Decided on September 30,1982



M.R.Sikka, - (1.) THE only question for consideration in this appeal is whether the assessee-company is entitled to depreciation under Section 32(1)(vi) of the Income-tax Act, 1961 ('the Act').
(2.) The assessee-company is engaged in the business of laying down pipelines for the Municipal Corporation. It maintains its accounts on mercantile basis. For the assessment year 1976-77, it claimed initial depreciation under Section 32(1)(vi), for the machinery purchased and used by it in its business. The ITO rejected the claim of the assessce on the ground that the assessee was not engaged in the business of 'manufacture' or 'production' of any of the articles specified in the Ninth Schedule to the Act. On appeal, the AAC confirmed the order of the ITO. The assessee has, therefore, filed the present appeal. Before me, the learned representative of the assessee contended that the laying down of pipes, after joining them together, tantamoimted to 'manufacture' or 'production' of articles within the meaning of Section 32(1)(vi). According to him, the long joint pipes resulting from the joining of the smaller pipes were different from their components and since a new product emerged out of the original constituents, the process involved 'manufacture' or 'production' of articles. In support of his contention, he referred to the decision of the Bombay High Court in the case of CIT v. Tata Locomotive and Engineering Co. Ltd. [1968] 68 ITR 325 and also to the decision of the Tribunal in the case of ABC v. ITO [IT Appeal Nos. 3261 to 3263 (Bom) of 1979].
(3.) THE learned representative of the department on the other hand, contended that the assessee was only engaged in the business of joining together the small pipes and laying down the same, that the original 'pipes' still remained 'pipes' even afterwards and as such, the assessee was not engaged in the 'manufacture' or 'production' of any article. According to him, therefore, the assessee was not entitled to initial depreciation under Section 32(1)(vi). In support of his case, he relied upon the decision of the Kerala High Court in the case of CIT v. Casino (P.) Ltd. [1973] 91 ITR 289.;

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