PR. COMMISSIONER OF INCOME TAX-6, NEW DELHI vs. NALWA STEEL & POWER LTD.

$~2 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 186/2017

PR. COMMISSIONER OF INCOME TAX-6, NEW DELHI ..... Appellant

Through : Sh. Asheesh Jain, Sr. Standing Counsel.

versus

NALWA STEEL & POWER LTD.

..... Respondent

Through : None.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI

O R D E R %

22.03.2017

The Revenue is aggrieved by an order of the Income Tax Appellate Tribunal (ITAT) which affirmed the CIT(A)’s order holding that the disallowance of `31,14,97,013/- which was claimed by the assessee as depreciation, was not justified. The assessee in its return had claimed 15% depreciation on the electrical installations used for manufacturing activity. The Assessing Officer (AO) felt that the articles for which depreciation was claimed were essentially electrical installations and were part of its furnitures and fittings as clarified in the new Appendix I to the Income Tax Rules, 1962 read together with Note 5. The further submission was that Section 43(3) which defined “plant” excluded from its ambit business or future and fittings. The CIT(A) accepted the assessee’s plea; that interpretation was affirmed by the ITAT. The ITAT noticed Page 1 of 4

that the appellant/assessee was engaged in iron and steel manufacturing and employed continuous process plant facilities for that purpose and additionally, had captive power generation unit to generate and supply electricity to the plant. This was because power was an essential and critical component for steel and input manufacturing. The ITAT, after considering various authorities upheld the findings of the CIT(A) in the following terms:

“7.1 After going through the findings of the Ld. CIT(A), as aforesaid, in our considered view, on the anvil of the decision in the case of CIT vs. Oswal Woollen Mills Ltd. (supra), the Punjab and Haryana High Court applied Berger Paints India Ltd. vs. CIT 266 ITR 99 by following the case of Bharat Earthmovers vs. CIT 245 ITR 428, CIT vs. Oswal Woollen Mills Ltd. 254 ITR 666, CIT vs. Oswal Woollen Mills Ltd. 257 ITR 737 and CIT vs. Starlight Silk Mills P. Ltd. 280 ITR 257 the Hon'ble High Court has upheld the Tribunal's decision and hence, we are of the view that the electrical installations formed an integral part of the assessee's plant, therefore, depreciation was allowable at the rate applicable to plant and machinery. We are also of the considered view that electrical installation is integral to the plant and machinery used for manufacturing steel and as the Assessing Officer has not controverted the contentions of the assessee company hence, Ld. CIT(A) has rightly directed the AO to allow depreciation on electrical installations @ 15% i.e. the rate applicable to 'plant & machinery'. We further note that Ld. CIT(A) was justified in holding that as a natural corollary, additional depreciation amounting to Rs.1,02,12,533/- is also required to be allowed as the Assessing Officer disallowed the same considering electrical installations as part of furniture and fixture, which does not need any Page 2 of 4