Appeal on Additional Depreciation for Cement Manufacturing Remitted for Re-Examination

The appeal by the Revenue under section 260A of the Income Tax Act challenged the entitlement of additional depreciation for the assessment year 2007-08 regarding the manufacturing of ready mix cement by the respondent. The court directed the tribunal to re-examine whether the cement was sold to third parties or used captively to determine the eligibility for additional depreciation. The decision was partly in favor of the Revenue, and the matter was remitted to the tribunal for a fresh decision based on the directions provided in a related appeal. No costs were incurred in disposing of the appeal.

---

---

Issues involved:
The appeal by the Revenue u/s 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal regarding the entitlement of additional depreciation u/s 32(1)(iia) for the assessment year 2007-08 in relation to the activity of manufacturing ready mix cement (RMC) by the respondent/assessee.

Summary:

Issue 1: Entitlement to Additional Depreciation
The substantial question of law framed was whether the assessee is engaged in the activity of manufacturing RMC and thus entitled to additional depreciation u/s 32(1)(iia) of the Income Tax Act, 1961. The tribunal's decision was based on a previous order for the assessment year 2004-05. However, the Revenue contended that the tribunal did not consider whether the RMC was used for captive use or sold to third parties, which is crucial as per the judgment in NC Budharaja. It was acknowledged by both parties that if the RMC was used for the assessee's own construction activities, additional depreciation cannot be allowed, but if it was sold as a commodity, then the assessee is entitled to additional depreciation. The tribunal was directed to re-examine the matter on merits after determining whether the RMC was sold to third parties or captively used. The decision was partly in favor of the Revenue, and the matter was remitted to the tribunal for a fresh decision based on the directions provided.

Conclusion:
The decision in a related appeal equally applied to the present case, and the matter was remitted to the tribunal for a fresh decision based on the directions given in the previous appeal. The appeal was disposed of with no costs incurred.

---