Tribunal allows additional depreciation for aggregate production, emphasizing manufacturing activities

The Tribunal upheld the Commissioner of Income Tax (Appeals) decision to allow the firm engaged in the production of aggregate to claim additional depreciation under Section 32(i)(iia) of the Income Tax Act. The Tribunal determined that the assessee's activities constituted manufacturing and production of a distinct article, justifying the allowance of additional depreciation on the plant and machinery used for production. The appeal by the Revenue was dismissed, emphasizing the significance of the nature of the assessee's activities in determining eligibility for tax benefits.

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Issues:
Claim of additional depreciation disallowed by AO but allowed by CIT(A) based on the nature of the assessee's activities.

Analysis:
The main issue in this appeal was the disallowance of additional depreciation by the Assessing Officer (AO) which was later allowed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The dispute revolved around whether the assessee, a firm engaged in the production of GSB and aggregate, was eligible for claiming additional depreciation under Section 32(i)(iia) of the Income Tax Act. The AO contended that the assessee, being a civil work contractor, did not qualify for additional depreciation as it was not involved in the production or manufacture of articles. However, the CIT(A) ruled in favor of the assessee, stating that the firm was indeed engaged in manufacturing and production of aggregate, not civil work.

The Departmental Representative (DR) argued that the assessee received contractual payments for job work from various parties and was not involved in manufacturing or production. The DR relied on a Supreme Court decision to support the claim that contractual civil work did not fall under production or manufacture. On the other hand, the Authorized Representative (AR) of the assessee contended that the firm was manufacturing aggregate, not engaged in civil work. The AR highlighted that the assessee supplied aggregate to infrastructure companies and had set up a crusher unit for production. The AR emphasized that the raw material used was transformed into aggregate, making the plant and machinery eligible for additional depreciation.

The Tribunal analyzed the submissions and the facts on record. It noted that the assessee's activities involved converting stone blocks into aggregate used in construction, indicating manufacturing rather than civil contracting. The CIT(A) had considered the details of the production process and machinery used, concluding that the assessee qualified for additional depreciation. The Tribunal agreed that the assessee's process resulted in a new marketable product, justifying the allowance of additional depreciation on the plant and machinery used for production. Consequently, the appeal by the Revenue was dismissed, upholding the CIT(A)'s decision to allow the claim of additional depreciation.

In conclusion, the Tribunal affirmed that the assessee's activities constituted manufacturing and production of a distinct article, warranting the allowance of additional depreciation. The judgment highlighted the importance of the nature of the activities carried out by the assessee in determining eligibility for tax benefits under the Income Tax Act.

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