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2021 (4) TMI 573 - AT - Income TaxExcess depreciation on plant and machinery - assessee company derives income from the business of Sea foods/Prawn culture/Production and export - HELD THAT - As perused the observations of the coordinate bench of the Tribunal in the case of M/s Bikanervala Foods Pvt. Ltd 2018 (5) TMI 626 - ITAT DELHI wherein the Tribunal observed that additional depreciation is allowable u/s.32(1)(iia) of the Act even if the assessee is engaged in processing of food products on items directly not linked to manufacturing activities. As per our considered opinion, prawn is a part of food. Respectfully following the above observations of the coordinate bench of the Tribunal, we held that the assessee is eligible for claiming addition depreciation. Accordingly, we allow the sole ground raised by the assessee. Consequently, appeal of the assessee is allowed.
Issues Involved:
1. Legality of the CIT(A)'s order dated 01.12.2016. 2. Influence of the Assessing Officer (AO)'s decision on the CIT(A). 3. Legality of the addition of ?15,71,130/- by disallowing additional depreciation. 4. Eligibility of the assessee for additional depreciation on plant and machinery used in prawn processing. 5. Overall legality and fairness of the orders passed by the AO and CIT(A). Issue-wise Detailed Analysis: 1. Legality of the CIT(A)'s Order Dated 01.12.2016: The assessee contended that the CIT(A)'s order was "unjustified, arbitrary, contrary to the facts and bad in law." They argued that the CIT(A) did not consider the merits, facts, and circumstances of the case and was unduly influenced by the AO's decision. The assessee highlighted that the CIT(A) relied on irrelevant case law and ignored a Supreme Court case favoring the assessee. 2. Influence of the AO's Decision on the CIT(A): The assessee claimed that the CIT(A) was biased by the AO's decision and did not consider the submissions that the assessee was engaged in production activities, having installed the necessary plant and machinery for processing exportable prawns. The CIT(A) confirmed the AO's addition without independent analysis. 3. Legality of the Addition of ?15,71,130/- by Disallowing Additional Depreciation: The AO disallowed the additional depreciation claimed by the assessee on the grounds that the assessee was not engaged in the business of manufacturing or production of any article or thing, referring to Section 32(1)(iia) of the Act. The AO cited various High Court decisions, including CIT Vs. Sri Venkateswara Hatcheries Pvt. Ltd., to support the disallowance. 4. Eligibility of the Assessee for Additional Depreciation on Plant and Machinery Used in Prawn Processing: The assessee argued that the machinery used in their factory for processing and packaging prawns should qualify for additional depreciation. They contended that the term "production" includes processing activities, and the machinery used for processing prawns into an edible form for export should be considered part of manufacturing. The assessee cited the Finance Minister's budget speech and relevant provisions of the Income Tax Act to support their claim. They also referred to the Supreme Court's decision in M/s. Cine India Agency Vs. Commissioner of Income Tax, which defined "production" to include packing, labeling, and other methods to render a product marketable. 5. Overall Legality and Fairness of the Orders Passed by the AO and CIT(A): The assessee argued that the AO's and CIT(A)'s orders were illegal and against the intention of the law. They claimed that the AO did not properly consider the nature of their business and the machinery used for processing prawns. The assessee also cited the ITAT Delhi's decision in DCIT Vs. M/s. Bikanervala Foods Pvt. Ltd., which allowed additional depreciation for processing food products, even if not directly linked to manufacturing activities. Tribunal's Observations: The Tribunal observed that the assessee was engaged in processing, packaging, and exporting prawns. They found substance in the assessee's arguments and the case law cited. The Tribunal referred to the ITAT Delhi's decision in M/s. Bikanervala Foods Pvt. Ltd., which allowed additional depreciation under similar circumstances. They concluded that the assessee was eligible for additional depreciation as per Section 32(1)(iia) of the Act, as the processing of prawns was considered part of production activities. Conclusion: The Tribunal allowed the appeal of the assessee, holding that they were entitled to additional depreciation on the plant and machinery used for processing prawns. The Tribunal found that the CIT(A) and AO had not properly considered the nature of the assessee's business and the relevant legal provisions. The appeal was allowed, and the addition of ?15,71,130/- was deleted. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open court on 11/03/2021.
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