PRINCIPAL COMMISSIONER OF INCOME TAX 1 vs. DHOLU CONSTUCTION AND PROJECTS LTD

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TAXAP/65/2018HC GujaratGJHC24008412201819 March 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises from the ITAT's order. The Tribunal correctly observed that Section 32(1)(iia) of the Income Tax Act, 1961, does not refer to the concept of owning the mining rights. The ITAT's reliance on the Supreme Court judgment in Commissioner of Income Tax v. Sesa Goa Ltd. and the High Court's own judgment in General Contracts Co. v. Commissioner of Income-tax was appropriate. The Tribunal had considered the agreements the assessee had with Mineral Corporations of Gujarat and Rajasthan, which outlined the assessee's scope of work, including mining of lignite and loading it into trucks using specialized equipment. The Court found no error in the Tribunal's decision to grant additional depreciation.

What were the facts?

The Revenue is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) dated March 20, 2017. The appeal concerns the admissibility of additional depreciation amounting to Rs. 67,20,175 claimed by the assessee, Dholu Construction and Projects Ltd. The assessee engaged in mining activities and purchased and deployed additional machinery for this purpose. The Revenue denied the additional depreciation, arguing that the assessee was not the owner of the mines and therefore not engaged in the manufacture or production of any article or thing. This view was upheld by the CIT(Appeals). The ITAT, however, granted the depreciation, relying on Supreme Court and High Court judgments.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts by not appreciating the findings of the Assessing Officer that the assessee was not a manufacturer under Section 2(29BA) of the Income Tax Act, 1961, rendering the additional depreciation of Rs. 67,20,175 inadmissible? Assessee's Contention: The assessee contended that it was engaged in mining activity and had purchased and deployed additional machinery for this purpose. The ITAT, relying on judgments in Commissioner of Income Tax v. Sesa Goa Ltd. and General Contracts Co. v. Commissioner of Income-tax, held that Section 32(1)(iia) does not require ownership of the mines for claiming additional depreciation. The assessee's scope of work, as per agreements with Mineral Corporations of Gujarat and Rajasthan, included mining of lignite and loading it into trucks using excavators and other equipment. Revenue's Contention: The Revenue argued that the assessee was not the owner of the mines and therefore could not be considered to have produced or manufactured any article or thing, thus disentitling it from additional depreciation.

Which sections of the Income-tax Act were involved?

Section 32(1)(iia),Section 2(29BA)

AI-generated summary — verify with the full judgment below

C/TAXAP/65/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 65 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 1 Versus DHOLU CONSTUCTION AND PROJECTS LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 19/03/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

Revenue is in appeal against the judgment of the Income Tax   Appellate   Tribunal   dated   20.3.2017   raising   the   following question for our consideration : “Whether the Appellate Tribunal has erred in law and on facts   by   not   appreciating   the   findings   of   the   Assessing Officer   that   the   assessee   was   not   manufacturer   u/s 2(29BA)   so   that   the   additional   depreciation   of Rs.67,20,175/­ was not admissible?”

Issue pertains to additional depreciation claimed by the assessee under section 32 (1)(iia)  of the Income Tax Act on the ground   that   the   assessee   was   engaged   in   business   of manufacture or production of any article or thing.

Undisputably, facts are that the assessee was engaged in mining activity for which additional machinery was purchased Page 1 of 2

C/TAXAP/65/2018 ORDER and   deployed.   Revenue   however   denied   the   additional depreciation on the ground that the assessee was not the owner of mines and therefore, could not be stated to have produced or manufactured   any   article   or   thing,   a   view   even   CIT(Appeals) upheld. The Tribunal however, relying on judgments of Supreme Court in case of Commissioner of Income Tax v. Sesa Goa ltd reported   in   271   ITR   331   and   this   Court   in   case   of  General Contracts   Co.   v.   Commissioner   of   Income­tax  reported   in (2006) 287 ITR 416 granted depreciation. The Tribunal took note of the agreements the assessee had entered into with Mineral Corporation of Gujarat and Rajasthan States which outlined the assessee's scope of work also. This included mining of lignite, loading the same into truck after employing hydrolic excavator and   other   equipments.   The   Tribunal   correctly   observed   that section 32(1)(iia) nowhere refers to the concept of owning the mining.

No question of law arises. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) raghu Page 2 of 2

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