DCIT, TUTICORIN vs. INDIAN OCEAN GARNET SAND COMPANY, TUTICORIN

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ITA 1271/CHNY/2016Status: DisposedITAT Chennai26 October 2017AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, finding that the process of converting beach sand into garnet sand constituted manufacture. The Tribunal also noted that the Revenue had previously accepted the assessee as a manufacturer for Section 80HHC purposes.

What were the facts?

The Revenue appealed against the CIT(A)'s decision to allow additional depreciation on a windmill claimed by the assessee. The AO had denied this on the grounds that the assessee was not engaged in manufacturing, only processing garnet sand. The CIT(A) allowed the claim, relying on the definition of 'manufacture' and a Supreme Court decision.

What were the issues?

Whether the processing of garnet sand amounts to 'manufacture' for claiming additional depreciation, and if the assessee's past acceptance as a manufacturer impacts this claim.

Which sections of the Income-tax Act were involved?

Section 32(1)(iia),Section 2(29BA),Section 80HHC

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI GEORGE MATHAN, & SHRI A. MOHAN ALANKAMONY

Hearing: 26.10.2017Pronounced: 26.10.2017

आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:

1.

the Order of the Commissioner of Income Tax (Appeals)-1, Madurai, in dated 24.02.2016 for the AY 2012-13.

2.

Mr.ARV.Sreenivasan, JCIT represented on behalf of the Revenue and Mr.B. Ramakrishnan, CA, represented on behalf of the assessee.

ITA No.1271/Mds/2016 :- 2 -:

3.

It was submitted by the Ld.DR that the only issue in the Revenue’s appeal was against the action of the Ld.CIT(A) in deleting the disallowance of the additional depreciation on the cost of wind mill made by the AO on the ground that the assessee was not engaged in the manufacture or production of any article or thing. It was a submission that the assessee is processing garnet sand. The assessee had purchased a wind mill and had claimed additional depreciation in respect of the same. It was a submission that as the assessee was not doing any manufacturing activity and was only cleaning and segregating garnet through centrifugal works undertaken by the assessee, the AO had denied the benefit of the claim of additional depreciation. It was a submission that the Ld.CIT(A) had allowed the assessee’s claim of additional depreciation on the ground that the provisions of Sec.2(29BA) defining the term ‘manufacture’ introduced w.e.f. 01.04.2009 provided for any change in a non-living physical object resulting in transformation of the object into a new and distinct object having a different name, character and use. It was a submission that the Ld.CIT(A) had relied upon by the decision of the Hon’ble Supreme Court in the case of Sesa Goa Ltd. (142 Taxmann 16) wherein it has been held that extracting and processing of iron ore amounts to production of an article or thing. It was a submission that the assessee was only doing separation of garnet sand from beach sand by using various processes and therefore the same could not be held to be manufacture. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.

ITA No.1271/Mds/2016 :- 3 -:

4.

In reply, the Ld.AR submitted that the manufacturing process has been extracted in Page No.3 of the order of the Ld.CIT(A). It was a submission that the Ld.CIT(A) had also granted the assessee the benefit of additional depreciation on the ground that the provisions of Sec.32(1)(iia) had been amended w.e.f. 01.04.2013 to provide that even if the assessee is engaged in the business of generation of power exclusively, the assessee would be entitled to the benefit of additional depreciation. The Ld.AR further placed before us copies of the Assessment Order for the AY 2003-04, wherein under scrutiny assessment, the assessee has been granted the benefit of deduction u/s.80HHC. It was a submission that as per the provisions of Sec.80HHC(3)(a), the assessee being a manufacturer and exporter, has been granted the benefit of deduction u/s.80HHC. It was a submission that the order of the Ld.CIT(A) was liable to be upheld.

5.

We have considered the rival submissions. A perusal of the decision relied upon by the AO in the Assessment Order shows that the decision related to assessment years before the amendment to Sec.2(29BA) providing for the definition of term ‘manufacture’. Admittedly, the process involved in the conversion of the beach sand into garnet sand as has been extracted in Page No.3 of the Ld.CIT(A) clearly shows that the process is one of manufacture. This view of ours also find support from the decision of the Hon’ble Supreme Court in the case of Sesa Goa Ltd. referred to supra. Further, it is noticed that the Revenue has granted the benefit of ITA No.1271/Mds/2016 :- 4 -:

deduction u/s.80HHC for the AY 2003-04. Thus, even without the definition of the term manufacture u/s.2(29BA), the Revenue has been holding that the assessee is doing the business of manufacturing. Now, to hold that the assessee is not doing manufacturing only for the purpose of denying the benefit of additional depreciation is not permissible. In these circumstances, we find no error in the findings as arrived at by the Ld.CIT(A) and consequently, it stands upheld.

6.

In the result, the appeal filed by the Revenue stands dismissed.

Order pronounced in the Open Court on October 26, 2017, at Chennai.

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