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TMI Blog2016 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... up a separate unit for manufacturing pipes, which was utilized for captive consumption in contract business as well as sold to outsiders also. The above manufacturing unit is registered with excise department and the details of manufacturing and sales are given below: AY Description of pipes Total value For use in works contract value Sold to others value 2007-08 All kinds of pipes namely MS pies, PSC pipes, RCC pipes MS Shell 9,24,57,161 (Quantity in numbers 9644) 9,10,33,008 14,24,153 2008-09 -do- 15,77,83,764 (Quantity in numbers 11102 14,59,09,168 1,18,74,596 2009-10 -do- 27,49,39,351 (Quantity in numbers 18198) 26,57,34,545 92,04,806 2010-11 -do- 31,70,02,299 (Quantity in numbers 11102 30,85,35,938 84,66,361 3. The main issue before us is, the assessee claimed additional depreciation u/s 32(1)(iia) on plant and machinery at Rs. 32,25,776/-. The Assessing Officer relied on the section 32(1)(iia) i.e. to claim additional depreciation, the assessee should be engaged in the business of manufacture or production of any article or thing. Assessing Officer also relied on the Hon'ble Madras High Court's decision in the case of Hi Tech Arai Ltd., 321 ITR 477, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as not eligible for claim of additional depreciation. Ground No.5 is therefore decided against the appellant." 4. Aggrieved, the assessee is in appeal before us and has raised the following grounds of appeal: 1. The order of the Learned CIT(Appeals) is against law, weight of evidence and facts of the case. 2. The learned CIT(A) erred in law in not allowing additional depreciation under section 32(1)(iia) amounting to Rs. 32,25,776 when the appellant was engaged in manufacturing of pipes both for captive utilization in contract work and sale to out side parties, loosing sight of the fact that quantitative test is not a statutory criteria for allowing additional depreciation on business assets. 3. The learned CIT(A) ought to have appreciated that quasi judicial authorities are precluded from providing casus omisus and bring in new conditions while considering the imports of a statutory provision. 4. For the above grounds and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal be allowed. The appellant craves leave to add to, amend or the above grounds of appeal either before or at the time of hearing of the appeal, if it is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee though is in the business of construction and infrastructure business and in the process using pipes by manufacturing themselves and also has sold such manufactured pipes to others. Referring to the case relied upon by the AO and assessee in the case of M/s Hi Tech Arai Ltd. (supra), the ld. DR submitted that in the said case, the assessee had already set up a separate and distinct business of production of power, which had nothing to do with the original business of manufacture of oil seeds, moulded rubber parts, seed value assemblies etc. The new windmills purchased were used for a separate production activity of power. But, in the present case, the assessee has not set up any separate production unit and has been making the pipes in his construction and infrastructure business, which is not an activity of manufacture or production as held in a plethora of cases. He, therefore, submitted that mere usage of machinery in making pipes would not amount to manufacture or production as provided u/s 32(1)(iia) as the condition precedent to section 32(1)(iia) is an assessee engaged in the business of manufacture or production of any article or thing. The ld. DR submitted that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer had relied on this judgment to disallow the additional depreciation, whereas the revenue has no case on relying on this ratio of the judgment. 7.2 On the issue of dominant nature of business of manufacture, the Hon'ble Rajasthan High Court in the case Lake Palace Hotels and Motels (P.) Ltd., (supra), the Hon'ble Rajasthan High Court held as follows: 22. In that view of the matter, firstly we are of the opinion that the Circular dt. 29th July, 1991 [(1991) 96 CTR (St) 233], fully supports the view which the Tribunal has taken. Apart from that the Tribunal has also referred to the fact that the assessee is charging hire for providing the vehicle to its customers as independent business, which is corroborated by the fact that the vehicles were imported by the assessee with the approval of the RBI under the taxi quota only, giving out a clear intention that it is running them on hire. The assessee has also referred to the fact and which is not denied that the respondent-assessee is charging hire from the customers to use the vehicles for transportation, primarily which are being used for the hotel and for reaching the airport on checking out for leaving the place. The statutory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot see any reason to take a different view in this regard. The aforesaid decision fortifies the conclusion reached hereinabove." From the above decision, it is clear that the manufacturing activity of the assessee is a separate economical activity and incidental to the main business. Since, the assessee was already running a manufacturing activity independently and manufacturing pipes as it is observed in the above judgment, that one business can be advantageously combined with another business. Hence, in the present case, as per the provisions of section 32(11)(iia) and relying on the decision of Hon'ble Madras High Court in the case of Hi Tech Arai Ltd. (supra), the assessee is already engaged in the business of manufacture even though it is an activity of the main business. In our considered view, the assessee is eligible to claim additional depreciation u/s 32(1)(iia) of the Act as an existing manufacturer. 8. As the issue in ITA No. 938/Hyd/14 for AY 2009-10 is materially identical to that of AY 2008-09 in ITA No. 1674/Hyd/11, following the conclusion drawn therein, we allow the appeal of assessee in this year also. 9. In the result, both the appeals of the assessee are al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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