This tax case appeal challenged the Tribunal's direction to grant 100% depreciation and the CIT's subsequent revocation. The High Court held the Tribunal misunderstood its own order, but agreed with the CIT's conclusion that the machinery qualified only for 50% depreciation, dismissing the appeal.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
2025:MHC:581
T.C.No.886 of 2006
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 14.11.2024
CORAM :
THE HONOURABLE DR.JUSTICE ANITA SUMANTH and THE HONOURABLE MR.JUSTICE G. ARUL MURUGAN
T.C.No.886 of 2006
and
C.M.P.No.1557 of 2006
M/s. Madras Cements Ltd., 98A, Dr.Radhakrishnan Salai, Mylapore, Chennai – 600 004. .. Appellant vs
The Deputy Commissioner of Income Tax, Circle I, Special Range I, Madurai.
.. Respondent
Prayer : Appeal filed under Section 260A of the Income Tax Act, 1961
against order of the Income Tax Appellate Tribunal 'C' Bench, dated 01.03.2006 in I.T.A.No.681/Mds/2005.
For Appellant : Mr.P.J.Rishikesh For Respondent : Mr.J.Narayanaswamy Senior Standing Counsel
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JUDGMENT (Delivered by Dr. ANITA SUMANTH.,J)
T.C.No.886 of 2006
This Tax Case (Appeal) is for assessment year (AY) 1996-97 and
has been filed by the Assessee (hereinafter referred to as ‘Assessee’/’Appellant’) raising the following substantial questions of law:
'1.Whether in facts and circumstances of the case, the Tribunal was justified in holding that there was sufficient evidence before CIT that the assessment order was erroneous and prejudicial for the interest of revenue under Section 263 of the Income Tax Act?
2.Whether in facts and circumstances of the case, the Tribunal was justified in ignoring the earlier of its own order giving direction to A.O. giving 100% depreciation?
3.Whether in facts and circumstances of the case, the Tribunal was justified in holding that the assessee is not entitled to 100% depreciation on the surface miner, cross belt analyzer which were used for solid waste control and solid waste recycling and resource recovery system as mentioned in appendix 1 (old), part A/(III)(2)(vi)?
4.Whether in facts and circumstances of the case the CIT has jurisdiction to revise the order of A.O. dated 09.06.2003, when the A.O. has made a re-assessment revising the said order by power u/s.147 r.w.143(3) in terms of the order dated 29.03.2004?
5.Whether in facts and circumstances of the case, the order of A.O. dated 09.06.2003 has not merged with the order of A.O. dated 29.03.2004 and consequently the order under Section 263
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revising the order dated 09.06.2003 is not bad in law and liable to be set aside?'
return of income had been filed under the provisions of the Income Tax Act, 1961 (in short 'Act'), wherein inter alia, the petitioner claimed deduction on scientific research under Section 35(1)(iv) of the Act.
and the Assessing Authority, considering that the assets had been
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procured only in the second half of the year had granted 12.5%, adopting the rate of 25%.
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to deduction under Section 35 was decided by the Competent Authority one way or the other.
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'15.In view of the above submissions made by the learned authorised representative of the assessee that alternatively the claim of the assessee can be considered for depreciation as per the Schedule, we are of the view that if the assessee dis-owns the claim for scientific research and development on these machineries, the same be considered by the assessing officer for 100% depreciation or otherwise. According to law if the assessee completely disowns the first claim, only then the assessing officer will have the power to consider the issue on the basis of the other relevant provisions of the law. It is ordered accordingly.'
not raised a ground claiming depreciation at the rate of 100% nor had it filed a petition seeking admission of evidence in support of such a claim. In fact, the admitted position is that no evidence has been furnished by the assessee to substantiate its claim for 100% depreciation. The Tribunal was hence right in remitting the issue to the Assessing Authority for examination.
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263 of the Act. The proposal in the Show Cause Notice was for reversal of the 100% depreciation granted.
100%. The directions of the CIT in order dated 11.02.2005 are as below:
'I have examined the claim of the assessee and the advantages of cross belt analyzer. As seen during spot inspection these gamma rays sensor continuously analyses the composition and on the basis of system integration desirable grade of limestone and the proper mix for the same out of both high grade and low grade limestone is ensured. This is possible by adjusting automatically the hopper feed on the basis of analysis. But what is pertinent to note is that only chosen grades of limestone are mixed in desired proportions as fed from the storage hoppers. Thus it is only the proper and optimum mix that is ensured and not any resource recovery in its real sense. The materials stored in hopper could not be wasted but only mixed in appropriate ratios for effective and judicious utilization of available grades of limestone. Thus, the claim of rejection in the absence of cross belt analyzer is out of place and if at all, low grade limestone will be stored till a high grade limestone is mined to ensure the optimum mix for the preferred quality of the limestone pile (input). In other words, cross belt analyzer does not help in recovery
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through resource recycling or for solid waste control and recovery but only enables quality control of the produce through judicious mix of the available grades of cement grade limestone. As such it does not qualify to be a machinery eligible for 100% deprecation and accordingly the claim of the assessee is rejected. As the machinery was installed during the second half of the previous year only half of the normal depreciation is permissible and the Assessing Officer is directed accordingly. In view of the suggested modifications of carry forward loss from the assessment year 95-96 Assessing Officer should correctly determine the losses brought forward and the priority of set off and pass order modifying the order dated 09.06.2003 accordingly.'
CCIT on 18.03.2003 seeking a direction to the assessing officer to grant depreciation at 100%. The CCIT, in order dated 26.05.2003, directed as follows:
'Now that the assessee's claim u/s 35(1)(iv) is turned down, the allowance of depreciation @ 100% on the above assets may be considered by the AO with due respect to the DSIR and ITAT orders.'
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'I therefore hold the view that the expenditure claimed by the company on surface miners, magnetic separators and cross belt analyzers cannot be considered as R&D expenditure. However, these equipment have enabled the company to utilize raw material resources which could not have been otherwise utilized economically and would have been wasted or would have remained unutilized. Therefore, the income tax department may consider allowing 100% depreciation available for equipment installed for solid waste recycling and resource recovery systems as per Appendix – 1(Rule – 5).'
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11.02.2005 as well as in order of the Tribunal dated 01.03.2006.
appellant. No arguments have been addressed as regards questions (4) and (5) which are hence returned as unanswered. This Tax Case (Appeal) is dismissed. No costs.
[A.S.M., J] [G.A.M., J] 14.11.2024
Index:Yes Speaking order Neutral Citation:Yes vs
To
The Deputy Commissioner of Income Tax, Circle I, Special Range I, Madurai.
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T.C.No.886 of 2006
DR. ANITA SUMANTH.,J. and G. ARUL MURUGAN.,J.
vs
T.C.No.886 of 2006
14.11.2024
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3 issues framed by the court
Whether the Assessment Officer erred in granting 100% depreciation contrary to the Tribunal's conditional direction pending certification.
Whether the revocation of 100% depreciation by the tax authority is justified based on the machinery's function.
Whether the CIT had jurisdiction to revise the AO's order under Section 263.
3 provisions across 1 enactments
M/s. Madras Cements Ltd.
The Deputy Commissioner of Income Tax, Circle I, Special Range I, Madurai
Anita Sumanth
G. Arul Murugan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
