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2021 (3) TMI 935 - AT - Income TaxAdditional depredation u/s 32 (1)(iia) - process of delivery of CNG to automobiles at the CNG filling centres - Fulfilment of mandate of manufacture or production or an article or thing which is mandatory requirement for claiming additional depredation u/s 32 (1)(iia) - CIT (A) confirmed the addition holding that the company is not into manufacturing or production of CNG - HELD THAT - As decided in the case Central UP Gas Ltd. 2016 (12) TMI 814 - ALLAHABAD HIGH COURT Compressed natural gas in its compressed form has a distinct identity and character and use. It is settled law of the Apex Court in the case of Income Tax Officer Vs.Arihant Tiles and Marbles P. LTD. reported in 2009 (12) TMI 1 - SUPREME COURT that when a commodity acquires a distinct name, use and commercial identity, it would acquire the trait of 'manufacture'. The question is answered in favour of the assessee
Issues Involved:
1. Reopening of assessment under Section 147. 2. Allowance of additional depreciation under Section 32(1)(iia). Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 147: The appeals pertain to the assessment years 2011-12 and 2012-13, focusing on the issue of reopening under Section 147 of the Income Tax Act. The Tribunal noted that since the main grounds were addressed on the merits of the case, adjudicating the issue of Section 147 would be academic. Consequently, the Tribunal refrained from making a determination on this issue. 2. Allowance of Additional Depreciation under Section 32(1)(iia): The primary issue was whether the assessee was entitled to additional depreciation under Section 32(1)(iia) for the process of compressing natural gas into Compressed Natural Gas (CNG). The Tribunal referred to its earlier decision in the assessee's case for the assessment year 2013-14, where it had adjudicated the issue of additional depreciation. The Assessing Officer (AO) had disallowed the additional depreciation, arguing that the process of delivering CNG to automobiles did not amount to manufacturing or production of an article or thing, which is a mandatory requirement for claiming additional depreciation. The AO added ?8,23,15,761 back to the total income of the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the company was not engaged in manufacturing or production of CNG. The assessee appealed, arguing that it obtained a certificate from the Central Excise Department and paid excise duty, indicating it was engaged in manufacturing activities. The assessee explained the detailed process of compressing natural gas into CNG, involving multiple stages of compression, cooling, and filtration, and contended that this process constituted manufacturing. The Departmental Representative (DR) countered that the definitions of 'manufacture' under the Central Excise Act and the Income Tax Act are different. The DR argued that merely being registered with the Central Excise Department and paying excise duty did not necessarily mean the assessee was manufacturing an article or thing for the purposes of the Income Tax Act. The DR cited various case laws to support the argument that not all activities qualify as manufacturing under the Income Tax Act. The Tribunal considered the arguments and material on record, including the judgment of the Allahabad High Court in the case of Central UP Gas Ltd. Vs DCIT. The High Court had held that compressing natural gas into CNG resulted in a new product with a distinct name, character, and use, thereby qualifying as manufacturing. The Tribunal followed this judgment and concluded that the assessee's process of compressing natural gas into CNG constituted manufacturing for the purposes of Section 32(1)(iia). Conclusion: The Tribunal dismissed the revenue's appeals, upholding the assessee's entitlement to additional depreciation under Section 32(1)(iia) and refraining from adjudicating the reopening issue under Section 147. The judgment emphasized the distinction between definitions of 'manufacture' under different statutes and relied on the Allahabad High Court's interpretation to resolve the matter in favor of the assessee.
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