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TMI Blog2023 (11) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in respect of arm's length price of the specified domestic transaction vide his order dated 29.03.2018. During the regular course of assessment proceedings, the Assessing Officer found that the claim of additional depreciation of Rs. 32,65,56,918/- in respect of purchase of plant and machinery in the immediate preceding year wherein 50% of the additional depreciation was only claimed, since the plant and machinery were purchased and used less than 180 days, which was allowed by the A.O. in the Assessment Year 2014-15. Therefore the assessee claimed balance 50% of the additional depreciation during this Assessment Year 2015-16. 2.2. The above claim of the assessee was not accepted by the A.O. on the ground that (i) that additional depreciation can be claimed and allowed only in the year of installation of the plant and machinery and (ii) Section 32(1)(iia) was amended for claim of additional depreciation, with effect from the Assessment Year 2016-17 only. Therefore the claim of additional depreciation for the present Assessment year 2015-16 was denied. The A.O. also made other disallowances, however determined the total assessed income as Nil. 3. Aggrieved against the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was not accepted by Ld. CIT(A) and held that the additional depreciation of Rs. 32,65,56,916/- is not allowable since the assessee is not engaged in the business of manufacture and production of any article or thing. Thus the assessment was enhanced to this extent. 3.2. Similarly the Ld. CIT(A) confirmed the disallowance on the electrical items namely Substations, DG set and Transformers as not part of the plant and machinery which is eligible for additional depreciation. Thus the Ld. CIT(A) partly allowed the appeal of the assessee. 4. Aggrieve against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The Ld. CIT(A) has erred in law and on facts in confirming the disallowance of Rs. 2,61,70,650/- being additional depreciation claimed and allowable on plant and machinery. It is submitted that certain plant and machineries which were installed and put to use in immediate previous year i.e. A.Y. 2014-15, but after 180 days, only 10% additional depreciation was claimed and allowed in A.Y. 2014-15 and appellant correctly claimed the balance / remaining 10% additional depreciation during this A.Y. 2015-16 as per the provision of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main plant and machinery. It is submitted that disallowance of depreciation as available on the block of plant and machinery and additional depreciation thereon be allowed now. 6. Without prejudice to the above it is submitted that Ld. CIT(A) has erred in ignoring submissions and evidence filed that various items like DG set, Exhaust and Pedestal fans, Streat lighting, electrical equipment, transformers etc. were attached and forming part of plant and machinery. It is submitted that on the basis of facts and submissions and evidences filed these items be treated as part of the plant and machinery and depreciation and additional depreciation on the same be allowed at the rate applicable to plant and machinery. 7. Ld. CIT(A) has erred in directing the Assessing Officer to reopen the A.Y. 2014-15 and disallowed additional depreciation on plant and machinery which was claimed and allowed after thorough verification and scrutiny. It is submitted that Ld. CIT(A) has erred in crossing his jurisdiction by directing something which is not forming part of the grounds of appeal. It is respectfully submitted that Ld. CIT(A) has passed the jurisdiction and has erred in directing the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l depreciation is claimed during this present Assessment Year 2015-16. This identical issue was considered by this Tribunal after considering the Co-ordinate Bench of Delhi in the case of Cosmo Films Ltd. and held as follows: "......This restriction is only on the basis of period of usc. There is no restriction, that balance of one time incentive in the form of additional sum of depreciation shall not be available in the subsequent year. Section 32(2) A provides for a carry forward set up of unabsorbed depreciation. This additional benefit in the form of additional allowance u/s 32(1)(iia) is onetime benefit to encourage the industrialization and in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo vs. CIT, cited supra, the provisions related to it have to be constructed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute lo deny the benefit of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset:......." (Emphasis is ours) 11. We may only indicate that during the course of the arguments, our attention was drawn to the "Memorandum Explaining the provisions in Financial Bill, 2015", whereby, the aforementioned amendment was brought about. 11.1. The relevant part of the Memorandum is extracted hereafter: ".....To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50% of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant and machinery, shall be allowed in the immediately succeeding previous year. This amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectfully following the said decisions we uphold the order of the learned CIT(A) and reject the grounds raised by the Revenue." 7.1. Respectfully following the above decisions of the Co-ordinate Benches of the Tribunal, we have no hesitation in allowing the balance additional depreciation of Rs. 2,61,70,650/- during this present Assessment Year 2015-16. Thus the Ground Nos. 1 & 2 raised by the assessee are hereby allowed. 8. Regarding Ground Nos. 3 & 4 enhancement made by Ld. CIT(A) thereby denying the additional depreciation as the assessee only engaged in the "processing of Milk" and "not manufacturing of any item". 8.1. Ld. Counsel submitted that the assessee is engaged not only processing of milk but is manufacturing and producing, processing milk and other milk products namely Liquid Milk, Sanjivani Milk, Butter Milk, Eco Butter Milk, Amul Butter Milk, White Butter, Ice Cream, Kulfi and Candy etc, The Ld. Counsel drawn our attention to the Flow Diagram Chart for the above Milk products and the various stages of manufacturing of the Milk products as follows: 9. Thus the Ld. Counsel submitted that the decision relied upon by Ld. CIT(A) in the case of M/s. Creamline Dairy Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its being in the activity of manufacturing and production. 8. The plant here is of making milk powder and process of producing the milk powder is complex and it is a completely different commercial commodity from the main ingredient milk. 9. At this stage, the decision of the Apex Court rendered in the case of Aspinwall & CO. Ltd vs. CIT (supra) requires reference where the Apex Court has said that the word "manufacturing" has not been defined in the Income-tax Act but in the absence definition of word "manufacture" has to be given a meaning as is understood in a common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article, then the same would amount to manufacturing activity. The say of the respondent assessee that final product i.e. the milk powder was completely different from the main ingredient and the manufacturing process leads to the substantial value addition cannot be disputed nor has the same been in any manner challenged by the Revenue. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er be regarded as the original commodity but is recognized in a trade as a new and distinct commodity. 13. Reference needs to be made to the decision rendered in the case of Commissioner of Income-tax vs. Prabhudas Kishordas Tabacco Products P. Ltd reported in [2006] 282 ITR 568 (Guj), wherein itwas held:- "9. The tests to ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the apex court and this High Court. Broadly, the requirement is that the raw material must be, in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the end-product after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other goods. The article produced must be regarded by the trade as a new and distinct article having an identity of its own, an independent market after the commodity is subjected to the process of manufacture. The nature and extent of the process would on 23 January, 2014 vary from case to case, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached with the plant and machinery for which a certificate from Senior General Manager (Project), Engineering Department of the assessee company was filed before Ld. CIT(A). Therefore the assessee is entitled for depreciation as applicable on the plant and machinery and additional depreciation thereon also to be allowed. 14.1 In this connection, Ld. Counsel relied upon Co-ordinate Bench decision of this Tribunal in the case of Madhu Industries Vs. ITO in ITA No. 4172/Ahd/2007 and Delhi Tribunal decision in the case of DCIT Vs. M/s. Nalwa Steel & Power Ltd. in ITA No. 4559/Del/2010. 15. Per contra, the Ld.CIT- D.R. Shri Kamlesh Makwana appearing for the Revenue supported the order passed by the Lower Authorities and the disallowance made on electrical items as not forming part of the plant and machinery and the disallowance does not require any interference. 16. We have given our thoughtful consideration and perused the materials available on record. It is seen from the certificate issued by the Senior General Manager (Project) of Engineering Department of the assessee company, the manufacturing units are located in remote places at Palanpur where supply of electricity was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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