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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
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
No.0037/2015-16 for the assessment year 2009-10 passed
U/s.250 (6) r.w.s. 143(3) of the Act, for the assessment year 2010-11 and for the assessment year 2011-12 passed U/s.250(6) r.w.s. 263, 143(3) of the Act.
The assessee and the Revenue have raised several grounds in their respective appeals, however they are briefly stated herein
below for adjudication.
Assessee’s Appeal of 2016, Assessment 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 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.
Revenue’s Appeal of 2016, Assessment 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:-
1. Clarifier Bit 2. Dust collector 3. Waste desolver 4. Pulveriser machine 5. Dust collector system 6. Micro dust collector
Assessee’s Appeal of 2016, Assessment 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 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.
Revenue’s Appeal of 2016, Assessment year 2010-11
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:-
1. Water tank Clarifier 2. Sewage Plant 3. Chimneys pipeline for dust collector 4. Dust collector
Assessee’s Appeal of 2016, Assessment 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/-
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 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.
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.
Revenue’s Appeal of 2016, Assessment 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). 100% depreciation on the following items as against 15% / 7.5% allowed by the Ld.AO:-
1. Dust collector 2. Chimney work 3. Biomass Gasifier for heating chamber 4. Automatic voltage stabilizer
The brief facts of the case are that the assessee is a limited 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.
Assessee’s Appeal of 2016 Assessment 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 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 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 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.
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 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.
Revenue’s Appeal of 2016, Assessment 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 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). 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 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 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:-
1. Clarifier Bit :- The Ld.CIT(A) has allowed the claim of 100% depreciation by holding the aforesaid plant under solid waste recycling and resource system based on the certificate given 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.
2. Dust collector :- The Ld.CIT(A) has allowed the claim of 100% depreciation by holding the aforesaid plant as dust collector system based on the certificate given by the chartered engineer. In this situation, we do not find it
3. Waste dissolver :- The Ld.CIT(A) has allowed the claim of 100% depreciation by holding the aforesaid plant under solid waste recycling and resource system based on the certificate given 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.
4. Pulveriser machine :- The Ld.CIT(A) has allowed the claim of 100% depreciation by holding the aforesaid plant under solid waste recycling and resource system based on the certificate given 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.
5. Dust collector system :- The Ld.CIT(A) has allowed the claim of 100% depreciation by holding the aforesaid plant as dust collector system based on the certificate given 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.
6. Micro dust collector :- The Ld.CIT(A) has allowed the claim of 100% depreciation by holding the aforesaid plant as dust collector system based on the certificate given 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.
Assessee’s Appeal of 2016, Assessment year 2010-11 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 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 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 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.
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:-
1. Water tank Clarifier 2. Sewage Plant 3. Chimneys pipeline for dust collector 4. Dust collector
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.
Assessee’s Appeal of 2016, Assessment 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 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 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 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 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.
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 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 @ 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, 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 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.
Revenue’s Appeal of 2016, Assessment year 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.
Claim of 100% depreciation on the following items as against
15% / 7.5% allowed by the Ld.AO:-
Dust collector 2. Chimney work 3. Biomass Gassifier for heating chamber 4. Automatic voltage stabilizer
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.
In the result, assessee’s appeal in 1876, 1877 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 Order pronounced on 14th July, 2017 at Chennai.