2016 (6) TMI 926 - AT - Income Tax

Additional depreciation - plant and machinery acquired during the year which was utilized in the sales outlet of the assessee - Held that - We find that installation of new plant and machinery in sales outlet/retail office would fall under clause (B) of proviso to section 32(1)(iia) of the Act. We are in complete agreement with the arguments advanced by the Ld. DR. Needless to mention that the assessee is entitled for the benefit of having its written down value increased due to additional depreciation getting disallowed. The Ld. AO is directed to rework the written down value accordingly and give benefit of increased depreciation in the subsequent years as a consequential impact - Decided partly in favour of assessee for statistical purposes. Enhanced depreciation rate of 80% on Genset - Held that - We find that the issue in dispute is squarely covered by the decision of the Hon ble Rajasthan High court in the case of Agarwal Transformers Pvt. Ltd 2002 (2) TMI 34 - RAJASTHAN High Court wherein it was held that electric generator clearly falls under renewal energy device and thereby eligible for enhanced rate of depreciation. - Decided in favour of assessee

Summary

Issues:
1. Eligibility for claiming additional depreciation on plant and machinery.
2. Entitlement for enhanced depreciation rate of 80% on Genset.

Issue 1: Eligibility for claiming additional depreciation on plant and machinery:

The appeal revolved around the eligibility of the assessee for claiming additional depreciation of ?2,89,58,125 on plant and machinery acquired during the year, utilized in the sales outlet. The Assessing Officer (AO) disallowed the claim as the machinery was not used in manufacturing. The assessee argued that being engaged in manufacturing, the location of the machinery should not matter. The CIT(A) upheld the disallowance partially. The Appellate Tribunal found that the new machinery in the sales outlet fell under the proviso to section 32(1)(iia) of the Act. The tribunal agreed with the Revenue's arguments and directed the AO to rework the written down value accordingly, allowing partial relief to the assessee for statistical purposes.

Issue 2: Entitlement for enhanced depreciation rate of 80% on Genset:

The second issue concerned the claim of enhanced depreciation at 80% on Genset by the assessee. The AO disallowed the claim as the assessee was not engaged in specified manufacturing businesses. The CIT(A) upheld the AO's decision, stating that the Genset did not qualify as a renewable energy device. The assessee appealed, citing a Rajasthan High Court case where it was held that electric generators fall under renewable energy devices. The tribunal examined the case law and ruled in favor of the assessee, allowing the claim for enhanced depreciation at 80% on the Genset based on the definition of renewable energy devices.

In conclusion, the Appellate Tribunal partially allowed the appeal for statistical purposes, addressing the issues of eligibility for additional depreciation on plant and machinery and entitlement for enhanced depreciation rate on Genset. The judgment provided detailed analysis, referencing relevant legal provisions and precedents to reach a decision in each issue.