Gujarat Gas Ltd. Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that additional depreciation under section 32(1)(iia) of the Income Tax Act admissible since process of compression of natural gas qualifies as manufacturing activity.
Facts- PCIT observed that the assessee company had claimed additional depreciation on certain block of assets. PCIT observed that the assessee company is engaged in the business of city gas distribution including sale purchase, supply, processing, distribution and transportation of natural gas. PCIT was of the view that mere process of compression of natural gas cannot be considered to be a manufacturing activity for the purpose of claim of additional depreciation. However, the A.O. had allowed the claim of the assessee of additional depreciation without considering this aspect. Further, the PCIT observing that the assessee had claimed deduction under Section 35DD of the Act amounting to Rs. 5.39 crores, but the PCIT observed that the assessee company had made provision for Stamp Duty which was categorized as “contingent liability” and hence, the A.O. erred in allowing the claim of the assessee to the extent of Rs. 5 crores since as per tax laws, a claim of contingent liability cannot be allowed.
Conclusion- In the case of CIT vs. Gujarat Gas Company Ltd. it is held that there is a process of altering gas for making it consumable for industrial or domestic purpose or making it more user friendly for the industrial undertaking. In that view of the matter, we are of the opinion that the Tribunal has rightly taken the view that the assessee carries out manufacturing activity. Thus, held that PCIT has erred in facts and in law in holding that the A.O. erred in allowing assessee’s claim for additional depreciation u/s. 32(1)(iia) of the Act, thereby making the assessment order erroneous and prejudicial to the interest of the Revenue.
