Agarwal Rayons Pvt. Ltd.,, Surat v. The Income tax Officer,Ward-1(1),, Surat

ITA 3186/AHD/2007 | 2003-2004
Pronouncement Date: 09-07-2010 | Result: Allowed

Appeal Details

RSA Number 318620514 RSA 2007
Assessee PAN AADCA7188F
Bench Ahmedabad
Appeal Number ITA 3186/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 14 day(s)
Appellant Agarwal Rayons Pvt. Ltd.,, Surat
Respondent The Income tax Officer,Ward-1(1),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 09-07-2010
Date Of Final Hearing 30-06-2010
Next Hearing Date 30-06-2010
Assessment Year 2003-2004
Appeal Filed On 26-07-2007
Judgment Text
1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD BEFORE SHRI BHAVNESH SAINI AND SHRI_D.C. AGRAWA L ITA. NO. 3186 /AHD/2007 (ASSESSMENT YEAR : 2003 -04) AGARWAL RAYONS PVT. LTD. 504 EMPIRE STATE BUILDING RING ROAD SURAT. VS INCOME TAX OFFICER WARD 1(1) AAYAKAR BHAVAN MAJURA GATE SURAT. (APPELLANT) (RESPONDENT) PAN: AADCA 7188 F APPELLANT BY : SHRI HARDIK VORA RESPONDENT BY : SHRI K.M. MAHESH SR.D.R. ( (( ( )/ )/)/ )/ ORDER PER SHR D.C. AGRAWAL. THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUND :- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT THE LD. C.I.T.(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEPRECIATION OF RS .12 02 342/- OUT OF TOTAL DEPRECIATION OF RS.24 02 684/- CLAIMED AT 50% ON PLANT AND MACHINERY. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT L D. C.I.T.(A) HAS NOT ALLOWED THE BENEFIT OF HIGHER DEPRECIATION AT 50% T O THE ASSESSEE ON ITS PLANT AND MACHINERY USED IN TEXTURISING AND TWISTING OF Y ARN. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF TEXTURISED AND TWISTED YARN WHICH IS PURCHASING PARTIALLY ORIENTED YARN CALLED POY WHICH IS 2 CONVERTED TO TEXTURISED AND TWISTED YARN THROUGH ME CHANICAL PROCESS IT CLAIMED DEPRECIATION AT HIGHER RATE ON ITS PLANT AN D MACHINERY ENGAGED IN SUCH TEXTURISING AND TWISTING. THE HIGHER RATE OF D EPRECIATION IS 50% WHEREAS NORMAL RATE OF DEPRECIATION IS 25%. WHEN ASKED TO E XPLAIN WHY HIGHER RATE OF DEPRECIATION BE REFUSED THE ASSESSEE SUBMITTED FOL LOWING EXPLANATION:- AS REGARDS THE CLAIM OF DEPRECIATION @ 50% ON TEXT URISING MACHINE WE WOULD LIKE TO STATE THAT THE ASSESSEE HAD PURCHA SED THE TEXTURISING MACHINE UNDER TUFS (TEXTILE UPGRADATION FUND SCHEME ) AS PER RULE 5 IN APPENDIX 1 SR. NO.III(6) OF THE INCOME TAX RULES MACHINERY AND PLANT USED IN WEAVING . PROCESSING AND GARMENT SECT OR OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDER TUFS ON OR AFTER THE 1ST DAY OF APRIL 2001 BUT BEFORE 1ST APRIL 2004 AND IS PUT TO USE BEFORE LST APRIL 2004 IS ELIGIBLE FOR DEPRECIATION AT THE RATE OF 50%.THEREFORE THE MACHINERY UNDER CONSIDERATION QUALIFIES FOR THE TEC HNOLOGY UPGRADATION FUND SCHEME. TECHNOLOGY UPGRADATION FUND SCHEME FOR TEXTILE 7 JUTE INDUSTRIES THE SCOPE OF THE SCHEME ELIGIBILIT Y CRITERIA AND OPERATIONAL PARAMETRERS ARE DEFINED BELOW: I. SCOPE OF THE SCHEME THE FOLLOWING WILL BE COVERED UNDER THE TEXHNOLOGY UPGRADATION FUND SCHEME: (A) COTTON GINNING AND PRESSING. (B) TERXTILE INDUSGTRY COVERING. (I) SILK REELING AND TWISTING. (II) WOOL SCOURING AND COMBING. (III) SYNTHETIC FIULAMENT YARN TEXTURISING CRIMPIN G AND TWISTING. (IV) SPINNING. (V) VISCOSE STAPLE FIBRE (VSF) AND VISCOSE FILAMENT YARN (VFY) (VI) WEAVING KNITTING INCLUDING NON-WOVENS FABRIC EMBROIDERY AND TECHNICAL TEXTILES. (VII) TR5 GARMENT/MADE-UP M ANUFACTURING. (C ) JUTE INDUSTRY. THE SCOPE INCLUDED SYNTHETIC FILAMENT YARN TEXTURIS ING CRIMING AND TWISTING UNDER I(B)(III) OF THE MINISTRY OF TEXTILE RESOLUTION NO.28/01/1999 CTI DATED 31-03-1999.THEREFORE THE M ACHINERY OF THE 3 ASSESSEE COMES UNDER THE PURVIEW OF TUFS AND THUS I S ELIGIBLE FOR DEPRECIATION AT THE RATE OF 50%. THE ELIGIBILITY CRIETERIA OF TUFS INCLUDES TEXTURIS ING CRIMPING AND TWISTING OF SYNTHETICS FILAMENT YARN UNDER THE HEAD OF TEXTILE INDUSTRY AS PER POINT I(B)(III) OF THE MINISTRY OF TEXTILE RESOLUTI ON NIO.28-01-1999 CTI DATED 31-03-1999.FURTHER THE LOAN WAS SANCTIONED B Y THE BANK OF BARODA . MANDARWAJA BRANCH EVIDENCING THE FACT THA T THE MACHINERY WAS PURCHASED UNDER THE TECHNOLOGY UPGRADATION FUND SCHEME. 3. THE A.O. DECLINED THE HIGHER RATE OF DEPRECIATIO N ON THE GROUND THAT SUCH HIGHER RATE OF DEPRECIATION IS PROVIDED ON PLA NT AND MACHINERY USED IN WEAVING PROCESSING AND GARMENTS OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDER TUFS ON OR AFTER 1-4-2001 BUT BEFORE LST DAY OF APRIL 2004 AND IS PUT TO USE BEFORE 1-4-2004. ACCORDING TO LD. A.O. PLANT AN D MACHINERY OF THE ASSESSEE ARE NOT USED FOR WEAVING OR PROCESSING OF CLOTH BUT FOR TEXTURISING AND TWISTING ACTIVITY WHICH CANNOT BE QUOTED WITH W EAVING OR PROCESSING OF CLOTH. ACCORDING TO HIM THE TEXTURISING AND TWISTIN G ACTIVITY TAKES PLACE PRIOR TO WEAVING ACTIVITY. THUS ACCORDING TO THE A.O. THE W EAVING OF THE CLOTH AND PROCESSING OF THE CLOTH STARTS AFTER TEXTURISING AN D TWISTING AND HENCE ASSESSEE CANNOT GET HIGHER RATE OF DEPRECIATION ON MACHINERIES USED IN THE TEXTURISING AND TWISTING AS THEY ARE NOT PROVIDED I N THE RULES. HE ACCORDINGLY DENIED THE HIGHER BENEFIT. 4. THE LD. C.I.T. (A) CONFIRMED THE SAME BY HOLDING AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPE LLANT AND OBSERVATIONS OF THE A.O. THE ISSUE IS WHETHER THE A SSESSEES SIZING PROCESS IS COVERED BY THE ENTRY AT BLOCK III(6) OF APPENDIX-I OF THE DEPRECIATION TABLE. THE BLOCK III(6) STATES AS UNDE R:- MACHINERY AND PLANT USED IN WEAVING PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDE R TUFS ON OR AFTER 1 ST DAY OF APRIL 2001 BUT BEFORE THE 1 ST DAY OF APRIL 2002 AND IS PUT TO USE BEFORE THE 1 ST DAY OF APRIL 2004. FROM THE ABOVE IT IS SEEN THAT THE ENTRY STARTS WIT H MACHINERY AND PLANT USED IN WEAVING AND THEN PROCESSING AND G ARMENT SECTOR OF TEXTILE INDUSTRY. THIS CLEARLY SHOWS THA T PRODUCTION OR 4 TEXTURISING AND TWISTING OF YARN IS DEFINITELY NOT COVERED UNDER THIS PROVISION. THE MINISTRY OF TEXTILES AND BANKS MAY BE GIVING FUNDS AND HELP IN THE FORM OF EASY LOANS UNDER TUFS BUT THE INCOME-TAX RULES IS CLEARLY NOT GIVING THE HIGHER D EPRECIATION TO YARN MANUFACTURER. TEXTURISING AND TWISTING IS ALSO A PROCESS ON YARN MAKING IT SUITABLE FOR WEAVING. IN THE PRESENT CASE THE PROVISIONS OF BLOCK III(6) ARE VERY CLEAR THAT PROD UCTION AND PROCESSING OF YARN ARE NOT COVERED BUT THE BENEFITS STARTS FROM WEAVING AND AFTER WEAVING ALL PROCESSES OF GARMENT SECTOR AND TEXTILE INDUSTRY. IF THE PARLIAMENT INTENDED TO GIV E THE BENEFIT TO YARN MANUFACTURER OR TO YARN PROCESSING UNITS THE R ULE WOULD HAVE CLEARLY PROVIDED SO. THE WORD WEAVING WOULD NOT HAVE BEEN USED IN THE BEGINNING. AS DECIDED BY THE SUPRE ME COURT IN THE CASE OF IPCA LABORATORIES [266 ITR 521] AN INC ENTIVE PROVISION HAS TO BE STRICTLY INTERPRETED AND IF THE WORDINGS OF THE SECTION IS CLEAR THEN BENEFITS WHICH ARE NOT AVAIL ABLE CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN T HE SECTION. IN THE PRESENT CASE THE APPELLANT IS TRYING TO TAKE TH E BENEFIT EVEN THOUGH IT IS NOT AVAILABLE. THE APPELLANT IS CARRYI NG OUT A PROCESS ON THE YARN WHICH IS PRIOR TO WEAVING. THEREFORE T HE DEPRECIATION DISALLOWED BY THE A.O. IS CORRECT. THIS GROUND OF A PPEAL IS DISMISSED. 5. THE LD. A.R. SUBMITTED THAT TRIBUNAL HAS TAKEN A VIEW THAT TEXTURISING AND TWISTING ACTIVITIES ARE PART OF THE PROCESSING AND ARE COVERED UNDER APPENDIX-1 PART-A III AT SR.NO.6 WHICH HAS BEEN RE FERRED TO BY A.O. ON PAGE- 4 OF THE ASSESSMENT ORDER. HE REFERRED TO THE FOLLO WING JUDGEMENTS IN SUPPORT OF HIS CONTENTION :- 1. MAVIN TEXTURISERS PVT. LTD. VS. DCIT [ ITA NO.1 044/AHD/07] 2. NANGALIA SYNTHETICS PVT. LTD. VS. DCIT [ITA NO.2 213/AHD/08] 3. BIPINCHANDRA MOHANLAL GAJJAR VS. ITO [ ITA NO.3 128/AHD/08 ] 4. FAIRDEAL FILAMENTS LTD. VS. DCIT [ ITA NO. 870/ AHD/07 ] 6. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT FA CTS IN THE CASE OF THE PRESENT ASSESSEE ARE DIFFERENT THAN THE FACTS IN TH E CASE OF JUDGEMENTS REFERRED TO BY LD. A.R. HE MADE FOLLOWING SUBMISSIO NS ON PLAIN READING OF THE PROVISIONS OF RULE-5 VIS-A -VIS ASSETS IDENTIFIED FOR DEPRECIATION @ 50% IT COULD BE SEEN THAT MACHIN ERY & PLANT USED IN 5 WEAVING PROCESSING AND GARMENT SECTOR OF TEXTILE I NDUSTRY WHICH IS PURCHASED UNDER TUFS ON OR AFTER 1 ST DAY OF APRIL 2001 BUT BEFORE THE LST DAY OF APRIL 2004 AND IS PUT TO USE BEFORE THE 1STDAY OF APRIL 2004 IS ELIGIBLE FOR DEPRECIATION OF HIGHER RATE ( @ 50%) A S AGAINST NORMALLY ALLOWED DEPRECIATION @ 25%. ON GOING THROUGH THE DECISION OF HONBLE ITAT AHME DABAD RELIED UPON BY THE APPELLANT (NO.2 TO 5) THE NATURE OF BUSINES S ACTIVITY OF THE APPELLANT IS LISTED AS UNDER : SR.NO. NAME OF APPELLANT. NATURE OF BUSINESS. 1. MAVIN TEXTURISERS PVT. LTD. MANUFACTURING OF YA RN & CLOTH. 2. NAGALIA SYNTHETICS PVT. LTD. -DO- 3. BIPINCHANDRA MOHANLAL GAJJAR. MANUFACTURING OF YARN & ART SILK CLOTH. 4. FAIRDEAL FILAMENTS LTD. MANUFACTURING OF GREY FABRICS SIZING TEXTILE RISING AND TWISTING OF YARN. 5. AGARWAL RAYONS P. LTD. MANUFACTURING OF YARN. FROM THE ABOVE TABLE FOLLOWING INFERENCES COULD BE DRAWN. 1. ALL THE FOUR APPELLANTS WERE ENGAGED IN THE COMP OSITE ACTIVITY OF MANUFACTURING OF YARN AND ART SILK CLOTH. 2. THEY HAD SEPARATE UNIT FOR MANUFACTURING OF YARN & ART SILK CLOTH. 3. THE YARN MANUFACTURED BY THEM WAS USED FOR CAPTI VE CONSUMPTION OF THE APPELLANTS THEMSELVES TO MANUFAC TURE ART SILK CLOTH. 4. THERE WAS PERFECT BACKWARD AND FORWARD LINKAGE BETWEEN MANUFACTURING PROCESS OF YARN AND ART SILK CLOTH. IN LIGHT OF THE ABOVE INFERENCES WHAT ONE COULD S AFELY CONCLUDE IS BENEFIT OF DEPRECIATION AT HIGHER RATE ALLOWED B Y THE HONBLE ITAT. AHMEDABAD IS TO ALL THOSE APPELLANTS WHICH HAD WEAV ING FACILITY ON THEIR OWN AND USED MANUFACTURED YARN FOR THEIR OWN CAPTIVE CONSUMPTION. THIS NO DOUBT QUALIFIES TO DEPRECIAT ION AT HIGHER RATE (@ 50%) BEING MACHINERY & PLANT USED IN WEAVING PR OCESSING AND GARMENT SECTOR OF TEXTILES. 6 HOWEVER IN THE CASE OF APPELLANT THE BUSINESS ACTIVITY CARRIED OUT IS ONE AND ONLY MANUFACTURING OF YARN. MANUFACT URING OF YARN IS DIFFERENT AND DISTINGUISHABLE FROM THE WEAVING ACTI VITY. THE LEGISLATURES INTENTION IS CRYSTAL CLEAR VIS- -VIS ALLOWING DEPRECIATION OF HIGHER RATE TO ONLY THOSE ASSESSEES IN WHOSE CASES MACHINERY AND PLANT WAS PURCHASED UNDER TUF SCHEME AND USED FOR WEAVING PROCESSING AND GARMENT SECTOR OF TEXTILE. THE LEGISLATURES INTENT IS FURTHER EVIDENCE FROM THE FACT THAT IT HA S RESTRICTED THE BENEFIT OF HIGHER RATE OF DEPRECIATION TO WEAVING PROCESS ING AND GARMENT SECTOR OF TEXTILE ONLY. IMPLIED IN IT IS THAT THERE ARE OTHER SECTORS IN TEXTILE INDUSTRY IN WHOSE CASE THIS BENEFIT WAS NO T ALLOWED. IT IS ALSO SUBMITTED THAT AS COULD BE SEEN ELSE WHERE IN THE I.T. ACT THAT WHEREVER AND WHENEVER CERTAIN SPECIAL BENE FITS IN THE FORM OF DEDUCTIONS EXEMPTIONS ALLOWANCES ETC. ARE CONFER RED TO ANY CLASS OR CLASSES OF APPELLANTS THE ACT IS CATEGORICAL IN CLASSS OR CLASSES OF APPELLANTS WHO ARE ELIGIBLE TO AVAIL THE SPECIAL BE NEFITS. ONE SUCH EXAMPLE IS EXPORT BENEFIT AVAILABLE TO APPELLANT EX PORTING GOODS OUT OF INDIA U/S. 80HHC. THE PROVISION OF SEC. 80HHC ALSO SPECIFIES ALLOWABILITY OF DEDUCTION U/S. 80HHC TO SUCH SUPPO RTING MANUFACTURER SUBJECT TO FULFILLMENT OF CERTAIN SPE CIFIC TERMS AND CONDITIONS. ABOVE FACTS SQUARELY APPLICABLE TO APPE AL UNDER CONSIDERATION. IT IS ALSO HUMBLY SUBMITTED THAT THE VIEW EXPRESS E BY THE SUPREME COURT IN THE CASE OF IPCA LABORATORIES (266 ITR-521) WHICH CAN ACT AS GUIDING FORCE IN THE INSTANT CASE ALSO. THE SUPREME COURT OPINED IN ITS ORDER (SUPRA) THAT AN INCENTIVE PROVISION HAS TO BE STRICTLY INTERPRETED AND IF THE WORDINGS OF THE SEC TION IS CLEAR THEN BENEFITS WHICH ARE NOT AVAILABLE CANNOT BE CONFERR ED BY IGNORING OR MISINTERPRETING WORDS IN THE SECTION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORDS. IN OUR CONSIDERED VIEW THE FACTS OF THE PR ESENT CASE AND FACTS IN THE CASE OF REFERRED TO BY THE LD. A. R. PARTICULARLY I N THE CASE OF NANGALIA SYNTHETICS PVT. LTD. ARE SIMILAR. IN THAT CASE THE TRIBUNAL HAS OBSERVED AS UNDER :- 7. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF ITAT AHMEDABAD D BEN CH IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR VS. ITO WD-6(1) SU RAT IN ITA NO. 7 3128/AHD/2008 DATED 18-02-2009 RELATING TO A.Y. 200 5-06.THE ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS SIMILAR TO THAT OF THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR (SUPRA) WE HOLD THAT SINCE ADMITTEDLY THE TWISTING MACHINE WAS USED BY WEAVING SECTOR OF TEXTILE INDUSTRY DEPRECIATION ON THE SAID MACHINERY @ 50% SHOULD BE ALLOWED. WE ACCORDINGLY ALLOW THE GROUND OF APPEAL. 8. THE LD. D.R. HAS SOUGHT TO DISTINGUISH THE AUTHO RITIES REFERRED TO BY THE LD. A.R. ON THE GROUND THAT THERE WAS A NEXUS OF BA CKWARD AND FORWARD LINKAGES OF THE ACTIVITIES. THERE WAS COMPOSITE ACT IVITIES IN THESE CASES. WHEREAS IN THE CASE OF THE PRESENT ASSESSEE IT IS O NLY MANUFACTURING OF YARN AND NO WEAVING CARRIED OUT. HOWEVER DISTINCTION SO UGHT TO BE MADE BY THE LD. D.R. IS ARTIFICIAL AND DOES NOT CONFIRM TO THE LANG UAGE USED IN THE RULES. IN FACT TEXTURISING AND TWISTING ACTIVITIES ARE PART OF PROCESSING. IT IS INCORRECT ON THE PART OF THE A.O. TO HOLD THAT LANGUAGE USED IN THE RULE CONFINE PROCESSING OF CLOTH ONLY AND NOT TEXTURISING AND TWISTING OF T HE YARN. THE LANGUAGE USED IN RULE -6 OF BLOCK 3 OF APPENDIX -1 OF DEPRECIATIO N TABLE READS AS UNDER :- MACHINERY AND PLANT USED IN WEAVING PROCESSING AN D GARMENT SECTOR OF TEXTILE INDUSTRY WHICH IS PURCHASED UNDE R TUFS.. FROM THIS IT CANNOT BE READ THAT WEAVING AND PROCES SING IS PROVIDED BY CLOTH SO AS TO INFER THAT IT IS ONLY WE AVING AND PROCESSING OF CLOTH WHOSE MACHINERIES ARE ENTITLED FOR HIGHER DEPRECIATION. THE WORDS USED ARE WEAVING PROCESSIN G AND GARMENTS SECTOR OF TEXTILE INDUSTRY. 9. IN OTHER WORDS WEAVING PROCESSING AND GARMENTS SECTOR ARE PART OF TEXTILE INDUSTRIES WHICH IS A LARGER GROUP. IN THIS TEXTILE INDUSTRY THE WEAVING PROCESSING AND GARMENT SECTOR ARE COVERED IN RESPEC T OF WHOSE MACHINERIES THE HIGH RATE OF DEPRECIATION IS PROVIDED. THUS THE WORD PROCESSING WOULD INCLUDE TEXTURISING AND TWISTING OF YARN WHICH IS F INALLY USED IN TEXTILE INDUSTRY. 8 THUS RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE TRIBUNAL WE ALLOW THE CLAIM OF THE ASSESSEE. 10. AS A RESULT APPEAL FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 09 /07 /2010. SD/- SD/- (BHAVNESH SAINI) (D. C. AGRAWAL) JUDICIAL MEMBER ACCOUNT ANT MEMBER. AHMEDABAD. DATED:09 /07 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ ASSTT. REG ISTRAR ITA`T AHMEDABAD .