Tribunal Dismisses Revenue's Appeals, Allows Assessee's Depreciation Claim & Partial Deduction Appeal

The Tribunal dismissed Revenue's appeals for lack of approval from the Committee on Disputes. It allowed the assessee's appeal for depreciation on the gas sweetening plant and partially allowed the appeal on denial of deduction under section 80HHC, remitting several items for re-examination. The issue of reopening assessment was deemed academic.

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Issues Involved:
1. Approval from the Committee on Disputes.
2. Reopening of assessment.
3. Confirmation of disallowance of depreciation.
4. Denial of deduction under section 80HHC.

Detailed Analysis:

1. Approval from the Committee on Disputes:
The Revenue's appeals (I.T.A. Nos. 1967/Mds/06 and 1643/Mds/07) were dismissed due to the lack of approval from the Committee on Disputes, as mandated by the Supreme Court in ONGC v. CCE [1992] Suppl. 2 SCC 432. The Tribunal noted, "Nothing was placed before us to demonstrate what action the Revenue took for obtaining the approval of the Committee on Disputes."

2. Reopening of Assessment:
In I.T.A. No. 1822/Mds/2006, the assessee contested the reopening of the assessment. However, the learned Departmental representative pointed out that no permission was given by the Committee on Disputes for contesting this issue. The Tribunal held, "Since we have decided the issue on the merits without going into the controversy whether permission was granted to contest the issue of reopening, we are of the view that the same has been rendered of academic nature."

3. Confirmation of Disallowance of Depreciation:
The primary issue was whether the gas sweetening plant, which was ready for use but not actually used due to non-availability of raw material, was eligible for depreciation. The Tribunal considered various judicial precedents:

- The assessee argued that the plant was ready for use and cited cases like CIT v. Heera Financial Services Ltd. [2008] 298 ITR 245, where depreciation was allowed on assets ready for use but not actually used.
- The Department contended that the word "used" in section 32 denotes actual use, citing Dineshkumar Gulabchand Agrawal v. CIT [2004] 267 ITR 768 and Deputy CIT v. Yellamma Dasappa Hospital [2007] 290 ITR 353.

The Tribunal ultimately held, "In view of the above detailed discussion and considering the fact of wear and tear since gas sweetening plant was kept ready for use and must have suffered some wear and tear, the decision of the hon'ble jurisdictional High Court in the case of Heera Financial Services Ltd. [2008] 298 ITR 245 as well as the concept of block of assets, we are of the view that the assessee is entitled to depreciation on the gas sweetening plant."

4. Denial of Deduction Under Section 80HHC:
In I.T.A. No. 1823/Mds/2006, the Tribunal addressed the exclusion of certain receipts from business profits for calculating deduction under section 80HHC. The Tribunal followed the Supreme Court's observations in CIT v. K. Ravindranathan Nair [2007] 295 ITR 228 and examined individual items:

- Sale of Power: Excluded as it had nothing to do with export activities.
- Sale of Scrap: Excluded for the same reason.
- Unclaimed/Unspent Liabilities: Required re-examination to include only revenue items as business profits.
- Crane Hire Charges: Excluded as it was unrelated to export activities.
- Recoveries from Employees Furniture: Required re-examination to determine if it reduced expenditure on furniture.
- Recoveries from House Rent: Included as it offset the rent expenditure.
- Liquidated Damages and Other Recoveries: Required re-examination to include only revenue items.
- Participation Fees for Training Programme: Required re-examination to verify if it was reimbursement of training expenses.
- Reimbursement from PII and Others for Deputation of Employees: Required re-examination.

The Tribunal concluded, "These grounds are partly allowed as indicated above."

Conclusion:
The Tribunal dismissed the Revenue's appeals due to lack of approval from the Committee on Disputes, allowed the assessee's appeal regarding depreciation on the gas sweetening plant, and partly allowed the assessee's appeal on the denial of deduction under section 80HHC, with several items remitted for re-examination. The issue of reopening the assessment was rendered academic due to the decision on the merits.

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