JK AGRIGENETICS LIMITED(EARLIER KNOWN AS FLORENCE ALUMINA LTD.),KOLKATA vs. DCIT, CIRCLE-5(2), KOLKATA, KOLKATA

This is an appeal preferred by the assessee against the order of Ld. CIT(A)-2, Kolkata dated 04.10.2016 for AY 2012-13.

In the grounds raised in the appeal, the assessee company has primarily objected to action of the AO in disallowing the deduction for additional depreciation of Rs.15,78,386/- claimed u/s. 32(1)(iia) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) holding that the assessee was not engaged in manufacture or production of any article or thing.

Briefly stated facts of the case are that the assessee company is engaged in the production and processing of hybrid seeds. In the relevant year under consideration, the assessee had made new addition to plant and machinery on which it had claimed the additional depreciation u/s. 32(1)(iia) of the Act. In the assessment completed u/s. 143(3) of the Act, the AO was of the opinion that the assessee company was basically a trader of seeds and not a producer of seeds in terms of the provisions contained in sec. 2(29BA) of the Act and, therefore, held that the assessee could not be termed as a ‘manufacturer’ and J. K. Agri Genetics Ltd., AY 2012-13 hence, disallowed the claim of additional depreciation of Rs.15,78,396/- made u/s. 32(1)(iia) of the Act. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT (A) who was pleased to dismiss the same. Aggrieved by the order of the Ld. CIT (A), the assessee is before us.

We have heard rival submissions and gone through the facts and circumstances of the case. From a perusal of the assessment order we note that in para 2, the AO himself admitted that during the financial year the assessee was engaged in the business of production, processing and sale of seeds and related services. Despite recording such a finding, later on the AO contradicted himself by stating that the assessee was a mere trader or dealer in hybrid seeds. We further note that in the course of appellate proceedings the assessee had furnished a detailed note on the production process involved in the assessee’s business of manufacture or production of hybrid seeds. The Ld. AR explained that first the assessee after carrying out several research processes developed the breeder seeds. After the basic breeder/foundation seed was developed, the need to be multiplied for specific use in crop hybridization programme. For that these breeder/foundation seeds were taken to the agricultural grower/farmer for cultivation. And from them, the unprocessed hybrid seeds were purchased i.e. assessee purchased from the contractual growers the unprocessed hybrid seeds. After the unprocessed seeds were purchased, the assessee company conducts further processing such as cleaning, fermentation, fumigation, draying, application of chemicals, grading and packaging of hybrid seeds were carried out before the seeds were marketed in the market. The Ld. AR of the assessee submitted that the production processes outlined before the lower authorities in the process chart form was followed by all seeds companies in the country because the certification standards and process followed under the Seeds Act 1966 was same all over India. The Ld. AR further submitted that the question as to whether the seed companies engaged in production and sale of processed or hybrid seeds are engaged in manufacturing or production of an article or thing was considered and decided by various judicial authorities including the Hon’ble Supreme Court. He submitted that in the following judgments the Hon’ble Courts have held that the companies engaged in J. K. Agri Genetics Ltd., AY 2012-13 production of hybrid seeds are engaged in “manufacture or production of new article or thing”.