2010 (3) TMI 1188 - AT - Income Tax

Summary

Issues involved:
The issue in this case revolves around the allowance of depreciation at a rate of 25% instead of 50% as claimed by the assessee on machinery purchased under the TUF scheme.

Comprehensive Details:

1. Background and Claim:
The assessee, engaged in yarn twisting, texturising, and cloth manufacturing, claimed depreciation at 50% on machineries purchased under the TUF scheme for the purpose of twisting yarn. The Assessing Officer (AO) contended that higher depreciation was not available for machineries used in twisting, texturising, and yarn manufacturing, allowing only normal depreciation at 25%.

2. Arguments and CIT(A) Decision:
The assessee argued that the machineries were covered by the TUF scheme as per the Textile Ministry and had obtained a loan under the same scheme, justifying the claim for higher depreciation. However, the CIT(A) upheld the AO's decision to allow depreciation at 25%.

3. ITAT Order Reference:
The assessee's counsel cited a similar case before the ITAT B Bench, Ahmedabad, involving Nangalia Synthetics Pvt. Ltd., where higher depreciation was allowed. The ITAT order favored the assessee, referencing a previous case and holding that depreciation at 50% should be allowed for machineries used in the weaving sector of the textile industry.

4. ITAT Decision and Conclusion:
Upon considering the facts and the precedent set by the ITAT in the case of Nangalia Synthetics Pvt. Ltd., the ITAT Ahmedabad allowed the claim for higher depreciation at 50%, overturning the decisions of the lower authorities. Consequently, the appeal of the assessee was allowed, and the orders of the authorities below were set aside.

5. Final Outcome:
The ITAT pronounced the order on 22-03-2010, allowing the appeal of the assessee and granting the higher depreciation claim under the TUF scheme for machineries used in yarn twisting, texturising, and cloth manufacturing.