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2010 (1) TMI 880

Whether production of ready mixed concrete (RMC) amounts to manufacture - Additional depreciation - assessee to claim additional depreciation under section 32(l)(iia) of the Act - mixing of four products in prescribed ratio would result a different identifiable product which cannot be reconverted to its original shape. Hon'ble Supreme Court in the case of India Cine Agencies (2008 -TMI - 31532 - SUPREME COURT ) has considered cutting of a jumbo films rolls into small piece of films a manufacturing activity. - Held that:- Revenue Authority have erred in holding that assessee is not carrying out any manufacturing activity. Assessing Officer directed to allow additional depreciation on machinery used for the production of ready mixed concrete. - Disallowance of purchases - net profit in terms of percentage is almost double than the previous year - Assessing Officer was unable to point out a single defect in its books of account. Merely non-filing of confirmation from two suppliers, it cannot be held that assessee has not received the goods from these persons and the credit balance in the shape of sundry credit appearing in the books of account is unaccounted money of the assessee. The .....

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pany is altogether a different product from the material out of which it was produced. The product produced is known by a different product name and is bought and sold as distinct product from the raw material. The raw material once mixed cannot be reconverted into its original shape. Thus, assessee-company was carrying out manufacturing activity and entitled to the benefit available under section 32(l)(iia) of the Act on the new plant and machinery purchased during the year. In support of its contention, it has relied upon the decision rendered in the case of CIT v. Premier Tobacco Packers (P.) Ltd. [2006] 284 ITR 222 (Mad.) wherein it was held that the word manufacture has to be understood as in common parlance. It was also explained before the Assessing Officer that if the change made in the article results in a new and a different article, then it would amount to manufacturing activity. The Assessing Officer did not accept the contention of the assessee. He made a reference to the decision of Hon ble Supreme Court in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 , Singh Engg. Works (P.) Ltd. v. CIT[1979] 119 ITR 891 (All.) and other number of decisions. On the st .....

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actured according to the requirements of the buyers. There is different ratios of sand, cement, flyash to the requirement for different grade. The cement coming into water leads to a chemical reaction. The cement contains calcium oxide which mixed with the water is converted into calcium hydro oxide. Once R.M.C. is prepared, it cannot be sagrated in sand, cement and concrete. The assessee is supplying R.M.C. to buyers and delivers the same at buyers site of construction. It is not engaged in the construction activity. He further contended that Learned Revenue Authority below have erred in placing their implicitly reliance on the decision of Hon ble Allahabad High Court in the case of Singh Engg. Works (P.) Ltd. (supra). In that case, deduction under section 80-1 was allowed on the process of the goods. In the case of assessee, the chemical reaction of cement takes place and, therefore, it is to be construed that a new commercially known product is produced. The learned counsel for the assessee putting reliance upon the decision of Hon ble Supreme Court in the case of India Cine Agencies v. CIT [2009] 308 ITR 98 , contended that conversion of jumbo rolls of photographic films into s .....

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and Sewerage (supra). The assessee has also placed on record copy of BIS standard for concrete mixing material at pages 16 to 38 of the paper book which is contained various mathematical formulas and technical specification for demonstrating the method of concrete mixed design. According to the assessee, these standard do indicate that preparation of R.M.C. is not as simple as construed by the learned CIT (Appeals). 6. We have considered the rival contentions and gone through the records carefully. Hon ble Supreme Court in the case of India Cine Agencies (supra) has considered various judgments of Hon ble High Court as well of Hon ble Supreme Court, while construing the meaning of expression, manufacture and production. Hon ble Court has also considered the judgment in the case of N.C. Budharaja and Co. (supra) which has been relied upon by the Assessing Officer. The Hon ble Court has considered the dictionary meaning of expression manufacture as well as how this term has been construed and expounded by the Courts in various judgments. The authoritative observations of the Hon ble Court are worth to note for understanding the meaning of word manufacture : 2. As noted above, the co .....

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ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture-Collector of Central Excises. Rajasthan State Chemical Works[1991]4 SCC 473. 5. Manufacture is a transformation of an article, which is commercially different from the one, which is converted. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point, thus, is that in manufacture something is brought into existence, which is different from that which originally existed in the sense that the thing produced is by itself a commercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article-Saraswati Sugar Mills v. Haryana State Board [1992] 1 SCC 418. 6. The prevalent and generally accepted test to ascertain that there is manufacture is whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new art .....

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per the ratios of Hon ble Supreme Court s decision then its case is on a better footings. Therefore, we are of the opinion that learned Revenue Authority have erred in holding that assessee is not carrying out any manufacturing activity. We allow the first issue raised by the assessee and pleaded in ground Nos. 3 to 5. We direct the Assessing Officer to allow additional depreciation on machinery used for the production of ready mixed concrete. 8. In the next ground of appeal, grievance of the assessee relates to addition of Rs. 6,64,521 and Rs. 4,04,012. The assessee had purchased sand from one Subhash Chand and Vishal Enterprises. Assessing Officer on scrutiny of the accounts found that sand of Rs. 6,64,521 was purchased from Subhash Chand on various dates during the year and he paid Rs. 2,61,700 on two dates. Similarly, sand of Rs. 4,04,012 was purchased from Vishal Enterprises. Assessing Officer had issued notice under section 133(b) to Subhash Chand R/o Village Navrangpur (Hr.). The notice was returned back with the remarks not known . Assessing Officer has disallowed the claim of the assessee on the ground that assessee failed to file confirmation from these persons in support .....

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