Magnum Estates Limited, Bhubaneswar V. DCIT, Corporate Circle-2(1), Bhubaneswar

ITA 115/CTK/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9295 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: J M PATTNAIK
• Keywords: Depreciation; Additional depreciation; Assessment record
• Section: 40A(3); 32(1)(iia); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 115 /CTK/20 1 7 ( / A SSESSMENT Y EAR : 20 0 9 - 20 10 ) M/S MAGNUM ESTATES PVT. LTD., P LOT NO.132 - A,SECTOR - A, ZONE - A MANCHESWAR, BHUBANESWAR VS. DCIT, CORPORATE CIRCLE - 2(1), BHUBANESWAR PAN NO. : A A BCM 8066 G ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI J.M.PATTNAIK, AR /R EVENUE BY : SHRI S.C.MOHANTY , DR / DATE OF HEARING : 09 / 0 3 /20 2 1 / DATE OF PRONOUNCEMENT : 11 / 0 3 /20 2 1 / O R D E R PER BENCH : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 01.12.2016 , PASSED BY T HE CIT (A) - 1 , BHUBANESWAR FOR THE ASSESSMENT YEAR 20 0 9 - 20 10 , ON THE FOLLOWING GROUNDS OF APPEAL : - 1) THAT THE ORDER DTD. 01 - 12 - 2016 AS PASSED IN THE APPEAL NO.0308/15 - 16 BY THE LEARNED COMMISSIONER OF INCOME TAX - APPEAL(CITA) IS UNJUSTIFIED, ARBITRARY, C ONTRARY TO THE FACTS AND BAD IN LAW. 2) THAT THE LEARNED CITA IS SIMPLY INFLUENCED BY THE DECISION OF THE LEARNED AO WITHOUT GOING THROUGH THE MERITS, FACTS AND CIRCUMSTANCES OF THE CASE. 3) THAT THE ADDITION OF RS. 15,71,130/ - MADE BY THE LEARNE D AO AND CONFIRMATION OF THE SAME BY THE LEARNED CITA, BY DISALLOWING THE ADDITIONAL DEPRECIATION CLAIMED IN THE RETURN, IS ILLEGAL AS THE SAME IS BASED ON A IRRELEVANT CASE LAW, THE FACTS OF WHICH ARE TOTALLY DIFFERENT AND THE DECISIONS WERE GIVEN IN DIFF ERENT CONTEXT. THE LEARNED CITA HAVE COMPLETELY IGNORED A DIRECT CASE LAW OF THE SUPREME COURT WHICH IS IN FAVOUR OF THE ASSESSEE. 4) THAT THE LEARNED CITA IS TOTALLY BIASED BY THE DECISION OF THE LEARNED AO AND COMPLETELY IGNORED THE SUBMISSIONS OF T HE ASSESSEE THAT IT IS ENGAGED IN THE PRODUCTION ACTIVITIES BY ITA NO. 115 /CTK/201 7 2 INSTALLING THE REQUIRED PLANT AND MACHINERY IN ITS INDUSTRIAL UNDERTAKING AND HAVING RECEIVED REGISTRATION FROM VARIOUS GOVT, AGENCIES FOR PRODUCTION/PROCESSING ACTIVITIES OF EXPORTABLE PRAWNS AND ACCORDINGLY ENTITLED FOR ADDITIONAL DEPRECIATION. 5) THAT THE ABOVE ORDERS OF THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE ACTION OF THE ASSESSING OFFICER, ARE ILLEGAL AND AGAINST THE INTENTION OF THE LAW AND LIAB LE TO BE DELETED ON THE ABOVE GROUNDS AND SUCH OTHER GROUNDS TO BE ARGUED AT THE TIME OF HEARING OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY DERIVES INCOME FROM THE BUSINESS OF SEA FOODS/PRAWN CULTU RE/PRODUCTION AND EXPORT AND FILED ITS RETURN OF INCOME ELECTRONICALLY ON 24.09.2009 FOR THE ASSESSMENT YEAR 2009 - 2010 DECLARING TOTAL INCOME AT RS.61,31,758/ - . THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS. 69,10,310/ - DATED 30.12.2011. LATER ON THE CASE WAS REOPENED ON 19.02.2014 ON THE FOLLOWING GROUNDS : - 'ON VERIFICATION OF ASSESSMENT RECORD IT HAS BEEN REVEALED THAT THE ASSESSEE COMPANY HAS CLAIMED EXCESS DEPRECIATION OF RS. 15,71,130 ON PLANT AND MAC HINERY. FURTHER, THE ASSESSEE HAS SHOWN SECURED LOAN IN SCHEDULE - B - LOAN FUND AMOUNTING TO RS. 4,82,76,109/ - IN THE BALANCE SHEET. ON CHECK OF THE BANK STATEMENT OF ACCOUNT NO. 30061974195, ISSUED BY THE SBI, MIE, BHUBANESWAR, IT WAS NOTICED THAT A SUM OF RS. 4,78,93,844/ - WAS TRANSFERRED FROM ONE ACCOUNT NO. 30712543208 ON 17.03.2009 AND THE BALANCE BECAME NIL. THUS, IT IS EVIDENT THAT THE ASSESSEE HAS BEEN MAINTAINING AN ACCOUNT, WHICH WAS NOT DISCLOSED. THE FACT OF THE TRANSFER OF THE FUND SHOULD BE ASC ERTAINED AND ADDED BACK RS. 4,78,93,844 BEING UNDISCLOSED INCOME. IT IS ALSO REVEALED THAT THE ASSESSEE PAID THE AMOUNT OF RS. 9,65,208/ - TO DIFFERENT PERSONS IN EXCESS OF RS. 20,000/ - WITHOUT DEDUCTING TAX. WHICH IS NOT ALLOWABLE U/S 40A(3) OF THE INCOME TAX ACT, 1961. THEREFORE, THE SAME SHOULD BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE.' ITA NO. 115 /CTK/201 7 3 ACCORDINGLY, NOTICE WAS ISSUED ON 19.02.2014 U/S.148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE HA S CLAIMED ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY WHICH WAS USING FOR PROCESSING AND PACKAGING ETC. OF PRAWNS. THE AO REFERRING TO THE SECTION 32(1)(IIA) OF THE ACT, HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION AND ADDED INTO THE TOTAL INCOME OF THE ASSESSEE TO THE TUNE OF RS.15,71,130/ - . 3. FEELING AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) AFTER RELYING CERTAIN JUDGMENTS, WHICH HAVE BEEN INCORPORATED IN THE CIT(A)S ORDER, DISM ISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED FROM THE ORDER OF THE CIT(A), THE ASSESSEE FILED THIS PRESENT APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 5. LD. AR BEFORE US FILED HIS WRITTEN SUBMISSIONS AS UNDER : - THAT, THE APPELLANT COMPANY DERIVES INCOME FROM THE BUSINESS OF SEA FOODS, PRAWN CULTURE & PRODUCTION AND EXPORT OF PROCESSED PRAWNS AND FILED IT RETURN FOR THE ASST. YEAR:2009 - 10 SHOWING TOTAL INCOME AT RS.61,31,758/ - ON DT.24/09/2009 AND THE CASE OF THE APPELLANT HAS UNDER SCRUTINY U/S. 1 43(3) OF THE IT ACT WHERE THE LD. AO HAS DETERMINED THE TOTAL INCOME AT RS.69,10,310/ - , THEREBY MAKING AN EXTRA ADDITION OF RS.7,78,552/ - . THAT, THE CASE HAS AGAIN REOPENED U/S. 147 OF THE IT ACT ON THE BASIS OF THE REPORT OF THE AUDIT WING WHICH LEADS TO THE SATISFACTION OF THE LD. AO AS THE LD. AO HAS FAILED TO EXAMINE THE ADDITIONAL DEPRECIATION OF RS. 15,71,130/ - ON THE PLANT AND MACHINERY UTILIZED FOR THE PURPOSE OF MANUFACTURING - CUM - PROCESSING OF PRAWNS BEING CULTIVATED FROM THE PONDS OF THE APPELLAN T COMPANY AND ALSO RAW PRAWNS PURCHASED FROM THE MARKET FOR EXPORT. BESIDES THIS, THERE WAS OTHER ANOMALIES IN THE ORIGINAL ASSESSMENT ORDER AS POINTED OUT BY THE AUDIT WING FOR WHICH NECESSARY CLARIFICATION WAS SOUGHT FOR BY THE LD. AO. THE APPELLANT COMP ANY HAS EXPLAINED ALL THE ANOMALIES ARISING OUT OF THE ORIGINAL ASSESSMENT ESCAPED FROM THE ORIGINAL ASSESSMENT. THE LD. A.O. HAS ITA NO. 115 /CTK/201 7 4 SATISFIED ALL THE QUERIES EXCEPT DISALLOWANCE OF EXCESS DEPRECIATION(ADDITIONAL DEPRECIATION) CLAIMED AT RS. 15,71,130/ - . THAT , THE LD.AO HAS CITED THE REASONS FOR DISALLOWANCE OF EXCESS DEPRECIATION WHILE CONSIDERING THE BALANCE SHEET FOR THE PERIOD 31 ST MARCH'2009 AS FOLLOWS: - TOTAL DEPRECIATION CLAIMED AT RS.31,31,814/ - WHICH COMPRISES IN TWO PARTS VIZ. I) NORMAL DEPR ECIATION @ 15% AMOUNTING RS. 15,60,684 ON BOTH EXISTING AS WELL AS ADDITIONAL ASSETS OF 1,04,04560(25480907+7855653) II) ADDITIONAL DEPRECIATION @ 20% ON RS.78,55,653.00 WAS AT RS.15,71,130.00. THE LEARNED AO ALLOWED THE NORMAL DEPRECIATION BUT DISALLOWED THE ADDITIONAL DEPRECIATION ON THE GROUND THAT THE APPALENT COMPANY IS NOT ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING.. THE SOLE CLAIM OF THE LD. AO AS IT IS NOT A MANUFACTURING ORGANISATION FO R WHICH THE ADDITIONAL DEPRECIATION CANNOT BE ALLOWED BASING ON THE DECISION OF DIFFERENT HIGH COURTS AS ANALYZED BY THE LD. AO ARE AS FOLLOWS: - I. CIT VS. SRI VENKETESWAR HATCHERIES PVT. LTD. II. M/S. CINE INDIA AGENCY VS. COMMISSIONER OF INCOME TAX. III. M/S. STERLING FOODS VS. STATE OF KARNATAKA AND ANOTHER (1986), 63STC 239. IV. CIT VS. PREMIER EXPORT INTERNATIONAL (271) ITR 308. THE LD. AO HAS ANALYSED THE AFORESAID DECISIONS AND STATING THAT PROCESSING OF PRAWN IS NOT COM ING UNDER THE PROCESS OF MANUFACTURING IN THIS CONTEXT. A. ADDITIONAL DEPRECIATION CLAIMED AT RS.15,71,130/ - ; IN THE CONTEXT, IT IS HUMBLY SUBMITTED THAT USE OF THE MACHINERY AND EQUIPMENT IN THE ASSESSEE'S FACTORY AND WHAT HAS TO BE SEEN IS WHETHER EQUI PMENT/MACHINERY USED IS A PART OF THE MANUFACTURING OR PRODUCTION OF A THING OR ARTICLE4N THE ASSESSEE'S FACTORY AND WHETHER THE USE IS FOR PRODUCTION OR PROCESSING OR FOR BRINGING ABOUT ANY CHANGE IN THE MATERIALS USED IN THE MANUFACTURE/PRODUCTION OF A F INAL PRODUCT. IN THAT CASE, THE 'MACHINES, MACHINERY, PLANT, EQUIPMENT, APPARATUS, TOOLS OR APPLIANCES' USED FOR PRODUCING OR PROCESSING OF ANY GOODS OR FOR BRINGING ABOUT ANY CHANGE IN SUBSTANCE FOR THE MANUFACTURE/PRODUCTION OF THE FINAL PRODUCT. THE MAC HINERIES/EQUIPMENTS INSTALLED AND USED FOR STORING, PROCESSING, STACKING, HANDLING, PACKAGING AND BRINGING TOGETHER VARIOUS MATERIALS/COMPONENTS USED IN THE MANUFACTURE/PRODUCTION IS REGARDED AS USED FOR PROCESSING OF GOODS IN RELATION TO THE MANUFACTURE O F A FINAL PRODUCT. UNLESS THE PRAWNS ARE BROUGHT TO A FINAL SHAPE IN SIZE, SHAPE, STRUCTURE, PRESERVATION AND PACKAGING FOR HUMAN CONSUMPTION OR EDIBLE LEVEL BY WAY OF MANUFACTURING PROCESS, THE EXPORTS TO FOREIGN COUNTRIES ARE NEITHER FEASIBLE NOR ACCEPTA BLE TO CONSUMERS. THE LEARNED AO CAME TO CONCLUSION WITHOUT CONSIDERING. THESE PROCESSING OR MANUFACTURING ASPECTS OF RAW PRAWNS CHANGED TO EDIBLE ITA NO. 115 /CTK/201 7 5 FORM FOR HUMAN CONSUMPTION, THEREBY COMMITTED ERROR IN LAW AND IN FACT WHICH NEEDS JUDICIAL INTERFER ENCE FOR THE ENDS OF JUSTICE. A - L. BESIDES THE ABOVE, AS STATED, THE AUDITED BALANCE SHEET AND BOOKS OF ACCOUNTS WOULD COMPLETELY JUSTIFY AND FORTIFY THE CONTENTIONS OF THE APPELLANT COMPANY IN GROWN FROM IT'S OWN CULTURE AND PURCHASED FROM MARKET OF RAW PRAWNS AND IN TURN CONVERTED TO EDIBLE PURPOSE FOR CONSUMPTION OF HUMAN BEINGS BY VARIOUS PROCESSES OF MANUFACTURING OR PRODUCTION FOR WHICH PROCESSING AND MANUFACTURING UNIT WAS SET UP FOR THIS PURPOSE SINCE MARCH, 2008. A - 2 THE LEARNED CIT HAS DISALLOWED THE ENTIRE DEDUCTION ON THE GROUND THAT THE COMPANY IS NOT ELIGIBLE FOR THE ADDITIONAL DEPRECIATION SINCE THE PROCESS INVOLVED IN THE PLANT IS NOT 'MANUFACTURING' AND HAS SIGHTED THE DECISION OF HONBLE SUPREME COURT IN THE MATTER OF M/S STE RLING FOODS V. STATE OF KARNATAKA. WE SUBMIT HERE THAT THE LEARNED CIT HAS ERRED IN HIS CONCLUSION AND DENIED THE DEDUCTION DUE TO FOLLOWING REASONS: THE OBJECTIVE OF THE PROVISION OF ADDITIONAL DEPRECIATION AS REFLECTED IN THE BUDGET SPEECH OF THE FINAN CE MINISTER IN INTRODUCING THE RELEVANT PROVISIONS IN THE INCOME TAX ACT AND THE RELEVANT PROVISIONS OF THE INCOME TAX ACT FOR THE SAME HAS BEEN GIVEN BELOW: OBJECTIVE 'I HAVE ALREADY MENTIONED THE NEED TO PROVIDE INCENTIVES FOR FRESH INVESTMENTS IN THE INDUSTRIAL SECTOR. TO GIVE IMPETUS TO SUCH INVESTMENT, I PROPOSE TO ALLOW ADDITIONAL DEPRECIATION AT THE RATE OF 15% ON NEW PLANT AND MACHINERY ACQUIRED ON OR AFTER 1ST APRIL, 2002 FOR SETTING UP A NEW INDUSTRIAL UNIT, OR FOR EXPANDING THE INSTALLED CAPACI TY OF EXISTING UNITS BY AT LEAST 25%. ' SECTION 32(IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACT URE OR PRODUCTION OF ANY ARTICLE OR THING FOR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER], A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II FROM THE ABOVE PROVISIONS, IT MAY KINDLY BE SEEN THAT, THE DEDUCTION IS ALLOWABLE WHEN AN ASSESSEE IS ENGAGED IN PRODUCTION OF ANY ARTICLE. THE WORD PRODUCTION HAS NOT BEEN DEFINED IN THE ACT AND ACCORDINGLY SHOULD BE INTERPRETED TAKING INTO ACCOUNT THE OBJECT IVE OF THE PARLIAMENT AS ELABORATED IN FINANCE MINISTER SPEECH AND ALSO. HERE THE WORD PRODUCTION HAS MUCH WIDER MEANING AND SHALL INCLUDE PROCESSING ACTIVITIES OF THE ASSESSEE. 3 FURTHER, THE WORD PRODUCTION SHOULD BE INTERPRETED TAKING INTO THE OBJECTIV E OF THE SECTION WHICH INDUCES FOR FRESH INVESTMENT IN PLANT AND MACHINERY IN AN INDUSTRIAL UNDERTAKING. ITA NO. 115 /CTK/201 7 6 REGARDING THE COURT DECISIONS QUOTED BY THE LEARNED CIT(M/S STERLING FOODS V. STATE OF KARNATAKA), WE WOULD LIKE TO MENTION HERE THAT THE HON'BLE SUPR EME COURT HAS DECIDED IN THIS CASE, WHETHER THE NATURE OF A PARTICULAR PRODUCT CHANGES ITS ORIGINAL CHARACTER AFTER IT GOES THROUGH DIFFERENT PRODUCTION PROCESS. THIS JUDGMENT WAS GIVEN IN THE CONTEXT OF WHETHER THE ASSESSEE IS ELIGIBLE TO TAX BENEFIT AVAI LABLE, IF THE SAME NATURE OF THE PRODUCT IS EXPORTED WHICH WAS PURCHASED. ACCORDINGLY, THE HON'BLE SUPREME COURT WAS TO DECIDE WHETHER THE ORIGINAL NATURE OF THE PRODUCT IS REMAINING OR NOT IN THE PROCESSED PRODUCT. HERE THE HON'BLE SUPREME COURT HAS NEVER DEFINED WHETHER A PARTICULAR PROCESS AMOUNTED TO PRODUCTION OR NOT. THEREFORE, THIS DECISION OF THIS HON'BLE SUPREME COURT IS TOTALLY IRRELEVANT FOR THE MATTER AND FACTS OF THE ASSESSEE IN CLAIMING ADDITIONAL DEPRECIATION. THE JUDGMENT HAVE BEEN GIVEN IN CONNECTION WITH COMMERCIAL TAX MATTERS AND TO DETERMINE WHETHER AFTER THE PROCESSING, THE PRODUCT STILL HOLDS IT'S ORIGINAL CHARACTER TO ENJOY THE BENEFITS UNDER RESPECTIVE COMMERCIAL TAX ACTS. IN THIS CONTEXT, WE SHALL SITE THE DECISION OF HON'BLE SUPRE ME COURT IN THE MATTER OF M/S. CINE INDIA AGENCY VS. COMMISSIONER OF INCOME TAX, MADRAS AND ENCLOSING HEREWITH A COPY OF THIS DECISION. IT MAY KINDLY BE SEEN THAT HON'BLE SUPREME COURT IN THIS MATTER HAS DEFINED THE MEANING OF WORD MANUFACTURER/PRODUCTION AS FOLLOWS. 'PRODUCTION' WITH ITS GRAMMATICAL VARIATIONS AND COGNATE EXPRESSIONS; INCLUDES - (I) PACKING, LABELING, RELABELING OF CONTAINERS. (II) RE - PACKING FROM BULK PACKAGES TO RETAIL PACKAGES, AND (III) THE ADOPTION OF ANY OTHER METHOD TO RENDER THE PRODUCT MARKETABLE. 'PRODUCTION' IN RELATION TO A FEATURE FILM, INCLUDES ANY OF THE ACTIVITIES IN RESPECT OF THE MAKING THEREOF. (CINE WORKERS AND CINEMA THEATRE WORKERS (REGULATIONS OF EMPLOYMENT) ACT (50 OF 1981) S.2(I). THE WORD 'PRODUCTION ' MAY DESIGNATES WELL A THING PRODUCED AS THE OPERATION OF PRODUCING; (AS) PRODUCTION OF COMMODITIES OR THE PRODUCTION OF A WITNESS. 'MANUFACTURE' INCLUDES ANY ART, PROCESS OR MANNER OF PRODUCING, PREPARING OR MAKING AN ARTICLE AND ALSO ANY ARTICLE PREPAR ED OR PRODUCED BY MANUFACTURE. (PATENT AND DESIGNS ACT (2 OF 1911), S.2(10). IN VIEW OF ABOVE SUBMISSIONS, THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION AS PER SECTION 32(IIA) OF INCOME TAX ACT AS IT IS AN INDUSTRIAL UNDERTAKING ENGAGED IN PRODUCTI ON AND HAVE INVESTED IN NEW PLANT AND MACHINERY AND ACCORDINGLY THE ADDITIONS MADE BY THE LEARNED AO MAY KINDLY BE DELETED. (B) IN DCIT VS. M/S.BIKANERVALA FOODS PVT. LTD IN ITA NO.4139/DEL/2014, ASST.YEAR 2010 - 11 ON 4 TH MAY 2018(DELHI BENCH 'A'), HON'BLE ITAT, DELHI HAS HELD THAT ADDITIONAL DEPRECIATION IS ALLOWABLE UNDER SECTION 32(L)(IIA) EVEN IF ASSESSEE IS ENGAGED IN ITA NO. 115 /CTK/201 7 7 PROCESSING OF FOOD PRODUCTS ON ITEMS DIRECTLY NOT LINKED TO MANUFACTURING ACTIVITIES. IN THIS CASE , THE HON'BLE ITAT HAS FOLLOWED DECIS ION OF THE HON'BLE SUPREME COURT IN ASPINWALL & CO. LTD. V. CIT(2001) 251ITR 323 (SC) WHO HAS HELD THAT CURING OF COFFEE BY PROCESS OF PRODUCING COFFEE BEANS FROM RAW BERRIES AMOUNTS TO MANUFACTURE AND HON'BLE COURT OBSERVED THAT THE TERM HAS TO BE UNDERST OOD AS MEANING OF THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES OR COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINES . FURTHER IT WAS HELD THAT THE PROCESS OF CURING OF COFFEE STARTS WITH THE DRYING OF COFFEE AND THEREAFTER THERE COMES THE STAGE OF HULLING WHICH MEANS REMOVING OUTER HUSK OF COFFEE BEAN AND THEREAFTER, THERE IS A PROCESS OF ROASTING WHICH GIVES BROWN COLOUR TO COFFEE AND THERE IS ALSO CHANGE IN CHEMICAL COMPONENT AND THAT THE PR OCESS OF ROASTING BRINGS WITH IT SPLENDID AROMATIC QUALITIES AND PLEASING TASTE. THUS, DISALLOWANCE OF ADDITIONAL DEPRECIATION BY THE LEARNED AO WHICH WAS UPHELD BY THE LEARNED CIT (A) WITHOUT DUE APPLICATION OF MIND IS NOT SUSTAINABLE IN THE EYES OF LAW AND ADDITIONAL DEPRECIATION U/S.32(L)(IIA) IS ALLOWABLE AS PER EXISTING LAWS, FACTS AND CIRCUMSTANCES OF THIS CASE. IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITIONAL DEPRECIATION MAY KINDLY BE ALLOWED BY THIS HON'BLE TRIBUNAL. IN ADDITION TO THE ABOVE WRITTEN SUBMISSIONS, LD. AR ALSO RELIED ON THE JUDGMENT OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S BIKANERVALA FOODS PVT. LTD., ITA NO.4139/DEL/2014, ORDER DATED 04.05.2018. 6. ON THE OTHER HAND, LD. DR RELIED ON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE CIT(A) HAS RIGHTLY UPHELD THE ADDITION AFTER RELYING THE JUDGMENTS OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. SRI VENKATESWARA HATCHERIES (P) LTD. AND THE ASSESSEE IS NOT ENGAGED IN THE MANUFACTURING ACTIVITIES, THEREFORE, HE IS NOT ENTITLED TO ADDITIONAL DEPRECIATION AS PER SECTION 32(1)(IIA) OF THE ACT. ITA NO. 115 /CTK/201 7 8 7. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE OBSERVE THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS OF PROCESSING, PACKAGING AND EXPORTING ETC. WE FOUND SUBSTANCE ON THE WRITTEN SYNOPSIS SUBMITTED BY THE LD. AR OF THE ASSESSEE AND THE CASE LAW RELIED ON BY THE LD. AR. WE HAVE CAREFULLY PERUSED THE OBSERVATIONS OF THE COO RDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S BIKANERVALA FOODS PVT. LTD (SUPRA) , WHEREIN THE TRIBUNAL OBSERVED THAT ADDITIONAL DEPRECIATION IS ALLOWABLE U/S.32(1)(IIA) OF THE ACT EVEN IF THE ASSESSEE IS ENGAGED IN PROCESSING OF FOOD PRODUCTS ON ITEMS DIRECTLY NOT LINKED TO MANUFACTURING ACTIVITIES. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : - 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE FIND MUCH FORCE IN THE CO NTENTION OF THE ASSESSEE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING ACTIVITIES. THE ID. CIT(A) HAS ALSO CORRECTLY DEALT WITH THE OBJECTION OF THE ASSESSING OFFICER REGARDING THE ACTIVITIES OF THE ASSESSEE BEING THAT OF A MANUFACTURER. THE LD.CIT(A) HAS ALSO CONSIDERED VARIOUS CASE LAWS IN SUPPORT OF HIS CONCLUSION THAT THE ASSESSEE COMES WITHIN THE CATEGORY OF A MANUFACTURER. THE CONTENTIONS MADE BY THE ASSESSEE BASED ON NATIONAL INDUSTRIAL CLASSIFICATION, REFERRED TO ABOVE, ARE ALSO FOUND ACCEPTABLE ON THE POINT OF ASSESSEE BEING MANUFACTURER. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE FINDINGS REACHED BY THE ID. CIT(A) THAT THE ASSESSEE IS A MANUFACTURER AND WAS ITA NO. 4139/DEL./2014 8 ELIGIBLE TO CLAIM, ON THIS COUNT, THE A DDITIONAL DEPRECIATION ON THE PLANTS AND MACHINERIES ACQUIRED AND INSTALLED. 8. HOWEVER, WHILE GOING THROUGH THE ASSESSMENT ORDER AND THE ORDER OF THE ID. CIT(A), WE FIND IT OBVIOUS ON RECORD THAT THE ASSESSING OFFICER, APART FROM DOUBTING THE ACTIVITI ES OF ASSESSEE, BEING THAT OF MANUFACTURER, HAS ALSO OBJECTED, FROM THE DETAILS OF ASSETS, THAT THEY ARE NOT INSTALLED IN FACTORY AS THE SO CALLED FACTORY OF THE ASSESSEE IS LOCATED AT LAWRENCE ROAD AND THESE ITEMS ARE UTILIZED FOR OFFICES OR RESIDENTIAL O R SHOW ROOM PURPOSES; THAT ALL OF THESE ITEMS CANNOT BE TERMED AS PLANT & MACHINERY E.G., THE DISTRIBUTION PENAL AT FARIDABAD IS FALLING UNDER THE CATEGORY OF FURNITURE & FIXTURE AND NOT UNDER PLANT AND MACHINERY; THAT SAME IS THE CASE WITH OTHER ITEMS ALS O E.G. AIR CONDITIONERS ARE MORE IN NATURE OF OFFICE APPLIANCES RATHER THAN PLANT & ITA NO. 115 /CTK/201 7 9 MACHINERY; AND THAT INKJET PRINTER INSTALLED AT FARIDABAD IS UNDOUBTEDLY AN OFFICE APPLIANCE AND NOT PLANT & MACHINERY. IT CANNOT BE DISPUTED THAT BY VIRTUE OF PROVISO TO S ECTION 32(L)(IIA) OF THE ACT, NO ADDITIONAL DEPRECIATION IS ALLOWABLE THE FOLLOWING EVENTUALITIES. THE RELEVANT PROVISO READS AS UNDER : 'PROVIDED FURTHER THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTA LLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST - HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; OR ITA NO. 4139/DEL./2014 9 (D) AN Y MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR;' 9. IN VIEW OF THE AFORESAID PROVISO, NO ADDITIONAL DEPRECIATION IS, INTER ALIA, ALLOWABLE TO ANY ASSESSEE, EVEN ENGAGED IN THE MANUFACTURING BUSINESS, IF THE PLANT AND MACHINERY IS INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ANY GUEST HOUSE. IT IS ALSO CLEAR FROM THE ABOVE PROVISO THAT NO SUCH DEDUCTION IS PERMISSIBLE ON ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES. THEREFORE, APPLYING THE ABOVE PROVISIONS, THE CLAIM OF ASSESSEE IS REQUIRED TO BE TESTED. THE ASSESSEE, AS STATED ABOVE, IS ENGAGED IN MANUFACTURING OF SWEETS, AS THE ASSESSEE IS ENGAGED IN THE MANUFACTURING ACTIVITIES AND RESTAURANT BUSINESS. ON EACH OF THE OUTLET, IT MANUFACTURES SWE ETS AND OTHER FOOD PRODUCTS. IT IS ALSO OBVIOUS FROM THE FINANCIAL STATEMENT THAT ABOUT 91% OF THE REVENUE IS COLLECTED BY THE ASSESSEE FROM MANUFACTURING ACTIVITIES AND 9% THEREOF IS EARNED FROM RESTAURANT. ALSO, THE EQUIPMENTS OR PLANTS ARE INSTALLED AT THOSE PREMISES. FURTHER, THE ID. AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THOSE PLANTS ARE INSTALLED AT ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION* THE NATURE OF GUEST HOUSE. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT AIR CONDITI ONERS ARE REQUIRED AT MANUFACTURING OUTLETS TO KEEP THE SWEETS ALSO IN PROPER CONDITION OVER AND ABOVE REFRIGERATORS. ELECTRICITY DISTRIBUTION PENAL ALSO CANNOT BE SAID TO BE INSTALLED AT RESIDENTIAL PLACE. NO MATERIAL IS BROUGHT ON RECORD BY THE AO THAT T HE OUTLETS DO NOT MANUFACTURE SWEETS. IT IS OF PARAMOUNT IMPORTANCE THAT THE AO HAS GRANTED NORMAL DEPRECIATION ON ALL THOSE ITEMS HOLDING THEM TO BE PLANT AND MACHINERY. IN VIEW OF THIS, WE ARE OF THE VIEW THAT ASSESSEE HAS SATISFIED THE CONDITIONS FOR AD DITIONAL DEPRECIATION. WE, THEREFORE, DO NOT FIND ITA NO. 4139/DEL./2014 10 ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE ID. CIT(A) FOR ALLOWING ADDITIONAL DEPRECIATION, AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED, BEING DEVOID OF MERITS. AS PER OUR CONSIDERED OPINION, PRAWN IS A PART OF FOOD. RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS OF THE COORDINATE BENCH OF THE ITA NO. 115 /CTK/201 7 10 TRIBUNAL, WE HELD THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING ADDITION DEPRECIATION . ACCORDINGLY, WE ALLOW THE SOLE GROUND RAISED BY THE ASSESSEE. CONSEQUENTLY, APPEAL OF THE ASSESSEE IS ALLOWED. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 11 / 0 3 / 20 2 1 . SD/ - ( C.M.GARG ) S D/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 11 / 0 3 /20 2 1 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , /ITA T, CUTTACK 1. / THE APPELLANT - M/S MAGNUM ESTAT ES PVT. LTD., PLOT NO.132 - A,SECTOR - A, ZONE - A MANCHESWAR, BHUBANESWAR 2. / THE RESPONDENT - DCIT, CORPORATE CIRCLE - 2(1), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR , ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//