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2015 (12) TMI 377 - ITAT AMRITSAR

2015 (12) TMI 377 - ITAT AMRITSAR - TMI - Rectification of mistake - CIT(A) quashed the order passed by the AO u/s 154 by holding that disallowance of depreciation in this case was not a prima facie mistake - Held that:- CIT(A) quashing the rectification order passed by the AO, has placed reliance on M/s. Hari Fashion vs. ACIT [2011 (5) TMI 931 - ITAT AHMEDABAD] wherein Tribunal observed that because of the above processes, which have to be carried out in a very careful manner, the embroidered f .....

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Court ), development rebate claimed u/s 33(1)(b)(B)(i) of the Act was allowed by holding that the plant and machinery were used in the production of processed textiles (embroidery) and, therefore, machinery was entitled to the development rebate claimed; that the decision in “S.S.M Brothers (P) Ltd. & others” (supra), was directly applicable to the facts of this case, because section 32(1)(iia), like section 33(1)(b)(B)(i), also provides for additional depreciation in respect of new machinery an .....

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article or thing, whereas section 33(1)(b)(B)(i) pertains to development rebate on plant and machinery which is used in the construction, manufacture or production of any article or thing, as listed in the Fifth Schedule; that even from the angle of Excise Duty under the Central Excise Act, embroidery is subject to levy of duty and is considered as manufacture under Tariff item 5810.

CIT(A) was correct in quashing the rectification order passed by the Assessing Officer. - Decided aga .....

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this case the assessment was completed u/s 143(3) of the Income Tax Act, 1961 ( In short, the Act ) vide order dated 16.11.2009. The assessee is engaged in the business of embroidery work of cloth. During F.Y. 2006-07, relevant to A.Y. 2007-08, the assessee firm purchased and installed new machinery in the month of August, 2006 and started the business of embroidery work of cloth. During the year under consideration, the assessee firm claimed additional depreciation of ₹ 18,25,184/- u/s 32 .....

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istake. 3. The AO rejected the assessee s explanation by holding as follows: As per provision of section 32(1)(iia) the additional depreciation is admissible in respect of the machinery or plant ( other than ships and aircraft) which is acquired and installed after the 31st day of March, 2005 by an assessee engaged in the business of manufacture or production of any article or thing a further sum equal to twenty percent of the actual cost of such Machinery or Plant shall be allowed as deduction .....

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the object or article or thing into a new and distinct object or article or thing having a different name, character and user, or b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. It is clear from the above that the assessee has not using the Machinery for the purposes which may entitle the assessee for additional depreciation. The case Laws quoted by the assessee do not help him as the facts of the cases repo .....

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e on account of disallowance of additional depreciation. 4. The Ld. CIT(A) quashed the AO s order. 5. Aggrieved, the Department is in appeal. 6. The Ld. DR has contended that the ld. CIT(A) went wrong in quashing the order passed by the AO u/s 154 of the Act without taking into consideration the AO s observations that as per provisions of section 32(1)(iia) of the Act, additional depreciation is admissible in respect of machinery or plant which is acquired and installed after 31.03.2005 by an as .....

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e means a change in a non-living physical object or article or thing, resulting in transformation of the object or article or thing into a new distinct object or article or thing having a different name, character and user, or bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure; that herein, the assessee was not using the machinery for the purposes which may entitle the assessee for additional depreciation; and that .....

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o whether the ld. CIT(A) has rightly quashed the order passed by the AO u/s 154 of the Act. 9. The Ld. CIT(A), it is seen, while quashing the rectification order passed by the AO, has placed reliance on the Ahmedabad Bench decision of the Tribunal in the case of M/s. Hari Fashion vs. ACIT , passed on 27.05.2011, in ITA No.3105/AHD/2010. In this case, the assessee, like the present assessee, was doing embroidery work on job work basis. The embroidery activity, according to the Tribunal, also resu .....

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hich have to be carried out in a very careful manner, the embroidered fabric acquires entirely different looks and has different commercial value and that thus, because of the said operations, an entirely new commodity emerges. It was held that because of these operations, the look of the fabric changed substantially and the new article is commercially known differently from the original fabric; that even otherwise, the word produce has a wider connotation than the work manufacture ; that in S.S .....

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additional depreciation in respect of new machinery and plant purchased by an assessee engaged in the business of manufacture or production of article or thing; that since section 32(1)(iia) also uses the expression production of any article or thing , any product with embroidery work is an article or thing; that the provisions of section 31(1)(iia) are larger in scope than those of section 33(1)(B)(b)(i) in asmuch as section 32(1)(iia) provides for additional depreciation on plant and machinery .....

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of the Hon ble jurisdictional High Court of Punjab & Haryana in CIT vs. Sovrin Knit Works , 199 ITR 679 (P&H)(FB), which was based on the decision of the Hon ble Supreme Court in the case of Empire Industries Ltd. vs. U.O.I , 162 ITR 846 (SC), which stood endorsed by the Hon ble Supreme Court in the case of Ujagar Prints vs. U.O.I , 179 ITR 317 (SC). 11. In Empire Industries Ltd. vs. U.O.I. (supra), the Hon ble Supreme Court has held manufacture under the Central Excise Act to include t .....

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