TaxTMI 
TaxTMI 
2022 (12) TMI 279
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....w, the Ld. CIT(A) erred in sustaining the order passed by ld. Assessing Officer. u/s 143(3), without appreciating assessee's submission while adjudicating the appeal. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the appellant has not fall within the purview of manufacturing in term of section 2(29BA) of the Income Tax Act, 1961." 2. Brief facts are such that the assessee-company filed return of income on 30.09.2015 declaring a loss of Rs. 39,72,580/-. The case was selected for scrutiny and statutory notices u/s 143(2)/142(1) were issued, which were duly complied with. During assessment proceeding, Ld. AO observed that the assessee has claimed additional depreciation u/s 32(1)(iia) of Rs. 20,25,596/- on plant and machinery. Ld. AO confronted the assessee on eligibility of claim. The assessee made a detailed submission on business activity, which is reproduced in assessment-order at Page No. 4 to12, and tried to convince the Ld. AO that it is eligible for claim of additional depreciation. However, the Ld. AO being unsatisfied with the submission of assessee, rejected the claim of assessee by observing as under: "5....
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....aged in the manufacturing activities i.e. repacking of edible Oil in which company used to buy oil in bulk and loose quantities from market and sale in Tin/Jar and bottles or other packing as required by the customers. The Repacking process involved several stages such as Storing, Analytical observation, Segregation & Mixing of oil, packing, branding etc. and the said stages requires labour, machinery, power, packing material, analytical lab and job works. In addition to the above company is also engaged in trading business of Oil i.e. loose oil purchased from Local as well as overseas market and sale directly to the parties in tankers or in loose quantities which constitute 1.07 % only of total sale and balance is from manufacturing activities i.e. 98.93 % as regard the year under consideration. Now, we would like to draw your Honour's attention toward the assessment order passed under section 143(3) of Income-tax Act for the year under consideration wherein Ld. AO has disallowed Rs. 2025596/- on account of additional depreciation as claimed by assessee under section 32(1)(iia) of the Income Tax Act by observing that - assessee has not involved in any manufacture activity. ....
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....tion -Finished edible oil Receiving material from packing unit ## Repacking of oil in jar /bottles with various brands names [as per quality] It is needless to mention here that the above process required Labour, Packing material, Loading, Unloading, Power, machinery and analytical Lab and same can be evident from attached Note No. 26 -"Factory expenses" of Profit & Loss Account of audited Balance-Sheet for the year under consideration. Kindly refer page no. 1 ##. Here we would like to draw your honour attention towards the packing unit, wherein assesse company also manufactured the packing material such as jar/pouches/bottles form plastic granules by using machinery installed in factory. In this regard we are enclosing copies of purchase bills of plastic granule/raw material. Kindly refer page no. 2 to 3 We are also enclosing the schedule & Sub schedule of fixed assets from audited Balance-sheet for the year under consideration showing Plant & machineries related to manufacturing activates. Kindly refer page no. 4 to 7 In the above manufacturing process assessee-company not only repacked the edible oil but repacked the oil in manner that not loses its nut....
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.... transport, delivery or disposal, (ii) pumping oil, water, sewage or any other substance; or (iii) generating, transforming or transmitting power; or (iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; [or] (v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or (vi) preserving or storing any article in cold storage; It is pertinent to mentioned here that assesse company having license under the provision of Factories Act, 1948. Wherein stated that company engaged in manufacture process of Edible Oil & packing and Jar Packing. Xerox copy of same is enclosed for your honour kind perusal. Kindly refer page no. 8 The above proposition has been also supported by various judicial pronouncements; In this regard assesse has place reliance on judgment of the Supreme court in the case of: [i] M/s India Cine Agencies Vs. Commissioner of Income-tax madras (3649- 3650 of 2003) [ii] Arihant Tiles and marbles P.Ltd. (2010) 320 ITR 79 (SC) [iii] CIT Vs. Hindustan Petroleum Corporation Ltd. (9296 of 2017) Xerox copies of above Judgments are annexed - ki....
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.... change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. it is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. Collector of Central Excise v. Rajasthan State Chemical Works [1991) 4 SCC 473) = (2002-TIOL-66-SC-CX....
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....ve. I have considered the reasons given by the Assessing Officer in the assessment order and also the written submission filed by the appellant. After taking into account the express provision of the Income Tax Act, 1961 dealing the additional depreciation and definition of plant and machinery and manufacturing, I am of the opinion that the activity of packaging of oil being done by the appellant does not fall within the purview of manufacturing. Therefore, I am in agreement with Assessing Officer that the additional depreciation is admissible only for manufacturing of the articles in terms of section 2(29BA) of the Income tax Act, 1961. I have also gone through the various case laws cited by the appellant in support of the ground of appeal which have not been found applicable on the facts of the present case. Therefore, I hereby endorse the finding of the Assessing Officer as listed at serial Nos.1 to 4 above. The addition made on this account is hereby confirmed. The grounds of appeal are dismissed." 5. Aggrieved by order of Ld. CIT(A), the assessee has now come in appeal before us. 6. During hearing before us, Ld. AR reiterated the extensive submissions made by assessee to low....
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....has been consistently regarded as "manufacture" by various Government Department and Agencies. The process undertaken by the assessee have been treated as manufacture under Excise Act and allied tax laws, although the excise-duty is exempt on edible oil. With these submissions, Ld. AR prayed to accept the assessee as eligible for additional depreciation. 7. Ld. DR strongly opposed the submissions of Ld. AR and placed a heavy reliance on the orders of lower authorities. Ld. AR argued that whatever process is applied by the assessee, the oil remains oil and the requirements of "manufacture" as defined in section 2(29BA) are not satisfied. Therefore, the assessee is not eligible to claim additional depreciation. 8. In order to resolve the controversy, let us first examine the relevant provision of law. 8.1 Section 32(1)(iia) of the act, which grants the benefit of additional depreciation, reads as under: "32.(1) In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on o....
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.... the processes may be termed as being 3 ITA no.2113/Ahd/2010 engaged in manufacturing of textiles yet, an industry engaged in one or two activities or processes in the series, should also be considered as a manufacturer. It has been further submitted that the Assessee, in addition to job-work, is engaged in manufacturing and trading of embroidered dupattas, sarees and dress materials. The work done by embroidery machines changes the basic form of the fabric in the same manner as is in the case of dyeing and printing. The value of cloth is increased by way of embroidery. The input is cloth and the output is embroidered sarees, dupattas and dress materials: In support of his contentions, the AR has placed reliance on the various provisions of section 32(1)(iia) of the IT Act and on the following case-laws, and has pleaded that the addition be deleted. 6. I have carefully considered both the positions. At the outset, it is necessary to refer to the provisions under which additional depreciation was claimed by the Assessee, which is section 32(1)(iia): (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31....
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.... 30/2004- Central Excise dated 09-07-2004 has exempted all the excisable goods falling under Chapter 58 (except 5804.90, 5805.90, 58,07 and 5808.10) from the levy of Excise Duty, (see Annexure-2). Thus, even if the criteria of manufacturing is to be applied, then also the activity of embroidery would amount to manufacturing under the Central Excise Act, resulting in the embroidered product being liable to excise duty. 6.3 The AR has placed reliance on the decision of the Hon'ble Supreme in the case of S.S.M.Bros. (P) Ltd. & Ors. V/s CIT (2000) 243 ITR 418. In this case, the Hon'ble Supreme Court has dealt with the application of the provisions of section 33(1)(b)(B)(i) and has held that, when read together with item 32 of Schedule-V, the machinery or plant installed for the production of textiles including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the Assessee is entitled to deduction on account of development rebate under the said section. The Court has further observed that, if the machinery or plant is required to be utilized in the production of such textiles at whatever stage, the Assessee is entitled to the benefit. In this cas....
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....peration / process fall within the meaning of the word "manufacture". 6.5 It must be appreciated that the designs which are embroidered are specific to a product and the purpose for which the product is to be utilized. It is thus different from printing. While a design may be printed on bales of cloth, embroidery can only be done for a specific purpose and for a specific use. The embroidery for the top of a woman's wear would be clearly different from that of the bottom, the embroidery on the kameez would have to be a specific design which is suitable and matches a kameez. The embroidery on the salwar or the bottom would be different. The Assessee cut the pieces, got them embroidered, packed them into 6 ITA no.2113/Ahd/2010 boxes and exported them. This meant that the end product was completely different from the bale of cloth or finished fabric prior to being embroidered. In other words, the market recognition of the embroidered finished product necessarily had to be different from the finished fabric prior to being embroidered. To this extent, such activity of embroidery could also be treated as manufacture. 6.6 In view of the discussion above, it is held that the Assesse....
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.... of man-made fabrics. The words used in sec. 32(1)(iia) of the Act are 'manufacture' or 'production'. 'The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture. The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products which emerge in the course of manufacture . Here we may refer to a decision of the Hon'ble Apex Court relied upon by the assessee before the ld. CIT(A) in the case of S.S.M.Bros. (P) Ltd. & Ors. V/s CIT (2000) 243 ITR 418. In this decision, the issue was as to whether the assessee purchasing cloth and doing embroidery work thereon with the aid of imported machines, would be entitled to development rebate at an enhanced rate under the provisions of section 33(1)(b)(B)(i) of the Act. Hon'ble Apex Court held that if the machinery or plant is required to be utilised in the production of such ....