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ACIT, Circle-2 (1) , Guntur Versus M/s. Rahaman Khan Tobacco Enterprises Pvt. Ltd.

2017 (10) TMI 531 - ITAT VISAKHAPATNAM

Eligibility for claim of depreciation - AO clearly mentioned that the activity of the assessee is re-drying and threshing tobacco for trading purpose. The raw material and the end product are tobacco only - Held that:- We find that the facts of this case are similar to the case already been considered by the coordinate bench of the tribunal and therefore by following the decision of the coordinate bench of the tribunal in the case of Maddi Lakshmaiah & Co. Ltd. (2017 (10) TMI 476 - ITAT VISAKHAP .....

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by : Shri K. Tirumala Rao - CA. Department By : Shri Y. Sesha Srinivas - Sr.DR ORDER Per V. Durga Rao, Judicial Member This is an appeal filed by the revenue against the order of Commissioner of Income Tax (Appeals)-1, Guntur, dated 30/03/2016 for the Assessment Year 2011-12. 2. Facts of the case, in brief, are that assessee-company is deriving income from tobacco processing and trading, filed its return of income by admitting total loss of Rs. 8,56,40,672/-. The return field by the assessee was .....

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s some processing activity, no new and distinct object or article having a different name, chemical composition or integral structure is produced by the process carried out by the assessee. Therefore, the Assessing Officer was of the opinion that the activity carried out by the assessee does not amounting to manufacturing activity and, accordingly, the claim made by the assessee was disallowed. 3. On appeal, the ld. CIT(A) by following the decision of the Hon'ble Madras High Court in the cas .....

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s of purchasing of raw-tobacco and processing and selling the same, filed ROI for the A.Y. 2011-12. on 30.09.2011, admitting total income (loss) of ₹ 8,56,40,672/- and scrutiny assessment was completed on 18.02.2014 computing the total income (loss) at ₹ 2,40,27,030/-. While doing so, the AO has disallowed the additional depreciation to the extent of ₹ 5,93,23,320/- on plant and machinery. AO. in the impression that the activities of the assessee company cannot be considered as .....

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drying of tobacco, trading of tobacco'. As per I.T. Act, 1961 sec,2(29BA) "manufacture" with its grammatical variations, means a change in a non-living physical object or article or thing:- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral struc .....

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er processing the raw Virginia flue-cured tobacco converted it into tobacco which is a commercially different commodity. Conversion of the Virginia flue-cured tobacco into tobacco would, be a manufacturing activity. The assessee was entitled to special deduction us 80HH. The claim of additional depreciation was not allowed as per the provisions of section 32(iia) of the I.T. Act. Thus, if drying and threshing of tobacco could be shown as manufacturing, then there should not be any problem for th .....

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beans was a manufacturing activity and the appellant was, therefore, entitled to the investment allowance under sec.32A. Though the Supreme Court of India has rendered the judgment regarding the allowability of investment u/s.32(iia) of the I.T.Act, applying the same analogy that the additional depreciation claim made by the assessee has to be allowed. In view of the detailed discussion of the facts and circumstances of the case and various court judgments, the assessee is entitled for addition .....

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Co. Ltd. in ITA No. 422/VIZ/2012, by order dated 05/05/2017. 6. On the other hand, learned Departmental Representative relied on the order of the Assessing Officer. 7. We have heard both the sides, perused the material available on record and orders of the authorities below. 8. In the assessment order, the Assessing Officer clearly mentioned that the activity of the assessee is re-drying and threshing tobacco for trading purpose. The raw material and the end product are tobacco only. Therefore, .....

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material on record, we find that the A.O. has disallowed additional depreciation claimed by the assessee, on the ground that the activity of drying and threshing of tobacco does not amount to manufacture which is eligible for additional depreciation under the provisions of section 32(iia) of the Act. The CIT(A) by following the decision of Hon ble Madras High Court, in the case of CIT Vs. Premier Tobacco Packers Pvt. Ltd. (2006) 284 ITR 222, held that drying and threshing of tobacco leaves is ma .....

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e the claim of additional depreciation was not allowed as per the provisions of section 32(iia) of the Act. Thus, if drying and threshing of tobacco could be shown as manufacturing, then there should not be any problem for the AO to accede to the request of the appellant. In this context, I am reminded of the case of CIT Vs. Premier Tobacco Packers (P), reported in (2006) 284 ITR 222 (Mad), wherein the same question of whether drying and threshing of tobacco amounts to manufacturing activity? An .....

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Tribunal, which has confirmed the order of the CIT(A) following its earlier order on which has confirmed the order of the CIT(A) following its earlier order on the ground that the appellant s activity falls within the purview of the manufacture or production and dismissed the appeal of the revenue. Aggrieved by the said order of the Tribunal, the Revenue has referred the above matter and raised the substantial questions of law that whether, in the facts and circumstances of the case, the Tribun .....

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