Additional depreciation for milk standardisation and pasteurisation machinery denied; foreign travel expense sent back for verification.

Additional depreciation on plant and machinery used for standardisation and pasteurisation at milk chilling/processing facilities was denied because such processes were not necessary for manufacturing curd and ghee; the assessee could have produced those products from milk without standardisation/pasteurisation, making the machinery too remote from the eligible manufacturing activity. The claim was therefore rejected on merits. Levy of interest under ss. 234B and 234C was held to be consequential and mandatory; the ground was dismissed. Foreign travel expenditure was partly disallowed since the assessee failed to furnish a business-versus-pleasure bifurcation; the disallowance direction was set aside and the issue remitted to the AO for fresh verification on details to be furnished, partly allowing the appeal for statistical purposes.

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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.

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