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2024 (4) TMI 347 - AT - Income TaxInvestment allowance u/s 32AC - claim disallowed as assessee do not fulfill the requisite condition - CIT(A) deleted addition as business activity of the assessee is manufacturing as per the Central Excise Act and that the assessee had acquired installed the new assets during the period 01.04.2013 to 31.03.2014 - HELD THAT - The key word for consideration is that the assessee should be a company who should be engaged in the business of manufacture or production of any article or thing and installs new assets after 31st day of March, 2013 but before the 01st day of April, 2015 and aggregate amount of actual cost of such new assets exceeds INR 100 crores. The term new asset has been defined in sub-clause (4) of section 32AC of the Act which defines new asset means any new plant machinery (other than ship or aircraft). In the present case, the assessee is a company and claims to be engaged in the business of manufacture or production of lube oil. The assessee claims that blending of lube oil tantamount to manufacture or production as contemplated u/s 32AC of the Act. The opinion of the AO that the assessee is not engaged in the manufacturing or production activity, is contrary to the judgement of the Hon ble Supreme Court in Hindustan Petroleum Corporation Ltd 2017 (8) TMI 197 - SUPREME COURT - As the provision is not restricted to manufacturing activity and it also has production in its ambit. We therefore, do not find any merit in the findings of AO. Reliance placed by Ld. DR for the Revenue during the course of hearing in the case of Commissioner of Trade Tax vs M/s. Kumar Paints Mill Stores through its Proprietor 2023 (3) TMI 943 - SUPREME COURT would not help the Revenue as referred judgement decided the dispute under U.P. Trade Tax Act, 1948. Objection of the AO was regarding investment made by the assessee, did not meet threshold limit - Figures submitted by the assessee are self-explanatory. Revenue has not brought any contrary material to controvert the claim of the assessee that it had made investment exceeding the threshold limit. In the absence of such material, we do not see any infirmity in the finding of CIT(A). CIT(A) has given a finding on fact regarding installation of plant machinery and as categorically recorded that it has been clarified beyond doubt that deduction is allowable in the year of installation and not in the year of acquisition. The fact that installation of the plant machinery has been completed during the year under consideration is not in the dispute at all. CIT(A) has pointed out that it is only in the Assessment Year 2014-15, the assets has actually been capitalized in the books of the assessee. It is only in the year under consideration that such assets were put to use for production of lubricant oil on which normal claim of depreciation has been allowed by the assessee. This finding is not controverted by the Revenue. Ground No.1 raised by the Revenue is accordingly, dismissed. Denial of additional depreciation claimed u/s 32(1)(iia) - The issue whether the assessee is engaged in the manufacturing or production activity, has been elaborately discussed while deciding the Ground No.1, we have affirmed the view of Ld.CIT(A). The assessee in our considered view, would be entitled for additional depreciation under the facts of the present case. Therefore, we do not see any infirmity in the finding of CIT(A), the same is hereby affirmed.
Issues Involved:
1. Deletion of addition on account of Investment allowance u/s 32AC. 2. Deletion of addition on account of disallowance of additional depreciation u/s 32(1)(iia). 3. Classification of the assessee as a manufacturer. 4. Deletion of addition on account of excess depreciation due to incorrect classification of certain assets. Summary: Issue 1: Investment Allowance u/s 32AC The Revenue argued that the assessee's activity of blending oil does not qualify as "manufacture" u/s 2(29BA) of the Act and that the assessee did not meet the threshold limit of INR 100 crores for investment in new plant & machinery during the specified period. The Tribunal noted that the AO's interpretation was contrary to the Supreme Court's judgment in CIT-1, Mumbai vs Hindustan Petroleum Corporation Ltd., which held that blending processes could be considered as "production." The Tribunal found that the assessee met the investment threshold and the assets were correctly classified as plant & machinery, thus upholding the CIT(A)'s decision to allow the investment allowance. Issue 2: Additional Depreciation u/s 32(1)(iia)The Revenue contended that the assessee was not engaged in manufacturing or production, thus disqualifying it from additional depreciation. The Tribunal, referencing its findings on Issue 1, affirmed that the assessee's blending of oil constitutes production. Consequently, the Tribunal upheld the CIT(A)'s decision to allow additional depreciation. Issue 3: Classification as ManufacturerThe Tribunal reiterated its findings from Issue 1, confirming that the assessee's activities qualify as production under the relevant tax provisions. Thus, the classification of the assessee as a manufacturer was upheld. Issue 4: Excess Depreciation on Incorrect Classification of AssetsThe AO disallowed excess depreciation due to incorrect classification of certain assets. The Tribunal found that the CIT(A) correctly classified the assets under "Plant & Machinery" and upheld the deletion of the addition. Cross Objection by Assessee:The assessee's cross-objection regarding capitalization of interest income on fixed deposits and the treatment of loss on reinstatement of foreign currency loans was dismissed as not pressed. Conclusion:Both the Revenue's appeal and the assessee's cross-objection were dismissed, upholding the CIT(A)'s decisions on all contested issues.
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