TMI Blog2011 (12) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... V, AC, Washing Machine etc. During the year under consideration, the assessee filed its return of income on 31/03/2006 claiming depreciation on plastic moulds manufactured by him in his factory @ 40% and the same was allowed by the AO. The CIT found that the assessee is in the business of manufacturing TV, AC, Washing Machine, etc. and, therefore, he was of the view that the depreciation claim of the assessee @ 40% cannot be considered on the ground that the assessee is not in the business of rubber and plastics goods manufactured. The rate of 40% can be allowed only for moulds used in the plastic/rubber industry, the AO ought to have been allowed depreciation @ 25% on the moulds, which were used in its business of manufacturing TV, AC, Washing Machine, etc. and the excess depreciation claimed by the assessee should have been disallowed. In view of the above observations, the CIT issued show cause u/s 263 to the assessee, against which the assessee filed its submissions dated 23/3/2010, which were reproduced by the CIT in his order at page 2 and the same were extracted below: The assessee has claimed that it is also manufacturing plastic and rubber components which are used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the entry, it cannot be made good by any recourse to breadth of construction. There is no question of any broad construction of appendix II to the Income-tax Rules, 1962. On the basis of above ruling, the CIT had held that the assessee is not eligible for depreciation at the rate of 40% which is eligible only for moulds used in the plastic/rubber industry and the eligibility will only be at the rate of 25%. The CIT, therefore, held that the order of the AO is erroneous and prejudicial to the interests of the revenue for the reason that the AO had allowed depreciation @ 40% on plastic moulds in stead of 25%. With the above findings, the CIT set aside the order of the AO and restored the matter to the file of the AO with a direction to examine the issue in detail and decide the same afresh after due verification and after providing reasonable opportunity of hearing to the assessee. Aggrieved by the order of the CIT, the assessee is in appeal before us. 5. Before us, the learned counsel for the assessee submitted that depreciation @ 40% claimed by the assessee on the moulds for making rubber and plastic components used in the electronic items manufactured by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has relied upon the order of CIT and also relied upon the following case laws:- 1. Falcon Wires (P.) Ltd. (supra) 2. Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) 3. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 87 (SC) 4. Ms. Nehal N. Gandhi v. ITO [IT Appeal No. 2795 (Mum.) of 2010 for AY 2005-06, order dt. 18th May, 2011]. The learned DR submitted that the assessee is not a manufacturer of rubber and plastic goods therefore as per Entry I, the assessee is not eligible for higher depreciation @ 40%. He, therefore, submitted that the CIT has rightly invoked section 263 and set aside the order of the AO. 7. We have considered the rival submissions, perused the record, and gone through the orders of the authorities below as well as the decisions cited. The only issued involved in this appeal is whether the learned CIT is right in invoking the provisions of section 263 of the Act, or not ? The provisions section 263 read as under:- 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 7.1 From plain reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power. It can be exercised only on fulfillment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The power of suo motu revision under sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the view taken by the AO is a possible view or not. In this context, the learned counsel for the assessee has placed strong reliance on the decision of Hon'ble Karnataka High Court in the case of Amco Batteries Ltd. (supra), which has been followed by the Tribunal in the case of BPL Refrigeration Ltd. (supra), The Hon'ble Karnataka High Court has held as under:- The dyes and moulds used in the manufacture of plastic covers for batteries are entitled to higher depreciation though the assessee has not been selling the covers as such to anybody. 7.4 Following the judgment of the said Karnataka High Court, the Tribunal in the case of BPL Refrigeration Ltd. (supra) has held as under:- In the present case also though some parts are used in manufacture of washing machine, vacuum cleaners, etc. yet these parts are manufactured by the assessee itself. These parts are admittedly rubber and plastic goods. Thus the moulds used in manufacture of such rubber and plastic goods are to be held as used in rubber and plastic goods factories. There need not be a separate and distinguishable factory for production of such items and the moulds need not be used in such sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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