TMI Blog2016 (3) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of N.C. Budharaja & Co [1993 (9) TMI 6 - SUPREME Court ], bearing in mind the fact that the end product should amount to manufacture or production of an article or thing, the readymix concrete manufactured by the assessee, which is also engaged in the construction activity, cannot be said to be a manufacturing activity. Therefore, answer the question in the negative and in favour of the Revenue by holding that the assessee is not entitled for additional depreciation in respect of machinery used since production of readymix concrete would not amount to manufacture of article or thing. - Decided against assessee - I.T.A. No.25/Coch/2014 - - - Dated:- 20-3-2016 - SHRI D.MANMOHAN, VICE PRESIDENT For The Assessee : Shri R. Krishna Iyer, CA For The Revenue : Shri K.K. John, Sr. DR and Shri M. Anil Kumar, CIT(DR) ORDER U/S. 255(4) OF THE INCOME TAX ACT, 1961 Per D. Manmohan, Vice President: On account of difference of opinion between the Ld. Judicial Member and the Ld. Accountant Member with regard to allowability of additional depreciation on the machinery used by the assessee, the following question was framed and forwarded to the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change of an article is the result of treatment, labour and manipulation. When the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new distinct article, then it can be said that manufacture has taken place. To put it differently, the test to determine whether a particular activity amounts to manufacture is (a) whether new and different articles or goods emerge with distinctive name, use and character, (b) whether the transformation into a new commodity is commercially known as a distinct and separate commodity having its own character, use and name, (c) whether it is the result of a process or several processes. In the background of ratio laid down by various Courts, including the observations made by the Apex Court in the case of N.C. Budharaja Co. (cited supra), the ITAT, Delhi Bench observed that the production of RMC is a manufacturing activity as it has to be carried out in an organized manner with the help of heavy machinery and computer. Its activity is not as simple as mixing of sand, cement etc. by a labourer on the right side. Though, in the common p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. Accountant Member relied upon the decision of the Hon ble Delhi High Court in the case of Bhagat Construction Co. (P) Ltd. 232 ITR 722 wherein the assessee company derived income from construction work including mining work for extracting stones to be used in construction. In the backdrop of the facts of the case, the Court observed that though the assessee might be extracting minerals, such as stones,by carrying out mining operations but the byproduct of such mining operations was not the article or thing in which the assessee was dealing, since the assessee was consuming the minerals in the process of civil engineering works which was the main business activity of the assessee; The by-product of such manufacturing activity would be consumed by the assessee in its building work. 10. Similarly, the Ld. Accountant Member relied on the decision of Hon ble Delhi High Court in the case of CIT vs. Minocha Brothers (P) Ltd., 160 ITR 134 wherein the Court observed that the assessee-company while in the process of doing construction work, was engaged in crafting doors, windows, RCC slabs and so on which did not amount to manufacturing activity. 11. The ld. Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the CIT(A) as well as the Tribunal, was mainly on the ground that the preparation of readymix concrete involves a scientific process by which new product emerges which can be considered as manufacturing activity and therefore, the Transit Mixer, Tata truck and Ashok Leyland Truck on which mixer is mounted should be treated as plant and machinery utilised for manufacture and hence, they should not be considered as road transport vehicles in which event the assessee would be entitled to additional depreciation. When the assessee was specifically asked to point out what is the specialized scientific process involved for production of ready mix concrete, the Ld. Counsel submitted that he is only a Chartered Accountant and is not aware of the procedure. At the same time, he submitted that in the case of YFC Projects (P) Ltd, the Delhi Bench observed that it involves mixing of cement, sand, water etc. and the product is mixed with chemical known as admixture. The final product after mixing, has to be used within four hours of its mixing. This intermediate product or final product is altogether a different product, from the material out of which it was produced and it is known as RMC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. However, he referred to the decision of the Hon ble Supreme Court in the case of India Cine agencies vs. CIT (308 ITR 98) wherein the Bench observed that conversion of jumbo rolls of photographic films into small rolls in desired sizes, amounts to production and also the decision of the Madras High court in the case of CIT vs. Shriram Transport Finance Co. Ltd., 254 ITR 543 wherein it was held that mobile crane was not a road transport vehicle. He also relied upon the following decision in support of his contention that mobile crane is not road transport vehicle (225 ITR 573) (Patna) ( 258 ITR 448) (Mad.) and (281 ITR 297) (Guj.). 16. It deserves to be noticed that the point of difference which was referred to for my consideration is limited i.e., whether the preparation of ready mix concrete amounts to manufacture or production of article or thing . Hence the case law, as to whether the mobile crane is a road transport vehicle or not, is not the subject matter in dispute and hence, it is not necessary to go into that aspect. Thus the case law which is relevant in this context, from the point of view of Ld. A/R, is the decision of the ITAT, Delhi Bench which was relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of construction and repair of buildings (CIT vs. NUC (P) Ltd, 126 ITR 377). He further submitted that the decision in the case of YFC Projects Pvt. Ltd. (cited supra) was rendered on 24.9.2007 and the same was set aside by the Hon ble Delhi High Court and thus, a fresh order came to be passed in 2015 by the ITAT whereas the ITAT, Delhi A Bench, in the case of BSC CIV vs. ACIT (I.T.A. Nos. 1217/Del/2011 and 1752/Del/2011 dated 15-05-2012), considered the same issue exhaustively, running into 90 pages, and at pgs. 81 to 83, the Bench observed that the main ingredients for readymix concrete is aggregate, bitumen mix whereby a new intermediate product emerges and in fact reference was made to the decision of the ITAT Delhi Bench in the case of YFC Projects Ltd. (cited supra) while holding that such process does not amount to manufacture. The Tribunal, by relying upon the decision of the Apex Court in the case of N.C. Budharaja (cited supra), observed that if the assessee s end product does not amount to production of new article or thing, benefit cannot be extended to any intermediatary product. In other words, when the construction of building, etc. would not amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al parlance can be treated as a manufactured product. In the ordinary sense, the production of food materials in a hotel cannot be treated as manufacture. In the same way, the production of ready mix concrete, in the common parlance or commercial parlance cannot be treated as manufacturing activity; As rightly observed by the Hon ble Supreme Court in the case of N.C. Budharaja Co. (cited supra) a statute cannot always be construed with dictionary in one hand and the statute in the other hand. (pg. 204 ITR 434). Regard must also be had to the scheme, context and to the leglislative history of the provision. Having regard to the ratio laid down by the Hon ble Apex Court, bearing in mind the fact that the end product should amount to manufacture or production of an article or thing, the readymix concrete manufactured by the assessee, which is also engaged in the construction activity, cannot be said to be a manufacturing activity. 22. I, therefore, answer the question in the negative and in favour of the Revenue by holding that the assessee is not entitled for additional depreciation in respect of machinery used since production of readymix concrete would not amount to manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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