2014 (4) TMI 1156 - HC - Income Tax

High Court affirms manufacturing status for tax benefits, endorses additional depreciation, appeal dismissed.

The High Court upheld the ITAT's decision, confirming that the respondent's activities qualified as manufacturing under Section 32(1)(iia) of the Income ... Eligibility of depreciation - whether the activity did not amount to 'manufacture'? - Held that:- As it is not disputed by the appellant that the respondents are engaged in the business of processing of iron ore in the plant and generation of windmill energy which is held to be a manufacturing activity within the said provision of Section 32(1)(iia) of the Income Tax Act, the observations of the Apex Court in the case of Sesa Goa Ltd.[2004 (11) TMI 14 - SUPREME Court], are thus clearly applicable to the facts of the present case. Issues:Challenge to order passed by Income Tax Appellate Tribunal - Jurisdictional error in going into merits of dispute - Interpretation of Section 32(1)(iia) of Income Tax Act for additional depreciation.Analysis:The appeal before the Bombay High Court challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 8th August, 2013. The appellant argued that the ITAT exceeded its jurisdiction by delving into the merits of the dispute, which was impermissible in such an appeal. The appellant contended that there was a jurisdictional error committed by the ITAT. On the other hand, the respondent's counsel highlighted that the main issue was whether the respondent's activity qualified as a manufacturing activity under Section 32(1)(iia) of the Income Tax Act to claim additional depreciation. The respondent's counsel referenced a judgment by the Apex Court in the case of Commissioner of Income-tax vs. Sesa Goa Ltd. to support their position.Upon reviewing the arguments, the High Court noted that the central question was whether the respondent's activity fell within the scope of Section 32(1)(iia) of the Income Tax Act. The Court referred to the judgment in the case of Sesa Goa Ltd. where the Apex Court had clarified the interpretation of the term 'production' in the context of the Act. The High Court found that the respondent's activities, including iron ore processing and windmill energy generation, constituted manufacturing activities within the provisions of Section 32(1)(iia) based on the observations from the Sesa Goa Ltd. case.The High Court further examined the ITAT's order and agreed with its findings that the Assessing Officer had appropriately considered and allowed the additional depreciation claimed by the assessee. The Court cited precedents, including decisions from the Bombay High Court and the Supreme Court, to support the view that the Assessing Officer's actions were in accordance with the law. Consequently, the High Court concluded that there was no substantial question of law requiring consideration in the present case and rejected the appeal.In summary, the High Court upheld the ITAT's decision, emphasizing that the respondent's activities qualified as manufacturing under Section 32(1)(iia) of the Income Tax Act. The Court also affirmed the Assessing Officer's assessment regarding additional depreciation, citing relevant legal precedents to support its decision. Ultimately, the appeal was dismissed as there was no substantial legal issue to be addressed.