2015 (12) TMI 124 - AT - Income Tax

Disallowance of additional depreciation u/s.32(1)(iia) claimed on new plant and machineries - Held that - As decided in case of S.S.M. Bros. Pvt. Ld. & Others 1999 (1) TMI 2 - SUPREME Court where the machinery or plant is installed for the purpose of the business of production of textiles, including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the assessee is entitled to the deduction of the development rebate the under. What is important is that this development rebate is available if the machinery or plant is installed for the purposes of the business of the production of textiles, including those otherwise processed. If the machinery or plant is required to be utilized in the production of such textiles, at whatever sage, the assessee is entitled to the benefit of the 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. We are of the view that it makes no difference that in the particular case, the assessee buys the cloth and then processes it, using the machinery, by embroidering it and, in some cases, by dyeing it. The assessee utilizes the machinery in the production of processed textiles. Therefore, the machinery is entitled to the development rebate under s.33(1)(b)(B)(i). The question has, therefore, to be answered in the affirmative and in favour of the assessee.

Summary

Issues:
1. Disallowance of additional depreciation claimed on new plant and machineries.
2. Validity of CIT(A) order in deleting the addition made by the Assessing Officer.
3. Observance of judicial discipline by the Assessing Officer.

Issue 1: Disallowance of Additional Depreciation:
The appeal filed by the Revenue challenged the deletion of the addition of Rs. 27,17,259 made on account of disallowance of additional depreciation under section 32(1)(iia) of the Income Tax Act claimed on new plant and machineries. The Assessing Officer disallowed the claim, stating that the assessee was engaged in job work of embroidery, which was neither a manufacturing nor a processing activity. However, the CIT(A) allowed the claim of depreciation, citing precedents where embroidery job work was considered manufacturing and thus eligible for additional depreciation. The Tribunal affirmed the CIT(A)'s decision, emphasizing that the Assessing Officer failed to show any change in facts and circumstances to justify disallowing the claim.

Issue 2: Validity of CIT(A) Order:
The Revenue contended that the CIT(A) erred in deleting the addition and should have upheld the Assessing Officer's order. The CIT(A) justified the deletion based on precedents and the eligibility of the assessee for additional depreciation as a manufacturing concern engaged in embroidery job work. The Tribunal upheld the CIT(A)'s decision, noting the identical facts in previous cases and the absence of any new evidence presented by the Revenue to challenge the decision.

Issue 3: Observance of Judicial Discipline:
The Tribunal criticized the Assessing Officer for disregarding judicial discipline by not following the decision of the Tribunal in a similar case. The Assessing Officer failed to demonstrate any factual differences to justify deviating from the precedent set by the Tribunal. The Tribunal emphasized the importance of adhering to established judicial decisions and highlighted that if the Assessing Officer found the decision unacceptable, the appropriate course of action would be to appeal the decision rather than unilaterally disregarding it. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order and emphasizing the significance of respecting judicial discipline in tax assessments.