TaxTMI 
TaxTMI 
2024 (4) TMI 347
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.... the Ld.CIT(A) has erred in deleting the addition of Rs. 15,86,72,179/ on account of Investment allowance u/s 32AC of the IT Act, 1961 by holding that business activity of the assessee is manufacturing as per the Central Excise Act and that the assessee had acquired & installed the new assets during the period 01.04.2013 to 31.03.2014. b) Whether on the facts & in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the findings of the Assessing officer that i) The business activity of the assessee involves only blending of oil and therefore, does not qualify as "manufacture" as defined u/s 2(29BA) of the Act. ii) The assessee had not acquired and installed the whole of plant & machinery during the year under assessment, with a substantial part of the plant & machinery having been acquired & installed before 01.04.2013, and therefore, the threshold limit of investment of Rs. 100 crore during the year under consideration was not satisfied in this case. iii) A substantial part of the assets did not qualify as plant & machinery, being in the nature of lighting fixtures, switches, electric work, and therefore, such it....
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....ring the submissions and explanation of the assessee, the AO disallowed the claim of the assessee on the ground that the assessee does not fulfill the conditions as prescribed u/s 32AC of the Act. Thus, he made addition of INR 15,86,72,179/- in respect of disallowance of investment allowance u/s 32AC of the Act. Further, the AO also disallowed the additional depreciation claimed u/s 32(1)(iia) of the Act amounting to INR 20,82,61,994/-. He also disallowed excess depreciation in respect of incorrect capitalization of assets amounting to INR 97,05,846/-. Further, he made addition on account of difference of INR 98,97,292/- which was set off by the assessee against the interest paid on ECB loans. Further, he made addition on account of disallowance of Club Membership Fee subscription treating it as capital expenditure of INR 2,33,850/-. Thus, the AO assessed the income of the assessee at loss of INR 57,81,34,616/- against the income declared by the assessee at a loss of INR 96,49,05,777/-. 4. Aggrieved against this, the assessee carried the matter before Ld.CIT(A), who after considering the submissions, partly allowed the appeal of the assessee. Thereby, Ld.CIT(A) deleted the addit....
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.... assessee. He further submitted that the Assessing Authority erred in holding that the threshold limit of INR 100 crores, investment was not met. He contended that the AO erroneously excluded the items which were necessary part and parcel of plant & machinery and intrinsically connected with the plant & machinery. He contended that the plant & machinery would certainly include the accessories which are necessary for running of the plant & machinery that would also include the electrical fittings and sockets. He submitted that the assessee had given composite contract for plant & machinery. Therefore, he submitted that under the facts of the present case, the AO was not justified in deleing the claim made by the assessee regarding investment allowance. He submitted that the issue is no more res-integra and has been decided in favour of the assessee in catena of judgements. Hence, the Ld.CIT(A) has rightly allowed the claim of the assessee. 9. We have heard Ld. Authorized Representatives of the parties and perused the material available on record. The question is whether the Ld.CIT(A) was justified in allowing the claim of the assessee qua investment allowance made u/s 32AC of the....
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....nsferred, except in connection with the amalgamation or demerger, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) or sub-section (1A) in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head "Profits and gains of business or profession" of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. (3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of sub-section (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company. (4) For the purposes of this section, "new asset" means any new plant or machinery (other than ship or aircraft) but does not include- (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) a....
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....tention that the assessee is carrying out manufacturing of production activity. Reliance was placed on the judgement of Hon'ble Supreme Court in the case of CIT-1, Mumbai vs Hindustan Petroleum Corporation Ltd. (supra) wherein after examining various judgements, Hon'ble Supreme Court held as under:- 14) "We have given adequate consideration to the respective submissions of both the parties, which they deserve. As is clear from the facts and arguments noted above, the question of law which is involved (already mentioned) is: Whether bottling of LPG, as undertaken by the assessee, is a process which amounts to 'production' or 'manufacture' for the purposes of Sections 80HH, 80-I and 80-IA of the Act?; and if so, whether the respondents/assessees are entitled to claim the benefit of deduction under the aforesaid provisions while computing their taxable income? 15) At the outset, it needs to be emphasised that the aforesaid provisions of the Act use both the expressions, namely, 'manufacture' as well as 'production'. It also becomes clear after reading these provisions that an assessee whose process amounts to either 'manufacture' or 'production' (i.e. one of....
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....ory of "manufacture" or "production" under Section 80-IA of the Income Tax Act. 17. As stated hereinabove, the judgment of this Court in Aman Marble Industries (P) Ltd. [(2005) 1 SCC 279 : (2003) 157 ELT 393] was not required to construe the word "production" in addition to the word "manufacture". One has to examine the scheme of the Act also while deciding the question as to whether the activity constitutes manufacture or production. Therefore, looking to the nature of the activity stepwise, we are of the view that the subject activity certainly constitutes "manufacture or production" in terms of Section 80-IA. 18. In this connection, our view is also fortified by the following judgments of this Court which have been fairly pointed out to us by learned counsel appearing for the Department. 19. In CIT v. Sesa Goa Ltd. [(2004) 13 SCC 548 : (2004) 271 ITR 331], the meaning of the word "production" came up for consideration. The question which came before this Court was whether ITAT was justified in holding that the assessee was entitled to deduction under Section 32-A of the Income Tax Act, 1961, in respect of machinery used in mining activity ignoring the ....
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....se variable levels of pressure for suction, unloading and vapour recovery; (c) Refilling/bottling of LPG in cylinders by compressing the same into liquid form; and (d) Capping, fixing of seals and safety valves prior to storage and loading of filled cylinders. 17) Thus, after the bottling activities at the assessee's plants, LPG is stored in cylinders in liquefied form under pressure. When the cylinder valve is opened and the gas is withdrawn from the cylinder, the pressure falls and the liquid boils to return to gaseous state. This is how LPG is made suitable for domestic use by customers who will not be able to use LPG in its vapour form as produced in the oil refinery. It, therefore, becomes apparent that the LPG obtained from the refinery undergoes a complex technical process in the assessee's plants and is clearly distinguishable from the LPG bottled in cylinders and cleared from these plants for domestic use by customers. It may be relevant to point out that keeping in view the aforesaid process, the ITAT arrived at the specific findings in support of its decision, which are as under: (a) There is no dispute that the LPG produced in the ref....
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....instance, no distinction was drawn between manufacture and production and the matter was not looked into from the angle as to whether the aforesaid process would amount to production or not. Other reason which prevailed with the AO and which was also the argument of the learned counsel for the Revenue was that, on identical facts, the Gujarat High Court had held that refilling the LPG after purchasing from M/s. HPCL into small cylinders would not amount to manufacture. That was a case which was decided in the context of the Gujarat Sales Tax Act, 1969. The Court held that transfer of LPG from bulk containers into cylinders did not amount to process of manufacture. It is pertinent to point out that Section 2(16) of the Gujarat Sales Tax Act, 1969 defines 'manufacture' and, therefore, the entire case was examined keeping in view the said definition of 'manufacture' and the issue was as to whether the process amounted to manufacture or not. As pointed out above, the question as to whether it amounts to 'production' as well did not arise for consideration. The AO committed manifest error in relying upon the said decision inasmuch as the provisions with which we are concerned in the ins....
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....italization. For the sake of clarity, the same is reproduced as under:- "The Assessee Company during the financial year 2013-14 relevant to the assessment year 2014-15 under consideration had capitalized the total assets of Rs. 225.46 Crores as would be noted from the Fixed Assets Schedule of the Audited Financial Statement at Page No. 46 of Paper Book. The same amount had also been certified by the Tax Auditors in their Tax Audit Report in Annexure-III to such Tax Audit Report available at Page No. 76 of Paper Book (Rs. 214.78 Crores for more than 180 days and Rs. 12.22 Crores for less than 180 days minus Cenvat Credit on this capitalization of Rs. 1.54 Crores i.e. Rs. 214.78 plus Rs. 12.22 minus Rs. 1.54 Rs. 225.46 Crores). Out of this total capitalization of Rs. 225.46 Crores, Rs. 197.88 Crores was obtained through a turnkey contract which was granted to M/s. Shimizu Corporation India Private Limited for which the necessary details are available at Page No. 202 to 208 of Paper Book where assets wise details of assets supplied by the M/s. Shimizu Corporation India Private Limited has been given. Out of this Rs. 197.88 Crores, Rs. 88.27 Crores was on account of P....
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....t has been clarified beyond doubt that deduction is allowable in the year of installation and not in the year of acquisition. The fact that installation of the plant & machinery has been completed during the year under consideration is not in the dispute at all. Further, Ld.CIT(A) has pointed out that it is only in the Assessment Year 2014-15, the assets has actually been capitalized in the books of the assessee. It is only in the year under consideration that such assets were put to use for production of lubricant oil on which normal claim of depreciation has been allowed by the assessee. This finding is not controverted by the Revenue. Therefore, we are of the considered view that the assessee is entitled for claim as made by it and Ld.CIT(A) rightly allowed the same. Therefore, we do not see any merit in the Ground No.1, the same is hereby rejected. Ground No.1 raised by the Revenue is accordingly, dismissed. 14. Ground No.2 raised by the Revenue is against the deleting of addition of INR 20,82,61,994/- in respect of additional depreciation claimed u/s 32(1)(iia) of the Act and Ground No.3 raised by the Revenue is against treating the assessee as manufacturer. Undisputedly, G....