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2016 (5) TMI 541 - ITAT AHMEDABAD

2016 (5) TMI 541 - ITAT AHMEDABAD - TMI - Disallowance of additional depreciation on plant and machinery - Held that:- The assessee has acquired the plant and machineries before 31.03.2005 but the machineries were installed after 31.03.2005. If the revenue authorities’ view is accepted then the assessee cannot claim additional depreciation as per earlier provision since the machineries were neither acquired nor installed after 31.03.2002. At the same time, the assessee cannot claim the additiona .....

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acquired” has to be considered in the light of “ownership” of the asset. There remains no doubt that the assessee is very much entitled for the claim of additional depreciation. - Decided in favour of assessee. - ITA. No: 143/AHD/2013 - Dated:- 5-4-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri Sanjay R. Shah, AR For The Respondent : Shri Narendra Singh, Sr. D.R. PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. This appeal by the assessee is .....

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been upheld. 3. At the very outset, the ld. counsel for the assessee stated that he is not pressing the ground relating to the challenge of the re-opening of the assessment. Hence, the same is dismissed as not pressed. 4. Coming to the merits of the case, during the course of the assessment proceedings and on verification of the case records, the A.O found that the assessee had claimed depreciation of ₹ 2,18,50,976/- which was @ 20% u/s. 32(1)(iia) of the Act. On further probe, the A.O fou .....

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he twin condition and accordingly not entitled for additional depreciation. 5. Assessee was asked to justify its claim of additional depreciation. In its reply, the assessee stated that the machineries received were damaged and, therefore, had to be returned/replaced by the vendor which took sometime and, therefore, the installation took place after 31.03.2005. It was strongly contended that the claim of additional depreciation cannot be denied. 6. However, the claim of the assessee did not find .....

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he ld. counsel that since additional depreciation is a benefit conferred upon the assessee by the statute, it deserves liberal construction and the benefits cannot be denied on technical reasons. 9. Per contra, the ld. D.R. strongly supported the findings of the revenue authorities. It is the say of the ld. D.R. that the A.O has rightly denied the claim since the assessee has not fulfilled the mandatory conditions for the claim of additional depreciation. 10. We have heard the rival submissions .....

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32(1)(iia) of the Act and which reads as under:- INCENTIVES FOR INVESTMENT AND INDUSTRIAL GROWTH Additional depreciation on new machinery and plant Under the existing provisions contained in sub-section (1) of section 32 of the Income-tax Act, deduction is allowed in respect of depreciation on assets owned wholly or partly by the assessee and used for the purposes of the business or profession at the rates prescribed under the Income-tax Rules, 1962. With a view to give a boost to the manufactur .....

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less than twenty five per cent. Such further sum shall be deductible from the written down value of the asset. "Installed capacity" has been defined to mean the capacity of production as existing on the last day of any previous year commencing on or after the 31st March, 2002. The proposed amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003- 2004 and subsequent years. 11. A perusal of the aforementioned object clearly sh .....

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raft) acquired and installed after the 31st Day of March, 2002 by an assessee engaged in the business of manufacture or production of any article or thing, is allowed as deduction as further depreciation. It is proposed to increase the said sum of further depreciation mentioned in the said clause (iia) from fifteen per cent to twenty percent. It is further proposed to omit the conditions relating to industrial undertaking being new or substantial expansion mentioned in the first proviso to the a .....

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nstalled capacity and for furnishing details of machinery and plant and report of an Accountant were done away with. Meaning thereby, that these conditions were not necessary for the claim of additional depreciation. 14. Once again, it can be seen that the amendments brought to this section is to encourage new investment in plant and machinery. 15. Coming back to the facts of the present case, as mentioned elsewhere, the assessee has acquired the plant and machineries before 31.03.2005 but the m .....

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a vulnerable situation wherein even after making investments in new plant and machineries, the assessee is deprived of additional depreciation. 16. Let us look at the facts from another angle. The revenue has allowed the claim of depreciation admitting that the plant and machineries have been used by the assessee for its business only the claim of additional depreciation has been denied. In our considered opinion and the understanding of the law, the eligibility for the claim of depreciation sh .....

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nt. If the installation of a plant is spread over more than a year, the relevant year for the grant of allowance would be the year in which the installation is completed. As in the case of investment allowance, so also in the case of additional depreciation, the material date is the date of installation and not the year of acquisition. The Tribunal categorically found on a perusal of the assessment order for the asst. yrs. 1980-81 and 1981-82 and the relevant balance sheets of the assessee-compa .....

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ines were new and they were under installation and the installation was completed during the year under reference ; and secondly, no depreciation was ever claimed by the assessee prior to this assessment year on these machines. This finding of the Tribunal has not been challenged. The Tribunal also found that the machines, although acquired earlier, could not be installed in view of the change of management twice. The machines were lying idle and were kept for installation and the installation w .....

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ncial year and the installation process crosses another financial year because of the humongous task of installing such machineries. In such a situation, can the assessee be denied the claim of additional depreciation merely because the acquisition and installation have taken place in two different financial years? In our considered opinion, the sine qua non for the claim of depreciation should be the date of installation when it can be said that the plant and machineries are ready for use. Acqu .....

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