CHERIAN VARKEY CONSTRUCTION CO(P) LTD Vs. UNION OF INDIA REPRESENTED BY SECRETARY TO GOVERNMENT MINISTRY OF FINANCE

JUDGEMENT

(1.) The appellant, a construction company, is concerned with questions of law arising from the majority view of the Income Tax Appellate Tribunal. The bare facts to be noticed are as follows. The appellant for the assessment year 2006-07 procured three vehicles, specifically for the transport of Ready Mix Concrete (RMC) for use in their construction site, from their own manufacturing unit. The procurement of the vehicles were in the previous year to the assessment year. The appellant claimed additional depreciation, as available under Section 32(1)(iia), to the extent of 20% of the actual cost of such vehicles which, according to the assessee qualify as plant and machinery used in manufacture.

(2.) The claim was allowed by the Assessing Officer (A.O.), but later reopened on the ground of escapement of income from assessment, under Section 148. Notices were issued and assessment was completed declining the additional depreciation claimed under Section 32(1)(iia). The A.O. found that RMC is obtained by mere mixing and there is no manufacture involved. The additional depreciation under Section 32(1)(iia) was only applicable to plant and machinery installed by an assessee, engaged in the business of manufacture or production of any article or a thing. The first appellate authority found that RMC is a product of manufacture. But, however, the vehicles are not eligible for the benefit under Section 32(1)(iia) for reason of not answering the description of plant and machinery and are only used for the purpose of transportation of RMC.

(3.) Before the Tribunal, there was a difference of opinion between the Judicial Member and the Accountant Member (for short 'JM' & 'AM' respectively); which was referred to a third member, again a JM, the Vice-President (VP), who concurred with the AM. At the first instance, the JM found that RMC is a product of manufacture following a decision of the Delhi Bench of the Tribunal. The JM also found that the vehicles would answer the description of plant and machinery and hence the purchase price, is entitled to be considered for additional depreciation. The AM held that making of RMC does not involve any manufacture and relied on the judgment of the Hon'ble Supreme Court in Commissioner of Income Tax v. N.C.Budharaja & Co., 1993 204 ITR 412. The issue was referred to a third member and the third member agreed with the AM, to find that there is no manufacture involved in the making of RMC.