Accelerated Freeze Drying Co. Ltd. Vs ACIT (Kerala High Court)
Kerala High Court held that additional machines employed for carrying out the freeze-drying process entitled to enhanced depreciation at 20% under section 32(1)(iia) of the Income Tax Act. Appeal allowed, accordingly.
Facts- Appellant, an exporter of premium food products, is an assessee under the Income Tax Act, 1961. Appellant had for the Assessment year 2013-14 filed returns declaring a total income of Rs.2,42,34,820/-. While completing the assessment u/s. 143(3) of the IT Act, the assessing authority made certain disallowances and assessed the total income at a higher amount of Rs. 2,82,54,559/- and penalty proceedings u/s. 271 (1) (c) of the IT Act were initiated. Appellant challenged the assessment order before the First Appellate Authority which was allowed in part. Since claims under two heads made by the appellant were disallowed by the First Appellate Authority, to the said extent, appellant took up the matter before the Tribunal. The Tribunal dismissed the appeal vide Order dated 14.11.2018 and the said Order is impugned in this appeal.
Conclusion- Held that the activity of ‘accelerated freeze drying’ employed by the appellant in their plants, transforms the raw material into a new and distinct object or article or thing having a different character and brings into existence a new and distinct object or article. The same is different from the processing undertaken in seafood processing plants. Thus, the activity indulged in by the appellant is thus a business of manufacture or production as stipulated under Section 32 (1) (iia) of the IT Act. In so far as there is no dispute that the additional machines for carrying out the freeze-drying process were added during the subject assessment year, the appellant is entitled to the enhanced depreciation at 20% claimed by the appellant under Section 32 (1) (iia) of the IT Act.
