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The DCIT, Circle-1 (1) , Baroda Versus Gujarat Alkalies & Chemicals Ltd.

2015 (11) TMI 730 - ITAT AHMEDABAD

Depreciation on Chlorine toners - whether @ 60% instead of 15% applicable to plant and machinery of Caustic Chlorine Plant? - Held that:- Admittedly, the toners are being used for storage and transportation of chlorine gas generated in the plant of the assessee. Certificate of the experts also indicated that the same was a gas cylinder. Reference is also made to the Gas Cylinders Rules where the term Gas Cylinder" has been defined as closed metal container having volume exceeding 500 millilitre .....

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uters installed in the factory premises - ITAT deleted the disallowance - Held that:- t there cannot be universal preposition of law that computers are used only in offices and not for manufacturing activities. The insistence of the Assessing Officer that the same should therefore be treated as office appliance cannot be countenanced. Perhaps if it was shown that the computers formed part of the integrated manufacturing process, his stand that the same would form part of the plant and machinery .....

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art of the machinery and plant eligible for additional depreciation u/s 32(1) (iia) of the Act, then allowable depreciation on computers would be 15% instead of 60% as claimed by the assessee? - Held that:- In the present case, it is noted that the assessee is engaged in the business of producing chemicals, such as, Caustic Soda, and Caustic Potash and installed a new machinery i.e. Wind Electric Generator. Therefore, in the light of judgment of the Hon'ble Madras High Court in case of CIT vs. T .....

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wal, CIT-DR For the Respondent : Shri Sunil H Talati, AR ORDER Per Kul Bharat, Judicial Member This appeal filed by the Revenue is directed against the order of CIT(A)- I, Baroda, dated 30.08.2012 pertaining to assessment years 2008-09. 2. Briefly stated facts are that the case of the assessee was reopened and assessment u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961, hereinafter referred to as 'the Act' was framed vide order dated 13.12.2011. While framing assessment Assessing Office .....

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submissions deleted the disallowance of depreciation on wind electric generator of ₹ 12,17,06,979/-, depreciation on computers of ₹ 21,17,661/- and depreciation on tonners which was plant and machinery of Caustic Chlorine Plant. At the outset, ld. Counsel for the assessee submitted that these issues are covered in favour of assessee by the decision of Co-ordinate Bench and confirmed by the Hon'ble Jurisdictional High Court in Tax appeal No.942 of 2013. On the contrary, ld. CIT D .....

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5% applicable to plant and machinery of Caustic Chlorine Plant?" B(i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was correct in deleting the disallowance of additional depreciation of ₹ 32,29,051/- on computers installed in the factory premises, without appreciating that the computers are office appliances only whether installed in factory or office? B(ii) Whether on the facts and in the circumstances of the case and in law, the Hon' .....

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depreciation on wind electric generator without appreciating that it is not covered under clause (ii) of section 32 of the Income-tax Act. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred deleting the disallowance of ₹ 21,17,661/- on computers installed in t[he factory premises, without appreciating that the computers are office appliances only whether installed in factory or office and liable for depreciation as applicable to plant and machinery. .....

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mstances of the case and in law, the Tribunal was correct in law in considering the 'toners' as 'gas cylinders' and accordingly directing the Assessing Officer to allow depreciation @ 60% in Chlorine toners instead of 15% applicable to plant and machinery of Caustic Chlorine Plant, has decided this question in para 6 to 9 held as under: "6. Having heard learned counsel for the parties and having perused the materials on record, we see no reason to interfere. Admittedly, the .....

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ch an issue was considered by two High Courts of the country and held in favour of the assessee. Reference in this regard may be made to the decision of the Delhi High Court in the case of Commissioner of Income-Tax vs. Goyal MG Gases Ltd. reported in [2008] 296 ITR 72 (Delhi), where it was observed that "if we interpret the expression "gas cylinder" to mean "cooking gas cylinder", we will be really adding words to the statute which is not permissible.". Relying on .....

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ed upon. In the case before the Delhi High Court, the contention of the assessee therein was that the containers/tankers were nothing but big cylinders as they had all the attributes of a cylinder, which was rejected by the Revenue on the ground that since the so-called cylinders were merely containers and were mounted on trucks, the assessee therein was entitled to depreciation at the rate of 25 per cent as eligible to "plant and machinery" , While deciding the issue whether the item .....

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to mean "cooking gas cylinder", would be really adding words to the statute which is not permissible. Accordingly, the Division Bench of the Delhi High Court held that gas cylinders are entitled to depreciation at 100 per cent."" 8. Learned counsel for the assessee also stated that till the stage of Assessment Year 2004-05 such claim of the assessee for higher depreciation was even accepted by the Revenue. 9. Under the circumstances, we do not find that the CIT(A) and the Tri .....

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reciation of ₹ 32,29,051/- on computers installed in the factory premises, without appreciating that the computers are office appliances only whether installed in factory or office, has decided this question in para 10 to 11 as under: "10. Coming to the second question, facts are that during the previous year relevant' to the Assessment Year 2007-08 the assessee installed certain computers in its factory premises and claimed depreciation available to computers. The Assessing Offic .....

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ies in our opinion, the Ld CIT(A) has correctly analyzed the facts and decided the issue in the light of applicable law. It cannot be said as a universal proposition of law that computers are always used only in offices and not for manufacturing activities. The finding of fact recorded by the Ld.CIT (A) has not been rebutted before us. We are in agreement with the view taken by the Ld.CIT(A) in this regard. His order in this behalf therefore confirmed. Ground NO. 2 taken by the Department is dis .....

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d form part of the plant and machinery may have some basis. In the present case, no such material was available on record. It is not as if that in factory premises, computers cannot be installed for direct use in manufacturing activity; thereby forming part of machinery used in such activity. There may be number of ways in which installation of a computer may enhance and improve the efficiency. There is nothing on record to suggest that the computers were part of the plant and machinery. Therefo .....

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Hon'ble Madras High Court rendered in case of Commissioner of Income-tax vs. VTM Ltd. [2010] 187 TAXMAN 319 (MAD.), CIT vs. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad) and CIT vs. Texmo Precision Castings [2010] 321 ITR 481 (Mad). We find that the ld. CIT(A) has decided the issue by observing as under: "3.2 I have considered the matter. Section 32(1)(iia) reads as under:- "32(1). In respect of depreciation of (i) buildings, machinery, plant or furniture, being tangible assets; (ii) .....

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of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)" Additional depreciation @ 20% of actual cost of new machinery installed after 31.3.2005 by an assessee engaged in the business of manufacture or production of any article or thing is therefore available under clause (ii) of section 32(1). Appellant company is engaged in the business of producing chemicals such as Caustic Soda/Caustic Potash and had installed new machinery, i.e. wind electric gene .....

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ectric generator under clause (ii) of section 32(1) and not clause (i) of section 32(1) by exercising option in this regard under Rule 5(1A) of IT. Rules. Denial of additional depreciation by the A.O. for this reason is, therefore not tenable. Assessing Officer's other reason for denying additional depreciation on wind electric generator was that additional depreciation was admissible to assessee engaged in production or manufacture of article or thing, whereas generation and distribution of .....

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nt was manufacturing / producing chemicals and had installed new machinery, i.e. wind electric generator, denial of additional depreciation due to power generated by wind electric generator not resulting into 'production or manufacture' is not tenable. Additional depreciation u/s.32(1)(iia) on wind electric generator is directed to be allowed and disallowance of ₹ 12,17,06,967 is cancelled." Hon'ble Madras High Court in case of CIT vs. Texmo Precision Castings has confirme .....

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for captive consumption and reduced the electricity charges of the assessee. It was further noted by the Tribunal that when the assessee was already having the windmills for generation of power and the installation of two new windmills has increased the capacity or generation of power by more than 50 per cent, then the view taken by the authorities is that the increase of the capacity should have been in the business of investment castings is not correct on the premise that when the assessee wa .....

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ote that the Assessing Officer has disallowed the claim of the assessee on the ground that the assessee is basically generating the electricity by wind mills for its own consumption and it is not the business of the assessee. Therefore, the assesses is not entitled for additional depreciation on wind mills, under section 32(1)(iia). On appeal, the Commissioner of Income-tax (Appeals) has allowed the claim of the assessee on the ground that it is not essential that the assessee is in the business .....

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s the generation and generation and distribution of power unit on same footings, then we find no merit in the appeal of the Revenue on this issue. Accordingly, we decide this issue against the Revenue. The order of the Commissioner of Income-tax (Appeals) is upheld on this issue." It is also brought to our notice that the said decision of Hi Tech Arm Limited was taken on appeal by the Revenue to this court and this court by order September 1, 2009, in T. C. Appeals Nos. 670 and 671 of 2009 .....

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e that the assessee is a company engaged in the business of manufacture of oil seeds, moulded rubber parts, reed value assemblies apart from generation of power. After the installation of the additional wind mills, both prior to as well as after the installation of the additional wind mills, the assessee was using wind energy for generating power for its captive consumption apart from selling the surplus power generated to the Tamil Nadu Electricity Board. As far as application of section 32(1) .....

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