2017 (2) TMI 955 - AT - Income Tax

Additional depreciation under section 32(1)(iia) in the subsequent year of installation of the new machinery - Held that - The assessee has installed this machinery during the financial year relevant to the assessment year 2008-09 and since the machinery was put to use for less than 180 days during the financial year 2009-08, the assessee claimed only 10% additional deduction on this account. For the year under consideration, the assessee has again claimed balance 10% additional depreciation on the said machinery which was disallowed by the AO as well as by CIT(A). An identical issue fell for the consideration in the case of CIT(A) Vs. Rittal India Pvt. Ltd. 2016 (1) TMI 81 - KARNATAKA HIGH COURT wherein held that this provision is a beneficial legislation and should be given liberal interpretation. Accordingly, the Hon ble High Court has upheld the decision of this Tribunal in allowing the additional depreciation being onetime benefit to encourage the industrialization in the subsequent year. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of additional depreciation under section 32(1)(iia) in the subsequent year of machinery installation.

Analysis:

Issue 1: Disallowance of additional depreciation under section 32(1)(iia) in the subsequent year of machinery installation:
- The appellant challenged the disallowance of additional depreciation claimed for machinery installed in the previous year.
- The AO and CIT(A) disallowed the claim, stating that the benefit should be restricted to the year of installation.
- The appellant argued that since the machinery was installed late in the previous year, the balance of additional depreciation was claimed in the current year.
- The High Court's decision in a similar case emphasized a liberal interpretation of the provision as a beneficial legislation to encourage industrialization.
- The learned DR contended that there was no provision to extend the benefit to subsequent years.
- The Tribunal noted that the assessee claimed the balance 10% additional depreciation in the current year for the machinery installed in the previous year.
- Referring to the High Court's decision, the Tribunal held in favor of the assessee, allowing the claim for additional depreciation.
- The appeal was allowed, setting aside the disallowance made by the authorities below.

This detailed analysis covers the disallowance of additional depreciation under section 32(1)(iia) in the subsequent year of machinery installation, highlighting the arguments presented, the authorities' decisions, and the final judgment based on legal interpretations and precedents.