2016 (12) TMI 406 - HC - Income Tax

Additional depreciation under Section 32(1)(iia) - assessees were carrying out processing of iron ore - Held that - On perusal of the order passed by the CIT(A) we find that it is clearly noted therein that the ITAT while allowing the additional depreciation for the Assessment Year 2002-03 had clearly considered that the respondent/ assessee was engaged in the business of extraction and processing of iron ore. It is also not in dispute that even for the relevant Assessment Years 2006-07 and 2007-08 the same activities were being carried out by the respondents/assessees. In such circumstances the contention of Ms. Asha Desai learned Counsel appearing for the appellant that the respondent/assessee were carrying out only processing of the iron ore and not carrying out extraction and processing of the iron ore cannot be accepted. Thus we find that the substantial questions of law proposed by the appellant would no longer survive for the reasons recorded in the case of Commissioner of Income-tax Goa vs. Salgaonkar & Brothers (P.) Ltd. (2014 (4) TMI 1156 - BOMBAY HIGH COURT). - Decided in favour of assessee

Summary

Issues:
- Challenge to orders allowing additional depreciation under Section 32(1)(iia) of the Income Tax Act for carrying out processing of iron ore.
- Interpretation of whether processing activities constitute "production" for the purpose of claiming additional depreciation.
- Dispute regarding whether the assessee was engaged in extraction and processing of iron ore activities.
- Consideration of relevant case law regarding the eligibility for additional depreciation under Section 32(1)(iia) of the Income Tax Act.

Analysis:
1. The appellant contested the orders granting additional depreciation under Section 32(1)(iia) of the Income Tax Act, arguing that the processing of iron ore does not qualify as "production." The appellant highlighted that the Assessing Officer rejected the explanation provided by the respondent, emphasizing that no evidence suggested the carrying out of iron ore extraction. The appellant asserted the existence of substantial legal questions in the appeal.

2. Conversely, the respondent's counsel pointed out that the Income Tax Appellate Tribunal (ITAT) and the Commissioner of Income Tax (Appeals) had previously allowed additional depreciation, considering the respondent's engagement in both extraction and processing of iron ore activities. Citing relevant case law, the respondent's counsel argued that the eligibility for additional depreciation is established when both extraction and processing activities are conducted. The counsel contended that the issue had been settled in previous judgments, indicating no substantial legal questions in the present appeal.

3. Upon reviewing the submissions and records, the court found that the respondent had been involved in extraction and processing of iron ore, as noted in the orders of the CIT(A) and activities conducted in various assessment years. Referring to a previous judgment involving similar activities, the court concluded that the appellant's contentions were untenable, as the respondent's operations aligned with the criteria for claiming additional depreciation under Section 32(1)(iia) of the Income Tax Act.

4. The court referenced the judgment in the case of Commissioner of Income-tax, Goa vs. Salgaonkar & Brothers (P.) Ltd., which affirmed the eligibility for additional depreciation based on the nature of activities performed, including processing of iron ore and windmill energy generation. Quoting relevant observations, the court emphasized that when the assessing officer had allowed additional depreciation based on a plausible interpretation of the law, the order could not be deemed erroneous. Consequently, the court rejected the appeal, stating that no substantial legal questions arose under the Income Tax Act provisions.