cost of ignifluid/ fluidized bed boilers of Rs.68,16,465/- and depreciation on other ancillary equipment and accessories, cost of civil work on installation of these items, capitalized with boiler has been allowed at normal rate of 15% applicable to plant and machinery. The AO has relied on the decision of Madras High Court in the case of CIT vs Adyar Products Co. (2009) 314 ITR
38. In that case the dispute was whether higher rate of depreciation was allowable on fluid bed drier in the category of energy savings devices. The Hon’ble Court held that the word ‘being’ in the phrase energy saving devices being, Specialized boilers and furnaces implied energy saving devices ‘which are’ the devices mentioned therein. The appellant has submitted that addition of Rs.18976883/- has been made in the period October to March for its Etah unit and depreciation at the rate of 80% and additional depreciation at the rate of 20% has been claimed at Rs.7580753/- and Rs.1897688/- respectively. The breakup of the capital cost of boiler has been furnished which is as under: Description Value Sr.No. 1 Purchase of Boiler from Thermax 6509678 2 Civil job including foundation for boiler 1754157 3 Refrectory for boiler 434850 4 Conveyer for Husk & Ash for boiler 1705350 5 Electricals including light fitting for boiler 561563 6 Steel for foundation & structure for boiler 2020734 7 Chimney for boiler 772500 8 Installation & Fabrication job for boiler 2930834 9 IBR steam pipe lines for boiler 723671 10 Freight for boiler 614299 11 Insulation for steam pipe lines of boiler 129164 12 Material for boiler start up 226896 13 Pressure reducing station for steam 593187 TOTAL 18976883 I find that the dispute in this case is not whether depreciation is allowable on the specialized boiler, installed by the appellant. The dispute is whether depreciation on other ancillary equipment and accessories, cost of civil work on installation of these items, capitalized with boiler is to be allowed at the higher rate of 80%. I find that the case of DCIT vs Ms Vippy Solvex Products Ltd. (2007) 8 ITJ 624 (MP) is applicable to this case where in the issue was whether other components of boiler like coal container, coal conveyor, bucket elevator, dust collecting system constitute integral part of boiler to be entitled to 100% depreciation. In the case of Vippy Solvex it was held that the Tribunal did not err in extending benefit to the assessee towards depreciation at the rate of 100% on the automatic coal supply system, treating it to be a part and parcel of the boiler, and that on these items the assessee was not required to be restrict its claim to 25%. I am of the considered opinion that the ancillary equipment and accessories like chimney for boiler, conveyor systems for husk and ash for boiler, IBR steam pipeline electrical fittings and such like items are closely interconnected and linked as to form ITA.No.993/Mum/2016 Anik Industries Limited Assessment Year-2008-09 the common plant. The ancillary equipment and accessories facilitate the efficient functioning of the specialized boiler and these cannot have independent existence. Therefore, the cost of installation of these items, including civil jobs have rightly been capitalized with the cost of boiler and the appellant has rightly claimed the depreciation at the rate of 80% on these items, included in the cost of boiler at Rs.18976883/-. Accordingly, the AO is directed to allow the claim of depreciation on the boiler, considering the cost at Rs.1,89,76,883/-. The addition of Rs.3952136/- on account of depreciation on boiler is deleted in view of above discussion. This ground is allowed. Aggrieved, the revenue is in further appeal before us.
The Ld. Departmental Representative, Ms. N.Hemalatha, defended the stand of Ld. AO and submitted that higher depreciation could be allowed only against specific plant and machinery in terms of Appendix-I. Per Contra, Ld. Authorized Representative for Assessee, Sh. Bhupendra Shah, submitted that additional cost incurred by the assessee were integral part of the boilers and the formed part and parcel of the plant & machinery and had no separate independent existence and therefore, the stand of first appellate authority was quite justified in the circumstances.
We have considered the rival submissions and perused relevant material on record. Upon due consideration, we find that the relief has been provided to the assessee by Ld. first appellate authority by relying upon the decision of Hon’ble Madhya Pradesh High Court rendered in DCIT Vs Vippy Solvex Products Limited [2007 8 ITJ 624]. The cited case, in turn, places reliance on the decision of Hon’ble Kerala High Court rendered in CIT Vs. Cochin Refineries Limited [1988 173 ITR 461]. In both the cases, Hon’ble High Courts have allowed the claim of the assessee by observing that additional plant & machinery had no separate existence and could not be utilized for any other purpose and formed integral component of the boiler and therefore, eligible for higher ITA.No.993/Mum/2016 Anik Industries Limited Assessment Year-2008-09 depreciation. Similar observation has been made by Ld. First appellate authority while arriving at the conclusion. Before us, the revenue has neither controverted the factual findings nor able to bring on record any contrary judgment to defend its viewpoint. Therefore, Ld. CIT(A), in our opinion, has clinched the issue in right / proper perspective and provided relief to the assessee with due application of mind. Therefore, we find no reason to interfere with the same.
Resultantly, the revenue’s appeal stand dismissed. Order pronounced in the open court on 27th June, 2018 Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांकDated : 27.06.2018 Sr.PS:-Thirumalesh आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त(अपील) / The CIT(A) 4. आयकरआयु�त/ CIT– concerned 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, मुंबई/ DR, ITAT, Mumbai 6. गाड�फाईल / Guard File