TMI Blog2017 (5) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess is required to be granted 100% depreciation - All the authorities have seriously committed the error. - Decided in favour of assessee. - D.B. Income Tax Appeal No. 55/2006, D.B. Income Tax Appeal No. 464/2008, D.B. Income Tax Appeal No. 53/2011 - - - Dated:- 9-5-2017 - Mr. K.S. Jhaveri And Mr. Vijay Kumar Vyas JJ. For the Appellant(s) : Mr. Sunil Nath, Mr. Sandeep Taneja Mr. Archit Bohra For the Respondent(s) : Mr. R.B. Mathur Per Hon ble Jhaveri, J. 09/05/2017 1. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department as well as the assessee. 2. This Court while admitting the appeal No.55/2006 on 22.12.2010 has framed the following substantial questions of law: (i) Whether in the facts and circumstances of the case, the Hon ble ITAT was justified in not allowing the depreciation claimed by the appellant without there being any contrary evidence? (ii) Whether in the facts and circumstances of the case, the Hon ble ITAT was justified in holding that the machine installed by the appellant company is not an energy saving device? (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machine installed by the appellant company is not an energy saving device? (iii) Whether in the facts and circumstances of the case, the Hon ble ITAT was justified in not considering the certificate issued by the manufacturing company stating that the machine installed by the appellant is a thermally efficient in energy saving? (iv) Whether in the facts and circumstances of the case, the Hon ble ITAT was justified in not considering the machine installed by the appellant having automatic switch off facility on the completion of the job is not an energy saving device? (v) Whether in the facts and circumstances of the case, the Hon ble ITAT was justified in not treating the boiler as a part of the composite unit particularly when without boiler the machine cannot be put to operation. 3. The brief facts of the case are that the return declaring NIL taxable income and unabsorbed depreciation of the relevant year was filed which was processed under section 143(1)(a) of the Income Tax Act. The assessee subsequently filed a revised return declaring the unabsorbed depreciation of the year. It has been stated that interest due to financial institutions in earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustry. Therefore, depreciation @ 25% is allowable. Since the assets were put to use for less than 6 months, 50% of the normal rate would be allowed. In response to the queries raised the assessee furnished its detailed reply vide its letter dated 6/1/99 as under:- We have submitted the details, list of plant machinery along with invoices which is entitled for 100% depreciation. The list of machinery includes the main item i.e. 1219 MM 48 Faceo Roller width 12 Warp Indigo Dye Range 72 Face 1828 MM Roller width Integrated Range. Less Pare Brusher and Singer. It is a imported latest dyeing machine, imported from USA and the operation of this machine includes automatic monitoring of its use and automatic switch off once job is completed. This machine is energy saving device embed unit. In old type of dyeing machine these facilities were not available and the consumption of energy was more as compared to the production. Since it is a energy saving device, we have correctly claimed 100% depreciation on this item of machinery as per rule 3(iii) of the Income Tax Rules. Similarly, the second item machinery is also imported latest dyeing machine having above advantages. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich equipments needed for energy conservation were included. Thus, the total plant including boiler will constitute the plant machinery (Energy Saving Devices) on which 100 % depreciation is allowable. Machinery for the purpose of obtaining depreciation allowance need not be a self-contained unit; it may be a part of a bigger machine, or it may even be one that is used in conjunction with one or more machines before it can commence to operate. Nor would machinery cease to be machinery merely because it has been installed as part of a manufacturing or industrial plant. It would continue to be machinery even after it has been made an integral part of a plant. This position has now been established by the Supreme court in CIT V M/r Mohammad Ali. Thus, an electric supply company is entitled to depreciation and development rebate on the cost of mains, service lines and switch gears installed by it. So also, in the context of a rubber factory, the water supply system and miscellaneous equipment have been held to be part of machinery normally used in rubber factories. 5.3 I have considered the rival submissions. The details of the machinery on which 100% depreciation had been cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te one kt of water. 5.4 The depreciation has been ignored by all the authorities and the basic object of granting 100% depreciation has been frustrated. The Tribunal in para 10 of its order has observed as under: 10. By merely installing the auto-cut machine, it cannot be treated as Energy Saving Devices. In the absence of any legal provision or the case law, we are unable to agree with the submission made by the Ld. A/R. Hence, without repeating, we uphold the order of the lower authorities, who have rightly allowed the depreciation @ 25%. Hence, we find no merit in this ground. This ground is dismissed. 5.5 Counsel for the appellant has relied upon the decision of Orissa High Court in the case of M/s. Industrial Development Corporation of Orissa Ltd. vs. Commissioner of Income Tax Ors. (2004) 268 ITR 130 wherein it has been observed as under: 15. It will be clear from the aforesaid communication that as per the said expert opinion of the Chief Electrical Inspector (T D), at least two of the items, namely, 63 MVAR capacitor bank and 100 MVAR capacitor bank at different sub-stations come under 'energy saving devices'. In the communication date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation and the Commissioner (Appeals) and Tribunal have, both, committed a patent error in setting aside the order of the assessing officer, declining 100 per ent depreciation on the abovesaid items. Learned Counsel for the department contends that the items for which now depreciation is being claimed at 100 per cent, are not the integral part of the boiler in order to become eligible for 100 per cent depreciation. Learned Counsel for the respondentassessee, per contra, has pointedout that the coal container, coal conveyer, bucket elevator and dustcollecting system can have no independent existence and it is for the purposes of modernisation and automation that these items were pur-chased and attached to the boiler and since they become an integral and inseparable part of the boiler, without having any utility otherwise, they are also entitled to depreciation at the rate of 100 per cent. We have heard the learned Counsel for the parties and perused there cord. As per the facts of the case, as revealed in ITA No. 132/2003,the assessee is a Public Limited Company which filed return for the assessment year 1993-94 on 30-12-1993 indicating taxable income of ₹ 2,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gral components of the boiler, strengthens the view that they also become eligible to 100 per cent depreciation as was allowed in the case of Cochin Refineries Ltd. (supra). We are, therefore, of the view that the questions formulated in this case should be answered in favour of the assessee and against the revenue. We accordingly hold that the Tribunal did not err in extending benefit to the assessee towards depreciation at the rate of 100 per cent on the automatic coal system, treating it to be a part and parcel of the boiler, and that on these items the assessee was not required to restrict its claim to 25 per cent. 5.7 He has also contended that the said judgment of Madhya Pradesh High Court was taken to the Supreme Court vide its order dated 11.02.2008 dismissed the SLP. 6. Mr. Mathur has taken us to schedule 3 (iii) E which reads as under: (3) (i) Wooden parts used in artificial silk manufacturing machinery (ii) Cinematograph files- bulbs of studio lights (iii) Energy saving devices, being--- A. Specialised boilers and furnaces: B .. C .. D E. Electrical equipments: (a) Shunt capacitors and synchronous condenser systems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (thermal ] efficient higher than 75 per cent ] in case of coal fired and 80 per ] cent in case of oil/gas fired ] boilers ] 13. Let us see what can be used in the above extracts to substitute the word being . For example, in the sentence, excise duty being a levy on the manufacture or production of the goods can be read to mean, excise duty which is a levy on the manufacture or production of the goods . Therefore, how we may understand the word being used in the depreciation table is, it means, Energy saving devices which are the devices mentioned therein. Further, in the same table, the subject category in 8(ix) has the caption specialised boilers and furnaces and the word drier is not used. In the same table, the words ventilator used with anesthesia apparatus and the words ventilators other than those used with anesthesia are used with reference to life saving... being... . If we have to treat being as like or including, then it was not necessary to specifically mention ventilators used with anesthesia apparatus and ventilators other than those used with anesthesia . So, it does appear that the depreciation table enumerates and exhausts th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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