TMI Blog2017 (8) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of ready mix concrete has been disallowed, and the same is set aside. We restore the order of the Commissioner of Income Tax (Appeals) - 1 in this regard. - Decided in favour of assessee. - Tax Case (Appeal) No.261 of 2017 - - - Dated:- 8-8-2017 - THE HON'BLE MS. INDIRA BANERJEE, CHIEF JUSTICE AND THE HON'BLE MR.JUSTICE M.SUNDAR For Appellant: Mr. S. Sridhar For Respondent: Mr. T. Ravi Kumar Standing Counsel JUDGMENT (Delivered by the Hon'ble Chief Justice) This appeal is directed against the judgment and order dated 08.09.2016 passed by the Income Tax Appellate Tribunal 'A' Bench, Chennai, allowing the appeal of the Revenue being ITA No.829/Mds/2016 relating to the assessment year 2011-2012. 2. The short substantial question of law involved in this appeal is: Whether additional depreciation of 20% on plant and machinery used for production of ready mix concrete under Section 32(1)(iia) of the Income Tax Act, 1961 could have been disallowed when the assessee was manufacturing ready mix concrete for the purpose of sale apart from use in construction of buildings and was being levied Central Excise duty on such manufacture? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT v. N.C.Budharaja Co (204 ITR 412) (SC). He has also relied on the following decisions - (i) Builders Association of India v. UOI and others (209 ITR 877) (SC) (ii) Ansal Housing Constructions Ltd. (320 ITR 420) (Delhi HC) (iii)Jayprakash Associates P Ltd. (155 Taxman 392) (Allahabad HC) (iv)Mewara Constructions (119 Taxman 225) (M.P. HC) 10. Assailing the action of AO, the appellant has reiterated the arguments made at the assessment stage. Primarily the appellant relied upon its own case for the AY 2009-10, wherein the issue was decided in favour of the appellant by the then CIT (A) (Central-II) vide order in ITA No.373/13-14 dated 25.11.2013. 11. I have carefully considered the facts in issue, the view taken by the AO, the arguments advanced by the appellant and material on record. Similar issue was considered by my predecessor in the case of the appellant for the AY 2009-10 in ITA No.373/13-14 dated 25.11.2013. Since the facts obtaining in the case of the appellant in the appeal under consideration are same. I do not find any reasons to take different view in the matter as taken in AY 2009-10. Respectfully following the same, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute in the other hand. (pg 204 ITR 434). Regard must also be had to the scheme, context and to the legislative 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 ready mix concrete manufactured by the assessee, which is also engaged in the construction activity, cannot be said to be a manufacturing activity. 11. Being aggrieved by the disallowance of its claim to additional depreciation in respect of the machinery used for production of ready mix concrete, the appellant-assessee has filed this appeal before us. 12. Section 32(1)(iia) of the Income Tax Act, 1961 provides as follows:- Depreciation 32. (1) In respect of depreciation of - (i) buildings, machinery, plant, or furniture, being tangible assets; (ii) know-now, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of ready mix concrete did not constitute manufacture. He argued that the assessee was in construction business. It is, however, not in dispute that the Assessing Officer himself observed and held that the nature of business of the assessee was civil construction, mainly industrial construction, construction of IT Parks and Hotels and manufacture of ready mix concrete for sale to various construction sites. 16. In the assessment order, the Assessing Officer has quoted a note on additional depreciation in respect of machineries used for production of ready mix concrete, which stated that the assessee was engaged in manufacture of ready mix concrete for which the assessee procured necessary raw materials such as sand, crushed stone, cement fly-ash and gypsum. These were poured into the batching plant in the desired proportion and properly mixed by using water. The product produced was altogether a different product from the materials out of which it was produced. The product produced is known by name ready mix concrete and was sold as such in the market. 17. The Assessing Officer, rejected the claim on reference to the decision of the Supreme Court in Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. 23. There can be no doubt that preparation of ready mix concrete results in transformation of stone chips, sand, cement, flyash and other articles into a new and distinct object having a different name, character and use. Once the ready mix concrete is prepared, the ingredients used lose their original character and can never be restored to their original character. It is not in dispute that the appellant-assessee is registered under the Central Excise Act and has been paying inter alia excise duty for manufacture of concrete ready mix, which is sold by the appellant-assessee to other civil contractors. 24. The judgment and order of the learned Tribunal cannot be sustained to the extent that the additional depreciation claimed by the appellant-assessee on the machinery used for manufacture of ready mix concrete has been disallowed, and the same is set aside. We restore the order of the Commissioner of Income Tax (Appeals) - 1 in this regard. 25. The appeal is accordingly allowed, and the question formulated is answered against the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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