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2015 (6) TMI 942 - ITAT MUMBAI

2015 (6) TMI 942 - ITAT MUMBAI - TMI - Disallowance of Additional depreciation - business of the assessee involves carrying out piling works - business of manufacture or production of an article or thing or not - construction contracts - Held that:- It is in the common knowledge of everyone that, in civil construction contracts, "concrete slabs" are produced separately and they are then fitted at the required places. Does it mean that the civil contractor is manufacturing or producing the "Concr .....

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t place. Ultimately the assessee is executing his contract work of piling and the new machinery would enable him to complete the work fast, since the assessee could carry out boring work separately and the prefabricated piles could be prepared prior to boring work also. As observed earlier, it is not the case of the assessee that it is producing the prefabricated piles and selling them to outsiders. Hence, we are of the view that the assessee cannot be considered to be an assessee engaged in the .....

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confirming the disallowance of Additional depreciation claimed by the assessee. 2. The assessee is engaged in laying pile foundation on job work basis, which are required in construction activities. During the year under consideration, the assessee purchased new machinery named HR-180 Piling Ring and related accessories. Generally piling work is done at the site itself by digging bores of required sizes and erecting concrete pipes inside the bore. The new machinery enabled the assessee to fabri .....

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ferring to the definition of the term "manufacture" given in sec. 2(29BA) of the Act, contended that the pre-cast or pre-fabricated piles manufactured by using the new machinery results in manufacture of new article or thing. 3. The AO took the view that a "Pile" is constructed and it is not manufactured or produced. Accordingly the AO, by placing reliance on the decision of Hon'ble Supreme Court in the case of CIT Vs. N.C. Budharaja & Co. & Ors (204 ITR 412), hel .....

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taken by it during the year under consideration, i.e., the Ld CIT(A) noticed that the assessee has carried out piling works under the conventional method only during the year under consideration. Accordingly, without going into the merits of the contentions of the assessee, the Ld CIT(A) held that the question of granting additional depreciation does not arise. Aggrieved, the assessee has filed this appeal before us. 5. The Ld A.R invited our attention to following observations made by the Hon&# .....

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ontended that the pre-fabricated piles squarely falls in the definition of the term "manufacture". He further submitted that the assessee has started manufacturing and using the prefabricated piles in the succeeding year and in support of the same he submitted that the assessee has realised a turnover of ₹ 1.34 crores by using the MS Liner piles. Accordingly he submitted that the machinery was ready to use during the year under consideration and hence the AO has allowed normal de .....

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ot be said to have engaged in manufacture or production of any article or thing. Further the assessee has not used the machinery during the year under consideration. 7. We have heard the parties and perused the record. Since the issue revolves around the provisions of sec. 32(1)(iia), we feel it relevant to extract the same below:- "(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an .....

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w machinery was capable of preparing the piles in some other place and the said prefabricated piles could be brought to the project site and they can be fitted into the bore. Since the machinery enabled the assessee to produce or manufacture pre-fabricated piles, it has contended that the pre-fabricated piles involve production or manufacture of an article or thing. Accordingly, it was claimed that the assessee is eligible for additional depreciation. 8. However, a careful perusal of the provisi .....

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ess of piling would form part of construction activity and hence the decision rendered by the Hon'ble Supreme Court in the case of N.C. Budharaja (supra) would squarely apply to it. The Ld A.R contended, by referring to some of the observations made by the Hon'ble Supreme Court, that the Hon'ble Supreme Court did not decide about the case of manufacturing of prefabricated piles. A reference to the relevant observations of the Hon'ble Supreme Court, which is extracted above, would .....

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