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2015 (4) TMI 673 - ITAT DELHIDeduction u/s 80IC - Deduction denied on account of job work - No separate accounts prepared for manufacturing activity and job works - Depreciation on passive use of assets - Depreciation disallowed on the basis of individual assets in block of assets - Held that:- An industrial unit manufacturing or producing articles or things cannot be denied exemption u/s 80-IC merely on the ground that it is deriving profit by carrying out job work. Job work also tantamount to manufacture if otherwise the conditions required to classify the activity carried out by the undertaking result in manufacture of an article or thing. In Warren Laboratories (P) Ltd. [2005 (5) TMI 548 - ITAT MUMBAI],it has been held that Clauses (a) and (b) of section 80IC(2) does not say that the assessee company would be entitled to deduction, if it manufactures or produces articles or things, exclusively belonging to it. Therefore, when the goods belonging to others are manufactured by the assessee company and it derives a profit by way of job work charges, it is entitled to deduction under section 80IC. There is no requirement under law for maintaining separate books of account for manufacturing and non-manufacturing activities of an undertaking. Where Assessee Company carries on both manufacturing and non-manufacturing activity in its undertaking the assessing officer ought to have allowed deduction under section 80IC of the Act on some logical, rational and scientific basis as all the applicable conditions for allowability of deduction under section 80IC of the Act have been met by the said unit of the assessee company. It appears that there is no denial of deduction u/s. 80-IC in case of manufacturing activities in the nature of job works, work contract etc. In the background of the aforesaid detailed discussions and precedents relied upon by the Ld. CIT(A) in his order as well as by the assessee, as aforesaid, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting the grounds no. 1, 2 & 3 filed by the Revenue in its Appeal. We find that the Ld. CIT(A) has rightly held that the receipts of the unit has direct nexus with the operations of the unit and being operational income from main business activity of the unit, it would be eligible for deduction u/s.80IC of the IT Act. The assessee was required to keep its unit in ready for production stage at all times and the fixed minimum" guarantee received by it was not possible without keeping the plant of the undertaking in "ready for production stage" throughout the year. The Hon'ble Delhi High Court in the case of Capital Bus Service Pvt.Ltd.[1980 (2) TMI 69 - DELHI High Court] has recognized that even passive use of assets is entitled for depreciation. In Sanghvi Movers (P) Ltd. [2007 (8) TMI 401 - ITAT PUNE-A], it was held that depreciation is to be allowed even for passive use, i.e., while it is kept ready for use. Thus, the income derived by the assessee has sufficient nexus and is incidental to the main business of the industrial undertaking and is, therefore, eligible for deduction. We find that Ld. CIT(A) has rightly held that the Written Down Value of each block of assets is a single figure and due to this fact and because of the method of calculating WDV for the block of assets, it is not possible to work out the WDV for individual assets falls within the block of assets. We also find that this view is also buttressed by the finding of the Hon'ble Delhi High Court in the case of Bharat Alumunium Co. Ltd. [2009 (10) TMI 505 - DELHI HIGH COURT] , wherein, it was held that once a particular block of assets falls within the block, it is added to the Written Down Value and depreciation is to be allowed on the block. The individual asset loses its identity and the question whether an individual asset is put to use in a particular year or not is irrelevant inasmuch as the requirement of law is to establish the use of the block of assets and not the use of particular asset. - Decided against the revenue.
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