TMI Blog2016 (9) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... e is allowed for statistical purpose. Additional depreciation on Plant and Machinery disallowed - no manufacturing activity - Held that:- We perused the order of ld. Assessing Officer and activity of the assessee company engaged in the Business of manufacturing of readymix concrete and once the raw material is mixed which cannot be reconverted in shape. Hon’ble Apex Court in the case of CIT vs. N.C. Budharaja & Company (1993 (9) TMI 6 - SUPREME COURT) has held that readymade mixed concrete cannot be in the nature of manufacture - decided in favour of revenue Claim of deduction under Section 80-IA in respect of windmills - contention of the Department before the Tribunal that the Revenue has not accepted the judgment of Madras High Court and an appeal has already been filed along with Special Leave Petition and the same is pending before the Apex Court - Held that:- This Tribunal is of the considered opinion that mere pendency of Special Leave Petition before the Apex Court cannot be a reason to take a different view. The judgment of Madras High Court is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. Therefore, the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Court in the case of Builders Association of India vs. UOI reported in 209 ITR 877 (SC) and the Allahabad High Court's decision in the case of Agra construction Corporation reported in 146 Taxman 31 which are favourable to revenue . 3.5 The learned C1T(A) ought to have appreciated the fact that the on similar issue for A.Y.2009-10 in the assessee's own case, the department has filed appeal before the Hon'ble High Court. Since the issue has not reached finality, filing further appeal is necessitated on this issue. 4.1 The learned C1T(A) erred in allowing the deduction u/s.80IA of the Act. 4.2. The learned C1T(A) erred in not appreciating the fact that the loss on account of depreciation on windmills in earlier years. had to be set off notionally against the deduction as per Section 801A(S) as per the Special Bench decision of Ahmedabad Tribunal in the case of M/s.Goldmine Shares Finance Private Ltd (2008) 113 1TD 209. 4.3 The learned CIT(A) ought to have- appreciated the fact that the decision of the jurisdictional High Court in the case of Velayudhaswamy Spinning Mills Private Limited (2012) (38 DTR 57) (340 1TR 477) has not been accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tments were made on account of business expediency. The dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore the investment made by the assessee in its subsidiary are not to be reckoned for disallowance u/s 14A r.w. u/s 8D. In the decision of jurisdictional ITAT in DCIT v. Mls Amalgamations Ltd in ITA No,811 1712/Mds/2015 order dt. 16.9.2015), it was held similarly, reliance beinq placed in the ratio in EIH Associates Hotels v. CIT. 7. In ACIT vs. M. Baskaran (supra) the facts related to the assessee which had not received any exempt income. The ITAT held therein that disallowance u/s.14A could not be sustained in such circumsnces. In Chemivest Ltd vs. CIT 378 ITR 33 order dated 2.09.2015 in ITA No.749/2014, the Hon ble Delhi High Court held that disallowance u/s.14A envisages that there should be a actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Sec. 14A will not apply if no exempt income is received or receivable during the relevant previous year . and deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Authorised Representative drew our attention to the statement of details of subsidiary group companies and the investments reflected in financial statements and relied on judicial decisions. The assessee company made investments in these companies on Business expediency and no income has been generated by sister/group companies and also shareholding pattern varied from company to company. The provisions of Sec. 14A r.w.r. 8D are mandatorily applicable from assessment year 2008-09 but while calculating the disallowance u/sec. Rule 8D(2), the ld. Assessing Officer shall consider that the investments in subsidiaries are made in ordinary course of business. We found that there are no findings in the assessment order on this subsidiary/group companies which are considered as investments for calculating disallowance u/sec. 14A r.wr.8D(2) and rely on the Co-ordinate Bench decision of M/s. Rane Holdings vs. ACIT, Chennai in ITA No.115/Mds/2015, dated 06.01.2016 were it was held as under:- Taking note of the above decisions and the decision of the Chennai bench of the Tribunal in ITA No.156/Mds/13 cited supra, we hereby remit the matter back to the file of Ld. Assessing Officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided adequate opportunity of being heard before passing the order on merits. The ground of the Revenue is allowed for statistical purpose. 4. The next ground raised by the Revenue that the ld. Commissioner of Income Tax (Appeals) erred in deleting the additional depreciation on Plant and Machinery ;62,63,733/-. 4.1 The ld. Assessing Officer found that assessee company has claimed deprecation on additions of ;3,41,98,133/- to plant and machinery- RMC and issued show cause notice. In the assessment proceedings, the ld. Authorised Representative filed explanations referred at page 2, para 6.1. of the order as under:- Note on additional depreciation claimed in respect of mechlneries used for production of Ready Mix Concrete (RMC):- The assessee is engaged in manufacturing of ready mix concrete. The assessee procures necessary raw materials such as sand, crushed stone, cement, flyash and gypsum. These are poured into the batching plant in the desired proportion and properly mixed by using water. The plant is run for certain duration depending upon the desired mixture and product manufactured is mixed with another chemical called addmixture. The final product after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition, of additional depreciation, were such depreciation is allowed to entity engaged in manufacture or production but not civil construction works and relied on the Apex Court decision and other judicial decision were production of ready mix concrete does not amount to manufacture and the appeal is pending on similar issue and prayed for allowing the ground of the Revenue. 4.4 On the other land, the ld. Authorised Representative relied on earlier year orders and supported the order of Commissioner of Income Tax (Appeals) and opposed to the grounds. 4.5 We heard the rival submissions, perused the material on record and judicial decisions cited. The assessee is in the business of Civil construction works and has claimed additional depreciation on ready mix concrete as the activity of assessee company cannot be manufacture or production to allow additional depreciation. The ld Departmental Representative argued that the Apex court decision squarely cover the case. On the other hand, the ld. Authorised Representative explained that similar issue of the assessee for earlier year was decided in assessee favour.. We perused the order of ld. Assessing Officer and activity of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial 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. Respectfully following the Tribunal decision, we set aside order of Commissioner of Income Tax (Appeals) and allow the ground of the Revenue. 5. The last ground raised on claim of deduction under Section 80-IA of the Income Tax Act, 1961 (in short the Act ) in respect of windmills. 5.1 The ld. Assessing Officer denied the deduction of ;34,30,895/- under section 80IA of the Act by notionally bringing in and setting off the brought forward loss for determining the profits qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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