2009 (9) TMI 29 - HC - Income Tax

Additional Depreciation u/s 32(1) ITAT have held that the appellant-assessee is not entitled to the benefit of additional depreciation as the machinery in question is not new Held that - There is a finding of fact arrived at by all the three authorities below that the machinery is old/used machinery and the same cannot be interfered by this Court under Section 260A of the Act as undoubtedly the Income Tax Appellate Tribunal is the final fact finding authority. In view of the finding of fact that machines in question are old machines, we uphold the order of Income Tax Appellate Tribunal that the assessee is not entitled to the benefit of additional depreciation of 15% under Section 32(1)(iia).

Summary

Issues:
- Entitlement to additional depreciation of 15% under Section 32(1)(iia) of the Income Tax Act, 1961.

Analysis:
The judgment delivered by VALMIKI J. MEHTA, J. in the present appeal under Section 260A of the Income Tax Act, 1961, revolves around the issue of whether the appellant-assessee is entitled to additional depreciation of 15% under Section 32(1)(iia) of the Act. The appellant claimed the benefit of additional depreciation based on the installation of new machinery in their unit. However, all three authorities below - the Assessing Officer, the Commissioner of Income Tax (Appeals), and the Income Tax Appellate Tribunal - concluded that the machinery in question is not new, thereby denying the appellant the benefit of additional depreciation.

The appellant argued that the machinery, although assembled using some old parts, should be considered new due to the incorporation of new components and technical improvements. However, the Commissioner of Income Tax (Appeals) emphasized the need for evidence regarding the manufacturing dates, previous usage, technical enhancements, and the overall nature and cost of improvements to determine whether the machinery qualifies as 'new' under Section 32(1)(iia). The Commissioner highlighted the requirement for substantial changes or reconstruction to deem the machinery as new, citing the Cochin Company Vs. CIT (1968)67 ITR 199 judgment by the Supreme Court.

The Commissioner's finding that the machinery consisted of old and used components, coupled with the absence of evidence regarding substantial improvements or reconstruction, led to the rejection of the appellant's claim for additional depreciation. The judgment also differentiated the present case from precedent cases, emphasizing the distinction between the requirement of new machinery and the absence of prior usage by the assessee. The Income Tax Appellate Tribunal's final decision, supported by factual findings, upheld the denial of additional depreciation, as the machinery was deemed old and used, thereby dismissing the appeal.

In conclusion, the court upheld the Income Tax Appellate Tribunal's decision, emphasizing that the machinery in question was old and used, thereby affirming the denial of additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961. The judgment highlighted the importance of substantial changes or reconstruction to classify machinery as 'new,' as per the legal requirements, and dismissed the appeal due to the absence of evidence supporting the machinery's qualification as new.