TaxTMI 
TaxTMI 
2016 (5) TMI 340
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....take up ITA No. 1402/Ahd/2014 for A.Y. 2009-10 4. The assessment order u/s. 143(3) of the Act was made by the DCIT Circle 1(1), Baroda vide order dated 30.12.2011. 5. Invoking the powers conferred upon him by virtue of Section 263 of the Act, the Commissioner of Income Tax issued notice to the assessee after examining the records of the assessee. The Commissioner was convinced that the assessment order made u/s. 143(3) of the Act on 30.12.2011 was erroneous in so far as it was prejudicial to the interest of the revenue on account of the following :- "It is noticed the during the previous year 2008-09 relevant to A.Y. 2009-10, you have claimed depreciation of Rs. 57,31,18,034/- for wind mills, The additional depreciation was admissible only to assessee engaged in production or manufacture of articles or things. Generation and distribution of power dies not result into "production or manufacture of article or thing". Thus as per provisions of sec. 32(1)(iia) r.w.s. 2(29BA) of the Act, you were not entitled for additional depreciation of Rs. 7,22,82,760/-. This resulted in under assessment." It was also noticed from the P & L A/c relevant to A.Y. 2009-10, that ....
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....he interest of the revenue. (b) In so far as, the write off of stores and spares is concerned, it requires detailed examination which was not done by the A.O at the time of assessment proceedings, therefore, the order passed is erroneous as well as prejudicial to the interest of revenue. 9. Accordingly, the order dated 30.12.2011 was set aside. 10. Aggrieved by this, the assessee is before us. The ld. counsel argued at length reiterating that the assessment order is neither erroneous nor prejudicial to the interest of the revenue. Drawing our attention to the various submissions made during the course of the assessment proceedings, the ld. counsel pointed out that each and every query has been replied and verified by the A.O before making the assessment order. Therefore, the observations of the Commissioner are nothing but change of opinion. It is the say of the ld. counsel that on claim of depreciation, the A.O has taken a possible view which is supported by judicial decision. However, the Commissioner is of a different opinion which makes the observations of the Commissioner being of two possible views, therefore on this count only, the ld. Commissioner cannot invo....
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....ation. This issue is squarely covered in favour of the assessee and against the revenue by the decision of the Hon'ble Jurisdictional High Court of Gujarat in the case of Diamines and Chemicals Ltd. in Tax Appeal No. 1061 of 2013 dated 02.12.2013 wherein the Hon'ble High Court has allowed the claim of additional depreciation on setting up of Wind Electric Generator to an assessee who was engaged in manufacture and sale of chemicals. Wherein the Hon'ble Jurisdictional High Court has considered and followed the decision of the Hon'ble High Court of Madras in the case of VTM Ltd. 319 ITR 336 which was referred to an relied upon by the assessee before the Commissioner. 16. The relevant Head note of the decision of the Hon'ble High Court of Gujarat reads as under:- Section 32 of the Income-tax Act, 1961 - Depreciation - Additional depreciation [Wind Electric Generator] - Assessment year 2007-08 - Assessee-company engaged in business of manufacture and sale of various types of chemical, claimed additional depreciation under section 32(1)(iia) with respect to cost incurred by it for installation of Wind Electric Generator - Assessing Officer disallowed same on ground that asse....
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....gh MSTC. 3. Note of Shri VD Nanavati, Company Secretary, dated 17-04-2007 (FLAG-B) has been received, requesting to submit the report of compliance against the Resolution No.254 of the minutes of the Finance-cum-Audit Committee report. As per the Resolution No.254, the slow-moving/non-moving items policy is required to be reviewed as duration of 5 years (cut-off period) is too long, looking to the highly competitive market and the extent of automation achieved in the industry. 4. Hence, the period need to be reduced from 5 years to 3 years so that item which are not required by the plants can be expeditiously removed from the Stores Inventory and Inventory Reduction measures can be applied fast. Hence it is proposed to reduce the cut-off period from 5 years to 3 years for declaring the items Non-moving. 5. However, as per the existing policy, MCU has already initiated the write-off exercise in the month of February'2007. List of Non-moving items not moved since last 5 years have already been circulated to various plants/departments. Most of the replies have been received and the exercise is under final stage of putting up note. 6. After recei....
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....re was nothing on record which would show that the assessee was given an opportunity to respond to the discrepancies which formed part of the order in revision but were not part of notice dated May 11, 2006. Even though the notice issued by the Commissioner before commencing the proceedings u/s. 263 referred to four issues, the final order passed referred to nine issues, some of which obviously did not find mention in the earlier notice and hence resulted in the proceedings being vitiated as a result of the breach of the principles of natural justice. 22. A similar view was taken by the Hon'ble High Court of Delhi in the case of Contimeters Electricals Pvt. Ltd. 317 ITR 249 wherein the Hon'ble High Court has held as under:- "the Tribunal was also right in holding that the Commissioner did not even called for any explanation of the assessee and the issue of fulfillment of the conditions of Section 80IA had not been part of the show cause notice. Therefore, it could not form the basis for revision of the assessment order u/s. 263. No substantial question of law arose". 23. The observations of the Hon'ble jurisdictional High Court of Gujarat in the case of D.N. Dosani 280 ITR....
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....lakh as 'obsolete spares and other items written off." If assessee had capitalized the spares, the amount of spares now treated as obsolete and written off shall be deducted from the W.D.V. of the plant and machinery for depreciation purpose and section 50 of the IT Act would apply. No disclosure has been made in the Audit Report. In case of depreciable assets, no loss can be claimed when other assets in the same block of assets remains. Further, in Schedule-15 (Materials, Manufacturing and Operating Profits) to P & L account, assessee had debited Rs. 1537.83 lakh as " Stores and Spares consumed" which indicates that assessee is treating the expenditure as revenue. 26. In so far as the second issue mentioned hereinabove is concerned, we have considered this issue at length while deciding the appeal in ITA No. 1402/Ahd/2014. For our detailed discussions and reasons given therein, in our considered opinion, the observations of the Commissioner do not hold any water and cannot make the assessment order made u/s. 143(3) of the Act erroneous and prejudicial to the interest of the revenue. 27. Coming to the first issue relating to the debit of Rs. 4058.56 lacs towards "Contribu....