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2015 (10) TMI 589 - ITAT AHMEDABAD

2015 (10) TMI 589 - ITAT AHMEDABAD - TMI - Conversion of jumbo rolls into small sizes - whether conversion amounts to manufacture or production, eligible for deduction under sec. 32AB or deduction under sections 80-HH and 80-I? - Held that:- Hon'ble Supreme Court in M/s India Cine Agencies & Computer graphics Ltd. Versus CIT [2008 (11) TMI 15 - SUPREME COURT] held that this activity amounts to manufacture or production. Thus, we think it is not necessary to recapitulate and recite all the decisi .....

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hysically as well as commercially. The Hon'ble Court also explained broader test to determine whether manufacture is there or not, it is propounded that when a change or series of changes are brought out by application of processes which take the commodity to the point where, commercially, it cannot be regarded as the original commodity but is, instead recognized as a distinct and new article that has emerged as a result of the process.

Thus, in our opinion, the moment the assessee ha .....

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ufacture. In view of the above discussion, we do not find any merit in the appeal of the Revenue. - Decided in favour of assessee. - ITA No.1107/Ahd/2012, CO No.154/Ahd/2012 - Dated:- 21-8-2015 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Revenue : Shri Pravin Kumar, DR For The Assessee : None ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: The Revenue is in appeal before us against the order of the ld. CIT(A)-IV, Surat dated 16.2.2012 passed for Asstt.Year 2 .....

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nd notice under section 143(2) was issued on 8.8.2009 which was duly served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed depreciation of ₹ 60,87,545/- on the plant & machinery of having value of ₹ 1,69,46,773/-. The assessee had calculated the depreciation at normal rate of 15% plus additional depreciation at 20%. This calculation has been made as under: Total depreciation as per computation Less: Depreciation where no addl. .....

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ue. Thus, the embroidery work does not constitute any manufacturing activity and assessee is not entitled to for additional depreciation. The ld. AO in this way disallowed the claim of ₹ 32,89,944/-. 6. On appeal, the ld. CIT(A) has allowed the claim of the assessee by observing as under: 2. All the grounds of appeal pertain to just one grievance of the appellant, i.e. not admitting claim of additional depreciation u/s. 32(l)(iia) of ₹ 32,89,944/- on the ground that the appellant was .....

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t the embroidery on fabric amounts to manufacturing process and eligible for additional depreciation u/s. 32(l)(iia). It was further submitted that the issue is covered by the decision of the IT AT, Ahmedabad by its decision in the case of M/s. Aswani Industries, Surat (213/Ahd/2010, dated 29.10.2010) and Haripriya Processors Pvt. Ltd. (1569/Ahd/2010, dated 08.09.2009) wherein it was held that embroidery work done was an activity of manufacturing and entitled to additional depreciation u/s. 32(l .....

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ed above. Respectfully following the above decisions, it is held that the appellant is entitled to additional depreciation u/s. 32(l)(iia). The A.O. is therefore directed to allow the claim of additional depreciation. This ground is allowed. 7. With the assistance of learned DR, we have gone through the record carefully. Section 32(1)(iia) of the Income Tax Act provides that in the case of any new machinery or plant, which has been acquired and installed after the 31st day of March, 2005, by an .....

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depreciation. As far as the applicability of this section is concerned, that has not been disputed by the parties. The dispute is whether embroidery work carried out by the assessee amounts to manufacturing activity or not. 8. The expression "manufacture" has been defined in section 2(29)(B)(a) which read as under: "(29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation o .....

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ut before the Hon'ble Supreme Court also and the Hon'ble Court has explained both these expressions in detail. A reference to the decision of Hon'ble Supreme Court in the case of CIT vs. M/s. Arihant Tiles & Marbles Pvt. Ltd. reported in 320 ITR 79, India Cine Agency Vs. CIT reported in 308 ITR 98, CIT vs. Sesa Goa Ltd. reported in 271 ITR 331 and to the following decision of Hon ble Gujarat High Court can be made : (a) CIT vs. Neokarna reported in 137 ITR 879 (Bombay) (b) CIT vs .....

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nd all other decisions on the point which contemplate the meaning of expression "manufacture" as well as "production". The relevant discussion made by the Hon'ble Court reads as under: "2. As noted above, the core issue is whether activity undertaken was manufacture or production. 3. In Black's Law Dictionary (5th Edition), the word "manufacture' has been defined as, "the process or operation of making goods or any material produced by hand, by mach .....

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from which the thing or product is manufactured may necessarily lose its identity or may become transformed into the basic or essential properties. (See Dy. CST (Law), Board of Revenue (Taxes) Coco Fibres [1992] Supp. 1 SCC 290). 12. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made t .....

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here commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. The .....

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to determine whether a particular activity amounts to "manufacture' or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted. Etymologically the word 'manufacture' pr .....

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x x x x 15. In this case, assessee was carrying on business of conversion of Jumbo Rolls of photographic films into small flats and rolls in desired sizes. It claimed deduction under sec. 80-HH and 80-I as well as investment allowance under sec. 32AB. The controversy arose whether conversion of jumbo rolls into small sizes amounts to manufacture or production, eligible for deduction under sec. 32AB or deduction under sections 80-HH and 80-I of the Income-tax Act, 1961. Hon'ble Supreme Court .....

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