Income Tax Appellate Tribunal - Ahmedabad
Vasudev S. Dalwadi (Huf) vs Asstt. Cit on 1 April, 2002
Equivalent citations: (2002)77TTJ(AHD)1005
Order B.M. Kothari, A.M. The assessee has raised the following three grounds in this appeal:
(1) The assessment order passed under section 143(3) read with section 147 is bad in law and illegal inasmuch as it is nothing but a change of opinion and, therefore, the order is liable to be quashed.
(2) The learned Commissioner (Appeals) has erred in confirming the withdrawal of investment allowance to the extent of Rs. 1,57,748 in respect of cost of Rs. 7,88,740 on dumpers on the ground that they are road transport vehicles inasmuch as dumpers are plant and that they are not running on road. The quarry cannot be run without the help of dumpers. The dumpers are used in taking the rubbles from quarry to the crusher.
(3) The learned Commissioner (Appeals) has erred in relying upon the Gujarat High Court decision in case of CIT v. Shiv Construction (1987) 165 ITR 159 (Guj) inasmuch as the said case was never discussed on merits an that the concession was given by the assessee.
2. Shri A.C. Shah, the learned C.A. represented the assessee. He submitted that the assessee is engaged in the business of mining and extracting stone/rubble and crushing into Kapchi, grit and metal, which constitutes a manufacturing activity. The assessee is thus, engaged in the business of manufacture and production of an article or thing, as contemplated under section 32A and is eligible for grant of investment allowance on dumpers used in the aforesaid business. The learned counsel has placed reliance on various judgments given in the index submitted along with the compilation. He particularly drew my attention to various judgments referred to in column 4 to support the contention that dumpers on the facts of the assessee's case should be treated as plant and not road transport vehicles on which investment allowance is not allowable in view of clear provisions contained in section 32A. Reliance was placed on the following judgments :
(a) CIT v. Sibson Construction Co. (1996) 221 ITR 468 (Gau);
(b) CIT v. C. S. Anand (1997) 225 ITR 573 (Pat);
(c) CIT v. Mahalinga Shetty & Co. (1992) 195 ITR 526 (Karn);
(d) Gujarat Tubes Ltd. v. ITO (1992) 43 TTJ (Ahd) 331;
(e) ITO v. Chuge & Co. (1998) 47 TTJ (Pune) 33;
(f) Asstt. CIT v. Saket India (P) Ltd. (1999) 68 ITD 270 (Del); and
(g) Harihar Quarry v. ITO (1986) 25 TTJ (Ahd) 144.
2.1. The learned counsel has also relied on the following judgments to support his contention that the activity of mining and extracting stone/rubble and crushing it into Kapchi, grit and metal amounts to manufacturing activity in view of the following judgments:
(a) CIT v. SLM Maneklal Industries Ltd. (1994) 205 ITR 547 (Guj);
(b) CIT v. Kutch Oil & Allied Industries (P) Ltd. (1987) 163 ITR 237 (Guj); and
(c) Empire Industries Ltd. v. Union of India (1986) 162 ITR 846 (SC).
2.2. Shri Shah further submitted that the reliance placed by the learned Departmental Representative and by the department on the judgment of Hon'ble Gujarat High Court in the case of Shiv Construction (supra) is not correct as the facts of that case are clearly distinguishable. That was case of a firm engaged in the business of construction of roads and buildings. The assessee was, therefore, not entitled to development rebate on the equipments used in the business of construction of roads and buildings. Such a view is clearly supported by the judgments of the Hon'ble Supreme Court in the cases of CIT v. N.C. Budhiraja & Co. (1993) 204 ITR 412 (SC) and Builders Association of India v. Union of India (1994) 209 ITR 877 (SC). The ratio of the aforesaid judgments of the Supreme Court apply only in relation to assessee engaged in the business of construction of roads and buildings or other civil construction works. They do not apply to concerns engaged in the activity of mining of stone/rubble and crushing it into Kapchi, grit, etc. The learned counsel contended that the assessee's claim for grant of investment allowance is clearly supported by the judgments cited supra.
3. The learned Departmental Representative relied upon the judgment of the jurisdictional High Court in the case of Shiv Construction Co. v. CIT (supra) and submitted that the said jugment is binding on all subordinate authorities and the Tribunal.
4. I have carefully considered the submissions made by the learned representatives of the parties and have gone through the orders of the learned Departmental Representative. I have also gone through all the judgments cited by the learned representatives of the parties.
5. The assessing officer has observed that the activity of mining and quarry carried out by the assessee does not amount to manufacture or production of an article or thing. He relied on the judgment stated to be a judgment of the Hon'ble Supreme Court in Hind Nippon Rural Industries (P) Ltd. v. CIT (1993) 201 ITR 588 (Karn). This judgment is not a judgment of the Supreme Court but it was a judgment delivered by the Hon'ble Karnataka High Court. In this case the business of the assessee-company consisted of purchase and sale of granite blocks. The assessee after purchasing blocks carried out an activity of chipping and sizing of granite. The Hon'ble Karnataka High Court held that such, activity did not amount to manufacture or processing of goods and the equipments viz. mobile crane and air compressor used in such activity is not eligible for grant of investment allowance under section 32A. In a subsequent judgment, the Hon'ble Karnataka High Court in the case of CIT v. Gogte Minerals (1997) 225 ITR 60 (Karn) has held that mining operation carried on for excavating iron ore and sequestering the same from other materials involved a very big process and there was a complete transformation of the material from one form to another. This amounted to a manufacturing activity and consequently, the assessee would be entitled to investment allowance on the screening plant and electrical installations used in mining. The Hon'ble Karnataka High Court relied on the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Kutch Oil & Allied Industries (P) Ltd. (supra). It may be relevant here to mention that in this judgment, the Hon'ble Karnataka High Court has distinguished the decision rendered in the earlier case of Hindu Nippon Rural Industries (P) Ltd. v. CIT (1993) 201 ITR 581 (Karn) and observed as under :
"In an earlier case in Hind Nippon Rural Industries (P) Ltd. (No. 1) v. CIT (1993) 201 ITR 581 (Karn), this court took the view that if the assessee purchases granite blocks made to specifications stated by the assessee and granite blocks are brought into existence by employing a contractor and no quarrying was done by the assessee, it was held that the activity of the assessee thereunder would not involve any manufacturing process and, therefore, the assessee would not be an industrial company. That reasoning was adopted and extended in the second case to which we have made reference. Even in that decision, this court noticed a distinction between those cases where the granite blocks are purchased and sized and cases where quarrying activity is done by the assessee. Therefore, Hind Nippon Rural Industries (P) Ltd. case cannot be of any assistance to the department."
5.1. The business carried on by the assessee in the present case is that of mining and quarrying of stone, rubble and converting it into Kapchi, grit and metal, etc. The ratio of the decision in the case of Hind Nippon Rural Industries (P) Ltd. relied upon by the assessing officer in the assessment order is, therefore, not applicable to the facts of the present case.
5.2. Reliance placed by the learned Departmental Representative on the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Shiv Construction Co. (supra) also does not assist the department in any manner, as that is a case of a firm which is engaged in the business of construction of roads and buildings. The dumpers used by the assessee for carrying out the business of construction of roads and buildings is clearly not entitled to grant of investment allowance or development rebate in view of the judgments of the Hon'ble Supreme Court in the cases of N.C. Budhiraja & Co. (supra) and Builders Association of India v. Union of India (supra) referred to in the assessment order. The judgments of Hon'ble Supreme Court in the case of N.C. Budhiraja & Co. (supra) and Builders Association of India (supra) are also clearly distinguishable with the facts of the present case. Those judgments relate to the cases of assessees engaged in the business of construction and carrying out civil construction works. Those are not the cases which deal with the cases of persons engaged in the business of mining and quarrying.
5.3 It may be imperative to refer to the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Kutch Oil & Allied Industries (P) Ltd. (supra). It has been held by the Hon'ble High Court that a company which carries out pulverising process by treating raw lumps of mineral chemically and thereafter converting the lumps into powder, is engaged in the processing of goods as laid down in the definition of "industrial company under section 2(8)(c) of the Finance Act, 1974 and is entitled to the concessional rate of tax.
5.4. The Hon'ble Patna High Court in the case of CIT v. C.S. Anand (supra) has held as under :
"Held, that dumpers are not road transport vehicles and the Tribunal was right in holding that investment allowance was allowable on the cost of new dumpers."
5.5. The Hon'ble Karnataka High Court in the case of Dy. CIT v. Mysore Minerals Ltd. (2001) 250 ITR 730 (Karn) has decided a similar issue in favour of the assessee. The assessee in that case carried on activity of mining. The business of the assessee was extracting granite from quarries, converting it into slabs, and after cutting and polishing the slabs, effecting their-sale. The assessee claimed investment allowance under section 32A in respect of earth-moving equipments, crane, oil engine pumps and machinery installed for the purpose of its business. The Hon'ble High Court held that the process of extracting granite and cutting it into slabs of various sizes and polishing them was one of the manufacture and production of an article or thing and the assessee is accordingly entitled to grant of investment allowance under section 32A of the Act. Similar view was taken by the Hon'ble Karnataka High Court in the case of CIT v. Mysore Minerals Ltd. (2001) 250 ITR 728 (Karn).
5.6. In view of the aforesaid facts and discussion, I am of the considered opinion that the assessee is clearly entitled to grant of investment allowance on the cost of dumpers used in the business of mining and crushing stone-rubble into grit, Kapchi and metal, etc. The assessing officer is directed to grant relief accordingly.
6. No arguments were addressed by the learned counsel in relation to ground No. (1) regarding invalidity of proceedings under section 143(3). Hence, the said ground is rejected.
7. In the result, the appeal is partly allowed.