M/s. Vishwa Infrastructures and Services Pvt.Ltd, Hyderabad V. DCIT, Circle-3(3), Hyderabad

ITA 1674/HYD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5935 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 26-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: P CHIRANJEEVULU
• Keywords: Depreciation; Additional depreciation; Question of law
• Section: 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 1674/HYD/2011 & 938/H/12014 ASSESSMENT YEARS: 2008-09 & 2009-10 M/S VISHWA INFRASTRUCTURE AND SERVICES LTD., HYDERABAD PAN AABCV9814F VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. CHIRANJEEVULU REVENUE BY : SHRI M. SITARAM DATE OF HEARING 10-02-2016 DATE OF PRONOUNCEMENT 30-03-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS ARE PREFERRED BY THE ASSESSEE A GAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX(AP PEALS) IV AND VII, HYDERABAD, FOR THE AYS 2008-09 AND 2009-10. AS IDENTICAL ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE CLUBB ED AND HEARD TOGETHER AND, THEREFORE, FOR THE SAKE OF CONVENIENC E WE FIND IT CONVENIENT TO DISPOSE OF THESE APPEALS BY A COMMON ORDER. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF EXECUTION OF CONTRACT WORKS VIZ., DEVELOPMENT AND E XECUTION OF INFRASTRUCTURE PROJECTS (WATER SUPPLY/SEWERAGE PROJ ECTS, WATER TREATMENT PLANTS AND PLUMBING STATIONS) AWARDED TO IT BY VARIOUS CENTRAL/STATE GOVT. AGENCIES, LOCAL BODIES AND PRI VATE BODIES IN THE COUNTRY. THE ASSESSEE ALSO SET UP A SEPARATE UNIT F OR MANUFACTURING PIPES, WHICH WAS UTILIZED FOR CAPTIVE CONSUMPTION I N CONTRACT BUSINESS AS WELL AS SOLD TO OUTSIDERS ALSO. THE ABOVE MANUFA CTURING UNIT IS 2 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. REGISTERED WITH EXCISE DEPARTMENT AND THE DETAILS O F MANUFACTURING AND SALES ARE GIVEN BELOW: AY DESCRIPTION OF PIPES TOTAL VALUE FOR USE IN WORKS CONTRACT VALUE SOLD TO OTHERS VALUE 2007-08 ALL KINDS OF PIPES NAMELY MS PIES, PSC PIPES, RCC PIPES MS SHELL 9,24,57,161 (QUANTITY IN NUMBERS 9644) 9,10,33,008 14,24,153 2008-09 -DO- 15,77,83,764 (QUANTITY IN NUMBERS 11102 14,59,09,168 1,18,74,596 2009-10 -DO- 27,49,39,351 (QUANTITY IN NUMBERS 18198) 26,57,34,545 92,04,806 2010-11 -DO- 31,70,02,299 (QUANTITY IN NUMBERS 11102 30,85,35,938 84,66,361 3. THE MAIN ISSUE BEFORE US IS, THE ASSESSEE CLAIME D ADDITIONAL DEPRECIATION U/S 32(1)(IIA) ON PLANT AND MACHINERY AT RS. 32,25,776/-. THE ASSESSING OFFICER RELIED ON THE SECTION 32(1)(I IA) I.E. TO CLAIM ADDITIONAL DEPRECIATION, THE ASSESSEE SHOULD BE ENG AGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING. ASSESSING OFFICER ALSO RELIED ON THE HONBLE MADRAS HIGH COURTS DECISION IN THE CASE OF HI TECH ARAI LTD., 321 ITR 477, WHICH OBSERVED THAT FOR THE PURPOSE OF CLAIMING ADDITIONA L DEPRECIATION, THE CONDITION TO BE SATISFIED BY THE TAXPAYER, WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY AR TICLE OR THING, IS TO SET UP NEW MACHINERY OR PLANT. BASED ON THE ABOVE, ASSESSING OFFICER DISALLOWED THE CLAIM OF ASSESSEE BY OBSERVI NG THAT THE ASSESSEE IS ENGAGED IN THE INFRASTRUCTURE PROJECTS WHICH DOES NOT AMOUNT TO MANUFACTURING ACTIVITY, EVEN THOUGH, ASSE SSEE HAD CARRIED 3 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. OUT MANUFACTURING ACTIVITY OF PIPES AND REPORTED SA LE OF PIPES AT RS. 118,74,596/. ASSESSING OFFICER HAD OPINED THAT IT W AS NOT THE EXISTING BUSINESS OF THE ASSESSEE TO MANUFACTURE. THE MANUFA CTURING OF PIPES WAS ONLY A PROCESS IN THE ENTIRE BUSINESS OPERATION OF EXECUTION OF CONTRACT WORKS RELATING TO DEVELOPMENT AND EXECUTIO N OF INFRASTRUCTURE PROJECTS AND WAS NOT THE END ACTIVITY IN ITSELF. 4. ON AN APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER: (THE RUNNING NO. OF PARAS ARE N OT SEQUENTIAL, WE HAVE EXTRACTED THIS PARA FROM PAPER BOOK AT PAGE 31 OF CIT(A)S ORDER.) 10.1 IN THE CASE OF THE APPELLANT HOWEVER IT CAN BE SEEN THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF CONTRAC T WORKS FOR DEVELOPMENT AND EXECUTION OF INFRASTRUCTURE PROJECT S. OBVIOUSLY, THIS DOES NOT AMOUNT TO ANY MANUFACTURING ACTIVITY. AS REGARDS THE CLAIM THAT IT HAD ALSO MANUFACTURED PIPES DURIN G THE YEAR, IT IS NOT DISPUTED THAT THE PIPES WERE BEING MANUFACTU RED BY IT MAINLY ONLY ITS CAPTIVE CONSUMPTION. THEREFORE, EVE N IF ANY PART OF THE PIPES SO MANUFACTURED WAS SOLD OF DURING THE YEAR OR EVEN SALES TAX ON WAS PAID, SUCH SALES CANNOT LEAD TO TH E CONCLUSION THAT THE APPELLANT HAD STARTED ANY INDEPENDENT BUSI NESS OF MANUFACTURING PIPES, WHICH WAS AN ADDITIONAL AND DI FFERENT BUSINESS OF THE APPELLANT. ACCORDINGLY, I AM OF THE VIEW THAT THE CASE LAW RELIED UPON BY THE APPELLATE PROCEEDINGS O R THE ARGUMENTS RAISED BY THE LEARNED REPRESENTATIVE DO N OT HELP THE CAUSE OF THE APPELLANT ON THIS ISSUE. THEREFORE, TH E APPELLANT FAILS AT THE THRESHOLD LEVEL ITSELF, AS IT WAS NOT THE EXISTING BUSINESS OF THE APPELLANT TO MANUFACTURE ANY ARTICL ES / THINGS. BESIDES, IT IS ALSO CLEAR THAT MANUFACTURING OF SUC H ARTICLES WAS ONLY A PROCESS IN THE ENTIRE BUSINESS OPERATION OF WORKS CONTRACT AND WAS NOT THE END ACTIVITY IN ITSELF. UNDER THE C IRCUMSTANCES, I AM OF THE VIEW THAT THE APPELLANT HAS BEEN RIGHTLY HELD AS NOT ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION. GROU ND NO.5 IS THEREFORE DECIDED AGAINST THE APPELLANT. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US A ND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS AGAINST LAW, WEIGHT OF EVIDENCE AND FACTS OF THE CASE. 4 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. 2.THE LEARNED CIT(A) ERRED IN LAW IN NOT ALLOWING A DDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) AMOUNTING TO RS.32,25,776 WHEN THE APPELLANT WAS ENGAGED IN MANUFACTURING OF PIPES BOTH FOR CAPTIVE UTILIZATION IN CONTRACT WORK AND SALE T O OUT SIDE PARTIES, LOOSING SIGHT OF THE FACT THAT QUANTITATIV E TEST IS NOT A STATUTORY CRITERIA FOR ALLOWING ADDITIONAL DEPRECIA TION ON BUSINESS ASSETS. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T QUASI JUDICIAL AUTHORITIES ARE PRECLUDED FROM PROVIDING C ASUS OMISUS AND BRING IN NEW CONDITIONS WHILE CONSIDERING THE I MPORTS OF A STATUTORY PROVISION. 4. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THA T MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS T HAT THE APPEAL BE ALLOWED. THE APPELLANT CRAVES LEAVE TO ADD TO, A MEND OR THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 5. THE MAIN ISSUE BEFORE US IS, WHETHER TO CLAIM AD DITIONAL DEPRECIATION, THE ASSESSEES MAIN BUSINESS MUST BE MANUFACTURE OR CAN BE IT AN ACTIVITY OF THE MAIN BUSINESS I.E. AN CILLARY ACTIVITY. 6. BEFORE US, THE LD. AR OF ASSESSEE FILED WRITTEN SUBMISSIONS WHEREIN IT WAS STATED THAT ADDITIONAL DEPRECIATION IS ADMISSIBLE IN CASE OF NEW MACHINERY OR PLANT (OTHER THAN SHIPS AN D AIRCRAFTS) ACQUIRED AND INSTALLED AFTER 31.03.2005. TO CLAIM B ENEFIT, THE ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUF ACTURE OR PRODUCTION OF AN ARTICLE OR THING. THE PRE-CONDITIO N FOR THE CLAIM OF ADDITIONAL DEPRECIATION IS NEW INVESTMENT SHOULD BE MADE ON NEW PLANT & MACHINERY AFTER 31.03.2005 AND THE ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF AN ARTICLE OR THING. IN THE INSTANT CASE, THE APPELLANT HAS SATIS FIED BOTH THE CONDITIONS I.E., INVESTMENT IN NEW PLANT AND MACHIN ERY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTIO N OF AN ARTICLE OR THING. 5.1 IT WAS FURTHER STATED THAT CLAUSE (IIA) TO SECT ION 32 (1) WAS INTRODUCED IN THE ACT WITH A SPECIFIC PURPOSE / OBJ ECT OF PROVIDING 5 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. RELIEF TO THE ASSESSES WHO MAKES INVESTMENT IN NEW PLANT AND MACHINERY. 5.2. IT WAS STATED THAT THE DECISION RENDERED BY TH E HONORABLE ITAT MUMBAI BENCH (E) IN STEFON CONSTRUCTIONS PVT LTD VS . COMMISSIONER OF INCOME TAX-7, MUMBAI REPORTED IN (2016) 65 TAXMA NN.COM 140 (MUMBAI TRIBUNAL) RELIED BY THE LEARNED DEPARTMENTA L REPRESENTATIVE CANNOT BE MADE APPLICABLE TO ASSESSEES CASE. IN TH E ABOVE CASE, THE ASSESSEE IS USING THE PRE-FABRICATED PILES PRODUCED BY IT IN ITS BUSINESS OF EXECUTING THE PILING WORKS AND WAS NOT SELLING THEM TO OTHER CONTRACTORS OR OWNERS. IN THE ASSESSEE'S CASE , THE ASSESSEE IS MANUFACTURING PIPES AND NOT ONLY USING THE MANUFACT URED GOODS IN THE EXECUTION OF WORKS BUT ALSO SELLING THEM TO OTH ER CONTRACTORS. 5. 3 IT WAS STATED THAT IN FACT THE APPELLANT IN AD DITION TO HIS BUSINESS OF CONTRACT HAS A SEPARATE MANUFACTURING U NIT FOR PIPES. THE PRODUCTS ARE USED IN THE WORKS CONTRACTS WHEREIN ON E OF THE CONDITION IS ALSO TO SUPPLY THE PIPES. THE LD. AR RELIED ON T HE FOLLOWING CASES: 1. M/S HI TECH ARAI LTD., 321 ITR 477 2. CIT VS. LAKE PALACE HOTELS AND MOTELS (P.) LTD. , 286 ITR 589 (RAJ.) 6. THE LD. DR ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION ON THE PREMISE THAT THE ASSESSEE THOUGH IS IN THE BUSINESS OF CONSTRUCTION AND INFRA STRUCTURE BUSINESS AND IN THE PROCESS USING PIPES BY MANUFACTURING THE MSELVES AND ALSO HAS SOLD SUCH MANUFACTURED PIPES TO OTHERS. REFERRI NG TO THE CASE RELIED UPON BY THE AO AND ASSESSEE IN THE CASE OF M /S HI TECH ARAI LTD. (SUPRA), THE LD. DR SUBMITTED THAT IN THE SAID CASE, THE ASSESSEE HAD ALREADY SET UP A SEPARATE AND DISTINCT BUSINESS OF PRODUCTION OF POWER, WHICH HAD NOTHING TO DO WITH THE ORIGINAL BU SINESS OF MANUFACTURE OF OIL SEEDS, MOULDED RUBBER PARTS, SEE D VALUE ASSEMBLIES ETC. THE NEW WINDMILLS PURCHASED WERE US ED FOR A SEPARATE PRODUCTION ACTIVITY OF POWER. BUT, IN THE PRESENT CASE, THE 6 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. ASSESSEE HAS NOT SET UP ANY SEPARATE PRODUCTION UNI T AND HAS BEEN MAKING THE PIPES IN HIS CONSTRUCTION AND INFRASTRUC TURE BUSINESS, WHICH IS NOT AN ACTIVITY OF MANUFACTURE OR PRODUCTI ON AS HELD IN A PLETHORA OF CASES. HE, THEREFORE, SUBMITTED THAT ME RE USAGE OF MACHINERY IN MAKING PIPES WOULD NOT AMOUNT TO MANUF ACTURE OR PRODUCTION AS PROVIDED U/S 32(1)(IIA) AS THE CONDIT ION PRECEDENT TO SECTION 32(1)(IIA) IS AN ASSESSEE ENGAGED IN THE BU SINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE LD. DR SUBMITTED THAT IT IS CLEAR FROM THE FACTS OF THE CA SE THAT THE ASSESSEE IS IN CONSTRUCTION BUSINESS WHICH DOES NOT FALL IN THE CATEGORY OF MANUFACTURE AND PRODUCTION AND MOREOVER, THE ASSESS EE IS NOT IN THE BUSINESS OF MANUFACTURE OF PIPES AND HENCE PROVISIO NS OF SECTION 32(1)(IIA) CANNOT BE MADE APPLICABLE TO ASSESSEE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL FACTS ON RECORD. 7.1 THE HONBLE MADRAS HIGH COURT IN THE CASE OF HI TECH ARAI LTD. (SUPRA), HELD AS UNDER: 5. IN THE CASE ON HAND, THE ASSESSEE IS STATED TO HAVE SET UP TWO WIND MILLS IN ADDITION TO THE ALREADY EXISTING FOUR WIND MILLS AND THEREBY INCREASED ITS POWER GENERATION CAPACITY BY ABOVE 50 PER CENT. IT IS TRUE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURE OF OIL SEEDS, MOULDED RUBBER PARTS, REED VALUE ASSEMBLIES APART F ROM GENERATION OF POWER. AFTER THE INSTALLATION OF THE ADDITIONAL WIND MILLS , BOTH PRIOR TO AS WELL AS AFTER THE INSTALLATION OF THE ADDITIONAL WIND MILLS, THE ASSESSEE WAS USING WIND ENERGY FOR GENERATING POWER FOR ITS CAPITATIVE CONS UMPTION APART FROM SELLING THE SURPLUS POWER GENERATED TO THE TAMIL NADU ELECT RICITY BOARD. AS FAR AS APPLICATION OF S. 32(1)(IIA) OF THE ACT IS CONCERNE D, WHAT IS REQUIRED TO BE SATISFIED IN ORDER TO CLAIM THE ADDITIONAL DEPRECIA TION IS THAT THE SETTING UP OF A NEW MACHINERY OR PLANT SHOULD HAVE BEEN ACQUIRED AND INSTALLED AFTER 31ST MARCH, 2002 BY AN ASSESSEE, WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE SAID PROVISION DOES NOT STATE THAT THE SETTING UP OF A NEW MACHINERY OR PLA NT, WHICH WAS ACQUIRED AND INSTALLED UPTO 31ST MARCH, 2002 SHOULD HAVE ANY OPE RATIONAL CONNECTIVITY TO THE ARTICLE OR THING THAT WAS ALREADY BEING MANUFAC TURED BY THE ASSESSEE. THEREFORE, THE CONTENTION THAT THE SETTING UP OF A WIND MILL HAS NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY, MANUFACTURE OF OIL SEEDS, ETC. IS TOTALLY NOT GERMANE TO THE SPECIFIC PROVISION CONTAINED IN S. 3 2(1)(IIA) OF THE ACT. 7 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. IN THE ABOVE JUDGMENT, THE HONBLE COURT HAS NOT OP INED ANYTHING ON THE MAIN BUSINESS OR ANCILLARY BUSINESS. IT HAS DIS CUSSED ONLY THE DATE OF ACQUISITION AND INSTALLATION OF NEW MACHINE RY OR PLANT AND CLARIFIED THAT THE ASSESSEE WHO WAS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THIN G. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER HAD RELIED ON THIS JUDGMENT TO DISALLOW THE ADDITIONAL DEPRECIATION, WHEREAS THE REVENUE HA S NO CASE ON RELYING ON THIS RATIO OF THE JUDGMENT. 7.2 ON THE ISSUE OF DOMINANT NATURE OF BUSINESS OF MANUFACTURE, THE HONBLE RAJASTHAN HIGH COURT IN THE CASE LAKE P ALACE HOTELS AND MOTELS (P.) LTD., (SUPRA), THE HONBLE RAJASTHAN HI GH COURT HELD AS FOLLOWS: 22. IN THAT VIEW OF THE MATTER, FIRSTLY WE ARE OF T HE OPINION THAT THE CIRCULAR DT. 29TH JULY, 1991 [(1991) 96 CTR (ST) 23 3], FULLY SUPPORTS THE VIEW WHICH THE TRIBUNAL HAS TAKEN. APART FROM THAT THE TRIBUNAL HAS ALSO REFERRED TO THE FACT THAT THE ASSESSEE IS CHARGING HIRE FOR PROVIDING THE VEHICLE TO ITS CUSTOMERS AS INDEPENDENT BUSINESS, W HICH IS CORROBORATED BY THE FACT THAT THE VEHICLES WERE IMPORTED BY THE ASSESSEE WITH THE APPROVAL OF THE RBI UNDER THE TAXI QUOTA ONLY, GIVI NG OUT A CLEAR INTENTION THAT IT IS RUNNING THEM ON HIRE. THE ASSESSEE HAS A LSO REFERRED TO THE FACT AND WHICH IS NOT DENIED THAT THE RESPONDENT-ASSESSE E IS CHARGING HIRE FROM THE CUSTOMERS TO USE THE VEHICLES FOR TRANSPOR TATION, PRIMARILY WHICH ARE BEING USED FOR THE HOTEL AND FOR REACHING THE A IRPORT ON CHECKING OUT FOR LEAVING THE PLACE. THE STATUTORY PROVISION NOWH ERE PUTS A RESTRICTION THAT IF A BUSINESS IS RUNNING ON A RESTRICTED SCALE , THE BENEFIT COULD NOT BE AVAILABLE. THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO EVIDENCE ON THE BASIS OF WHICH THE TRIBUNAL COULD REACH ITS CONCLUS ION THAT THE ASSESSEE HAS ACQUIRED THE VEHICLES IN QUESTION FOR RUNNING A TAXI ON HIRE AND THAT THE ASSESSEE HAS USED THE VEHICLES IN QUESTION FOR RUNNING THEM ON HIRE FOR TOURISTS. 23. IN THIS CONNECTION, IT IS APPOSITE TO REFER TO THE DECISION OF THE KERALA HIGH COURT IN JAYACHANDRANS CASE (SUPRA). I T IS A CASE IN WHICH THE ASSESSEE WAS RUNNING A PRIVATE HOSPITAL AT COCH IN. THE ASSESSEE WAS ALSO OWNING AN AMBULANCE FOR TRANSPORTING THE PATIE NTS TO AND FRO FROM THE HOSPITAL. FOR AMBULANCE TRANSPORTATION, THE ASSESSE E WAS CHARGING HIRE. ON THIS PREMISE, THE ASSESSEE CLAIMED THAT HE WAS U SING THE AMBULANCE FOR RUNNING IT ON HIRE, AND THUS WAS ENTITLED TO CL AIM DEPRECIATION AT 40 PER CENT INSTEAD OF 30 PER CENT. THE AO, HOWEVER, ALLOW ED THE DEPRECIATION AT THE HIGHER RATE OF 40 PER CENT. THE CIT IN EXERCISE OF POWER UNDER S. 263 OPINED THAT THE CORRECT RATE TO BE APPLIED IN SUCH CASE WAS ONLY THE 8 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. REGULAR RATE OF 30 PER CENT OF DEPRECIATION AND NOT THE EXTRA RATE. CONSEQUENTLY, THE ORDER WAS HELD ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. 24. THE TRIBUNAL UPTURNING THE ORDER OF THE CIT HEL D THAT THE ASSESSEE IS ENTITLED TO THE HIGHER RATE NAMELY AT 40 PER CEN T AND SET ASIDE THE ORDER OF THE CIT. THE REVENUES APPLICATION UNDER S. 256( 1) FOR REFERRING THE QUESTION OF LAW ARISING FROM THE ORDER OF THE TRIBU NAL TO THE HIGH COURT OF KERALA WAS REJECTED BY THE TRIBUNAL. ON THE APPLICA TION UNDER S. 256(2) OF THE IT ACT, 1961, THE HIGH COURT REJECTED THE APPLI CATION BY HOLDING THAT THE TRIBUNAL HAS RIGHTLY REJECTED THE CONTENTION. I T HELD THAT THE AMBULANCE VAN IS KEPT BY THE ASSESSEE FOR THE PURPOSE OF BEIN G USED ON HIRE AND IT IS SO PLIED. THE PLYING OF THE AMBULANCE VAN ON HIRE I TSELF CONSTITUTES THE BUSINESS OF THE ASSESSEE THOUGH IT MAY BE INCIDENTA L TO THE RUNNING OF THE HOSPITAL. IT HAS ALSO OBSERVED THAT ONE BUSINESS CA N BE ADVANTAGEOUSLY COMBINED WITH ANOTHER BUSINESS. IN THE CASE OF THE ASSESSEE THE HIRE CHARGES RECEIVED BY THE ASSESSEE FROM THE HIRE OF T HE AMBULANCE VAN ARE ALSO ASSESSED UNDER THE HEAD 'BUSINESS'. HENCE, THE ASSESSEE IS ENTITLED TO DEPRECIATION AT THE RATE OF 40 PER CENT. 25. WE DO NOT SEE ANY REASON TO TAKE A DIFFERENT V IEW IN THIS REGARD. THE AFORESAID DECISION FORTIFIES THE CONCLUSION REA CHED HEREINABOVE. FROM THE ABOVE DECISION, IT IS CLEAR THAT THE MANU FACTURING ACTIVITY OF THE ASSESSEE IS A SEPARATE ECONOMICAL ACTIVITY AND INCIDENTAL TO THE MAIN BUSINESS. SINCE, THE ASSESSEE WAS ALREADY RUNN ING A MANUFACTURING ACTIVITY INDEPENDENTLY AND MANUFACTUR ING PIPES AS IT IS OBSERVED IN THE ABOVE JUDGMENT, THAT ONE BUSINESS C AN BE ADVANTAGEOUSLY COMBINED WITH ANOTHER BUSINESS. HENC E, IN THE PRESENT CASE, AS PER THE PROVISIONS OF SECTION 32(1 1)(IIA) AND RELYING ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF HI TECH ARAI LTD. (SUPRA), THE ASSESSEE IS ALREADY ENGAGED IN THE BUSINESS OF MANUFACTURE EVEN THOUGH IT IS AN ACTIVITY OF THE MA IN BUSINESS. IN OUR CONSIDERED VIEW, THE ASSESSEE IS ELIGIBLE TO CLAIM ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT AS AN EXISTI NG MANUFACTURER. 8. AS THE ISSUE IN ITA NO. 938/HYD/14 FOR AY 2009-1 0 IS MATERIALLY IDENTICAL TO THAT OF AY 2008-09 IN ITA NO. 1674/HYD /11, FOLLOWING THE CONCLUSION DRAWN THEREIN, WE ALLOW THE APPEAL OF AS SESSEE IN THIS YEAR ALSO. 9 ITA NOS. 1674 /HYD/2011 & 938/H/14 M/S VISHWA INFRASTRUCTURES AND SERVICES (P) LTD. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH, 2016. SD/- SD/- (D. MANMOHAN) (S. RIFAUR R AHMAN) VICE PRESIDENT A CCOUNTANT MEMBER HYDERABAD, DATED: 30 TH MARCH, 2016 KV COPY TO:- 1) M/S VISHWA INFRASTRUCTURE AND SERVICES LTD., 1- 11-256/C/24, PLOT NO. 24, GAGAN VIHAR COLONY, BEGUMPET, HYD 500 016. 2) DCIT, CIRCLE 3(3), IT TOWERS, AC GUARDS, HYDE RABAD. 3 CIT(A) - IV, HYDERABAD 4) CIT(A) VII, 4) CIT III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.