2017 (2) TMI 631 - AT - Income Tax

Tribunal dismisses Revenue's appeal, deems assessment reopening invalid. Assessee granted additional depreciation and deduction for statutory liabilities.

The ACIT, Circle-1, Kota Versus M/s Mangalam Cement Ltd.

The ACIT, Circle-1, Kota Versus M/s Mangalam Cement Ltd. - [2017] 55 ITR (Trib) 651 Issues Involved:1. Legality of reopening of assessment under section 147 of the Income Tax Act.2. Disallowance of additional depreciation on assets of power generating units.3. Disallowance under section 43B of the Income Tax Act.Detailed Analysis:1. Legality of Reopening of Assessment under Section 147:The primary issue was whether the reopening of the assessment under section 147 was justified. The original assessment was completed under section 143(3) on 31.12.2010, and a notice under section 148 was issued on 17.08.2012. The assessee argued that the reopening was merely a change of opinion, which is not permissible under the law.The Tribunal referred to several precedents, including CIT Vs. Hindustan Zinc Ltd., Ashwamegh Co.Op. House Soc. Ltd., and CIT vs. Usha International Ltd., which established that reassessment based on a mere change of opinion is not valid. The Tribunal found that the Assessing Officer (AO) had examined the issues of additional depreciation and deduction under section 43B during the original assessment proceedings. Therefore, the reassessment proceedings initiated by the AO were based on a change of opinion, making them illegal and bad in law.2. Disallowance of Additional Depreciation on Assets of Power Generating Units:The AO disallowed the additional depreciation claimed by the assessee on the grounds that the assets of power generating units were not eligible for additional depreciation under section 32(1)(iia) for the assessment year 2008-09. The AO argued that the amendment allowing additional depreciation for power generation units was effective from the assessment year 2013-14.The Tribunal noted that the assessee was engaged in the business of manufacturing cement and had installed new plant and machinery (P&M) for power generation for captive consumption. The Tribunal referred to several cases, including Principal CIT Vs. Kanishk Steel Industries and CIT Vs. Diamines & Chemicals Ltd., which held that additional depreciation is allowable if the assessee is engaged in the business of manufacturing or production of any article or thing. The Tribunal concluded that the assessee was eligible for additional depreciation under section 32(1)(iia) as the power generated was used for manufacturing cement, which is considered an article or thing.3. Disallowance under Section 43B:The AO disallowed the deduction claimed by the assessee under section 43B for payments made towards service tax and land tax, arguing that these payments were not allowable as they were not debited to the Profit & Loss account.The Tribunal observed that the payments were statutory liabilities and allowable on a payment basis under section 43B, regardless of whether the expenditure was booked in the accounts. The Tribunal cited several cases, including Associated Pigments Ltd. Vs. CIT and CIT Vs. Dharampal Satyapal Sons, which supported the claim that statutory liabilities are deductible when paid, even if they are not recorded in the books. The Tribunal upheld the CIT(A)'s decision to delete the disallowance under section 43B.Conclusion:The Tribunal dismissed the appeals filed by the Revenue, holding that the reopening of the assessment under section 147 was invalid as it was based on a change of opinion. Additionally, the assessee was entitled to claim additional depreciation on the assets of power generating units and the deduction under section 43B for the payments made towards statutory liabilities.