TMI Blog2016 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided in favour of assessee. - ITA Nos. 1674/Hyd/2011 & 938/H/12014 - - - Dated:- 30-3-2016 - Shri D. Manmohan, Vice President And Shri S. Rifaur Rahman, Accountant Member For the Petitioner : Shri P. Chiranjeevulu For the Respondent : Shri M. Sitaram ORDER Per S. Rifaur Rahman, A. M. Both these appeals are preferred by the assessee against the orders of the learned Commissioner of Income-tax(Appeals) IV and VII, Hyderabad, for the AYs 2008-09 and 2009-10. As identical issues are involved in both these appeals, they were clubbed and heard together and, therefore, for the sake of convenience we find it convenient to dispose of these appeals by a common order. 2. The assessee is a company engaged in the business of execution of contract works Viz., development and execution of infrastructure projects (water supply/sewerage projects, water treatment plants and plumbing stations) awarded to it by various central/state govt. agencies, local bodies and private bodies in the country. The assessee also set up a separate unit for manufacturing pipes, which was utilized for captive consumption in contract business as well as sold to outsiders also. The above m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erving as under: (The running no. of paras are not sequential, we have extracted this para from paper book at page 31 of CIT(A) s order.) 10.1 In the case of the appellant however it can be seen that the appellant is engaged in the business of contract works for development and execution of Infrastructure projects. Obviously, this does not amount to any manufacturing activity. As regards the claim that it had also manufactured Pipes during the year, it is not disputed that the pipes were being manufactured by it mainly only its captive consumption. Therefore, even if any part of the pipes so manufactured was sold of during the year or even Sales Tax on was paid, such sales cannot lead to the conclusion that the appellant had started any independent business of manufacturing pipes, which was an additional and different business of the appellant. Accordingly, I am of the view that the case law relied upon by the appellate proceedings or the arguments raised by the learned representative do not help the cause of the appellant on this issue. Therefore, the appellant fails at the threshold level itself, as it was not the existing business of the appellant to manufacture any article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Machinery and is engaged in the business of manufacture or production of an article or thing. 5.1 It was further stated that Clause (iia) to section 32 (1) was introduced in the Act with a specific purpose / object of providing relief to the assesses who makes investment in new plant and machinery. 5.2. It was stated that the decision rendered by the Honorable ITAT Mumbai Bench (E) in Stefon Constructions Pvt ltd Vs. Commissioner of Income Tax-7, Mumbai reported in (2016) 65 Taxmann.com 140 (Mumbai Tribunal) relied by the Learned Departmental Representative cannot be made applicable to assessee s case. In the above case, the Assessee is using the pre-fabricated piles produced by it in its business of executing the piling works and was not selling them to other contractors or owners. In the assessee's case, the Assessee is manufacturing pipes and not only using the manufactured goods in the execution of works but also selling them to other Contractors. 5. 3 It was stated that in fact the appellant in addition to his business of contract has a separate manufacturing unit for pipes. The products are used in the works contracts wherein one of the condition is also to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the additional wind mills, both prior to as well as after the installation of the additional wind mills, the assessee was using wind energy for generating power for its capitative consumption apart from selling the surplus power generated to the Tamil Nadu Electricity Board. As far as application of s. 32(1)(iia) of the Act is concerned, what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after 31st March, 2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed upto 31st March, 2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a wind mill has nothing to do with the power industry, namely, manufacture of oil seeds, etc. is totally not germane to the specific provision contained in s. 32(1)(iia) of the Act. In the above judgment, the Hon ble Court has not opined anyt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thus was entitled to claim depreciation at 40 per cent instead of 30 per cent. The AO, however, allowed the depreciation at the higher rate of 40 per cent. The CIT in exercise of power under s. 263 opined that the correct rate to be applied in such case was only the regular rate of 30 per cent of depreciation and not the extra rate. Consequently, the order was held erroneous and prejudicial to the interests of the Revenue. 24. The Tribunal upturning the order of the CIT held that the assessee is entitled to the higher rate namely at 40 per cent and set aside the order of the CIT. The Revenue s application under s. 256(1) for referring the question of law arising from the order of the Tribunal to the High Court of Kerala was rejected by the Tribunal. On the application under s. 256(2) of the IT Act, 1961, the High Court rejected the application by holding that the Tribunal has rightly rejected the contention. It held that the ambulance van is kept by the assessee for the purpose of being used on hire and it is so plied. The plying of the ambulance van on hire itself constitutes the business of the assessee though it may be incidental to the running of the hospital. It has a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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