2014 (1) TMI 591 - AT - Income Tax

Validity of Revisionary order u/s 263 of the Act Entitlement for Additional Depreciation - Conditions prescribed u/s 32(i)(ii) of the Act Held that - Section 32(1)(iia) was inserted by Finance Act, 2005 to grant further incentive, if any machinery etc was acquired and installed after 31st March, 2005 - It is to be seen that machinery on which assessee become eligible for additional depreciation was required not only to be acquired but also installed after a particular date i.e. 31.3.2005 - between the words acquired and installed, the conjunction used is and and not or which means both the conditions i.e. acquisition and installation has to take place after the specific date for getting eligibility to additional depreciation - The machine was acquired after this date which is in any case after 31.3.2005 - From the Octroi receipt and bill of entry for showing date of entry of goods in the country by the Customs Department makes it clear that machine could be installed only after that date i.e. 11.4.2005 - the assessee has acquired and installed the machinery after 31.3.2005 Thus, entitled to additional depreciation as per provisions section 32(1)(iia) of the Act revisionary order quashed Decided in favour of Assessee.

Summary

Issues:
- Dispute over correctness of Revisionary order u/s 263 by Ld. Commissioner.

Analysis:
1. The appeal was filed against the order of CIT-I, Ludhiana, focusing on the correctness of the Revisionary order u/s 263. The Ld. Commissioner found the assessment order erroneous due to wrongly allowed additional depreciation on new machinery purchased. The assessee argued that the machinery was acquired and installed after the specified date, citing internal audit objection and relevant case law. The Ld. Commissioner rejected the arguments, emphasizing the acquisition date based on LCs and payment records, setting aside the assessment for de novo consideration.

2. The Ld. Counsel for the assessee presented documents showing the acquisition date of machinery after 31.3.2005, challenging the Ld. Commissioner's decision. Referring to legal provisions and case law, the counsel argued that installation is a crucial requirement for claiming additional depreciation under section 32(1)(iia). The Ld. Commissioner's interpretation was deemed incorrect, overlooking the installation aspect and focusing solely on acquisition date based on LCs.

3. The Ld. DR highlighted section 32(1)(iia) conditions, emphasizing the acquisition date as a key factor for granting additional depreciation. The machinery's acquisition date was shown to be before 31.3.2005, supporting eligibility for additional depreciation based on the Sale of Goods Act provisions. However, the Ld. Counsel's argument stressed the importance of both acquisition and installation post the specified date for claiming the deduction.

4. The ITAT Chandigarh analyzed the submissions, emphasizing the conjunction 'and' between acquisition and installation in section 32(1)(iia), indicating both conditions must be met post 31.3.2005. The assessment of the acquisition date was crucial, considering the CIF basis of invoices and customs endorsements showing the machinery's arrival after 31.3.2005. The physical installation post-arrival was deemed necessary for eligibility, leading to the quashing of the Revisionary order and allowing the assessee's appeal.

5. The judgment, pronounced on 10/05/2013 by ITAT Chandigarh, resolved the dispute by upholding the assessee's entitlement to additional depreciation based on the correct interpretation of acquisition and installation criteria post 31.3.2005.