Court affirms embroidery machine depreciation claim under Income Tax Act

The Court upheld the Tribunal's decision allowing the claim of additional depreciation on embroidery machines, amounting to Rs. 74,92,303. It was determined that embroidery work on synthetic fabrics constitutes "manufacture" under section 32(1)(iia) of the Income Tax Act, as it transforms the fabric into a new commercially recognized article. The Court dismissed the appeal, stating that the activity qualifies as manufacturing, and the appellant's argument against eligibility was rejected based on the Act's definition of "manufacture."

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Issues:
Challenge to order disallowing claim of additional depreciation under section 260A of the Income Tax Act, 1961.

Analysis:
1. The appellant revenue challenged the order disallowing additional depreciation on embroidery machines amounting to Rs. 74,92,303. The Assessing Officer disallowed the claim stating that embroidery work does not qualify as "manufacturing" or "production" for additional depreciation eligibility.

2. The Commissioner (Appeals) deleted the disallowance, relying on a Tribunal decision. The Tribunal upheld the deletion, citing a previous decision and a Supreme Court ruling. The appellant argued that embroidery work is mere value addition and not manufacturing, questioning the reliance on the Supreme Court case cited.

3. The main issue was whether embroidery work on synthetic fabrics constitutes "manufacture" or "production" for claiming additional depreciation under section 32(1)(iia) of the Act. The relevant section allows additional depreciation for new machinery if the assessee is engaged in manufacturing. The Tribunal's decision was based on a Supreme Court ruling regarding development rebate eligibility for processed textiles.

4. The Court found that embroidery work transforms synthetic fabric into a new article, commercially recognized as another article. This transformation falls within the definition of "manufacture" under the Act. The Tribunal's decision was upheld, concluding that the activity qualifies as manufacturing, allowing the additional depreciation claim.

5. The Court dismissed the appeal, stating that the Tribunal's decision did not raise any substantial question of law warranting interference. The appellant's argument against the eligibility of embroidery work as manufacturing for additional depreciation was rejected based on the definition of "manufacture" under the Act.

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