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PR Commissioner of Income Tax-1 Versus M/s Vijay Pataka Synthetics

2015 (10) TMI 1091 - GUJARAT HIGH COURT

Disallowance of additional depreciation u/s. 32(iia) on embroidery machine - use of the input and the output remains the same even after doing the embroidery work - whether the embroidery work carried out by the assessee on synthetic fabrics would amount to "manufacture" or "production"? - ITAT allowed the claim - Held that:- In the present case, the assessee carries on embroidery work on synthetic fabrics. When the assessee carries on embroidery work on the synthetic fabric, such synthetic fabr .....

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ercially known as another article. Under the circumstances, the work of embroidery carried on by the assessee would fall within the ambit of definition of "manufacture" as envisaged under section 2(29BA) of the Act. The Tribunal, therefore, did not commit any legal error in holding that the activity carried on by the assessee falls within the ambit of manufacturing activity and thereby the assessee is entitled to avail of the additional depreciation under section 32(1)(iia) of the Act in relatio .....

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ITA No.1886/Ahd/2011 by proposing the following question stated to be a substantial question of law:- "Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in deleting the disallowance made on account of claim of additional depreciation u/s. 32(iia) on embroidery machine of ₹ 74,92,303/- where the use of the input and the output remains the same even after doing the embroidery work ?" 2. The assessment year is 2008-2009 and the relevant ac .....

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abrics on job work basis. The Assessing Officer while disallowing the claim of additional depreciation held that embroidery work does not constitute "manufacturing" or "production" so as to be eligible for additional depreciation. According to the Assessing Officer, the embroidery work done on synthetic fabrics was merely value addition work which adds to the value of synthetic fabrics and should not be regarded as "manufacturing" or "production." Accordin .....

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nce upon the decision of the Tribunal in the case of M/s. Haripriya Processor Private Limited. The revenue carried the matter in appeal before the Tribunal, which dismissed the appeal by placing reliance upon its earlier decision in the case of Haripriya Processors Private Limited (ITAT No.1569/Ahd/2010 dated 8.9.2009) as well as the decision of the Supreme Court in the case of S.S.M Brothers (P) Ltd. v. Commissioner of Income Tax (Central) Madras, 243 ITR 418 (SC). 4. Mr. Sudhir Mehta, learned .....

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manufacture or production of any article of a thing, who are eligible for the benefit under section 32(1)(iia) of the Act and that since the activity performed by the assessee was in the nature of job work only, making value addition on the product already in existence, the Assessing Officer had rightly disallowed the depreciation. It was submitted that reliance placed upon the decision of the Supreme Court in the case of S.S.M. Brothers (P) Ltd. v. Commissioner of Income-tax (Central) Madras (s .....

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einabove, the assessee was engaged in the business of embroidery work on synthetic fabrics on job work basis and claimed additional depreciation under section 32(1) (iia) of the Act to the tune of ₹ 74,92,303/- on embroidery machines. According to the Assessing Officer, embroidery work does not constitute "manufacture" or "production" so as to be eligible for additional depreciation. 7. The question that arises for consideration in the present case is as to, whether the .....

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of the business or profession, the deductions laid down therein shall be allowed. Clause (iia) of section 32(1) of the Act to the extent the same is relevant for the present purpose reads thus: "(iia) in the case of any new machinery or plant (other than ships and aircraft), which have been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual .....

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of his business. The dispute raised is that the embroidery work carried on by the assessee does not amount to "manufacture" or "production" of an article or a thing. The Tribunal has followed the decision of the Supreme Court in S.S.M. Brothers (P) Ltd. v. Commissioner of Income-tax (Central) Madras (supra) wherein it was held that higher rate of development rebate under section 33(1)(b)(B)(i) of the Act is available if the machinery or plant is installed for the production .....

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is therefore, eligible for the development rebate. Under section 33(1)(b)(B)(i) an assessee was entitled to development rebate in respect of machinery or plant installed for the purpose of business of construction, manufacture or production of any one or more articles or things specified in the list in the Fifth Schedule. Therefore, for the purpose of availing development rebate the assessee was required to be engaged in the business of manufacture of any one or more articles specified in the sc .....

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