2014 (9) TMI 1120 - AT - Income Tax

Additional depreciation u/s 32(iia) - addition of plant & machinery made during 01.10.2007 to 31.02.2008 - held for less than 180 days - Held that - Under section 32(1)(iia) of the Income Tax Act there is no embargo on the assessee to claim the balance additional depreciation in the subsequent year if in the first year the assessee was unable to claim 20% depreciation by virtue of proviso to section 32(1)(iia). Therefore we direct the AO to allow the claim of depreciation of 10% in the year under consideration. ACIT vs. SIL Investment Ltd.(2012 (6) TMI 83 - ITAT DELHI) and DCIT vs. Cosmo Films Ltd. 2012 (9) TMI 281 - ITAT DELHI .- Decided in favor of assessee.

Summary

Issues: Disallowance of additional depreciation under Section 32(iia) of the Income Tax Act for plant and machinery added during a specific period.

Analysis:
1. The appeal was filed by the assessee company against the order of the CIT(A)-8, Mumbai for the Assessment Year 2009-10.
2. The sole ground of appeal was the disallowance of additional depreciation amounting to Rs. 3,70,00,800 under Section 32(iia) of the Income Tax Act for the plant and machinery added during 01.10.2007 to 31.02.2008.
3. The assessee, engaged in the manufacturing business, added plant and machinery during the Financial Year 2007-08 and claimed 10% additional depreciation as the assets were held for less than 180 days during that year.
4. The Tax Authorities contended that additional depreciation is only available in the year when new plant and machinery are put to use, and any unclaimed portion cannot be carried forward to subsequent years.
5. The assessee cited precedents like ACIT vs. SIL Investment Ltd. and DCIT vs. Cosmo Films Ltd. to support the claim that the balance depreciation can be claimed in the subsequent year if the full 20% depreciation was not availed in the year of purchase.
6. The ITAT, after considering the arguments and precedents, ruled that there is no restriction for the assessee to claim the balance additional depreciation in the subsequent year if the full 20% depreciation was not claimed in the year of purchase.
7. Consequently, the ITAT directed the Assessing Officer to allow the claim of 10% depreciation for the year under consideration, thereby allowing the appeal filed by the assessee company.
8. The judgment was pronounced on 17th September 2014 by the ITAT Mumbai comprising D. Manmohan (Vice President) and D. Karunakara Rao (Accountant Member).