ORDER
M.V.R. Prasad, Accountant Member
1. This is an appeal filed by the assessee. It is directed against the order of the Commissioner of Income-tax A.P. -I, Hyderabad, dated 30-10-1995 passed under Section 263 of the Act, whereby he set aside the assessment order dated 19-4-1993 passed under Section 143(3) of the Act, for the assessment year 1992-93.
2. The assessee-company is engaged in the manufacture and sale of one-day old chicks. It claimed under first proviso to Section 32(1)(ii) of the Act, 100 per cent depreciation on the following items, which were allowed by the Assessing Officer-
Broiler Division:
Wall air circulation Rs. 69,389 - 100% Layer Division: Motors Rs. 13,850 - 100% Fans in farms Rs. 3,21,952 - 100% Nuzvid Division: Cages Rs. 9,33,804 - 100% Fogers Rs. 56,169 - 100% Fans in farms Rs. 1,31,632 - 100%
The Commissioner considered the issue of the grant of hundred per cent depreciation on cages, mentioned above, used in the poultry farming, in the light of the decision of the Hon’ble Karnataka High Court in Pathange Poultry Farm v. CIT [1994] 210 ITR 668 and came to the conclusion that cages do not qualify for 100 per cent depreciation. It was contended before the CIT that each cage is an individual unit, though a series of cages are fabricated on a common base, and so they are entitled for 100 per cent depreciation. Before the Commissioner, as before the Assessing Officer, the contentions of the assessee were as under-
i. The function of each cage is to ensure that the movement of birds is restricted to conserve the energy of birds and increase their productivity; to avoid exposure of the birds to litter and droppings of other birds, and to avoid movement of birds from one cage to another cage.
ii The birds can be put in or taken out since each cage has a separate gate.
iii. Cages can be shifted from one place to another for repairs, replacement, etc.
iv. The cages are detachable and it is a practice to shift sick and weak birds along with the cages in which they are housed to another shed.
v. Each cage has 3 birds. Hence if you have 9,000 birds you need 3,000 cages.
vi. There is no interdependence or interlinking of one cage with another. Each operates on its own performing the function for which each cage is made for.
It was also submitted thus :
From the above details and functions of cages, it is clear that each cage is an independent apparatus of performing distinct functions of caging the birds, hence is a self-contained, separate and independent plant. Further more as the cost of each cage is less than 5,000, it is entitled to 100 per cent depreciation under the first proviso to Section 32(1)(ii)…
Thus each cage is an independent, self-contained unit and there is no co-relation whatsoever with the other cages which are installed in the shed. Each cage houses 3 birds and the same does not effect the other cages. The operation of one cage are unrelated, unaffected and unhampered by other cages….
In support of the above propositions, the assessee relied on certain decisions before the Commissioner, which are referred to towards the end of para 5.1 of his order. The Commissioner also called for the bills for the purchase of the cages, and as a typical example, one of the bills extracted by him in para 5.2 of his order reads as under-
(I) Famous Metal Works
To Dated: 1-10-1991
M/s. Srinivasa Hatcheries Ltd.,
Nuzvid PO & (M), Krishna Distt.
Dear Sirs,
Bill
Fabrication and erection of Poultry
cages in your shed No. 5 at Nuzvid.
Females 5997 x Rs. 33.10 ps. Rs. 1,97,507-70 Ps.
Males 500 x Rs. 80 Rs. 40,000-00 Ps.
--------------------
Rs. 2,37,507-70 Ps.
--------------------
(Rupees Two Lakhs thirty seven thousand five hundred seven and paise seventy only)
for Famous Metal Works
Sd/-
(Proprietor)....
There are other similar bills relating to purchase of cages aggregating to Rs. 9,33,803.00, which have been considered by the CIT. In the light of the above bills, the CIT concluded as under-
5.3 Thus the assessee’s argument that the cost of each cage is less than Rs. 5,000 and therefore the entire cost is allowable as an expenditure under Section 32(1)(ii) cannot be entertained The various decisions relied on by the assessee are not relevant and are distinguishable on facts. As held by Karnataka High Court in the case of Pathange Poultry Farms v. CIT 210 ITR 668 (Kar.), cages purchased for poultry farming are not entitled for 100 per cent depreciation, when these were not used as independent units, but were only utilised for fabrication of bigger compartments with common facilities of lighting, feeding, watering, etc. and this decision is applicable on all fours to the facts of the present case. Therefore, the assessee is not entitled for 100 per cent depreciation on these items.
The CIT further noticed that the Assessing Officer granted 100 per cent depreciation on, what are called ‘Water Air Circulators’, of the cost of Rs. 69,389. He was of the view that the said circulators have been put to use in an integrated manner in the poultry farm for controlling and maintaining temperature conducive to the productivity and health of the birds, and therefore, it cannot be regarded that the cost of each item is below the statutory limit of Rs. 5,000 as contemplated under proviso to Section 32(1)(ii). As such, he concluded that the said circulators are eligible only for normal depreciation and not for 100 per cent depreciation.
3. In the light of the above conclusions, the Commissioner set aside the assessment framed under Section 143(3) by the Assessing Officer, with a direction to reframe it as per law and in the light of his above-mentioned observations/conclusions.
4. Before us, the learned counsel for the assessee assailed the order under Section 263 mainly on the ground that it is beyond the pale of the provisions of Section 263 inasmuch as the assessment order, which is subject of revision by the CIT is not actually erroneous. It is contended that the Assessing Officer has taken one of the two possible views in the matter, and simply because that view happens to be not to the satisfaction of the Commissioner or simply because it confer some tax advantage on the assessee, the provisions of Section 263 cannot be pressed into service. In this context reliance is placed on the decision of Apex Court in Malabar Industrial Co. Ltd. v. CIT[2000] 243 ITR 83. The assessee has filed a paper-book which contains at pages 13 to 15 thereof, the submissions made at the time of assessment order under Section 143(3). It also contains at pages 18 to 35, the reply of the assessee to the show-cause notice, dated 5-9-1995 issued by the CIT under Section 263. In the light of these submissions, it is made out that the main ground on which the CIT exercised his powers under Section 263, viz., that the assessee is not entitled for 100 per cent depreciation on cages, is unsustainable. It is explained that each cage is a compact, separate, self-contained and independent unit. Each cage can be used alone irrespective of the fact whether it is linked to additional cages, or not. The fact that number of cages are fixed with wire mesh to each other in a row for the economy of space and to facilitate easy operations, should not prejudice the claim for 100 per cent depreciation. It is firstly made out that the decision of Hon’ble Karnataka High Court in the case of Pathange Poultry Farm {supra) is distinguishable on facts. It is made out that the Hon’ble Karnataka High Court in that case proceeded on the assumption that the cages were not used as independent units, but utilised by the assessee for fabrication into a bigger component to accommodate a number of birds. It is pleaded that in the case of assessee, each cage is capable of independent usage without any association or assistance of other cages. Apart from attempting to distinguish its case from the one considered by the Hon’ble Karnataka High Court, the learned counsel for the assessee cited a number of cases where analogous issue has been considered and decided in favour of the assessee. They are the following-
(a) CIT v. Sri Krishna Bottlers (P.) Ltd. [1989] 175 ITR 154 (AP)
(b) CIT v. Prem Nath Monga Bottlers (P.) Ltd. [1997] 226 ITR 864 (Delhi)
(c) First Leasing Co. of India Ltd. v. CIT (No. 2) [2000] 244 ITR 2382 (Mad.)
(d) Patel Enterprises v. ITO [1990] 35 ITD 220 (Ahd.)
(e) ITO v. Lallooji & Sons [1985] 12 ITD 371 (All.)
(f) Ansal Construction Co. v. IAC [1990] 36 TTJ (Delhi) 24
(g) Oswal Woollen Mills Ltd. v. ITO [1987] 27 TTJ (Chd.) 535
(h) Anushree Contractor & Consultants Associates (P.) Ltd. v. Asstt. CIT [1995] 82 Taxman 196 (Delhi) (Mag.)
(i) P.C. Mathew & Sons v. Dy. CIT [1997] 95 Taxman 160 (Cochin) (Mag.)
(j) Dr. P.K. Chopade v. ITO[1982] 13 TTJ (Bom.) 422.
In the light of the above decisions, it is contended that the assessee is entitled for cent-per-cent depreciation on cages in question in terms of first proviso to Section 32(1)(ii) of the Act. It is also made out that, as already mentioned, when two views are possible, the provisions of Section 263 cannot be invoked simply because the Assessing Officer has taken a view favourable to the assessee.
5. The learned Departmental Representative on the other hand, contended that the Assessing Officer has not verified whether the cages in question were purchased separately or enblock. He has not called for various purchase bills referred to by the CIT in his order under Section 263, and the assessment was made in undue-haste, and so, it could be revised under Section 263 in view of the decision of the Apex Court in the case of Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84. He contended that if the Assessing Officer had done proper verification, he would have denied the claim of the assessee for cent-per-cent depreciation on cages, as held by the Hon’ble Karnataka High Court in the case of Pathange Poultry Farm (supra). Any assessment made on incorrect assumption of facts or law is subject to revision under Section 263 in the light of the decision of the Apex Court in the case of Malabar Industrial Co. Ltd. (supra). It may be observed that both the learned Department Representative as well as the learned counsel for the assessee have relied on the very same decision of the Apex Court, i.e., the decision in the case of Malabar Industrial Co. Ltd. (supra), in support of their respective positions/contentions. It is also made out by the learned Departmental Representative that the provisions of Section 263 can be invoked even when an assessment involves an issue of debatable nature, and for this proposition, reliance is placed on the decision of the Hon’ble Gujarat High Court in the case of CIT v. M.M. Khambatwala [1992] 198 ITR 144. In this case, the Hon’ble Gujarat High Court held that the powers under Section 263 are not comparable with the powers of rectification of a mistake under Section 154 of the Act, and so, even though powers under Section 154 cannot be exercised when the issue is debatable, such restriction does not apply to the powers under Section 263. It is also contended that when the assessment order is contrary to a direct decision of a High Court, though not of a jurisdictional High Court and there is no direct decision of any other High Court to the contrary, the CIT is within his rights in invoking the provisions of Section 263, as there is no other way of safeguarding the interests of the Revenue.
6. In reply, the learned counsel for the assessee pleaded that the decision of the Gujarat High Court in the case of MM. Khambatwala (supra) has to be regarded as erroneous in view of the subsequent decision of the Apex Court in the case of Malabar Industrial Co. Ltd. (supra) in which it has been clearly held that where two views are possible, the provisions of Section 263 are precluded.
7. We are of the view that the assessee deserves to succeed. This is not a case where the Assessing Officer has not applied his mind to the issue on hand. Even though he did not discuss the issue in the assessment order, he called for the explanation of the assessee on the question of grant of cent-per-cent depreciation on cages, upon which written submissions of the assessee, a copy of which can be seen at pages 13 to 15 of the assessee’s paper-book filed before us, came to be furnished before the Assessing Officer. Apparently, after considering the submissions of the assessee, the Assessing Officer came to the conclusion that the assessee is entitled for cent-per-cent depreciation in terms of the proviso to Section 32(1)(ii) of the Act. In the circumstances, it cannot be held that the view taken by the Assessing Officer is totally wrong or invalid in law. In arriving at this conclusion, we have considered the decisions cited by the learned counsel for the assessee before us. It is not necessary to discuss all the above cases in this order. We will however refer to some of the important decisions hereunder.
8. In the case of Sri Krishna Bottlers (P.) Ltd. (supra), the Hon’ble A.P. High Court held that bottles and shells used by an assessee, manufacturing and selling soft drinks, constitute plant and that the assessee is entitled to depreciation in respect of such bottles and shells at 100 per cent under first proviso to Section 32(1)(ii). The argument made out in that case was that though such bottles and shells are bought in bulk, each bottle and shell is an entity in itself, and so entitled for cent-per-cent depreciation in terms of proviso to Section 32(1)(ii). Similar is the decision of the Madras High Court in the case of First Leasing Co. of India Ltd. (supra). In that case, assessee claimed cent-per-cent depreciation under first proviso to Section 32(1)(ii) on bottles purchased at a cost of Rs. 44,80,245 for the purposes of leasing out enblock. It was held that each bottle was an independent unit and its use was not dependent on the availability of other bottles, and, therefore, each bottle is entitled for cent-per-cent depreciation under the proviso to Section 32(1)(ii). It has to be noticed that even though the bottles were purchased enblock, it was held that the assessee was entitled for the benefit of the proviso to Section 32(1)(ii).
9. In the case of Oswal Woollen Mills Ltd. (supra), the Chandigarh Bench of the Tribunal held that cent-per-cent depreciation is allowable in terms of Section 32(1)(ii) on fire-extinguishers numbering 24, each costing less than Rs. 750. In the same decision, three inter-com telephones were also held to be eligible to be depreciated at the rate of 100 per cent, even though they are only sub-instruments. In the case of Patel Enterprises (supra), the question that arose for consideration was grant of depreciation in terms of the proviso to Section 32(1)(ii) on chairs installed in a cinema theatre. The chairs in the cinema theatre are fixed to the earth and they are also inter-connected by some other arrangement. It was held that each chair being a separate unit liable to be repaired, replaced or removed without affecting the adjoining chairs, the assessee is entitled for the benefit of cent-per-cent depreciation on chairs in terms of proviso to Section 32(1)(ii). This case comes closest to the issue on hand before us in the present appeal. The cages involved in the case on hand, may also be connected and integrated for the facility of watering, etc. and even though they are so inter-connected, the contention of the assessee is that each cage is a separate unit and is meant to accommodate a specified number of chicks, and so each cage is a separate unit, though they are all fabricated together as mentioned by the CIT in the impugned order. In the other decisions cited by the learned counsel for the assessee, similar views have been expressed in respect of scafoldings and shutterings, planks, casurima poles used for construction business, etc.
10. The question before us is not whether the view taken by the Assessing Officer is correct or not. The question simply is whether two views are possible or not. We do not agree with the learned counsel for the assessee that the present case is distinguishable from that considered by the Hon’ble Karnataka High Court in the case of Pathange Poultry Farm (supra). To our mind, the case of the assessee falls squarely within the ratio of the decision of the Hon’ble Karnataka High Court. The Commissioner, in the impugned order referred to the bills issued by the suppliers of the cages, and from the bills, it is evident that the assessee has bought the cages enblock and bought them duly fabricated into series. So, the cages are utilised together and so, in the light of the functionality test laid down by the Hon’ble Karnataka High Court in the case of Pathange Poultry Farm (supra), possibly, the assessee is not entitled to cent-per-cent depreciation. However, already mentioned, the correctness or otherwise of the decision of the Assessing Officer is not the issue. The only question is whether the view taken by the Assessing Officer is so patently wrong that it has to be held that two views are not possible in the matter. We are convinced that even though the case of the assessee is not distinguishable from that of Hon’ble Karnataka High Court in the case of Pathange Poultry Farm (supra), the view taken by the Assessing Officer cannot be regarded as impossible in the light of the various decisions cited by the learned counsel for the assessee. It may also be mentioned at this juncture, that the judgment of the Hon’ble Karnataka High Court in the case of Pathange Poultry Farm (supra) is dated 18th July, 1994, whereas the assessment order under Section 143(3) revised by the Commissioner through the impugned order is dated 19-4-1993, which means that the Assessing Officer did not have the benefit of the said decision of the Karnataka High Court. We are aware that, as per Clause (b) of Explanation to Section 263(1) which defines the term ‘record’, all records relating to any proceeding under the Act available at the time of examination by the Commissioner, constitute record, and so, the Commissioner, in the present case, was justified in relying on the decision of the Hon’ble Karnataka High Court in the case of Pathange Poultry Farm (supra), though rendered subsequent to the completion of the assessment, for the purposes of initiating action under Section 263. The question however is whether the said decision of the Hon’ble Karnataka High Court in that case shuts out the other view taken by the Assessing Officer in the matter. We are of the view that the view taken by the Assessing Officer in accepting the claim of the assessee for hundred per cent depreciation cannot be regarded as impossible or illegal in the light of the ratio of the decisions cited by the learned counsel for the assessee before us. It also deserves to be noticed that the decision of another High Court cannot be equated to that of the jurisdi6tional High Court in its binding effect. If we go by the view taken by the Commissioner, every time a decision of another High Court (not of jurisdictional High Court) on a particular issue goes contrary to the view taken by the Assessing Officer, there would be occasions for action under Section 263. This does not seem to be in consonance with the principles laid down by the Apex Court in the case of Malabar Industrial Co. Ltd. (supra), to which we shall refer hereunder.
In this view of the matter, we hold that the action of the CIT in revising the assessment order in respect of the claim for depreciation on cages is not justified.
11. The CIT similarly considered the issue of grant of depreciation at 100 per cent on air-water circulators. The relevant observations of the CIT in this behalf are as follows :-
6.2. I have carefully considered the assessee’s arguments and perused the records. It is seen from the bill of M/s. Almonard Pvt. Ltd., dated 11-4-1991 for purchase of 24 air circulators at the rate of Rs. 2,780 each that all these circulators have been put to use in an integrated manner in the poultry farm in controlling and maintaining the temperature conducive to the productivity and health of the birds and therefore normal depreciation is allowable on these air circulators.
Before us, the learned counsel for the assessee pleaded that the air-circulators in question are only industrial fans; and each fan is a separate unit, though a number of fans have been put to use in, what the CIT called, in an integrated manner. The comments we have made in the context of the 100 per cent depreciation on cages hereinabove, hold good in respect of this issue as well. So, even in the context of depreciation on air-water circulators, the impugned order of the CIT under Section 263 cannot be sustained.
12. As already mentioned, the learned counsel for the assessee and the learned Departmental Representative placed reliance on the decision of the Apex Court in the case of Malabar Industrial Co. Ltd. (supra). This is a case where the CIT took action under Section 263 to bring to tax an amount received by the assessee as compensation for delay in payment of consideration, in respect of a rubber plantation owned and agreed to be sold by him. The consideration was to be received in instalments and the purchaser paid further compensation for delay in the payment of consideration. The Assessing Officer did not bring the said compensation to tax on the ground that it represented agricultural income. The CIT held that the amount did not have anything to do with agricultural income, and it was assessable under the head ‘Other sources’. The Apex Court upheld the action of the CIT, and while doing so observed that there was a finding of the Tribunal that the assessee stopped agricultural operations much earlier in November 1982; and that the receipt did not relate to any agricultural operation carried by the assessee. So, the decision of the Apex Court proceeded on certain factual findings given by the Tribunal. At the same time, the Apex Court laid down in unmistakable terms, the following legal propositions-
. . .The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. 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 Income-tax Officer has taken 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. It has been held by this court that where sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue- Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC).
The above principles laid down by the Apex Court do support the stand of the learned counsel for the assessee before us. In this case, the Assessing Officer adopted one of the courses permissible in law, and as such, it is immaterial that such a course resulted in loss of revenue, and the order of the Assessing Officer cannot be regarded as prejudicial to the interests of the Revenue.
13. For the foregoing reasons, we set aside the order of the Commissioner passed under Section 263 and restore the order of the Assessing Officer.
14. In the result, assessee’s appeal is allowed.