2017 (2) TMI 856 - AT - Income Tax

Additional depreciation on plant & machinery - AO disallowed the claim on the ground that the activities carried out were not amounting to manufacture or production of article or thing therefore not entitled for additional depreciation - Held that - Assessee is entitled for additional depreciation under section 32(1)(iia) of the Act. Thus we reverse the order passed by the Commissioner of Income Tax (Appeals) and the ground of appeal raised by the assessee is allowed. See ITO vs. M/s. Arihant Tiles & Marbles (P) Ltd. 2009 (12) TMI 1 - SUPREME COURT

Summary

Issues:
Claim of additional depreciation on plant & machinery disallowed by Assessing Officer for not amounting to production or manufacturing of articles or things.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals-1) for the Assessment Year 2006-07. The assessee, engaged in the business of granite quarry, cutting, and polishing, claimed additional depreciation on plant & machinery. The Assessing Officer disallowed the claim stating that the activities did not amount to production or manufacturing. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision. The assessee then appealed to the Tribunal.

The assessee argued that granite quarrying, cutting, and polishing constitute manufacturing or production of articles, relying on the judgment of the Hon'ble Supreme Court in a similar case. The Departmental Representative, on the other hand, supported the lower authorities' decisions. The Tribunal considered the arguments, reviewed the records, and analyzed the nature of the activities undertaken by the assessee.

The Tribunal referred to the judgment of the Hon'ble Supreme Court in the case of M/s. Arihant Tiles & Marbles (P) Ltd., which emphasized that activities leading to the transformation of raw materials into new and distinct commodities constitute manufacturing or production. The Tribunal also cited a case from the Coordinate Bench at Bangalore, which supported the entitlement for additional depreciation in similar circumstances.

Based on the legal precedents and the nature of the assessee's activities, the Tribunal concluded that the assessee was indeed engaged in the manufacturing or production of articles, making them eligible for additional depreciation under section 32(1)(iia) of the Income Tax Act. Consequently, the Tribunal reversed the decision of the Commissioner of Income Tax (Appeals) and allowed the ground of appeal raised by the assessee.

In the final order, the Tribunal pronounced that the appeal filed by the assessee was allowed, granting them the entitlement for additional depreciation.