No additional depreciation if manufactured goods were captively consumed for construction activity

Facts of the case:

a) The assessee was engaged in laying pile foundation on job work basis, which was required in construction activities.

b) Piling work was used to be done at the site itself by digging bores of required sizes and erecting concrete pipes inside the bore, hence, assessee purchased new machinery, which enabled him to fabricate piles of standard size.

c) He claimed additional depreciation under section 32(1)(iia) on machinery contending that the pre-cast or pre-fabricated piles manufactured by using the new machinery resulted in manufacture of new article or thing.

d) Assessing Officer rejected the claim holding that pile was constructed and it was not manufactured or produced and the business of civil construction would not amount to carrying on any manufacturing activity.

e) On appeal, the Commissioner (Appeals) upheld the disallowance. Assessee filed instant appeal before Tribunal:

 Tribunal held in favour of revenue as under:

1) As per the provisions of section 32(1)(iia), the additional depreciation is allowed to an assessee engaged in the business of manufacture or production of any article or thing.

2) The production of prefabricated piles which would be used by the assessee in its business of piling would 

form part of construction activity and the said business could be considered to be a business of manufacture or production of an article or thing.

3) In civil construction contracts 'concrete slabs' are produced separately and they are then fitted at the required places. It does not mean that the civil contractor is manufacturing or producing the 'concrete slabs'.

4) Production of prefabricated piles, which would be used by assessee in its business of piling would formed part of construction activity whether piles were constructed inside bore at project site itself or at a different place by using machinery

5) Hence, assessee cannot be considered to be an assessee engaged in the business of manufacture or production of an article or thing. Thus, order of CIT(A) was upheld. Stefon Constructions (P.) Ltd. v. CIT - [2016] 65 taxmann.com 140 (Mumbai - Trib.)