The main issue is with regard to allowability of foreign travel expenditure. The assessee claimed foreign travel expenditure at Rs. 20,35,971. As the assessee not furnished details of expenditure relating to business and pleasure trips, the Assessing Officer disallowed 80% of foreign travel expenses at Rs. 16,28,777. On appeal, the CIT(A) directed the Assessing Officer to allow 1/3rd of the expenditure instead of 1/5th of the expenditure. Against this the assessee is in appeal before us.
We have heard both the parties and perused the material on record. Before the lower authorities, the assessee not furnished bifurcation of expenditure as related to business and pleasure trips. Being so, the CIT(A) directed the Assessing Officer to disallow 2/3 of expenditure. Before us also nothing has been furnished. However, the AR made as plea that the assessee could furnish details of foreign travel as relating to business trips as well as pleasure trips. Considering the request of the assessee’s counsel, we remit the entire issue to the file of the Assessing Officer with a direction to get bifurcation of expenditure as attributable to business trips and pleasure trips. On obtaining the information, the Assessing Officer is directed to disallow the expenditure relating to pleasure trips. If the assessee fails to furnish the same the Assessing Officer shall pass consequential order in terms of the CIT(A) order. The appeal of the assessee is partly allowed for statistical purposes.
Standardization and pasteurisation of milk cannot be considered as a manufacture or production activity
Reopening of assessment for the purpose of reconsideration of additional depreciation granted on machinery installed at milk chilling plant/ processing centre/sales outlet on the reason that additional depreciation is not allowable as the assessee is not engaged in manufacture of article or thing. The Assessing Officer came to the conclusion on the basis of the order of the Tribunal Pune Special Bench in the case of B.G. Chitale (supra) wherein it was held that pasteurisation and standardisation of milk does not amount to production and the assessee is not entitled for deduction u/s. 80I. In view of this, the assessee is not entitled for additional depreciation in terms of provisions of section 32(1)(iia) as the machinery installed at milk chilling/processing centre, sales outlet and plant and machinery installed at milk powder centre are directly relatable to the milk processing which does not amount to manufacture. Therefore, as per the provisions of section 32(1)(iia) the additional depreciation cannot be granted. In our opinion, the reason recorded by the Assessing Officer is a valid basis for re-assessment proceedings by issuing notice u/s. 148 of the Act. In our opinion, additional depreciation is not available to that part of the machinery installed for the purpose of standardisation and pasteurisation of milk. The activities of standardisation and pasteurisation of milk are different from manufacturing of curd, ghee and other products. Standardisation and pasteurisation of milk cannot be equated with manufacturing of curd and ghee or other milk products. The new machinery which was installed for the purpose of manufacturing of production of any article or thing is entitled for additional depreciation not otherwise and not on the machinery installed in any other way by the assessee. As it was already decided by the Tribunal Pune Special Bench in the case of B.G. Chitale (supra), standardisation and pasteurisation cannot be considered as a manufacture or production activity. The plant and machinery installed for the purpose of standardisation and pasteurisation of milk cannot be considered for additional depreciation. Being so, reopening of assessment is valid. Consequently, the assessee not entitled for additional depreciation on merit also. The assessee might have used the standardised or pasteurised milk for the purpose of production of curd and ghee and there is no necessity of using standardised or pasteurised milk for the purpose of production of curd and ghee or other milk products. Because the assessee used standardised or pasteurised milk, we cannot be in a position to hold that the assessee is entitled for additional depreciation u/s. 32(1)(iia) of the Act. The plant and machinery used in the production and manufacture of curd and ghee must have a direct and immediate nexus with the assessee’s business. Although milk is required for the purpose of manufacturing of curd and ghee, standardised and pasteurised milk for the purpose of production of curd and ghee is a step removed from the business of production of curd and ghee. The curd and ghee could have been produced by the assessee from the milk without standardisation and pasteurisation. Usage of pasteurised condensed milk is not necessary for the purpose of production of ghee and curd. Because the assessee used the standardised and pasteurised milk, we cannot grant the additional depreciation on the plant and machinery which are used for the purpose of standardisation and pasteurisation of milk. Accordingly, even on merit we decide the issue against the assessee. The various case-law relied on by the assessee-company are delivered on their own context and cannot be applied to the facts of the present case.
Source- Creamline Dairy Products Ltd. v. DCIT (ITAT Hyderabad) – IT Appeal Nos. 20 (Hyd.) of 2012 and 1828 (Hyd.) of 2011, Dated- 05.10.2012