M/s. Banaskanth Dist. Co.-Op. Milk Producers Union Ltd., Banaskantha V. The DCIT, B K Circle, Palanpur

ITA 52/AHD/2021

AI Insights

The case revolves around the dispute concerning the eligibility of the Banaskantha Dist. Co-Op. Milk Producers Union Ltd. to claim additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961, for the Assessment Year 2015-16. The primary contention was whether the assessee, engaged in processing and manufacturing milk and milk products, qualifies for additional depreciation on assets used for less than 180 days in the year of acquisition. The Assessing Officer initially denied the claim, which was partly overturned by the CIT(A), but still resulted in some disallowances. The Tribunal, after considering various precedents and the specific activities of the assessee, concluded that the assessee is indeed engaged in manufacturing and is entitled to the claimed depreciation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114220 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-11-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 19-04-2021
• Other Referred Cases: M/s. Creamline Dairy Products Ltd. vs. ITO, Kanyakumari District Co-operative Milk Supply Producers Union Ltd. Vs. ITO, CIT vs. Rittal India (P) Ltd., Madhu Industries Vs. ITO, DCIT Vs. M/s. Nalwa Steel & Power Ltd., CIT Vs. Starlight Silk Mills Pvt. Ltd., Raw flints (P.) Ltd. Vs. ITO, CIT Vs. Gujarat Co.op. Milk Marketing Federation Ltd., Aspinwall & CO. Ltd vs. CIT, CIT vs. Prabhudas Kishordas Tabacco Products P. Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Unabsorbed depreciation; Set aside
• Section: 32; 143(3); 80IB; 32(1)(iia); 207

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Banaskantha Dist. Co-Op. Milk Producers Union Ltd. Post Box No. 20, Banas Dairy, Palanpur, Banaskantha PAN: AAAAB0575E (Appellant) Vs The DCIT, B K Cirlce, Palanpur (Respondent) Assessee Represented: Shri Sunil Talati, A.R. Revenue Represented: Shri Kamlesh Makwana, CIT-DR Date of hearing : 06-11-2023 Date of pronouncement : 08-11-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 09-03-2021 passed by the Commissioner of Income Tax (Appeals)-13, Ahmedabad, arising out of the assessment order passed under section 143(3) r.w.s. 92CA(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015-16. ITA No. 52/Ahd/2021 Assessment Year 2015-16 I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 2 2. The brief facts of the case is that the assessee is a Society engaged in the processing and manufacturing of milk and milk products. For the Assessment Year 2015-16, the assessee filed its Return of Income on 26.11.2015 declaring total income of Nil. 2.1. Due to specified domestic transaction, the case was referred to TPO on 31.07.2017 wherein the TPO-1, Ahmedabad made no adverse inference in respect of arm’s length price of the specified domestic transaction vide his order dated 29.03.2018. During the regular course of assessment proceedings, the Assessing Officer found that the claim of additional depreciation of Rs. 32,65,56,918/- in respect of purchase of plant and machinery in the immediate preceding year wherein 50% of the additional depreciation was only claimed, since the plant and machinery were purchased and used less than 180 days, which was allowed by the A.O. in the Assessment Year 2014-15. Therefore the assessee claimed balance 50% of the additional depreciation during this Assessment Year 2015-16. 2.2. The above claim of the assessee was not accepted by the A.O. on the ground that (i) that additional depreciation can be claimed and allowed only in the year of installation of the plant and machinery and (ii) Section 32(1)(iia) was amended for claim of additional depreciation, with effect from the Assessment Year 2016-17 only. Therefore the claim of additional depreciation for the present Assessment year 2015-16 was denied. The A.O. also made other disallowances, however determined the total assessed income as Nil. I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 3 3. Aggrieved against the same, the assessee filed an appeal before Commissioner (Appeals). The Ld. CIT(A) considered the submission of the assessee and confirmed the claim of additional depreciation on the ground that amendment to 3 rd proviso to Section 32(1)(iia) is applicable with effect from A.Y. 2016-17 only and the same is not applicable retrospectively for the present Asstt. Year 2015-16. However the Ld. CIT(A) found that the assessee is not eligible for additional depreciation u/s. 32(1)(iia) following the decisions in the case of M/s. Creamline Dairy Products Ltd. in ITA No. 20/Hyd/2012 and Kanyakumari District Co-operative Milk Supply Producers Union Ltd. Vs. ITO reported in 1995 (9) TMI 120 (ITAT- Madras) wherein it was held that the assessee society is not engaged in manufacturing of any “article or thing” but processing of milk only. Therefore a show cause notice dated 01-03-2021 was issued as to why the allowability of depreciation on substation, DG set, Exhaust & pedestal fans, street lighting, additional electrical equipment, transformers at the rate applicable to plant & machinery and not that of electrical fitting as treated by the A.O. Since all these equipment cannot be treated as plant and machinery. 3.1. In reply, the assessee submitted it is in the business of procuring raw milk and from that it processes and treats to maintain a specified FAT and SNF which is packed in bottles and pouched and delivered to the customers. Thus the raw material received by the assessee is raw milk and the final product sold to customers are totally different. Thus the assessee cannot be said that it is not engaged in the “manufacture or production of an I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 4 article or thing”. The assessee further submitted that it is not only manufacturing milk but also several and different items like buttermilk, lassi, butter, ghee, milk power, ice cream, sweets/malai and several other consumable items which are undoubtedly manufactured and produced by the assessee society. The assessee brought to the attention of the Ld. CIT(A) in assessee’s own case for the Assessment Year 2007-08 in ITA No. 2047/Ahd/2010 dated 09.11.2012, wherein the assessee claim of deduction u/s. 80IB has been upheld. Thus the assessee contended that the word manufacturing is common both in Section 80IB and 32(1)(iia) of the Act. Therefore the claim of additional depreciation was clearly justified. The above explanation of the assessee was not accepted by Ld. CIT(A) and held that the additional depreciation of Rs. 32,65,56,916/- is not allowable since the assessee is not engaged in the business of manufacture and production of any article or thing. Thus the assessment was enhanced to this extent. 3.2. Similarly the Ld. CIT(A) confirmed the disallowance on the electrical items namely Substations, DG set and Transformers as not part of the plant and machinery which is eligible for additional depreciation. Thus the Ld. CIT(A) partly allowed the appeal of the assessee. 4. Aggrieve against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The Ld. CIT(A) has erred in law and on facts in confirming the disallowance of Rs. 2,61,70,650/- being additional depreciation claimed and allowable on plant and machinery. It is submitted that certain plant and machineries which were installed and put to use in immediate previous year i.e. A.Y. 2014-15, but after 180 days, only 10% additional I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 5 depreciation was claimed and allowed in A.Y. 2014-15 and appellant correctly claimed the balance / remaining 10% additional depreciation during this A.Y. 2015-16 as per the provision of Section 32 of Income Tax Act, 1961. It is submitted that additional depreciation on the plant and machinery on which 10% additional depreciation was already granted in A.Y. 2014-15, the balance 10% additional depreciation of Rs. 2,61,70,650/- be allowed now. 2. The Ld. CIT(A) has erred on facts as well as on law in not allowing additional depreciation of Rs. 2,61,70,650/- in spite the fact that on the very said plant and machinery and on the very same manufacturing/producing processing milk, additional depreciation was allowed in A.Y. 2014-15. It is submitted that Ld. CIT(A) has grossly erred in not following legal precedents and binding decision of jurisdictional tribunal and other tribunals has erred in confirming the disallowance of Rs. 2,61,70,650/- which is absolutely incorrect and illegal and the same be deleted now. 3. The Ld. CIT(A) has erred in enhancing the income by disallowing additional depreciation of Rs. 32,65,56,916/- on the ground that appellant is not entitled for additional depreciation under Section 32(1)(a) of the Act. It is submitted that on the basis of facts and circumstances and according to the provisions of Income Tax Act, appellant is entitled to additional depreciation under Section 32(1)(iia) and illegal and erroneous disallowance by enhancement of such additional depreciation be deleted. 4. Without prejudice to the above Ld. CIT(A) has erred in not following and appreciating the clear directions and decision of Hon'ble ITAT, Ahmedabad in which additional depreciation is allowed on identical facts and circumstances of the case. It is submitted that appellant is in the business of manufacturing and processing milk and milk products and, therefore, is entitled to claim the additional depreciation. It is submitted that the enhancement and disallowance of additional depreciation of Rs. 32,65,56,916/- be deleted. 5. The Ld. CIT(A) has erred in confirming the disallowance of depreciation of Rs. 2,58,50,676/- being depreciation and additional depreciation claimed on certain items forming part of the block of plant and machinery on the incorrect finding that they are electric items and not plant and machinery. It is submitted that appellant has correctly claimed depreciation and additional depreciation on various such items of additions which were forming part of the block of plant and machinery as all these items were attached to the main plant and machinery. It is submitted that disallowance of depreciation as available on the block of plant and machinery and additional depreciation thereon be allowed now. 6. Without prejudice to the above it is submitted that Ld. CIT(A) has erred in ignoring submissions and evidence filed that various items like DG set, Exhaust and Pedestal fans, Streat lighting, electrical equipment, I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 6 transformers etc. were attached and forming part of plant and machinery. It is submitted that on the basis of facts and submissions and evidences filed these items be treated as part of the plant and machinery and depreciation and additional depreciation on the same be allowed at the rate applicable to plant and machinery. 7. Ld. CIT(A) has erred in directing the Assessing Officer to reopen the A.Y. 2014-15 and disallowed additional depreciation on plant and machinery which was claimed and allowed after thorough verification and scrutiny. It is submitted that Ld. CIT(A) has erred in crossing his jurisdiction by directing something which is not forming part of the grounds of appeal. It is respectfully submitted that Ld. CIT(A) has passed the jurisdiction and has erred in directing the Assessing Officer to reopen A.Y. 2014-15 which is absolutely incorrect and bad in law. 8. The Order passed by the learned Commissioner of Income Tax (Appeal) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now. 9. The Ld. CIT(A) erred in law and on facts in charging the interest u/s 234A / 234 B and 234C of the Act. 10. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing. 5. Ld. Counsel Shri Sunil Talati appearing for the assessee submitted before us two Paper Books running to 97 pages and submitted Flow Diagram Chart for manufacture of Liquid Milk, Sanjivani Flavoured Milk, Butter Milk, Eco Butter Milk, Amul Butter Milk, White Butter, Ice Cream, Kulfi and Candy etc,. Ld. Counsel further submitted that the amendment to Section 32(1)(iia) thought is clarificatory in nature, which was introduced with effect from 01-04-2016, the assessee is entitled for claim of additional depreciation for the balance 50% in the present Assessment Year 2015-16 and strongly relied upon Tribunal Decisions in the case of ITO Vs. Aswani Industries in ITA No. 140/Ahd/2013 dated 13.05.2013 and also Mumbai Tribunal decision in the case of TCPL Packaging Ltd. Vs. DCIT in ITA No. 7370/Mum/2016 dated I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 7 22.04.2019. Ld. Counsel further submitted for the earlier Assessment Year 2014-15 wherein the new plant and machineries installed which were used less than 180 days, thereby the additional depreciation at 50% was allowed while passing a regular assessment dated 30.12.2017 by the very same Assessing Officer. Thus the assessee cannot be denied the balance 50% of the additional depreciation amount during the present Assessment Year 2015-16. 6. Per contra, the Ld. CIT- D.R. Shri Kamlesh Makwana appearing for the Revenue supported the order passed by the Lower Authorities and pleaded to sustain the disallowance. 7. We have given our thoughtful consideration and perused the materials available on record. It is seen from Page No. 89 of the Paper Book, the assessee has placed on record, the assessment order dated 30.12.2017 passed by DCIT in assessee’s own case for the previous Assessment Year 2014-15, wherein the Assessing Officer satisfied with the claim of additional depreciation, wherein the plant and machinery were used less than 180 days. Now the remaining 50% of the additional depreciation is claimed during this present Assessment Year 2015-16. This identical issue was considered by this Tribunal after considering the Co-ordinate Bench of Delhi in the case of Cosmo Films Ltd. and held as follows: “......This restriction is only on the basis of period of usc. There is no restriction, that balance of one time incentive in the form of additional sum of depreciation shall not be available in the subsequent year. Section 32(2) A provides for a carry forward set up of unabsorbed depreciation. This additional benefit in the form of additional allowance u/s 32(1)(iia) is onetime benefit to encourage the industrialization and in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo vs. CIT, cited I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 8 supra, the provisions related to it have to be constructed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute lo deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days. Onetime benefit extended to assessee has been earned in the year of acquisition of new plant and machinery. It has been calculated @ 15% but restricted to 50% only on account of usage of these plant & machinery in the year of acquisition. In section 32(1(iia) the expression used is "shall be allowed". Thus the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s. 32 shall definitely not exceed the total cost of plant machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit." 7.1. Further Mumbai Bench of the Tribinal in the case of M/s. TCPL Packaging Ltd. Vs. DCIT in ITA NO. 7370/Mum/2016 dated 22.04.2019 considered the amendment made section 32(1)(iia) of the Act held as follows: “....10.1. The plain language of Section 32(1)(iia) read along with the relevant proviso would have a come to the conclusion that, there is no limitation in the assessee claiming the balance 10% of additional depreciation in the succeeding assessment year. B 10.2. As a matter of fact, with effect from 01.04.2016, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment. 10.3. The amendment brought in the relevant proviso obtaining in Section 32, reads as follows: ".... 32. (1)....... Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 9 a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset:......." (Emphasis is ours) 11. We may only indicate that during the course of the arguments, our attention was drawn to the "Memorandum Explaining the provisions in Financial Bill, 2015", whereby, the aforementioned amendment was brought about. 11.1. The relevant part of the Memorandum is extracted hereafter: “.....To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50% of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant and machinery, shall be allowed in the immediately succeeding previous year. This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years." 11.2. A perusal of the extract of the Memorandum relied upon would show that the legislature recognised the fact that the manner in which the Revenue chose to interpret the provision, as it stood prior to its amendment would lead to discrimination, in respect of plant and machinery, which was used for less than 180 days, as against that, which was used for 180 days or more. 11.3. In our opinion, as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The Memorandum cannot be read in the manner, in which, the Revenue has sought to read it, which is, that the amendment brought in would apply only prospectively. 11.4. We are, clearly, of the view that the Memorandum, which is sought to be relied upon by the Revenue, only clarifies as to how the unamended provision had to be read all along. 11.5. In any event, in so far as the Court is concerned, it has to go by the plain language of the unamended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 10 Assessee could not claim balance depreciation in the A.Y., which follows the A.Y., in which, the machinery had been bought and used, albeit, for less than 180 days." 8. As can be seen from the above decision the Hon'ble Madras High Court, following the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Rittal India (P) Ltd. (380 ITR 423) and also considering the amendment brought in by way of proviso to section 32(1) wherein it has been specifically stated that 50% of additional depreciation which was not allowed in the preceding assessment year shall be allowed in the subsequent assessment year, concluded that the assessee is entitled for additional 50% depreciation in the assessment year which follows the assessment year in which the machinery had been bought and put to use for less than 180 days. We also found that the Coordinate Bench in the case of Rashtriya Chemicals and Fertilizers Ltd. (supra) has taken similar view following the decision of the the Hon'ble Karnataka High Court in the case of CIT vs. Rittal India (P) Ltd. (380 ITR 423). Respectfully following the said decisions we uphold the order of the learned CIT(A) and reject the grounds raised by the Revenue.” 7.1. Respectfully following the above decisions of the Co-ordinate Benches of the Tribunal, we have no hesitation in allowing the balance additional depreciation of Rs. 2,61,70,650/- during this present Assessment Year 2015-16. Thus the Ground Nos. 1 & 2 raised by the assessee are hereby allowed. 8. Regarding Ground Nos. 3 & 4 enhancement made by Ld. CIT(A) thereby denying the additional depreciation as the assessee only engaged in the “processing of Milk” and “not manufacturing of any item”. 8.1. Ld. Counsel submitted that the assessee is engaged not only processing of milk but is manufacturing and producing, processing milk and other milk products namely Liquid Milk, Sanjivani Milk, Butter Milk, Eco Butter Milk, Amul Butter Milk, White Butter, Ice Cream, Kulfi and Candy etc, The Ld. Counsel drawn our attention I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 11 to the Flow Diagram Chart for the above Milk products and the various stages of manufacturing of the Milk products as follows: I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 12 I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 13 9. Thus the Ld. Counsel submitted that the decision relied upon by Ld. CIT(A) in the case of M/s. Creamline Dairy Products Ltd. which is the case of only processing milk and not doing any other manufacturing activity whereas in the case of the assessee, it is not only processing of milk but also manufacturing products like buttermilk, lassi, butter, ghee, milk power, ice cream, sweets/malai etc. 10. Per contra, the Ld.CIT- D.R. Shri Kamlesh Makwana appearing for the Revenue supported the order passed by the Lower Authorities and requested to uphold the enhancement made by Ld. CIT(A). 11. We have given our thoughtful consideration and perused the materials available on record including Paper Book and case laws filed by the assessee. The assessee is a Milk Purchaser Co.Op. Society and milk is procured from various farmers and villagers. Thereafter the said milk processed under various machines and manufactured into various milk products. Thus the activity carried out by the assessee is not only processing of milk but involved detailed technical machineries and manufacturing different kind of milk products. 11.1. It is in the case of CIT Vs. Gujarat Co.op. Milk Marketing Federation Ltd., whether the processing of Milk and the milk products will amount of “manufacture or production” and whether the assessee is entitled for additional depreciation and the above activity was considered by the Jurisdictional High Court in Tax Appeal No. 760 of 2013 dated 23.01.2014, wherein the Hon’ble I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 14 High court held that it amounts to manufacture and assessee is entitled for additional depreciation as follows: 7. This provision provides for giving depreciation to the assessee engaged in the business of manufacturing or production of any article or thing in case of any new machinery or plant acquired or installed after 31-3-2005. The assessee, in the instant case, had installed Mother Dairy plant at Gandhinagar for manufacturing milk powder and had accordingly claimed the additional depreciation under section 32(1)(iia) claimed for such powder plant to the tune of Rs.4.00.95.506/- and for other plant and machinery and old powder plant respectively the sum of Rs.53,807/- and of Rs.1,80,66,227/- had been claimed, totaling to Rs.5,82,15,539/-. The fact is not disputed that the appellant is engaged in the business of manufacturing of milk products and the assessee respondent had been assessed since many years on regular basis where the Revenue has at no point of time disputed the aspect of its being in the activity of manufacturing and production. 8. The plant here is of making milk powder and process of producing the milk powder is complex and it is a completely different commercial commodity from the main ingredient milk. 9. At this stage, the decision of the Apex Court rendered in the case of Aspinwall & CO. Ltd vs. CIT (supra) requires reference where the Apex Court has said that the word "manufacturing" has not been defined in the Income-tax Act but in the absence definition of word "manufacture" has to be given a meaning as is understood in a common parlance. It is to be understood as meaning 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. If the change made in the article results in a new and different article, then the same would amount to manufacturing activity. The say of the respondent assessee that final product i.e. the milk powder was completely different from the main ingredient and the manufacturing process leads to the substantial value addition cannot be disputed nor has the same been in any manner challenged by the Revenue. Thus, the very issue is rightly appreciated by both the authorities concurrently and their findings give rise to no perversity warranting interference. 10. We can take note of the complex process explained by the assessee in making milk powder which is completely a different commodity. There is no way in which the final product could be restored to the original product. This process involves four different stages namely (1) Standardization (ii) Pre- heating(iii)Evaporation and (iv) Spray dying, as noted in the order of Assessing Officer, they are as under:- "Standardization: The conventional process for the production of milk powders starts with taking the raw milk received at the dairy I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 15 factory and pasteurising and separating it into skim milk and cream using a centrifugal cream separator. "Preheating: The next step in the process is "preheating during which the standarised milk is heated to temperatures between 75 to 120C and held for a specified time from a few seconds up to several minutes. Evaporation: In the evaporator the preheated milk is concentrated in stages or "effects" from around 9.0% total solids content for skim milk and 13% for whole milk, up to 45-52% total solids. This is achieved by boiling the milk under a vacuum at temperatures below 72 C in a falling film on the inside of vertical tubes, and removing the water as vapour. Spray Drying: Spray drying involves atmoising the milk concentrate from the evaporator into fine droplets. This is done inside a large drying chamber in a flow of hot air using either a spinning disk atomiser or a series of high pressure nozzles. The milk droplets are cooled by evaporation and they never reach the temperature of the air." 11. A distinct commodity is thus arising from the entire complex process and it is a commercially distinct marketable commodity resulting from this process and such transformation is irreversible and thus, the plant and machinery installed by the assessee for the purpose of manufacturing the milk powder has been rightly given the benefit of additional depreciation by the authorities. 12. Supreme Court in the case of Commissioner of Income-tax vs. N.C. Budharaja and Co. and another reported in [1993] 204 ITR 412, has held that for determining whether manufacturing can be said to have taken place is where the commodity which is subject to the process of manufacturing can no longer be regarded as the original commodity but is recognized in a trade as a new and distinct commodity. 13. Reference needs to be made to the decision rendered in the case of Commissioner of Income-tax vs. Prabhudas Kishordas Tabacco Products P. Ltd reported in [2006] 282 ITR 568 (Guj), wherein itwas held:- "9. The tests to ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the apex court and this High Court. Broadly, the requirement is that the raw material must be, in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the end-product after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 16 goods. The article produced must be regarded by the trade as a new and distinct article having an identity of its own, an independent market after the commodity is subjected to the process of manufacture. The nature and extent of the process would on 23 January, 2014 vary from case to case, and in a given case, there may be only one stage of processing, while in another case, there may be several stages of processing, and perhaps, a different kind of process at every stage. That with every process, the commodity would experience a change, but ultimately, it is only when the change, or a series of changes, bring about a result so as to produce a new and distinct article, that it can be said that the commodity used as raw material has been consumed in the manufacture of the end-product. To put it differently, the final product does not retain the identity of the raw material after it has undergone the process or processes of manufacture." 14. Thus, the whole process of conversion of the raw material when leads to production of new article and when its character, use and nature also indicate complete transformation bringing into existence the new product altogether. The assessee has rightly been allowed the benefit of additional depreciation by both the revenue authorities.” 11.2. Further the assessee produce before us detailed Flow Diagram Chart of manufacture of various produces which is extracted at Page Nos. 11 & 12 of this order. Thus the end product manufactured by the assessee is not the same raw milk that is collected from the farmers and villagers. The end product are entirely distinct with that of the raw milk. Thus the assessee cannot be denied the claim of additional depreciation. 12. Respectfully following the Jurisdictional High Court Judgments and Supreme Court Judgments, we have no hesitation in deleting the enhancement made by the Ld. CIT(A). Thus the Ground Nos. 3 & 4 raised by the assessee are allowed in favour of the assessee. 13. The next ground nos. 5 & 6 disallowance of additional depreciation of Rs. 2,58,50,676/- on various electrical items I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 17 installed by the assessee as forming part of the plant and machinery. 14. Ld. Counsel Shri Sunil Talati submitted that the various items of electrical goods as mentioned by the A.O. are not purely electrical items, but the same are integral part of the plant and machinery. In as much as without such electrical items, the plant just cannot function. Ld. Counsel further argued that the Ld. CIT(A) erred in ignoring the submissions and evidence filed various items like substation, DG set, exhaust & pedestal fans, street lighting, additional electrical equipment, transformers where in fact attached with the plant and machinery for which a certificate from Senior General Manager (Project), Engineering Department of the assessee company was filed before Ld. CIT(A). Therefore the assessee is entitled for depreciation as applicable on the plant and machinery and additional depreciation thereon also to be allowed. 14.1 In this connection, Ld. Counsel relied upon Co-ordinate Bench decision of this Tribunal in the case of Madhu Industries Vs. ITO in ITA No. 4172/Ahd/2007 and Delhi Tribunal decision in the case of DCIT Vs. M/s. Nalwa Steel & Power Ltd. in ITA No. 4559/Del/2010. 15. Per contra, the Ld.CIT- D.R. Shri Kamlesh Makwana appearing for the Revenue supported the order passed by the Lower Authorities and the disallowance made on electrical items as not forming part of the plant and machinery and the disallowance does not require any interference. I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 18 16. We have given our thoughtful consideration and perused the materials available on record. It is seen from the certificate issued by the Senior General Manager (Project) of Engineering Department of the assessee company, the manufacturing units are located in remote places at Palanpur where supply of electricity was not regular and often, there is power cut in supply of electricity. It is for this reason, sub-station, DG set, and transformers are required for manufacture of milk products. Similarly, exhaust & pedestal fans are required for cooling of the milks. Hence the same cannot be categorized as pure electrical items but to be treated as part and parcel of the plant and machinery for the manufacture of milk products. 16.1. The Hon’ble High Court of Gujarat in the case of CIT Vs. Starlight Silk Mills Pvt. Ltd. [2006] 280 ITR 257 held that AC plants, electric installation and transformers form integral part of plant and machinery and eligible for depreciation. Similarly, the Co-ordinate Bench of this Tribunal in the case of Raw flints (P.) Ltd. Vs. ITO [1987] 21 ITD 207 held that electrical installations are an integral part of manufacturing process and cannot be divorced from ‘plant and machinery’. 17. Thus respectfully following the above rulings, we hold that the electrical fittings are integral part of the plant and machinery and the assessee is eligible for depreciation and additional depreciation accordingly. Thus the Grounds raised by the assessee is hereby allowed. I.T.A No. 52/Ahd/2021 A.Y. 2015-16 Page No M/s. Banaskantha Dist. Co-Op. Milk Producers Union Ltd. vs. DCIT 19 17. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 08 -11-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 08/11/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद