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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
O R D E R
PER Waseem Ahmed, Accountant Member:
- This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-10, Kolkata dated 02.01.2016. Assessment was framed by DCIT, Circle-4 Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 13.01.2014 for assessment year 2011-12. Grounds raised by Revenue reproduced as under:- “1. Whether on the fact and in the circumstances of the case, the Ld. CIT(A) had erred in allowing the deduction u/s. 80IE, when the primary condition of addition of Plant & Machinery to qualify for substantial expansion had not been substantiated by the assessee.
2. Whether on the fats and in the circumstances of the case, the Ld. CIT(A) had erred in allowing depreciation and additional depreciation to plant & machinery although there had been factual evidence that the relevant plant & machinery had not been put to use during the year under consideration.
3. That the appellant craves for leave to add, or modify any of the grounds of appeal before or at the time of hearing.” A.Y. 2011-12 DCIT, Cir-4(2) Kol. Vs. M/s Sublime Agro Ltd. Page 2 Shri S. Dasgupta, Ld. Departmental Representative appeared on behalf of Revenue and Shri Pratyush Jhunjhunwala, Ld Advocate appeared on behalf of assessee.
2. First issue raised by Revenue is that Ld. CIT(A) erred in allowing the deduction u/s 80IE of the Act despite the fact that condition for substantial expansion was not substantiated by the assessee.
3. Briefly stated facts are that assessee in the present case is a limited company and engaged in business of manufacturing of tea. It has its tea estate in the State of Assam and West Bengal. During the year, assessee has claimed deduction u/s 80IE of the Act for Rs. 2,53,65,000.00 in respect of its tea estate namely “Doomni Tea Garden” which is located in Assam. As per the assessee there was substantial expansion in the plant and machinery @ 37.38% in the immediate preceding AY 2010-11. The detail of substantial expansion in the immediate preceding AY i.e. 2010-11 stand as under:- “The percentage of additions to the plant & machinery at Doomni tea estate, Assam during AY 2010-11 were as under:- Particulars Values(a) Addition al Percentage additions to investments(b) plant 7 machinery (b/a*100) Book value as on 1 April 3,72,61,507 1,39,29,790 37.38% 2009 excluding revaluation during AY 1995-96 (i.e. original cost) However, during the course of assessment proceedings for the AY 2010-11, AO observed that there were certain machineries which were not put to use as the installation of such machineries were not done. As per the AO these machineries were received by the assessee towards fag-end of the year i.e. financial year 2009-10 relevant to AY 2010-11. Accordingly, there was no evidence suggesting that this plant and machineries were installed or put to use, thus the AO was of the view that the manufacturing activity cannot be initiated without the installation of plant and machinery. Thus, assessee cannot claim the benefit u/s. 80IE of the Act without carrying out the manufacturing activity. Hence, it was essential before claiming the deduction ITA No.574/Kol/2016 A.Y. 2011-12 DCIT, Cir-4(2) Kol. Vs. M/s Sublime Agro Ltd. Page 3 u/s. 80IE of the Act that the assessee should be engaged in the manufacturing activity of eligible article or things. 3.1 Similarly, AO observed that plant and machinery put to use during the assessment year 2010-11 comes to ₹49,42,931/- whereas the book value of the plant and machinery as on 01.04.2009 was at ₹4,58,99,643/-. Accordingly, AO worked out the expansion in the plant and machinery at 10.76% only. The provision u/s 80IE of the Act requires minimum expansion of 25% in the plant and machinery. In view of above, AO disallowed the deduction u/s 80IE of the Act for the AY 2010-11 and added to the total income of assessee. Accordingly the AO following the order of preceding AY 2010-11 disallowed the deduction claimed by the assessee under section 80IE of the Act for Rs. 2,53,65,000/- during the year under consideration. The amount of deduction disallowed was added to the total income of the assessee.
4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has deleted the addition made by the AO. The Revenue, being aggrieved, is in appeal before us.
Before us both parties relied on the order of Authorities Below as favorable to them.
We have heard the rival contentions of both the parties and perused the material available on record. At the outset, it was noticed that the identical issue came up for consideration before this Tribunal in the immediate preceding Assessment Year 2010-11 in assessee’s own case where the Tribunal was pleased to allow the deduction u/s. 80IE of the Act in dated 31.01.2018, the relevant extract of the order is reproduced below:- “6. We have given a careful consideration to the rival submissions and perused the material available on record, we note that remand report of the Assessing Officer clearly states that machineries were obtained in the end of March, 2010. The Assessing Officer also stated that there was hardly any change of putting the assets to use, as they were commenced at the fag-end of the year. Therefore, the Assessing Officer has, himself in his remand report agreed that assets were commenced at the fag-end of the year. Hence, it is abundantly clear from the remand report and order of the ld. CIT(A) that commencement has happened in the March 2010, and that is sufficient A.Y. 2011-12 DCIT, Cir-4(2) Kol. Vs. M/s Sublime Agro Ltd. Page 4 evidence to claim deduction under section 80-IE of the Income Tax Act, 1961. We are of the view that commissioning has not been disputed by the Assessing Officer. That being so, we decline to interfere with the order of ld. CIT(A), his order on this issue is therefore upheld and the grounds of appeal
of the Revenue are dismissed.” We respectfully following the view of the Tribunal, decline to interfere with the order passed by the Ld. CIT(A) on this account. Accordingly the ground taken by the Revenue is dismissed.
7. Next issue raise by Revenue in ground No.2 is that Ld. CIT(A) erred in allowing the depreciation and additional depreciation to the assessee though the relevant plants and machineries were not put to use during the year. The assessee was denied the depreciation in the immediate preceding AY 2010-11 on certain value of machineries by the AO on the reasoning that these were not put to use during the relevant year. The assessee accordingly preferred an appeal before Ld. CIT(A) for the immediate preceding AY i.e. 2010-11 who allowed the claim of assessee.
8. However, in the year under consideration, the AO added the amount of depreciation disallowed in the immediate preceding year with written down value of the plant and machinery pertaining to immediate preceding AY i.e. 2010-11. Accordingly, the AO allowed excess depreciation to assessee by ₹1,00,465.00 only during the year.
9. However, we note that during the course of assessment proceedings under consideration, AO failed to give the effect of the order of Ld. CIT(A) for AY 2010-11. Accordingly the Ld. CIT(A) directed the AO in his appellate order for the year under consideration to re-work out the depreciation in the light of the order of Ld. CIT(A) for the immediate preceding AY. Being aggrieved, by this order of Ld. CIT(A) Revenue is in appeal before the Tribunal.
10. Before us both parties relied on the order of Authorities Below as favorable to them.
11. From the foregoing discussion, we note that in the immediate preceding AY (2010-11) the depreciation was not allowed to assessee on the ground