TMI Blog2011 (2) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... /SHRI BHAVNESH SAINI, AND A. N. PAHUJA, JJ. Appellant by Shri Gaurav Nahta, AR Respondent by Shri R. K. Dhanista, Sr. DR ORDER PER BHAVNESH SAINI: This appeal by the assessee is directed against the order of the learned CIT(A)-VI, Ahmedabad dated 19th January, 2009 for assessment year 2005-06 on the following grounds: 1. The Ld. CIT Appeals VI has erred in law and on facts in passing appellate order dated 19/01/2009 for A. Y. 2005-06 in the case of appellant by confirming the disallowance of Rs.18,42,527/- out of depreciation being additional depreciation claimed by the appellant. 2. The Ld. CIT Appeals also erred in law and on facts in confirming the disallowance of Rs.7,62,565/- out of interest expenses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rease in out-put is not co-terminus with an increase in installed capacity. Further, the Directors Report states that installed capacity of current and previous year is not ascertainable. The AO accordingly added Rs.18,42,527/- to the income. Addition was challenged before the learned CIT(A) and it was submitted that gross block of asset were put to use and the assessee has substantially increased the plant and machineries and increased the installed capacity, therefore, addition is unjustified. The learned CIT(A) considering the explanation of the assessee and material on record confirm the addition. His findings at pages 5 to 8 of the appellate order are reproduced as under: Keeping in view the aforesaid facts and circumstances, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (other than ships and aircraft) which has been acquired and installed after 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to fifteen per cent of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) Provided that such further deduction of fifteen per cent shall be allowed to (A) A new industrial undertaking during any previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002 or (B) any industrial undertaking existing before 1st day of April 2002 during any previous year in which it achieves the substantial expansion by way of incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has rightly allowed the normal depreciation of Rs.30,70,880/-. However, when the use of additional depreciation is considered with the facts and circumstances of the grounds of appeal in question, it is crystal clear that the conditions laid down in section 32(1)(iia) of the Income-tax Act, 1961 requires an increase of 10% of installed capacity (i.e. the processes which turn the raw material into finished goods). The appellant clearly has the existing surplus of installed capacity vis- -vis the stenter, thereby, the purchase of the stenter does not add installed capacity at all. It is also a fact that the director s report clearly states that the installed capacity of the current and the previous year are not ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f both the products, the increase in combined installed capacity fell short of 25 per cent. 5. On the other hand, the learned DR relied upon the orders of the authorities below. 6. On consideration of the rival submissions we do not find it to be a fit case for interference. The assessee s Counsel did not dispute the Directors Report which states that the installed capacity of current and previous year is not ascertainable. It would, therefore, show that the management was aware of the fact that the installed capacity has not been enhanced even if some plant and machineries were purchased. The Directors Report is virtually an admission of the fact which can not be contradicted by the report of the Chartered Accountant. The AO even on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings given in assessment years 2002-03 and 2003-04 disallowed the interest. The learned CIT(A) confirmed the addition by following the order of his predecessor for assessment years 2002-03 and 2003-04 being the facts identical. 8. The learned Counsel for the assessee at the outset submitted that the issue is decided by ITAT Ahmedabad A Bench in assessment years 2002-03 and 2003-04 in ITA No.2407/Ahd/2005 and ITA No.163/Ahd/2007 vide order dated 07-05-2010 and similar addition has been deleted. Copy of the order dated 07-05-2010 is filed on record. The learned DR did not dispute the above fact. 9. On consideration of the above fact, we are of the view that the learned CIT(A) was not justified in confirming the addition. In assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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