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2022 (12) TMI 279 - AT - Income TaxDisallowance of additional depreciation u/s 32(1)(iia) - appellant has not fall within the purview of manufacturing in term of section 2(29BA) - Whatever process is applied by the assessee, the oil remains oil and the requirements of “manufacture” as defined in section 2(29BA) are not satisfied? - HELD THAT:- We observe certain facts from the submission of assessee made before lower authorities and also argued before us, which stand uncontroverted by revenue. Firstly the assessee is doing two distinguishable types of activities, viz. (i) purchasing oil from local/overseas market and reselling as such, which is a “trading activity” and (ii) purchasing raw-oil, applying technical-processes, converting the same into finished-oil of high nutritional value of different qualities/brands, which is a “manufacturing activity”. The proportion of “manufacturing activity” in the year was 98.93%. Secondly, the flow-chart of “manufacturing activity” depicts various step-by-step activities from purchase of raw-oil - storage of oil – analytical observation – segregation of oil according to quality / nutritional value – mixing for enhancing quality / nutritional value – lastly packing in jars/bottles of different brand names and qualities. Thirdly, the whole process requires application of labour, machinery and analytical lab. Fourthly, the chemical composition is changed in such a way that nutritional-values are enhanced and the finished product becomes edible for a longer period. Therefore, the final product is a commercially, physically and chemically different. Fifthly, a very important factor that the assessee has been consistently regarded as “manufacture” by various Government Department and Agencies. The process undertaken by the assessee have been treated as manufacture under Excise Act and allied tax laws. These factors clearly indicate that the assessee’s case falls within the scope of “manufacture” as defined in sub-clause (b) of section 2(29BA) i.e. “bringing into existence of a new and distinct object or article or thing with a different chemical composition” or alternatively it qualifies to be treated as “production”. Hence the assessee is eligible for additional depreciation. Vital fact, which is not disputed by revenue, that the assessee is purchasing plastic granule/raw material and manufacturing packing material therefrom such as jar/pouches/bottles make the assessee fully eligible for “additional depreciation”. It is very much clear that the assessee is eligible for “additional depreciation”. Therefore, we uphold the claim of additional depreciation as made by assessee and direct the Ld. AO to allow the same. Appeal of assessee is allowed.
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