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Sayaji Industries Ltd. P.O. Versus Income Tax Officer, Ward- 7 (2) , Ahmedabad

Revisionary order passed by ld. CIT u/s. 263 - claim of additional depreciation - Held that:- There has been non application of mind on the issue of additional depreciation by the A.O and therefore ld. CIT has rightly invoked the revisionary power u/s. 263 of the Act. As far as the submissions of Assessee that it is eligible for claiming additional depreciation in view of the various decisions cited by ld. A.R. is concerned, we are of the view that ld. CIT has directed the A.O to examine the iss .....

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AHD/2015 - Dated:- 30-10-2015 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER For The Appellant : Shri Sanjay R. Shah, AR For The Respondent : Shri R.I. Patel, CIT/ D.R. ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. This appeal filed by the Assessee is against an order of ld. CIT dated 25.03.2015 for A.Y. 2010-11 passed u/s.263 of the Income-tax Act, 1961. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a company st .....

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itional depreciation of ₹ 38,86,967/- in respect of Bio-gas power generating engine plant. He was of the view that additional depreciation was admissible only to Assessee s engaged in the production or manufacture of articles or things and since generation of power does not result into production or manufacture of article or thing Assessee was not eligible to claim additional depreciation. He was therefore of the view that A.O had failed to examine the issue with regard to the excess claim .....

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rits submitted that the Assessee has rightly been allowed additional depreciation. The submissions of the Assessee were not found acceptable to the ld. CIT. He was of the view that since A.O has failed to examine the issue on the aspect of additional depreciation on Bio-gas generation engine the order of the A.O dated 4.02.2013 passed u/s. 143(3) to be erroneous and prejudicial to the interest of Revenue and accordingly set it aside and directed the A.O to examine the issue. Aggrieved by the afo .....

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the order and directing the AO to reframe the assessment. It is submitted it be so held now. 1.2 The CIT erred in holding that the AO has failed to enquire & examine the claim for additional depreciation on Bio-gas power Generating Engine when in fact the details of additions to fixed assets & depreciation were filed in regular proceedings. It is submitted it be so held now. 1.3 The CIT failed to appreciate that the view taken by the AO was in consonance with the provisions of the Act a .....

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be so held now. 2.1 The CIT erred in not appreciating that the fact since appellant is engaged in manufacturing of starch it is entitled to additional depreciation irrespective of whether the Biogas power generating engine is engaged in manufacturing of article or thing. It is submitted it be so held now. 2.2 The CIT erred in not following decision of Madras High in case of CIT v. VTM Ltd. 319 ITR 336 which is now affirmed by Supreme Court. 2.3 The CIT erred in holding that generation of power d .....

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conditions specified u/s. 263 of the Act were not satisfied and therefore the proceedings u/s. 263 lacks jurisdiction and are bad in law. He further submitted that ld. CIT can revise an order passed by the A.O only on the satisfaction of twin conditions namely (i) the order is erroneous and (ii) it is prejudicial to the interest of Revenue. He further submitted that the error envisaged to Section 263 is not one which depends on possibility or guesswork but it should have an actual error either .....

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isfied the claim of the assessee was allowed. He further submitted that the only requirement for claiming deduction of additional depreciation u/s. 32(1)(iia) is the setting up of new machinery or plant that should be acquired or installed by an Assessee who is already engaged in the business of manufacture or production of any article or thing which was satisfied in the case of Assessee and was therefore eligible for claim of additional depreciation and for this proposition he relied on the dec .....

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in the case of Gabriel India Ltd. (1993) 203 ITR 108 (Bom) and various other decisions placed in the paper book. He therefore submitted that the order passed by CIT be quashed both on legally and on merits. The ld. D.R. on the other hand submitted that during the course of assessment proceedings a specific query on the issue of claim of depreciation was raised by the A.O vide notice u/s. 142(1) dated 27.07.2012 but there was no reply of the Assessee. He pointed to page 29 & 30 of the paper .....

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he issue was not examined by A.O. On the issue of merits of allowing additional depreciation u/s. 32(1)(iia), he submitted that the amendment made by Finance Bill, 2012 was applicable for assessment year 2013-14 and subsequent years and therefore not applicable for the year under consideration. He further submitted by setting aside the order of A.O, no prejudice is caused to the Assessee as the Assessee s claim, if is legally allowable, will be allowed by the A.O. He also placed reliance on the .....

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rd the rival submissions and perused the material on record. The issue in the present case is about the invoking of provisions of Section 263 by ld. CIT. 7. S. 263(1) of the Act, the powers under which ld. CIT has assumed power for revision, reads as under: 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 ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giv .....

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e circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous prejudice has been caused to the interests of the Revenue. 9. Interpretation of Section 263 has been subject matter of consideration in various decisions including the decision in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 where the Hon ble Apex Court while interpreting Se .....

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ication of mind. 10. We further find that the full Bench of Hon ble Gauhati High Court in the case of CIT vs. Jawahar Bhattacharjee (2012) 341 ITR 434 (Gau) (FB) has held that not holding such inquiry as is normal and not applying mind to relevant material would certainly be erroneous assessment warranting exercise of revisional jurisdiction and that an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous non application of mi .....

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tails of addition made to fixed assets and other details and justification of claim of deduction u/s. 32(1)(iia). The exact details called for by the A.O is reproduced under for ready reference. 10.Complete details of additions made to fixed assets, including work in progress during the financial year 2009-10, relevant to assessment year 2010-11, along with the copies of bills/vouchers exceeding ₹ 10 lakhs for such additions. 11.Complete details of all the deletions made to fixed assets, t .....

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