Purchase of Raw Material and making packing material is manufacture: ITAT allows Additional Depreciation [Read Order]

The Income Tax Appellate Tribunal (ITAT), Indore Bench allowed additional depreciation as Purchase of raw material and making packing material is manufacture.

The assessee-company, M/s. Madhuri Refiners Private Ltd filed return of income 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, the AO observed that the assessee has claimed additional depreciation u/s 32(1)(iia) of Rs. 20,25,596 on plant and machinery.

The AO confronted the assessee on eligibility of claim. The assessee made a detailed submission on business activity, and tried to convince the AO that it is eligible for claim of additional depreciation. However, the AO being unsatisfied with the submission of assessee, rejected the claim of assessee. The CIT(A) also rejected the contention of the assessee and hence the present appeal.

The Counsel for the assessee, submitted that had there been a “trading activity” only, why would have assessee installed the plant and machinery of such a high magnitude on which the “additional depreciation” itself is as high as Rs. 20,25,596 and also emphasised that the assessee 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.

A Division Bench consisting of Madhumita Roy, Judicial Member and BM Milani, Accountant Member observed that “The process undertaken by the assessee have been treated as manufacture under Excise Act and allied tax laws. These factors clearly indicate that the assessee’s case falls within the scope of “manufacture” as defined in sub-clause (b) of section 2(29BA). This vital fact, which is not disputed by revenue, that the assessee is purchasing plastic granule/raw material and manufacturing packing material therefrom such as jar/pouches/bottles make the assessee fully eligible for “additional depreciation”.

To Read the full text of the Order CLICK HERE

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