2015 (1) TMI 1280 - AT - Income Tax

Additional depreciation u/s 32 on ready mix concrete (RMC) - Held that - Assessee s appeal are restored to the file of AO for the limited purpose of examination and verification of the following factual issues - i) Whether RMC manufactured by the assessee during relevant periods was consumed in house or sold to outside third parties? ii) Whether the assessee is entitled for additional depreciation on the machinery/equipment used for the said activities/purpose of manufacturing of the RMC which was sold to outside third parties in the light of decision of Hon ble Apex Court in the case of N.C. Buddhiraja (1993 (9) TMI 6 - SUPREME Court )? The Assessing Officer is directed to allow additional depreciation as per outcome of aforementioned factual issues

Summary

Issues Involved:

1. Claim of additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961.
2. Determination of whether Ready Mix Concrete (RMC) was sold to third parties or used in-house for construction activities.

Issue-wise Detailed Analysis:

1. Claim of Additional Depreciation under Section 32(1)(iia):

The primary issue in these appeals revolves around the entitlement of the assessee to claim additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961. The Tribunal initially allowed the assessee's claim for AY 2004-05, accepting that the production of "ready mix concrete" (RMC) amounted to the manufacture of an article or thing. However, the Revenue appealed, and the Hon'ble High Court of Delhi remitted the matter back to the Tribunal for a limited examination to ascertain whether the RMC was sold to outside parties or consumed in-house.

2. Determination of Whether RMC Was Sold to Third Parties or Used In-House:

The Hon'ble High Court of Delhi emphasized that the determination of whether the RMC was sold to third parties or used in-house is crucial for deciding the claim of additional depreciation. The Court stated that if the RMC was used for the assessee's construction activities, the claim for additional depreciation cannot be allowed. Conversely, if the RMC was sold to third parties as a commodity, the assessee would be entitled to additional depreciation under Section 32(1)(iia).

Application for Admission of Additional Evidence:

The assessee filed applications for the admission of additional evidence, including audited balance sheets, party-wise sales summaries, and month-wise sales details for the relevant assessment years. The Tribunal admitted this additional evidence, recognizing its necessity for a proper adjudication of the issue in light of the High Court's directions.

Re-examination and Verification by the Assessing Officer (AO):

The Tribunal restored the matter to the AO for a limited purpose of verifying and examining the additional evidence submitted by the assessee. The AO is directed to ascertain:
- Whether the RMC manufactured by the assessee during the relevant periods was consumed in-house or sold to outside third parties.
- Whether the assessee is entitled to additional depreciation on the machinery/equipment used for manufacturing the RMC sold to third parties, considering the decision of the Hon'ble Supreme Court in the case of N.C. Budharaja.

Conclusion:

The Tribunal concluded that the AO should be given an opportunity to verify and examine the additional evidence and adjudicate the issue in light of the High Court's order and the Supreme Court's decision in N.C. Budharaja. The appeals for AY 2004-05, 2006-07, 2007-08, and 2008-09 were restored to the AO for this limited purpose. The AO is directed to allow additional depreciation based on the outcome of the factual issues and the Supreme Court's decision. The appeals are deemed allowed for statistical purposes on this limited issue.

Order Pronouncement:

The order was pronounced in the open court on 23.1.2015.