TMI Blog2013 (8) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... windmill operation as per the decision of Madras High Court in the case of CIT Vs V T M Limited [319 ITR 336] - Decided in favor of assessee - ITA No. 63/PNJ/2013 - - - Dated:- 8-8-2013 - SHRI P. K. BANSAL, HON BLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HON BLE JUDICIAL MEMBER Appellant by : Shri P. J. Pardiwalla (Adv) Respondent by : Smt Asha Desai (DR ) O R D E R PER D. T. GARASIA JM This appeal is filed against order of CIT, Panaji dt. 31/01/2013. The grounds raised in this appeal are reads as under: - 1. The order passed by the learned CIT is ultra vires, bad in law and contrary to the provisions of the ITA and facts of the case and hence ought to be quashed. 2. The learned CIT erred in invoking the provisions of section 263 of the ITA without specifically holding that the order is erroneous and prejudicial to the interest of revenue. 3. The learned CIT erred in holding that the appellant cannot be said to be engaged in the production or manufacturing of an article or thing, and hence not eligible for additional depreciation as envisaged in section 32(l)(iia) of the ITA. 4. The learned CIT erred in holding that the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 263 of the IT Act, 1961 vide this office letter in F. No.CIT-PNJ/263/2011-12 dated 8/2/2012. 3. In reply to show cause notice the assessee replied as under: - Merits of the case: - Additional depreciation claimed under section 32(1)(iia) on new plant machinery used in iron ore processing and windmill operation 4. As can be seen from the details of depreciation along with statement of addition to fixed assets during the year on which additional depreciation has been claimed, as annexed in Annexure A, the company has claimed additional depreciation in respect of new plant and machinery used in the business of iron-ore processing carried on in its mining division as well as in generation of electricity carried on in its windmill division. 5. In this connection, we invite your Honour's attention to the provisions of section 32(l)(iia) of the ITA, which deals with additional depreciation. In terms thereof, additional depreciation is allowed in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assesses engaged in the business of manufacture or produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not of 'manufacture' but of 'production of iron ore which has wider meaning as compared to the word 'manufacture'. As held by Apex Court processing activity carried out by the company falls under 'production'. 12. In this connection, reliance is also placed on the decision of Hon'ble Supreme Court in the case of CIT v. N.C. Budharaja and Co. (204 ITR 412) wherein it has been held thai the-word production is much wider than the word manufacture . 13. It is submitted that the activity carried on by the company in its mining division viz., iron-ore processing, amounts to production of an article. 14. In this regard, specific attention is also invited to the decision of the Hon'ble Supreme Court in the case of CIT v. Sesa Goo Ltd. (271 ITR 331) which has held that extraction and processing of iron ore amounts to production of article. It is pertinent to note here that the appellant in the aforesaid decision is carrying out the similar activity as is carried our by the Company. The relevant observations of the Hon'ble Supreme Court are reproduced as under: ... The word 'production'has a wider connot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation at the prescribed rate u/s 32(l)(iia) of the Income Tax Act, 1961. 20. Though not for the purpose of section 32(l)(iia), list of article or thing has been listed out in the Part A to Fourteenth Schedule for the purpose of section 80-IC(2). In the said Schedule, your Honour's attention is drawn to item No. 13(iii) which describes power generation as 'production'. Though this is under section 80-IC, this establishes the intention of legislature to consider 'power generation' as 'production'. Copy of Part A to Fourteenth Schedule as annexed in Annexure E. 21. On the basis of the above, the company submits that generation of electricity amounts to production of any article or thing and hence eligible for additional depreciation. 22. Without prejudice to the above, it is submitted that once the company is in the manufacture or production of article or thing (in the present case by virtue of carrying being iron-ore processing activity), any new machinery or plant purchased would qualify for additional depreciation, irrespective of the fact that the same is directly or indirectly used in the manufacturing or production activity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT v. Hi Tech Arai Ltd. (321ITR 477) and CIT v. Texmo Precision Castings (321ITR 481). 26. In view of the above, your Honour would appreciate that the company is eligible for claiming additional depreciation in respect of new plant and machinery used in the mining division as well as windmill division and hence has rightly been allowed by the learned Addl CIT. Revision under section 263 (A) Order passed by the learned Addl. CIT is not erroneous 27. Without prejudice, it is submitted that to invoke proceeding u/s 263, following two conditions are to be satisfied:- (a) Order is erroneous and (b) It is prejudicial to the interest of revenue. 28. Even if one condition fails, proceeding u/s 263 of the Act, 1961 cannot be invoked. 29. It is respectfully submitted that the case under reference does not satisfy both the conditions. 30. During the course of assessment proceedings, specific query was raised on the 'allowance of additional depreciation on the plant machinery used in processing activity as well as plant machinery used in windmill operation. 31. After thorough analysis of the assessee company' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew expressed by the Assessing Officer was a possible view and since the Assessing officer had taken a possible view, the Commissioner had, no jurisdiction to interfere by exercising his powers wider section 263. The appeal filed by the department against the above High Court order has been dismissed by the Hon'ble Supreme Court (295ITR 282) Patel Cotton Co. Ltd. Vs. Asstt. CIT (64ITD 273) (Mumbai) Where two views are possible in a case, mere fact that the Assessing Officer adopted one view would not render his views erroneous though it might be prejudicial to the interests of the revenue. Jhulelal Land Development Corvn. Vs. Dv. CIT (56 ITD 345) (Mumbai) Where view taken by Assessing Officer can also be a possible view, it cannot be held to be erroneous merely because Commissioner holds a, different, view Mannesmann Demae A.G. Vs. Dv. CIT. (53 ITD 533) (Delhi) Merely because of there being a possibility of contrary view, order of the Assessing Officer cannot be said to be erroneous. The Assessing Officer is a quasi-judicial authority vested with the powers of making fair assessment. If two views are possible, he wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case is outside the purview of section 263. 37. Further, in accordance with the provisions of section 263, only the orders 'which are erroneous and prejudicial to the interests of the Revenue can be revised. The expression 'erroneous' refers to an order, which has an error or is contrary to the law. Thus, if the order passed by the Assessing Officer is in accordance with the law, the order is not erroneous. 38. Similarly, the words 'prejudicial to the interest of Revenue' has not been defined in the Act. However, giving ordinary meaning for the words used in the statute, they must mean that the orders under consideration are such as are not in accordance with the law, and in consequence whereof the lawful revenue due to state has not been realised. 39. The expressions 'erroneous' and 'prejudicial to the interest of Revenue' have been recently considered by the Supreme Court in the case of Malabar Industrial Com. Ltd. (243 ITR 83). The Hon'ble Supreme Court has held as under (relevant portion from Head Notes): ..... the Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstance of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimate the income at a higher figure than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a, higher figure. This is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a. conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in questions prejudicial to the interest of the Revenue. But that by itself would not be enough to vest the Commissioner with the power of suo-moto revision because the first requirement, namely, that the order is er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmill division and in reply to show cause the assessee has replied as under: - As can be seen from the details of depreciation, as annexed, the company has claimed additional depreciation in respect of new plant and machinery used in the business of iron ore processing carried on its mining divisions as well as in generation of electricity carried on in its windmill division. In this connection, we invite your goodself s attention to the provisions of section 32(1)9iia) of the Income Tax Act ( the Act ) which deals with additional depreciation. In terms thereof, additional depreciation is allowed in the case of any new machinery or plant (other than ships and aircraft), which has been 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, subject to the satisfaction of prescribed conditions. Thus form the above your goodself will appreciate that an assessee, to be eligible for additional depreciation, should be engaged in the business of manufacture or production of any article. 5. The Ld. AR submitted that when AO has made the inquiry and allowed the additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in the business of manufacture or production of any article or thing, subject to the satisfaction of prescribed conditions. Thus form the above your goodself will appreciate that an assessee, to be eligible for additional depreciation, should be engaged in the business of manufacture or production of any article. 8. We are of the opinion that the AO has examined the claim of assessee regarding additional depreciation on machinery and windmill and allowed the claim in the year under consideration. We are of the opinion that the ITO acted in accordance with the law and makes an assessment the same cannot be branded as erroneous by CIT simply because according to him the order have been not written elaborately. This view is also supported by the decision of Bombay High Court in case of Gabriel India Limited 203 ITR 108. We are also of a view that when AO has made the inquiry and allowed the additional depreciation on machinery and windmill. An order cannot be termed as erroneous unless it is not in accordance with the law. We find that assessee is entitle to additional depreciation on machinery as per the decision of Hon ble Supreme Court in the case of CIT Vs Sesa Go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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