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Dy. Commissioner of Income-Tax Versus M/s Sapna Arts

2015 (12) TMI 124 - ITAT AHMEDABAD

Disallowance of additional depreciation u/s.32(1)(iia) claimed on new plant and machineries - Held that:- As decided in case of S.S.M. Bros. Pvt. Ld. & Others [1999 (1) TMI 2 - SUPREME Court] where the machinery or plant is installed for the purpose of the business of production of textiles, including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the assessee is entitled to the deduction of the development rebate the under. What is important is that this develo .....

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y would have been entitled to be considered for the purposes of such development rebate. We are of the view that it makes no difference that in the particular case, the assessee buys the cloth and then processes it, using the machinery, by embroidering it and, in some cases, by dyeing it. The assessee utilizes the machinery in the production of processed textiles. Therefore, the machinery is entitled to the development rebate under s.33(1)(b)(B)(i). The question has, therefore, to be answered in .....

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of the case and in law, the Ld. CIT(A)-II, Surat has erred in deleting the addition of ₹ 27,17,259/- made on account of disallowance of additional depreciation u/s.32(1)(iia) of the I.T. Act claimed on new plant and machineries. Without appreciating the fact that the assessee was doing job work in embroidering the finished cloths supplied by its clients. Embroidering is neither a manufacturing activity nor a processing activity. [2] On the facts and circumstances of the case and in law, t .....

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lowance of claim of additional depreciation of ₹ 27,17,259/-. 3. Assessee aggrieved by this order preferred an appeal before ld. CIT(A) who after considering the submissions and relying upon the decision of coordinate Bench in case of Aswani Industries, Surat in ITA No.2103/Ahd/2010 and Haripriya Processors Pvt. Ltd. in ITA No.1569/Ahd/2010 allowed the claim of depreciation. Ld. Sr. DR supported the order of Assessing Officer and submitted that ld. CIT(A) had not justified in deleting the .....

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on of the ITAT are not squarely covered by the decision of Hon ble Supreme Court. The relevant observation of the Assessing Officer are reproduced as under: "Further in favour of allowability of additional depreciation recent decision of Hon'ble ITAT (Ahd)in the case of ITO ward 1(2) , Surat Vs. M/s Haripriya Processors Pvt. Ltd where Hon'ble ITAT has relied on the decision of Hon'ble Supreme court in the case of S.S.M. Brothers Pvt. Ltd & Others (243 ITR 418) and allowed th .....

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/- is hereby disallowed and added back to total income bf the assessee." However, ld. CIT(A) has decided the issue as under: "3. I have gone through the facts of the case and the orders of the Hon'ble ITAT, Ahmedabad bench referred above. In their decision, the Hon'ble ITAT, Ahmedabad bench held that embroidery job work was manufacturing and that benefit of additional depreciation was available to an assessee engaged in business of embroidery on job work basis. I find that the .....

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e co-ordinate Bench has reproduced in para 2, the ground raised by the revenue i.e. reproduced for this hearing for the sake of clarity: "1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of claim of additional depreciation of ₹ 9,45,450/-." The co-ordinate Bench then goes on to recording the facts in para 3 as under: "3. The brief facts are that the assessee engaged in the activity of .....

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006 and assessee claimed depreciation @ 35%. The AO noted that depreciation allowable on plant & machinery is prescribed as per I.T. Rules, 1962 @ 15%. The assessee claimed that as per Section 32(1)(iia) of the Act if any new machinery and plant ii acquired and installed after 30-03-2005 in the manufacture or production of anything, additional depreciation of 20% will be allowed as deduction. The assessee claimed that it is manufacturing concern entitled for additional 20% depreciation. Acco .....

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isions of Section 32(1)(iia) of the Act. Accordingly, the Assessing Officer disallowed the additional depreciation claimed by the assessee. Aggrieved, assessee preferred appeal before CIT(A)." The Tribunal while deciding the issue reproduced the finding of the ld. CIT(A) in para 4 as under: "4. The CIT(A) allowed the claim of the assessee by giving following finding in para-3.3 of his appellate order:- "3.3 I have considered the submission made by the appellant and the observation .....

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titled to the deduction of the development rebate the under. What is important is that this development rebate is available if the machinery or plant is installed for the purposes of the business of the production of textiles, including those 'otherwise processed.' If the machinery or plant is required to be utilized in the production of such textiles, at whatever sage, the assessee is entitled to the benefit of the development rebate. It is not disputed fairly that if the assessee had b .....

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