2010 (10) TMI 1090 - AT - Income Tax

Summary

Issues: Disallowance of additional depreciation claimed by the assessee u/s 32(1)(iia) of the Income Tax Act, 1961.

Summary:

The appeal was filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-II, Surat, which deleted the disallowance of additional depreciation claimed by the assessee for the assessment year 2007-08.

The Assessing Officer disallowed the claim of additional depreciation on the grounds that the assessee was not engaged in manufacturing or embroidery works on fabrics as required by section 32(1)(iia) of the Income Tax Act, 1961. However, the Learned Commissioner of Income Tax (Appeals) allowed the claim based on the provisions of section 32(1)(iia) and directed the Assessing Officer to allow the depreciation.

During the hearing, the Revenue contended that the assessee was not engaged in manufacturing and therefore not entitled to additional depreciation. On the other hand, the assessee's counsel cited a previous decision of ITAT, 'SMC' Bench, Ahmedabad, which held that an assessee engaged in embroidery work on fabrics is entitled to additional depreciation under section 32(1)(iia).

After considering the arguments and the previous decision, the Tribunal upheld that the assessee was entitled to additional depreciation under section 32(1)(iia) of the Income Tax Act, 1961. The Tribunal found no infirmity in the order of the Learned Commissioner of Income Tax (Appeals) and dismissed the appeal filed by the Revenue.

The decision was based on the interpretation of the activities carried out by the assessee in embroidery work, which were deemed to result in the production of a new article with different commercial value, thus qualifying for additional depreciation under the relevant provisions of the Income Tax Act.

The Tribunal's decision aligned with the previous ruling of ITAT, 'SMC' Bench, Ahmedabad, and the principles established by the Hon'ble Supreme Court regarding the eligibility for additional depreciation in cases involving the production of new articles or things.