DCIT, MADURAI vs. M/S. RAMCO INDUSTRIES LTD., RAJAPALAYAM

PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER:

These appeals are filed by the assessee and Revenue against the orders passed by the learned Commissioner of Income

2 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 Tax (Appeals)-1, Madurai, all dated 04.04.2016 in ITA

No.0037/2015-16 for the assessment year 2009-10 passed

U/s.250 (6) r.w.s. 143(3) of the Act, ITA No.0177/2015-16 for the

assessment year 2010-11 and ITA No.176/2015-16 for the

assessment year 2011-12 passed U/s.250(6) r.w.s. 263, 143(3) of

the Act.

in their respective appeals, however they are briefly stated herein

below for adjudication.

year 2009-10 :

(i) The Ld.CIT(A) has erred in confirming the disallowance

U/s.14A r.w.r 8D for an amount of Rs.20,56,515/-.

(Since the Ld.AR has not pressed this ground, the

ground raised by the assessee is dismissed.)

(ii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied depreciation at 100% on the

cost of “pulper stirrer amounting to Rs.61,800/-

(Arakkonam Factory)” claimed under Rule 6 item

3 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 No.3(viii)(b) of Part III - Plant & Machinery – dust

collector system.

(iii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied depreciation at 100% on the

cost of “Vacuum cleaner amounting to Rs.19,380/-

(Karagpur Unit)” claim made under Rule 6 item

No.3(viii)b of Part III - Plant & Machinery – dust

collector system.

(iv) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied depreciation at 100% on the

cost of “Microyarn cleaner amounting to Rs.16,76,690/-

(at spinning unit)” - claim made under Rule 6 item

No.3(viii)b of Part III - Plant & Machinery – dust

collector system.

(v) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied depreciation at 80% on the cost

of “Energy saving devices-Inverter amounting to

Rs.12,77,910/-(at spinning unit)” claimed under Rule 6

– Plant & Machinery – Item 8 (IX)E(b) – automatic

power cut off device (relays) mounted on individual

motor.

4 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016

year 2009-10

(i) The Ld.CIT(A) has erred in holding that the refund of

sales tax amounting to Rs.5,79,39,673/- is capital

receipt and therefore exempt from tax disregarding the

decision of the Hon’ble Apex court in the case CIT vs.

Sahney Steel & Press Works Ltd reported in 228 ITR

253 (SC) and 152 ITR 39 (AP High court).

(i) The Ld.CIT(A) has erred in directing the Ld.AO to allow

100% depreciation on the following items as against

15% / 7.5% allowed by the Ld.AO:-

year 2010-11

(i) The Ld.CIT(A) has erred in confirming the

disallowance U/s.14A r.w.r 8D for an amount of

Rs.1,53,64,094/-. (Since the Ld.AR has not pressed

5 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 this ground, the ground raised by the assessee is

dismissed.)

(ii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Fly ash silo amounting to Rs.24,85,384/-

(Vijayawada Unit)” claimed under Rule 5 item

No.3(viii)(e) – Ash handling system and evacuation

system.

(iii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Cement blower amounting to Rs.1,16,655/-

(Bhuj Unit)” claimed under Rule 5 item No.3(viii)(e) –

Ash handling system and evacuation system.

(iv) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Centrifugal fan amounting to Rs.7,32,513/-

(at Spinning mills)” claimed under Rule 5 – Part III-

item No.8(xiii)(e) – Air / gas / fluid heating system.

year 2010-11

6 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 (ii) The Ld.CIT(A) has erred in holding that the refund of

sales tax amounting to Rs.5,40,36,767/- is capital

receipt and therefore exempt from tax disregarding the

decision of the Hon’ble Apex court in the case CIT vs.

Sahney Steel & Press Works Ltd reported in 228 ITR

253 (SC) and 152 ITR 39 (AP High court).

(i) The Ld.CIT(A) has erred in directing the Ld.AO to allow

100% depreciation on the following items as against

15% / 7.5% allowed by the Ld.AO:-

year 2011-12

(i) The Ld.CIT(A) has erred in confirming the disallowance

U/s.14A r.w.r 8D for an amount of Rs.1,01,30,836/-.

(Since the Ld.AR has not pressed this ground, the

ground raised by the assessee is dismissed.)

(ii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Vacuum cleaner amounting to Rs.44,203/-

7 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 (Ibrahim Pattinam)”, claim made under Rule 6 item

No.3(viii)c of Part III - Dust collector systems.

(iii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Vacuum cleaner amounting to Rs.35,500/-

(Bhuj Unit)”, claim made under Rule 6 item No.3(viii)c

of Part III - Dust collector systems.

(iv) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Biomass Gasfier amounting to

Rs.8,14,988/-(at Karur)”, claim made under Rule 6 item

No.3(viii)c of Part III - Dust collector systems.

(v) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Vacuum pump amounting to Rs.47,464/-(at

Karur)”, claim made under Rule 6 item No.3(viii)(e) of

Part III – Ash handling system and evacuation system.

(vi) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Fly Ash Silo amounting to Rs.59,54,690/-

(at Gangai Kondan)”, claim made under Rule 6 item

8 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 No.3(viii)(e) of Part III – Ash handling system and

evacuation system.

(vii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “capacitor duty contractor amounting to

Rs.22,482/-(at Gangai Kondan)”, claim made under

Rule 6 item No.8(ix)(b)(a) of Part III – Automatic

Electrical load monitoring system.

(viii) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Travelling cleaner amounting to

Rs.1,02,492/-(at Rajapalayam Spinning Mill)”, claim

made under Rule 6 item No.3(viii)c of Part III - Dust

collector systems.

(ix) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “waste cotton collection amounting to

Rs.3,77,518/-(at Rajapalayam Spinning Mill)”, claim

made under Rule 6 item No.3(viii)c of Part III - Dust

collector systems.

9 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 (x) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Energy efficient centrifugal fan amounting

to Rs.5,91,960/-(at Rajapalayam Spinning Mills)”, claim

made under Rule 6 item No.8(xiii)(e) of Part III – Air /

gas fluid heating systems.

(xi) The Ld.CIT(A) has erred in confirming the order of the

Ld.AO who had denied higher rate of depreciation on

the cost of “Humican control system amounting to

Rs.35,225/-(at Rajapalayam mills)”, claim made under

Rule 6 item No.3(viii)c of Part III - Dust collector

systems.

year 2011-12

(iii) The Ld.CIT(A) has erred in holding that the refund of

sales tax amounting to Rs.6,19,69,482/- is capital

receipt and therefore exempt from tax disregarding the

decision of the Hon’ble Apex court in the case CIT vs.

Sahney Steel & Press Works Ltd reported in 228 ITR

253 (SC) and 152 ITR 39 (AP High court).

10 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 (iv) The Ld.CIT(A) has erred in directing the Ld.AO to allow

100% depreciation on the following items as against

15% / 7.5% allowed by the Ld.AO:-

company engaged in the business of manufacturing and selling

fiber cement cements, accessories, calcium silicate boards, cotton

yarn, generation of power etc., filed its return of income for the

respective assessment years. Subsequently for the assessment

year 2009-10 assessment was completed U/s.143(3) of the Act,

wherein the Ld.AO made several additions and on appeal the

Ld.CIT(A) gave some part relief and confirmed certain other

additions. Similarly for the assessment year 2010-11 and 2011-12,

assessment was completed by the Ld.AO U/s.143(3) of the Act,

subsequent to the intervention of the Ld.CIT u/s. 263 of the Act,

wherein the Ld.AO made several additions which was partly

confirmed by the CIT(A). Aggrieved by the orders of the

Ld.CIT(A), the assessee and the Revenue both are in appeal

before us for all the three assessment years.

11 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016

year 2009-10 :

A) Ground No. 3(ii) - Pulper Stirrer at Arakonam CSB :- The

assessee has claimed 100% depreciation on pulper stirrer at

Arakonam CSB under Rule 6 item No.3(viii)(b) of Part III - Plant &

Machinery – dust collector system. However the Ld.AO denied the

assessee’s claim of 100% depreciation stating that the asset does

not tally with the asset mentioned in the list of items given in New

Appendix I of Depreciation table. Therefore the Ld.AO had

granted depreciation @ 15% and disallowed the balance claim of

the assessee. On appeal, the Ld.CIT(A) rejected the appeal of the

assessee stating that the pulper stirrer helps to stir the waste pulp

constantly and keep the raw material without setting. Therefore, it

cannot be treated as dust collector system. Accordingly he

confirmed the order of the Ld.AO, wherein depreciation of 15% is

allowed.

After examining the issue, we find merit in the findings of the

Revenue. 100% depreciation is allowable to air pollution control

equipment being dust collector systems as per the rate of

12 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 depreciation prescribed under New Appendix Rule-Part A-III-

Machinery and Plant – 8 (viii)(c). In the case of the assessee,

pulp stirrer machine is not air pollution control equipment. It is

machinery used in the manufacturing process of the assessee.

Hence the rate of depreciation allowed by the Revenue is

appropriate. Therefore, we do not find it necessary to interfere

with the orders of the Revenue in this issue.

B) Ground No. 3(iii) – Vacuum Cleaner at Kharagpur Unit :-

The assessee has claimed 100% depreciation on Vacuum Cleaner

at Kharagpur Unit under Rule 6 item No.3(viii)(b) of Part III - Plant

& Machinery – dust collection system. However the Ld.AO denied

the assessee’s claim of 100% depreciation stating that the asset

does not tally with the asset mentioned in the list of items given in

New Appendix I of Depreciation table. Therefore the Ld.AO had

granted depreciation @ 15% and disallowed the balance claim of

the assessee. On appeal, the Ld.CIT(A) rejected the appeal of the

assessee stating that it is a normal vacuum cleaner used in the

factory only for cleaning the premises and not for avoiding air

pollution by installing dust collector system. Therefore, it cannot

13 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 be treated as dust collector system. Accordingly he confirmed the

order of the Ld.AO, wherein depreciation of 15% is allowed.

After examining the issue, we find merit in the findings of the

Revenue. 100% depreciation is allowable to air pollution control

equipment being dust collector systems as per the rate of

depreciation prescribed under New Appendix Rule-Part A-III-

Machinery and Plant – 3 (viii)(c). In the case of the assessee,

vacuum cleaner is not air pollution control equipment. It is a

machinery used for cleaning the premises of the assessee as held

by the Ld.CIT(A). Hence the rate of depreciation allowed by the

Revenue is appropriate. Therefore, we do not find it necessary to

interfere with the orders of the Revenue in this issue.

C) Ground No. 3(iv) – Micro Yarn Cleaner at Spinning Unit :-

The assessee has claimed 100% depreciation on Mircro Yarn

Cleaner at Spinning Unit under Rule 6 item No.3(viii)(b) of Part III -

Plant & Machinery – dust collection system. However the Ld.AO

denied the assessee’s claim of 100% depreciation stating that the

asset does not tally with the asset mentioned in the list of items

given in New Appendix I of Depreciation table. Therefore the

14 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 Ld.AO had granted depreciation @ 15% and disallowed the

balance claim of the assessee. On appeal, the Ld.CIT(A) rejected

the appeal of the assessee stating that this machine is used only to

improve the quality of yarn by removing projections in the yarn by

electronically control method and the waste generated and

collected is only dumped into the environment. Therefore, it

cannot be treated as air pollution control unit being dust collector

system. Accordingly he confirmed the order of the Ld.AO, wherein

depreciation of 15% is allowed.

After examining the issue, we find merit in the findings of the

Revenue. 100% depreciation is allowable to air pollution control

equipment being dust collector systems as per the rate of

depreciation prescribed under New Appendix Rule-Part A-III-

Machinery and Plant – 3 (viii)(c). In the case of the assessee,

Micro yarn cleaner is not air pollution control equipment. It is a

machinery used to improve the quality of yarn in the manufacturing

process of the assessee as held by the Ld.CIT(A). Hence the rate

of depreciation allowed by the Revenue is appropriate. Therefore,

we do not find it necessary to interfere with the orders of the

Revenue in this issue.

15 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016

D) Ground No. 3(v) – Inverter at Spinning Unit :- The assessee

has claimed 80% depreciation on Energy Saving devices - Inverter

at Spinning Unit under Rule 6 item No.8(IX)E(b) of Part III - Plant &

Machinery – Automatic power cut off devices (relays) mounted on

individual motor. However the Ld.AO denied the assessee’s claim

of 80% depreciation stating that the asset does not tally with the

asset mentioned in the list of items given in New Appendix I of

Depreciation table. Therefore the Ld.AO had granted depreciation

@ 15% and disallowed the balance claim made by the assessee.

On appeal, the Ld.CIT(A) rejected the appeal of the assessee

stating that from the bills, it is found that the machine is only

inverter and controller and not automatic power cut off device.

Therefore, it cannot be treated as automatic power cut off device.

Accordingly he confirmed the order of the Ld.AO, wherein

depreciation of 15% is allowed.

After examining the issue, we find merit in the findings of the

Revenue. 80% depreciation is allowable to Automatic power cut-

off devices as per the rate of depreciation prescribed under New

Appendix Rule-Part A-III- Machinery and Plant – 8(IX)E(b). In the

16 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 case of the assessee, Inverter / controller cannot be held as

automatic power cut off devices. Hence the rate of depreciation

allowed by the Revenue is appropriate. Therefore, we do not find

it necessary to interfere with the orders of the Revenue in this

issue.

year 2009-10

A) Ground No. 4(i) - Refund of sales tax amounting to

Rs.5,79,39,673/- held as capital receipt :- During the course of

scrutiny assessment proceedings, it was observed by the Ld.AO

that the assessee company had reduced a sum of

Rs.5,79,39,673/- from its income as capital receipt being capital

subsidy received. The break-up of the same was shown as follows:

a. Kutch development scheme 2001 in respect of fibre

cement plant at Anjar, Bhuj, Gujarat – Rs.2,91,81,043/-

b. West Bengal incentive scheme 2000 in respect of fibre

cement plant and clinker grinding unit at Kharagpur, West

Bengal – Rs.2,87,58,630/-

The Ld. AO opined that the claim of the assessee, to treat the

incentive given by the State Government to promote business and

17 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 reduce the burden in under-developed areas as capital receipt, is

incorrect because the subsidy received falls in the revenue field.

He further opined that such subsidy was only a concession which

increases the income of the assessee. The Ld.AO further held

that there is no provision in the Income Tax Act to treat the subsidy

received from Government as non-taxable income and since the

incentive received is in the nature of revenue receipt added to the

income of the assessee. Aggrieved by the order of the Ld.AO, the

assessee carried the matter on appeal. The Ld.CIT(A) relying in

his earlier orders for the assessment years 2007-08 & 2008-09 in

ITA 169/2009-10 and 34/2010-11 directed the Ld.AO to delete the

above said addition.

At the outset the Ld.DR submitted before us that the issue is

covered in favour of the Revenue by the decision of the Hon’ble

Apex court in the case CIT vs. Sahney Steel & Press Works Ltd

reported in 228 ITR 253 (SC) and 152 ITR 39 (AP High court). He

therefore pleaded that the order of the Ld.AO may be reinstated.

The Ld.AR on the other hand relied on the orders of the Ld.CIT(A).

18 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 We have heard the rival submissions and carefully perused

the materials on record. The gist of the decision rendered in the

case CIT vs. Sahney Steel and Press Works Ltd., by the Hon’ble

Andhra Pradesh High Court reported in 152 ITR 39, is reproduced

herein below for reference:-

Facts of the case : “The assessee received refunds of sales tax on purchase of machinery and raw materials and on the sale of finished goods under a G.O. issued by the State Government of Andhra Pradesh. The G.O. had been issued with a view to speed up the industrial development of the industry and could not be distributed as profits. The ITO assessed the receipts but the Tribunal held that the development subsidy was in the nature of a capital receipt and it was not also assessable under s.41(1). On a reference, it was contended on behalf of the assessee that the amounts were not of the nature of “income” at all and in any case it was a voluntary contribution.”

Decision : It was not necessary for a receipt to constitute income that it must necessarily be in the nature of return. It may be that there is no consideration for the benefits extended to the assessee in terms of the G.O. in the common law sense. But it cannot be said that it is an act of generosity on the part of the State. The State is interested in its industrial development; it wants to attract industries to enhance the employment potential, economic prosperity and the income of the State. It is to attract new entrepreneurs that the Government had come forward with the said incentives. The payments could not be considered to be voluntary contributions. The assessee and for that matter any other person setting up an industry in the State of Andhra Pradesh was entitled to the facilities and incentives provided by the said G.O. as a matter of right, which, if denied, he could enforce in a court of law. The fact that the Government reserved to itself the power to withdraw the G.O.

19 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 or to amend it, did not mean that so long as the G.O. was in operation, the persons concerned did not have a right to enforce the same. The source as well as the payments were both certain and definite. The payments were inseparably connected with the business carried on by the assessee. The benefits were available only from the date the new industrial undertaking commenced production and for a period of five years therefrom. The refund or the subsidy, as it may be called, was dependant upon the industry continuing in production. There was no room or basis for disassociating the subsidy from the business of the assessee, in as much as the subsidy was given for development of the business and not for any other unrelated purposes. The payment was not a subsidy for setting up the plant but a subsidy given for the efficient and profitable running of the industry and its growth. The receipt was, therefore, of a revenue nature. All three items comprised in the payment constituted income of the assessee.”

Further on appeal, the Hon’ble Apex court in the above said

case also held the issue in favour of the Revenue. The gist of the

same is reproduced herein below for reference:

“Dismissing the appeal, that, under the notification in question the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing but supplementary trade receipts. It was true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose. The subsidies had not been granted for production of, or bringing into existence any new asset. The subsidies were granted year after year, only after the setting up of the new industry and commencement of production. Such a subsidy could only be treated as assistance given for the

20 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 purpose of carrying on of the business of the assessee. The subsidies were of revenue nature and would have to be taxed accordingly.”

From the facts of the case, it appears that the above said

decisions of the Hon’ble Apex court and the Hon’ble AP High Court

were not brought to the knowledge of the Ld.CIT(A). Therefore, in

the interest of justice we remit the matter back to the file of the

Ld.CIT(A) in order to examine the facts of the case and the ratio

laid down by the Hon’ble Apex Court and the Hon’ble AP High

Court (supra) and thereafter decide the matter afresh in

accordance with law and merit. It is ordered accordingly.

B) Ground No.4(ii) :

Claim of 100% depreciation on the following items as against

15% / 7.5% allowed by the Ld.AO:-

21 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 necessary to interfere in the finding of the Ld.CIT(A) which is based on the opinion of technical expert.

2010-11

22 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 A) Ground No. 5(ii) – Fly Ash Silo at Vijayawada Unit :- The

assessee has claimed higher rate of depreciation on Fly ash silo at

Vijayawada Unit under Rule 5 item No.3(viii)(e) of Part III - Plant &

Machinery – Ash handling system & evacuation system – Air

pollution control equipment. However the Ld.AO denied the

assessee’s claim of higher rate of depreciation stating that the

asset does not tally with the asset mentioned in the list of items

given in New Appendix I of Depreciation table. Therefore the

Ld.AO had granted depreciation @ 15% and 7.5 % for the

additional machinery purchased during the second quarter and

disallowed the balance claim of the assessee. On appeal, the

Ld.CIT(A) rejected the appeal of the assessee stating that the

assessee has only installed modern fly ash silo which is

incidentally fitted with a bag filter and it does not amount to either

dust collector system or solid wastage recycling system.

Accordingly he confirmed the order of the Ld.AO, denying the

higher depreciation.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to air pollution

control equipment as per the rate of depreciation prescribed under

23 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 New Appendix Rule-Part A-III-Machinery and Plant – 3 (viii)(e). In

the case of the assessee, Fly ash silo does not amount to either

dust collector system or solid wastage recycling system. Hence the

rate of depreciation allowed by the Revenue is appropriate.

Therefore, we do not find it necessary to interfere with the orders

of the Revenue in this issue.

B) Ground No. 5(iii) – Cement Blower at Bhuj :- The assessee

has claimed higher rate of depreciation on Cement blower at Bhuj

Unit under Rule 5 item No.3(viii)(e) of Part III - Plant & Machinery –

Ash handling system & evacuation system – Air pollution control

equipment. However the Ld.AO denied the assessee’s claim of

higher rate of depreciation stating that the asset does not tally with

the asset mentioned in the list of items given in New Appendix I of

Depreciation table. Therefore the Ld.AO had granted depreciation

@ 15% and 7.5 % for the additional machinery purchased in the

second quarter and disallowed the balance claim of the assessee.

On appeal, the Ld.CIT(A) rejected the appeal of the assessee by

perusing the purchase bill of the machinery, that it is only air

compressor and cannot be treated as solid waste recycling system

24 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 or dust collector system. Accordingly he confirmed the order of the

Ld.AO, denying the higher depreciation.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to air pollution

control equipment as per the rate of depreciation prescribed under

New Appendix Rule-Part A-III-Machinery and Plant – 3 (viii)(e). In

the case of the assessee, cement blower is only air compressor

and does not amount to either dust collector system or solid

wastage recycling system. Hence the rate of depreciation allowed

by the Revenue is appropriate. Therefore, we do not find it

necessary to interfere with the orders of the Revenue in this issue.

C) Ground No. 5(iv) – Centrifugal Fan at Spinning Mills :- The

assessee has claimed higher rate of depreciation on Centrifugal

Fan at Spinning Mills under Rule 5 item No.8(xiii)(e) of Part III -

Plant & Machinery – Renewable Energy Devices - Air/gas/fluid

heating system. However the Ld.AO denied the assessee’s claim

of higher rate of depreciation stating that the asset does not tally

with the asset mentioned in the list of items given in New Appendix

I of Depreciation table. Therefore the Ld.AO had granted

25 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 depreciation @ 15% and 7.5 % for the additional machinery

purchased in the second quarter and disallowed the balance claim

of the assessee. On appeal, the Ld.CIT(A) rejected the appeal of

the assessee by perusing the purchase bill of the machinery that it

is only centrifugal fan with dry bags and base frame. Therefore, it

cannot be treated as either air pollution control equipment or solid

wastes recycle system. Accordingly he confirmed the order of the

Ld.AO, in restricting the depreciation.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Renewable

Energy Devices as per the rate of depreciation prescribed under

New Appendix Rule-Part A-III-Machinery and Plant –8(xiii)(e). In

the case of the assessee, centrifugal fan helps to improve the

performance of the machinery and does not amount to either air

pollution control equipment or solid waste recycle system. Hence

the rate of depreciation allowed by the Revenue is appropriate.

Therefore, we do not find it necessary to interfere with the orders

of the Revenue in this issue.

26 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 13. Revenue’s Appeal ITA No.2144 of 2016, Assessment year

2010-11:

A) Ground No. 6 (i) : Refund of sales tax amounting to

Rs.5,40,36,767/- held as capital receipt :-

On this identical issue in the Revenue’s appeal in ITA

No.2143 of 2016 for the assessment year 2009-10, we have

remitted back the matter to the file of Ld.CIT(A) in order to decide

the matter afresh in the light of the decision of the Hon’ble Apex

Court and Hon’ble AP High Court cited supra. Accordingly, for the

relevant assessment year also the same decision holds good. It is

ordered accordingly.

B) Ground No. 6 (ii):

Claim of 100% depreciation on the following items as against

15% / 7.5% allowed by the Ld.AO:-

The Ld.CIT(A) has allowed the claim of 100% depreciation based on the certificate issued by the chartered engineer. In this situation, we do not find it necessary to interfere in the finding of the Ld.CIT(A) which is based on the opinion of technical expert. Therefore this issues raised by the Revenue is devoid of merit.

27 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016

year 2011-12

A) Ground No.: 7 (ii) & 7 (iii) - Higher depreciation on cost of

Vacuum cleaner at Ibrahim Pattinam & Bhuj :- On this identical

issue, in ITA No.1875 of 2016 for the assessment year 2009-10

herein above, the matter has been held against the assessee.

Therefore, for the relevant assessment year also the same

decision holds good and accordingly the issue is held against the

assessee.

B) Ground No.: 7 (iv) – Biomass Gassifier at Karur :- The

assessee has claimed higher rate of depreciation on Biomass

Gasifier at Karur under Rule 6 item No.3(viii)(c) of Part III - Plant &

Machinery – Dust Collector Systems. The Ld.AO denied the

assessee’s claim of higher rate of depreciation by holding that the

machinery does not fall in the nature of dust collector system.

However the Ld.AO granted depreciation @ 15% and disallowed

the balance claim of the assessee. On appeal, the Ld.CIT(A)

examined the certificate issued by the Chartered Engineer. From

the certificate it was revealed that Biomass Gasifier is an

28 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 alternative energy used for drying corrugated asbestos sheets.

Therefore the Ld.CIT(A) held that it cannot be treated as dust

collector system. Accordingly he confirmed the order of the Ld.AO.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Dust

Collector Systems as per the rate of depreciation prescribed under

New Appendix Rule-Part A-III-Machinery and Plant –3(viii)(c). In

the case of the assessee, the Biomass Gasifier cannot be treated

as Dust collector system as held by the Ld.CIT(A). Hence the rate

of depreciation allowed by the Revenue is appropriate. Therefore,

we do not find it necessary to interfere with the orders of the

Revenue in this issue.

C) Ground No.: 7 (v) – Vacuum Pump at Karun :- The assessee

has claimed higher rate of depreciation on Vacuum Pump at Karur

under Rule 6 item No.3(viii)(e) of Part III - Plant & Machinery – Ash

handling system and evacuation system. The Ld.AO denied the

assessee’s claim of higher rate of depreciation by holding that the

machinery do not control air pollution or water pollution. However

the Ld.AO granted depreciation @ 15% and disallowed the

29 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 balance claim of the assessee. On appeal, the Ld.CIT(A) rejected

the appeal of the assessee stating that the it is a normal pump for

flushing out the slurry fly ash and it does not control air or water

pollution. Therefore the Ld.CIT(A) held that the above said

machinery cannot be treated as ash handling system. Accordingly

he confirmed the action of the Ld.AO.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Ash handling

system as per the rate of depreciation prescribed under New

Appendix Rule-Part A-III-Machinery and Plant –3(viii)|(e). In the

case of the assessee, as held by the Ld.CIT(A), it cannot be

treated as ash handling system, since it is used only for flushing

out the slurry ash. Hence the rate of depreciation allowed by the

Revenue is appropriate. Therefore, we do not find it necessary to

interfere with the orders of the Revenue in this issue.

D) Ground No.: 7 (vi) - Fly Ash Silo Tank at Gangai Kondan:-

On this identical issue, in ITA No.1876 of 2016 for the assessment

year 2010-11 herein above, the matter has been held against the

assessee. Therefore, for the relevant assessment year also the

30 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 same decision holds good and accordingly the issue is held

against the assessee.

E) Ground No. 7 (vii) - Capacity Duty Contractor at

Gangaikondan:- The assessee has claimed higher rate of

depreciation on Capacity Duty Contractor at Gangaikondan under

Rule 6 item No.8(ix)(B)(a) of Part III – Automatic electrical load

monitoring systems. The Ld.AO denied the assessee’s claim of

higher rate of depreciation by holding that the machinery do not fall

under automatic electrical load monitoring systems. However the

Ld.AO granted depreciation @ 15% and disallowed the balance

claim of the assessee. On appeal, the Ld.CIT(A) held that as per

the certificate of the Chartered Engineer, the equipment was

installed to save energy consumption and the item falls under

automatic electrical load monitoring system. But on perusing the

purchase bill, it revealed that it is only a capacitor. Therefore

Ld.CIT(A) held that it cannot be treated as automatic electrical load

monitoring system. Accordingly he confirmed the action of the

Ld.AO.

31 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Energy

saving devices – Automatic electrical load monitoring systems as

per the rate of depreciation prescribed under New Appendix Rule-

Part A-III-Machinery and Plant –8(ix)(B)(a). In the case of the

assessee, as held by the Ld.CIT(A) it cannot be treated as

automatic electrical load monitoring system. Hence the rate of

depreciation allowed by the Revenue is appropriate. Therefore,

we do not find it necessary to interfere with the orders of the

Revenue in this issue.

G) Ground No.: 7 (viii) - Travelling Cleaner at Rajapalayam

Spinning Mill :- The assessee has claimed higher rate of

depreciation on travelling cleaner at Rajapalayam Spinning Mill

under Rule 6 item No.3(viii)(c) of Part III – Dust collector systems.

The Ld.AO denied the assessee’s claim of higher rate of

depreciation by holding that the machinery is not dust collector

system. However the Ld.AO granted depreciation @ 15% and

disallowed the balance claim of the assessee. On appeal, the

Ld.CIT(A) found that the equipment has been installed only to

improve the quality of yarn and therefore it cannot be treated as

32 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 dust collector system. Accordingly he confirmed the action of the

Ld.AO.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Plant and

Machinery – Dust collector system as per the rate of depreciation

prescribed under New Appendix Rule-Part A-III-Machinery and

Plant –3(viii)(c). In the case of the assessee, as held by the

Ld.CIT(A) the equipment has been installed only to improve the

quality of yarn and cannot be treated as dust collector system.

Hence the rate of depreciation allowed by the Revenue is

appropriate. Therefore, we do not find it necessary to interfere

with the orders of the Revenue in this issue.

H) Ground No.: 7 (ix) - Waste Cotton Collection at

Rajapalayam Spinning Mills :- The assessee has claimed higher

rate of depreciation on waste cotton collection at Rajapalayam

spinning mills under Rule 6 item No.3(viii)(c) of Part III – Air/gas

fluid heating systems. The Ld.AO denied the assessee’s claim of

higher rate of depreciation by holding that the machinery do not

control air pollution. However the Ld.AO granted depreciation @

33 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 15% and disallowed the balance claim of the assessee. On

appeal, the Ld.CIT(A) held that though the equipment is certified

as dust collector system but as per the bill, it represents waste

collection system and therefore it cannot be treated as air pollution

control machine being dust collector system. Accordingly he

confirmed the action of the Ld.AO.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Plant and

Machinery – dust collector system as per the rate of depreciation

prescribed under New Appendix Rule-Part A-III-Machinery and

Plant –3(viii)(c). In the case of the assessee, from the bill, it is

only a waste collection system. There it cannot be treated as

pollution control machine as held by the Ld.CIT(A). Hence the rate

of depreciation allowed by the Revenue is appropriate. Therefore,

we do not find it necessary to interfere with the orders of the

Revenue in this issue.

I) Ground No.: 7 (x) - Energy Efficient Centrifugal fan at

Rajapalayam Spinning Mills :- On this identical issue, in ITA

No.1876 of 2016 for the assessment year 2010-11 herein above,

34 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 the matter has been held against the assessee. Therefore, for the

relevant assessment year also the same decision holds good and

accordingly the issue is held against the assessee.

G) Ground No.: 7 (xi) - Humican control system at

Rajapalayam Mills :- The assessee has claimed higher rate of

depreciation on humican control system at Rajapalayam mills

under Rule 6 item No.3(viii)(c) of Part III – Dust collector systems.

The Ld.AO denied the assessee’s claim of higher rate of

depreciation by holding that the machinery is not a dust collector

system. However the Ld.AO granted depreciation @ 15% and

disallowed the balance claim of the assessee. Therefore the Ld.AO

had granted depreciation @ 15% and disallowed the balance claim

of the assessee. On appeal, the Ld.CIT(A) held that the machine

has been installed only to improve the quality of yarn and therefore

it cannot be treated as dust collector system. Accordingly he

confirmed the action of the Ld.AO.

After examining the issue, we find merit in the findings of the

Revenue. Higher rate of depreciation is allowable to Plant and

Machinery – dust collector system as per the rate of depreciation

35 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 prescribed under New Appendix Rule-Part A-III-Machinery and

Plant – dust collector system - 3(viii)(c). In the case of the

assessee, the machine is used to improve the quality of yarn in the

manufacturing process. There it cannot be treated as dust

collector system. Hence the rate of depreciation allowed by the

Revenue is appropriate. Therefore, we do not find it necessary to

interfere with the orders of the Revenue in this issue.

2010-11:

A) Ground No. 6 (i) : Refund of sales tax amounting to.

Rs.6,19,69,482/- held as capital receipt :-

On this identical issue in the Revenue’s appeal in ITA

No.2143 of 2016 for the assessment year 2009-10, we have

remitted back the matter to the file of Ld.CIT(A) in order to decide

the matter afresh in the light of the decision of the Hon’ble Apex

Court and Hon’ble AP High Court cited supra. Accordingly, for the

relevant assessment year also the same decision holds good. It is

ordered accordingly.

36 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 B) Ground No. 6 (ii):

Claim of 100% depreciation on the following items as against

15% / 7.5% allowed by the Ld.AO:-

The Ld.CIT(A) has allowed the claim of 100% depreciation

based on the certificate issued by the chartered engineer. In this

situation, we do not find it necessary to interfere in the finding of

the Ld.CIT(A) which is based on the opinion of technical expert.

Therefore the issues raised by the Revenue are held to be devoid

of merit. Accordingly, the ground is disposed off. Further with

respect to Biomass Gassifier, the Ld.CIT(A) has confirmed the

order of the Ld.AO. Therefore the Revenue has no reason for any

grievance with respect to the same. Accordingly the issue with

respect to Biomass Gassifier raised in the ground does not have

any merit and accordingly disposed off.

of 2016 for the assessment years 2009-10, 2010-11 & 2011-12 are

dismissed and Revenue’s appeal in 2143, 2144, 2145 of 2016 for

37 I.T.A. Nos. 1875 to 1877/Mds/2016 & I.T.A Nos.2143 to 2145/Mds/2016 the assessment years 2009-10,2010-11 & 2011-12 are partly allowed for statistical purpose as indicated herein above.

Order pronounced on 14th July, 2017 at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन) (ए. मोहन अलंकामणी) (N.R.S. Ganesan) (A. Mohan Alankamony) लेखा सद�य/Accountant Member �याियक सद�य/Judicial Member चे�ई/Chennai, �दनांक/Dated, the 14th July, 2017. JR. आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.