TMI Blog2011 (5) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... bove extent. 2. Adverting first to ground no.1 in the appeal, facts, in brief, as per relevant orders are that return declaring income of Rs.7,85,249/- filed on 08-10-2007 by the assessee, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 [hereinafter referred to as the Act ] on 27-09-2008. The assessee is a proprietor of two concerns, namely, (i) M/s Ekta Exports (Trading A/c.) engaged in the business of trading of art silk cloth and (ii) M/s Ekta Exports (Embroidery A/c.) engaged in embroidery on job work basis .During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee claimed depreciation(including additional depreciation) of Rs.15,96,196/- @ 17.5% on plant and machinery of the value of Rs.91,51,492/-installed in the second half of the financial year under consideration. But in the depreciation chart attached with the computation of income, the assessee had shown the value of said machinery at Rs.1,00,63,604/-. To a query by the AO, the assessee submitted a copy of ledger account along with bills in respect of machinery , revealing the cost of machinery installed during the year - R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s J.K.K. Textiles Processing Mills 2000 249 ITR 487 (Mad) (v) CIT V/s Mysore Minerals Ltd. 2001 250 ITR 725 (Kar) (vi) CIT V/s Daljeet Tyres 2006 287 ITR 344 (All) (vii) Singh Engg. Works Pvt. Ltd V/s CIT 1979 119 ITR 891 (all) (viii) Orient Paper Industries Ltd. V/s State of MP and Ors. Vol (7) 20 V.Re. (ix) CIT V/s Sovrin Knit Works 1993 199 ITR 679 (P H) (x) Emptee Poly-Yarn Pvt. Ltd V/s CIT Mumbai in Civil Appeal No, 787 to 792 of 2010 (xi) Oracle Software India Pvt. Ltd V/s CIT reported in 2010 (1) Scale 425. Decision 6. I have carefully considered both the positions. At the outset, it is necessary to refer to the provisions under which additional depreciation was claimed by the Assessee, which is section 32(1)(iia): (iia) 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, a further sum equal to twenty percent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii). It is evident that some of the new machineries or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Act, resulting in the embroidered product being liable to excise duty. 6.3 The AR has placed reliance on the decision of the Hon ble Supreme in the case of S.S.M.Bros. (P) Ltd. Ors. V/s CIT (2000) 243 ITR 418. In this case, the Hon ble Supreme Court has dealt with the application of the provisions of section 33(1)(b)(B)(i) and has held that, when read together with item 32 of Schedule-V, the machinery or plant installed for the production of textiles including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the Assessee is entitled to deduction on account of development rebate under the said section. The Court has further observed that, if the machinery or plant is required to be utilized in the production of such textiles at whatever stage, the Assessee is entitled to the benefit. In this case, the Assessee had been producing embroidered cloth which started from scratch i.e., with cotton, The Court observed that it would make no difference if the Assessee bought the cloth and then processed it using the machinery for embroidering, and in some cases after dying. What was important was that, the Assessee utilized the machinery in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a specific use. The embroidery for the top of a woman's wear would be clearly different from that of the bottom, the embroidery on the kameez would have to be a specific design which is suitable and matches a kameez. The embroidery on the salwar or the bottom would be different. The Assessee cut the pieces, got them embroidered, packed them into boxes and exported them. This meant that the end product was completely different from the bale of cloth or finished fabric prior to being embroidered. In other words, the market recognition of the embroidered finished product necessarily had to be different from the finished fabric prior to being embroidered. To this extent, such activity of embroidery could also be treated as manufacture. 6.6 In view of the discussion above, it is held that the Assessee was fully entitled to the additional depreciation of 10% (machineries used for less than 180 days) under the provisions of section 32(1)(iia) of the IT Act. The AO is directed to allow the claim of additional depreciation i.e. the sum of Rs.9,12,112/- under the provisions of section 32(1)(iia) of the IT Act. 4. The Revenue is now in appeal before us against the aforesaid fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products which emerge in the course of manufacture . Here we may refer to a decision of the Hon ble Apex Court relied upon by the assessee before the ld. CIT(A) in the case of S.S.M.Bros. (P) Ltd. Ors. V/s CIT (2000) 243 ITR 418. In this decision, the issue was as to whether the assessee purchasing cloth and doing embroidery work thereon with the aid of imported machines, would be entitled to development rebate at an enhanced rate under the provisions of section 33(1)(b)(B)(i) of the Act. Hon ble Apex Court held that if the machinery or plant is required to be utilised in the production of such textiles, at whatever stage, the assessee is entitled to the benefit of this development rebate. It is not disputed, fairly, that if the assessee had been producing the embroidered cloth starting from scratch, that is, by starting with cotton, this machinery would have been entitled to be considered for the purposes of such development rebate. It did not make any difference that in the particular case, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1 On verification of the books of account and vouchers, the AO found that some of the payments towards the aforesaid expenditure were made in cash and complete bills / vouchers were not available with the assessee while some of the vouchers did not contain proper signatures of the recipients or complete details of payments. Since the assessee did not respond to a show cause notice, proposing to disallow an amount of Rs.34,054/-,being 20% of Rs.1,70,271/-, the AO while relying on decisions in CIT V/s. Calcutta Agency Ltd. [1951] 19 ITR 191 (SC) Lakashimaratan Cotton Mills Co. Ltd. V/s. CIT [1969] 73 ITR 634 SC) Dalmia Jain Co. Ltd, V/s, CIT [1958] 33 ITR 294 (Pat)Dey's Medical Stores Mft. Pvt. Ltd, V/s. CIT [1986] 162 ITR 630 (Cal) Liberty Cinema V/s. CIT [1964] 52 ITR 153 (Cal) Hotz Trust V/s. CIT [1952] 21 ITR 149 (Punj), L.H. Sugar Factory Oil Mills Pvt. Ltd, V/s. CIT [1980] 125 ITR 293 (SC),CIT V/s, Chandravilas Hotel [1987] 164 ITR 102 (Guj) and State of Madras V/s. GJ, Coelho [1964] 53 ITR, 186 (SC) concluded that in absence of any proof, the element of personal and non business expenditure incurred by the assessee could not be ruled out. Consequently, am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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