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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These two appeals filed by the assessee are arising out of the different orders of the Commissioner of Income Tax (Appeals)-5, in short CIT(A), in appeal Nos. CIT(A)-5/DCIT-2(2)(1)/IT-262 & 261/2016-17 of even date 15.01.2018. The Assessments were framed by the Dy. Commissioner of Income Tax, Circle 22(1), ITAs No.2644 & 2645/Mum/2018 Mumbai (in short DCIT/ITO/ AO) for the A.Ys 2010-11 & 2011-12 vide orders dated 03.12.2016 & 23.12.2016 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The only common issue in these two appeals of assessee is as regards to the order of CIT(A) confirming the action of the AO in disallowing the additional claim of depreciation under section 32(i)(iia) of the Act. The facts and circumstances are exactly identical in both the years and hence, we will adjudicate the ground by taking the facts from AY 2013-14 in . The relevant ground raised
by assessee read as under: - “1. Not treating the activity of the appellant as ‘manufacturing’ or ‘production’ and therefore in not allowing additional depreciation under section 32 of the Income tax Act, 1961.”
3. Briefly stated facts are that the assessee is a manufacturer of frozen foodstuffs and has an integrated manufacturing facility at Unnao. The assessee also operates bakery ingredients manufacturing facility at Kalwa, Dighe. The assessee claimed additional depreciation under section 32(1)(iia) of the Act amounting to Rs. 1,25,06,298/- on machinery installed at its integrated undertaking at Unnao. The assessee was required to explain as to why the additional depreciation claim should not be disallowed as the assessee company has not engaged in manufacturing/ production activity as held in earlier years. The assessee replied in detail about the manufacturing process and stated that the assessee is an integrated industrial undertaking engaged in the business of manufacturing of Frozen Boneless Buffalo Meat, Frozen ITAs No.2644 & 2645/Mum/2018 and Dried inedible products, Poultry Feed Supplements, Animal Fats, Gel Bone Chips and Blood Meal. The assessee explained fully the process and AO reproduced the same in pages 10 to 26 of its assessment order vide Para 8.2. But the AO noted that the assessee is not engaged in the business of manufacture or production of any article or thing and hence, the claim of additional depreciation under section 32(1)(iia) of the Act is not allowable. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) also confirmed the action of the AO by following the earlier year order for AY 2012-13 by giving following finding in Para 6.3 as under: - “6.3 I have considered the facts of the case and also submission made by the appellant. the appellant is an Integrated Industrial undertaking and engaged in the business of manufacturing of Frozen Boneless Buffalo Meat, Frozen and Dried Inedible products, Animal Fats, Gel Bone chips and Blood Meal. In the appellant’s submissions, the appellant contended AO’s disallowance under section 32 on account of additional depreciation as the appellant installed new machineries at its meat manufacturing undertaking. The appellant contend that during the assessment proceedings, the details of the claim with supporting documents were submitted before the Assessing Officer.
On perusal of case records, it is seen that this issue had come up for consideration before the ITAs No.2644 & 2645/Mum/2018 CIT(A) for the AY 2012-13 where the Ld. CIT(A) vide his order dated 18.03.2016 has held that: - Following the above order of the CIT(A) for the AY 2010-11 the disallowance of depreciation is allowed. However, AO will have to recalculate the depreciation chart by computing the WEV of the machineries in all those years for computation of normal eligible deprecation. This ground of appeals partly allowed.
In view of the above decision, the AO’s disallowance of additional deprecation under section 32 of the Income Tax Act, 1961 is upheld. However, the AO is directed to recalculate the depreciation chart by computing the WDV of the machineries in all those years for computation of normal eligible depreciation.”
Aggrieved, now assessee is in appeal before Tribunal.
Before us, the learned Counsel for the assessee filed copy of Tribunal’s order in assessee’s own case in 7343 and 7344/Mum/2008 for AYs 2003-04 to 2005-06 respectively, vide order dated 26.04.2019 and drew our attention to the findings of the Tribunal at Para 18 of page 16 and Tribunal finally held that the assessee is in manufacturing or producing of article or thing for the purpose of section 80IB of the Act. According to the learned counsel once the Tribunal’s finding is final, the assessee is engaged in the manufacturing or producing of article or thing for the purpose of the ITAs No.2644 & 2645/Mum/2018 act including all sections. According to her, the decision will apply to the provisions of section 32(i)(iia) of the Act for claim of additional depreciation. The learned Sr. DR heavily relied on the orders of the lower authorities and agitated the claim.
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the Tribunal in assessee’s own case in ITAs No. 7342, 7343 and 7344/Mum/2008 for AYs 2003-04 to 2005-06 vide para 18 has held as under: - “18. Considering the above referred factual and legal discussion, we are of the view that the final product produced by the assessee-company is commercially different from the raw-material (Buffalo Carcasses), the process of production involved a number of steps and processes. The raw material used by the assessee cannot be substituted by the final product. The production process as explained by assessee resulted not only in qualitative changes, but also a distinct product for end-use of the consumer. Thus, in our considered view, the assessee fulfilled the requisite requirement i.e. manufacturing or producing an article of things for the purpose of section 80IB of the Act. In the result, ground no.1 of the appeal raised by assessee is allowed.”