ITAT Kolkata: Construction activities not industrial for tax benefits.

The ITAT Kolkata dismissed all appeals of the assessee, upholding the disallowances u/s. 35D of the I.T Act 1961 for assessment years 2002-03, '03-04, and '04-05. The court affirmed that construction activities, such as laying down railway tracks, did not qualify as industrial undertakings engaged in manufacturing activities as required by law. The decision was based on judicial interpretations emphasizing that construction does not amount to manufacturing or production, settling the law on the matter.

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Issues involved:
Confirmation of disallowance u/s. 35D of the I.T Act 1961 for assessment years 2002-03, '03-04, and '04-05.

Detailed Analysis:
The appeals were filed by the assessee against the common order of Ld. CIT(A) regarding the disallowance u/s. 35D of the I.T Act 1961 for the mentioned assessment years. The AO disallowed the claim of the assessee as it did not meet the conditions stipulated in section 35D, which mandates the assessee to be an industrial undertaking involved in manufacturing activities. The assessee, engaged in construction activities, contended that laying down railway tracks constituted an industrial undertaking, citing lack of a specific definition in the Act. However, the revenue authorities unanimously concluded that construction of roads and railway tracks did not amount to manufacturing or production as required by the law.

The ld. CIT(A) analyzed the case laws and observed that the construction activity did not qualify as an industrial undertaking based on judicial authorities' interpretations. The Hon'ble Delhi High Court in Ansal Housing and Construction Ltd vs. CIT clarified that undertakings involved in manufacturing activity qualify as industrial undertakings, which construction activities do not fall under. The court emphasized that construction does not amount to manufacturing or production of an article or a thing, settling the law on the matter.

The assessee referred to the ITAT Delhi (Special Bench) order in M/s. Hyde Constructions Ltd, but the ITAT Kolkata dismissed its relevance as it was rendered before the significant decisions by the Hon'ble Supreme Court and the Hon'ble Delhi High Court. The assessee also mentioned the AO's acceptance of the claim in a previous year, but it was not taken up for scrutiny, and no findings were recorded. Consequently, the ITAT Kolkata upheld the disallowances made u/s. 35D for all the assessment years under consideration, affirming the ld. CIT(A)'s order.

In conclusion, the ITAT Kolkata dismissed all appeals of the assessee, upholding the disallowances u/s. 35D of the I.T Act 1961 based on the lack of qualification as an industrial undertaking engaged in manufacturing activities, as clarified by judicial authorities.

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