Section 32 – Depreciation – Additional depreciation – Condition precedent – Manufacture of article – Assessee need not be principally engaged in manufacture – Assessee entitled to additional depreciation on plant and machinery used in manufacture of ready mix concrete
Cherian Varkey Construction Co. (P) Ltd. vs. UOI; 406 ITR 262 (Ker): Date of order:
19th December, 2017
- Y. 2006-07
For the A. Y. 2006-07, the assessee procured three vehicles, specifically for the transport of ready mix concrete for use in the construction site, from its own manufacturing unit. The procurement of the vehicles was in the relevant year.
The assessee claimed additional depreciation u/s. 32(1)(iia) of the Act to the extent of 20% of the actual cost of such vehicles which, according to the assessee qualified as plant and machinery used in manufacture. The claim was allowed by the Assessing Officer, but later disallowed in reassessment u/s. 147/148 of the Act.
The Tribunal held that there was no manufacture involved in the making of ready mix concrete and upheld the disallowance.
On appeal by the assessee, the Kerala High Court reversed the decision of the Tribunal and held as under:
“i) It cannot be held on a reading of section 32(1)(iia) of the Act, that the additional depreciation permissible to the extent of 20% of the actual cost of plant and machinery, would be permissible only in the case of an assessee engaged principally in the business of manufacturing or production. This would be doing violence to the provision since then it would amount to introducing the word “principally” to read “ an assessee engaged in the business principally of manufacture and production of any article or thing; then a claim u/s. 32(1)(iia) would be permissible to the extent allowed as depreciation.
- ii)Considering the high degree of precision and stringent quality control observed in the selection and processing of ingredients as also the specific entry in the Central Excise Tariff First Schedule, heading 3824 50 10 which deals with “Concrete ready to use known as “Ready mix concrete”, though the ready mix concrete did not have a shelf-life, the final mixture of stone, sand, cement and water in a semi-fluid state, transported to the construction site to be poured into the structure and allowed to set and harden into concrete was a thing or article manufactured.
iii) The assessee, though engaged principally in the business of construction, was entitled to additional depreciation u/s. 32(1)(iia) for the plant and machinery used in the manufacturing activity being the production of ready mix concrete.”
