2012 (11) TMI 949 - AT - Income Tax

Reopening of Assessment - Additional depreciation on machinery installed at milk chilling plant/processing centre, sales outlet, etc - Held that - Although milk is required for the purpose of manufacturing of curd and ghee, standardised and pasteurised milk for the purpose of production of curd and ghee is a step removed from the business of production of curd and ghee. The curd and ghee could have been produced by the assessee from the milk without standardisation and pasteurisation. Usage of pasteurised condensed milk is not necessary for the purpose of production of ghee and curd. Because the assessee used the standardised and pasteurised milk, we cannot grant the additional depreciation on the plant and machinery which are used for the purpose of standardisation and pasteurisation of milk. Accordingly, even on merit we decide the issue against the assessee. The various case-law relied on by the assessee-company are delivered on their own context and cannot be applied to the facts of the present case. - decided against the assessee. Levy of Interest - levy of interest u/s. 234B and 234C of the Act is consequential and mandatory in the nature - this ground is dismissed - Appeal of assessee is dismissed. Allowability of foreign travel expenditure - held that - , the assessee not furnished bifurcation of expenditure as related to business and pleasure trips - Being so, the CIT(A) directed the Assessing Officer to disallow 2/3 of expenditure. Before us also nothing has been furnished. However, the AR made as plea that the assessee could furnish details of foreign travel as relating to business trips as well as pleasure trips. - matter remitted back - appeal of assessee is partly allowed for statistical purposes.

Issues Involved:

1. Reopening of assessment for AY 2005-06.
2. Allowability of additional depreciation on machinery.
3. Levy of interest under sections 234B and 234C.
4. Allowability of foreign travel expenditure for AY 2008-09.

Detailed Analysis:

1. Reopening of Assessment for AY 2005-06:

The primary issue in ITA No. 20/Hyd/2012 pertains to the reopening of the assessment for the assessment year 2005-06. The original assessment was completed under section 143(3) on 26.12.2007. Subsequently, a notice under section 148 was issued on 24.3.2009, based on the reason that additional depreciation claimed on machinery installed at milk chilling plant/processing centre and sales outlet was not allowable since the assessee was not engaged in manufacturing. The assessee contended that all relevant information was available at the time of the original assessment, and no new tangible material had surfaced to justify reopening. The assessee argued that this constituted a change of opinion. However, the Tribunal upheld the reopening, citing that the Assessing Officer had valid reasons based on the Tribunal Pune Special Bench's decision in B.G. Chitale v. Dy. CIT, which held that pasteurisation and standardisation of milk do not amount to production, thus justifying the reassessment.

2. Allowability of Additional Depreciation on Machinery:

On the merits of the additional depreciation, the Tribunal concluded that the machinery installed for pasteurisation and standardisation of milk does not qualify for additional depreciation under section 32(1)(iia). The Tribunal referenced the B.G. Chitale case, which determined that such activities do not constitute manufacturing or production. Consequently, the machinery used for these processes could not be considered for additional depreciation. The Tribunal emphasized that the activities of standardisation and pasteurisation are distinct from manufacturing curd, ghee, and other milk products, and thus, the machinery used in these processes does not have a direct nexus with the production of curd and ghee.

3. Levy of Interest under Sections 234B and 234C:

The issue of interest levied under sections 234B and 234C was deemed consequential and mandatory by the Tribunal. As such, this ground was dismissed without further deliberation.

4. Allowability of Foreign Travel Expenditure for AY 2008-09:

In ITA No. 1820/Hyd/2011, the main issue was the allowability of foreign travel expenditure claimed by the assessee. The assessee claimed Rs. 20,35,971 as foreign travel expenditure. Due to the lack of detailed bifurcation between business and pleasure trips, the Assessing Officer disallowed 80% of the expenditure. On appeal, the CIT(A) adjusted this to allow 1/3rd of the expenditure. The Tribunal, considering the assessee's request to furnish details of the expenditure, remitted the issue back to the Assessing Officer. The Assessing Officer was directed to obtain the bifurcation and disallow the portion related to pleasure trips. If the assessee fails to provide the details, the Assessing Officer should follow the CIT(A)'s directive.

Conclusion:

The Tribunal dismissed the appeal in ITA No. 20/Hyd/2012 and partly allowed ITA No. 1828/Hyd/2011 for statistical purposes. The decisions were based on the interpretation of the relevant sections and previous judicial pronouncements, ensuring that the legal principles were applied consistently.

← Previous Next →