Tax Appeal No. 99 of 2017. Case: Pr. Commissioner of Incomex Tax-Vadodara and Ors. Vs Gujarat State Fertilizer & Chemicals Ltd.. High Court of Gujarat (India)

Case NumberTax Appeal No. 99 of 2017
CounselFor Appellant: K.M. Parikh, Advocate and For Respondents: Manish J. Shah, Advocate
JudgesM.R. Shah and B.N. Karia, JJ.
IssueIncome Tax Act, 1961 - Sections 143(3), 2(29BA), 263, 263(1), 32(1)(iia)
Judgement DateMarch 15, 2017
CourtHigh Court of Gujarat (India)


M.R. Shah, J.

  1. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal, Ahmedabad "A" Bench (hereinafter referred to as "the tribunal") dated 31/03/2016 in ITA No. 1402/AHD/2014 for the Assessment Year 2009-10 by which the learned tribunal has allowed the said Appeal preferred by the assessee and has quashed and set aside the order passed by the learned Commissioner in exercise of powers under Section 263 of the Income Tax Act (hereinafter referred to as "the Act"), the revenue has preferred the present Appeal with the following proposed question of law;

    Whether on the facts and in the circumstances of the case, the ITAT was right in law in setting aside the order of the CIT and restore that of the AO, disregarding the applicability of the provisions of Section 263 of the IT Act to the fact of the case?

  2. The assessee filed the return of income for the Assessment Year 2009-10 declaring the total income of Rs. 889,61,66,980/-. The assessee claimed the depreciation of Rs. 57,31,18,034/- for windmills under Section 32(1)(iia) of the Act. The assessee also debited Rs. 92,66,211/- as obsolete stores and spares and other items written off and ultimately while framing scrutiny assessment under Section 143(3) of the Act on 30/12/2011, the Assessing Officer determined the total income of Rs. 963,46,05,466/- as against the return of income of Rs. 889,61,66,980/-. Learned Commissioner took the order of assessment under suo motu revision under Section 263 of the Act as the revisional authority was of the view that the order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interest of the revenue on account of the following;

    "It is noticed that during the previous year 2008-09 relevant to A.Y. 2009-10, you have claimed depreciation of Rs. 57,31,18,034/- for windmills. 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 Section 32(1)(iia) read with Section 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 the assessee had debited Rs. 92,66,211/- as obsolete spares and other items written off. If these spares had been capitalized, the amount of spares now treated as obsolete and written off shall be deducted from the cost of plant and machinery for depreciation. In the depreciation chart no such deduction was made from the WDV of plant and machinery. Further in Schedule 15 to P & L A/c, Rs. 1366.90 as stores and spares consumed. Thus it can be inferred...

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