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2017 (10) TMI 531

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..... assessee is eligible for additional depreciation as per the provisions of section 32(iia) of the Act, accordingly we direct the Assessing Officer to allow additional depreciation claimed by the assessee. - Decided against revenue. - ITA No. 333/VIZ/2016 - - - Dated:- 6-10-2017 - Shri V. Durga Rao, Hon ble Judicial Member And Shri D.S. Sunder Singh, Hon ble Accountant Member Assessee 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 .....

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..... sment order, written submissions filed by the assessee and the case laws relied by the assessee. The assessee M/s. Rahaman Khan Tobacco Enterprises Pvt. Ltd, is in the business 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 manufacturing activity and disallowed the claim of additional depreciation .....

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..... o 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 the AO to accede to the request of the appellant. In this context, l am reminded of the ease 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? And it was answered In favor of the a .....

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..... ment 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, the Assessing Officer has disallowed the claim of the assessee for depreciation. The coordinate bench of the tribunal in the case of Maddi Lakshmaiah Co. Ltd. (supra) has considered the issue by following the decision of the Hon'ble Madras High Court in the case of Premier Tobacco Packers Pvt. Ltd. (supra), allowed depreciation claimed by the assessee. For the sake of convenience, the relevant portion of the order is extracted as under:- 18. Having heard both the sides and considered material on record, we find that the A.O. .....

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..... ppellant. In this case the appellant is engaged in the activity7 of processing tobacco for others, which is known as thrashing. In the return filed, entire income was claimed deductible under section 80HH, as its activity is manufacturing or production. The AO disallowed the claim. But on appeal, the CIT(A) following the earlier order of the Tribunal, allowed the appeal and answered the issue in favour of the appellant. Hence, the Revenue went in appeal to the 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 o .....

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..... g of tobacco leaves amounts to manufacture, which is eligible for additional depreciation as per the provisions of section 32(iia) of the Act, accordingly directed the A.O. to allow additional depreciation claimed by the assessee. 9. 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. (supra) and also by following the decision of the Hon'ble Madras High Court in the case of Premier Tobacco Packers Pvt. Ltd. (supra), we hold that assessee is eligible for additional depreciation as per the provisions of section 32(iia) of the Act, accordingly .....

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