TaxTMI 
TaxTMI 
2013 (8) TMI 1026
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....d CIT erred in holding that the actual activity carried on by the appellant in its mining division and windmill division has to be examined and ascertained whether they can fit into the category of 'production'. 5. The learned CIT erred in holding that the assessing officer has passed the assessment order in a routine manner without proper appraisal and without verifying the relevant facts and hence the assessment order passed by the assessing officer is erroneous. The learned CIT erred in not appreciating the fact that detailed submissions were made in this regard before the assessing officer in response the query raised during the course of regular assessment proceedings. 6. The learned CIT erred in directing the assessing officer to examine and analyze in detail whether the activities in the mining division and windmill division fit into the categories of production. 2. The short facts of the case are as under: - "From a perusal of the assessment records of the assessee for the assessment year 2008-09, it was found that the assessee has claimed additional depreciation on plant and machinery utilized in its mining operations, windmill operations and compute....
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.... manufacture or production of any article or thing, subject to the satisfaction of prescribed conditions. 6. Thus from the above your Honour will appreciate that the assessee, to be eligible for additional depreciation, should be engaged in the business of manufacture or production of any article. 7. The Company is in the business of mining of iron ore, processing and exporting the same. The company submits that the activity carried on by the company in its mining division viz., iron-ore processing amounts to production of an article. 8. From Schedule 14 to the Audited annual accounts for the year under reference, it would be observed that the Company has sold 'processed' iron ore during the year. It would also be observed from Schedule 20 to the Audited annual accounts that the Company has incurred substantial Production and Operational Expenses in relation to aforesaid processing activity viz. Consumption of stores & spares, water and electricity, repair and maintenance to Plant & Machinery etc. Copy of relevant pages of Schedules as annexed in Annexure B. 9. It would be pertinent to draw your kind attention to clause 22(a) to Schedule 23 of the Audited Annual....
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....the word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture. ... The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods." It is, therefore, not necessary, as has been sought to be contended by learned counsel for the Revenue, that the mined ore must be a commercially new product. The decisions and other authorities on the definition of the word "ore", as cited by the appellant, are irrelevant..... We are, therefore, of the opinion that extraction and processing of iron ore amounts to "production" within the meaning of the word in section 32A(2)(b)(iii) of the Act and, consequently, the assessee is entitled to the benefit of section 32A(J) of the Act. 15. Similarly, as regards the activity carried on by the company in its windmill division viz., generation of electricity, the company submits that the sa....
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....ia) of the Act is concerned, the company submits that what is required to be satisfied in order to claim the additional depreciation is that a, new machinery or plant should have been acquired and installed after 31st March, 2002, by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed up to March 31, 2002, should have any operational connectivity to the article or thing that was already being manufactured by the assessee. 24. In this connection, we invite your Honour's attention to the decision of the Madras High Court in the case of CIT v. Vtm Ltd. (319 ITR 336), the relevant observations of which are reproduced as under: In the case on hand, the assessee is stated to have set up a wind mill at a cost of Rs. 5,85,60,000 It is true that the assessee is a company engaged in the business of manufacture of textile goods. As far as application of section 32(l)(iia) of the Act, is concerned, what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machiner....
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....ciation on plant & machinery used in iron ore processing as well as plant & machinery used in windmill operation. Copy of letter dated 18.10.2010 as annexed in Annexure F. 32. In view of the above, Order passed u/s 143(3) cannot be held to be erroneous. In this regard, reliance is placed on the following judicial pronouncement:- * CIT Vs. Gabrial India Limited (203ITR 108) - Bombay High Court The Hon'ble High Court has held that it is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a, conclusion cannot be termed to be erroneous simply because the Commissioner does not fee satisfied with the conclusion. * CIT Vs. Development Credit Bank Ltd. (323 ITR 206) - Bombay High Court The Hon'ble High Court has held that where and enquiry was specifically held with reference to which disclosure of details was called for by the AO and made by the assessee, the observation of the CIT that the AO has arrived at his findings without conducting an enquiry was erroneous and therefore the CIT has wrongly exercised the powers by recourse to section 263. * CIT Vs. Design & Automation Engineers (B....
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....ded for change of opinion and, cannot be invoked only to take a view different from subordinate officer's view" * Cf. S. S. Muddana Vs. State of Karnataka (Kar) (89 STC 90) By resort to a different method, a larger tax can be levied and collected cannot be the sole consideration to attract section 263, as prejudicial to the interest of the Revenue, unless the said method is the only mode legally applicable. * Mool Rai Sineh & ors. Vs. ITO (63 TTJ 211) (Delhi) Simply because the CIT is of a different opinion, powers given under section 263 cannot be invoked simply because a different conclusion can be-arrived at in the given facts and circumstances of a particular case. Such a conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. It may be said that in such a case in the opinion of the CIT the order in question is prejudicial to the interests of Revenue, but that itself would not be enough to vest the CIT with powers for suo moto revision. Therefore the CIT has wrongly exercised jurisdiction under section 263. * CIT Vs. Rajasthan Financial Corporation (229 ITR 246) (Rai) ...since the assesses had continu....
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.... or if it is not erroneous but is prejudicial to the Revenue -recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. ..... every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Incometax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. " 40. Reliance is placed on the decision of the Bombay High Court in the case of Gabriel India Ltd. (203 ITR 108) wherein the exercise of the power of the CIT to make revision suomoto was discussed at length. The Hon 'ble High Court has held as under: " The power of suo-moto revision under sub-section (1) of section 263 o....
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....g Officer, the power of revision under section 263 cannot be exercised. 42. Accordingly, your Honour will appreciate that all the issues discussed above are outside the purview of section 263. 43. In view of the above, it is respectfully submitted that the order passed by the Addl. CIT is not erroneous and prejudicial to the interests of the revenue and therefore proceedings under section 263, initiated by your Honour, be dwpped,. 44. Without prejudice, it is submitted that For the assessment year 2006/07, an Order giving effect has been passed by the AO u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961 on similar issue by not allowing additional depreciation u/s 32(iia) of the Income Tax Act, 1961. For the assessment year 2006/07, an Order giving effect has been passed by the AO u / s 143(3) r.w.s. 263 of the Income Tax Act, 1961 on similar issue by not allowing additional depreciation u/s 32(iia) of the Income Tax Act, 1961. For the assessment year 2007/08, revision proceeding was initiated by your Honour on similar issue. The same is pending for disposal. If at all your Honour directs the AO to revise his Order u/s 143(3) of the Act despite the above subm....
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....windmill operation as per the decision of Madras High Court in the case of CIT Vs V T M Limited, 319 ITR 336. When AO has taken one of the possible view the power of revision u/s 263 cannot be exercised. This view is supported by the decision of Hon'ble Supreme Court in the case Max India Ltd, 295 ITR 282. 6. On the other hand Ld. DR relied upon the order of Commissioner of Income Tax. 7. We have heard the rival contention of both the parties looking to the facts and circumstances of the case we are of the opinion that the claim of assessee regarding additional depreciation on machinery u/s 32(1)(iia) and windmill has been not allowed in A.Y. 2006-07 and 2007-08 without making proper inquiry by AO. The Commissioner of Income Tax u/s 263 has revised the order of AO and AO was directed to consider the issue a fresh after considering the submission made by the assessee and directed to pass a speaking order in accordance with law after giving adequate opportunity of being heard to the assessee. This action of the CIT has been confirmed by Tribunal in respective assessment year in A.Y. 2006-07 & 2007-08, ITA No 139/PNJ/2011 and ITA No. 44/PNJ/2012 respectively. We find in assessme....