2019 (5) TMI 340 - AT - Income Tax

Revision u/s 263 - additional depreciation u/s 32(1)(iia) - apprehension of the assessee that various observations are made which make it obligatory on the part of the AO to disallow the claim of additional depreciation - HELD THAT - We find that the claim of additional depreciation u/s 32(1)(iia) was granted to the assessee without any deliberation. The learned AR has not placed any evidence / material on record to show that the additional depreciation claimed was subject matter of examination by the A.O. during the course of assessment proceedings and thereafter deduction was granted. Since deduction u/s 32(1)(iia) was granted without any deliberation by the Assessing Officer, we are of the view that the assessment order dated 16.02.2016 is erroneous and prejudicial to the interest of the revenue. Therefore, the CIT had correctly invoked his revisionary power u/s 263. - Decided against assessee We are not aware of the fate of the order of Cochin Bench of the Tribunal in the case of Cochin Frozen Food Exports Pvt. Ltd. 2012 (4) TMI 757 - ITAT COCHIN . We are also not aware of the processes undertaken in that case whether it is identical / similar to the processes undertaken by the assessee in the instant case. The Assessing Officer shall compare the processes undertaken by the assessee in the instant case and that of the assessee in Cochin Frozen Food Exports Pvt. Ltd. (supra). In other words, the Assessing Officer shall independently come to a conclusion whether there is a manufacture or production of a new article or thing in the facts of the instant case, irrespective of the observation made by the CIT. With these observations, we dispose off the matter.

Summary

Issues:
1. Validity and jurisdiction of the order passed under section 263 of the Income Tax Act.
2. Eligibility of the assessee for additional depreciation under section 32(1)(iia) based on engagement in the manufacture or production of an article or thing.

Issue 1: Validity and jurisdiction of the order under section 263:
The appeal challenged the Commissioner of Income Tax's order under section 263 of the Income Tax Act, contending it was without jurisdiction and bad in law. The assessee argued that the assessment order was not erroneous or prejudicial to the revenue's interest. The Commissioner, in response, highlighted that the assessee was granted additional depreciation on plant and machinery, which was deemed inadmissible as the assessee was not engaged in manufacturing or production activities. The Commissioner referred to a previous ITAT order to support this argument. The CIT set aside the assessment order for de novo examination, stating that the omission by the Assessing Officer was prejudicial to the revenue's interest.

Issue 2: Eligibility for additional depreciation under section 32(1)(iia):
The primary contention revolved around whether the assessee was engaged in the manufacture or production of an article or thing to qualify for additional depreciation under section 32(1)(iia). The CIT rejected the assessee's claim based on the business of processing and export of frozen marine products, stating it did not fall under the category of manufacturing or production. The assessee, however, argued that their processing methods, specifically the Individually Quick Frozen (IQF) Technology, constituted manufacturing or production activities. The Tribunal noted that the initial grant of additional depreciation lacked proper deliberation by the Assessing Officer, leading to the conclusion that the assessment order was indeed erroneous and prejudicial to the revenue's interest. The Tribunal directed the Assessing Officer to independently assess whether the assessee's processes qualified as manufacturing or production, disregarding the CIT's observations.

In conclusion, the Tribunal dismissed the appeal, emphasizing the need for a thorough assessment of the manufacturing or production activities undertaken by the assessee to determine eligibility for additional depreciation under section 32(1)(iia). The judgment highlighted the importance of proper deliberation in granting tax benefits and the Assessing Officer's responsibility to make an independent assessment based on the specific facts of the case.