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2021 (12) TMI 762 - AT - Income TaxAdditional depreciation u/s. 32(1)(iia) on block of assets like Computers and Software - AO disallowed the claim on the premise that the computers were installed in the office premises, thus would disentitle claim for additional depreciation within the meaning of the Proviso 2B to section 32(1)(iia) - HELD THAT - It was a case of windmill for generation of power wherein additional depreciation was claimed by assessee. AO therein disallowed the claim on the ground that assessee was engaged only in manufacture of textile goods and setting up of windmill had no connection with the manufacture of textile goods. Assessee is already claiming 60% depreciation on the computers which are used for the purpose of business and in rendering of software development services to its associated enterprises. We note that the Ld.AO granted depreciation as per the provisions u/s. 43(3) read that Rule 5 as well as appendix-1 has been granted. Assets eligible for additional depreciation must be plant or machinery. Also that such plant or machinery should not be installed in any office premises or residential accommodation. We note that the development activity carried on by the assessee cannot be considered to be a manufacturing activity. Accordingly, relying on the decision of IBM World Trade Corporation 1977 (11) TMI 4 - BOMBAY HIGH COURT , we do not find any infirmity in the disallowance of additional depreciation to assessee. However, the alternative plea to allow the deprecation in the subsequent assessment year on the enhanced WDV of block of assets at the prevailing rates cannot be denied. - Decided in favour of assessee. Addition of CSR activities - as submitted that donations were made to eligible institutions and deduction u/s. 80G was claimed that pertained to such donations - HELD THAT - Assessee has suo moto disallowed the expenditure towards the CSR responsibilities u/s. 37(1) of the Act and claimed deduction u/s. 80G to the extent of donations paid to eligible charitable institutions. Thus as relying on FIRST AMERICAN (INDIA) PVT. LTD. case 2020 (5) TMI 187 - ITAT BANGALORE we direct the Ld.AO verify the payments made by assessee towards CSR that also forms part of deduction u/s. 80G. Ld.AO shall then grant the deduction claimed u/s. 80G of the Act in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes.
Issues Involved:
1. Disallowance of additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961. 2. Denial of deduction under Section 80G of the Income Tax Act, 1961. 3. Charging of interest under Section 234D. 4. General grounds and procedural requests. Detailed Analysis: 1. Disallowance of Additional Depreciation under Section 32(1)(iia): The primary issue revolved around the disallowance of the appellant's claim for additional depreciation amounting to ?24,47,283 on computers and software installed during the Assessment Year 2016-17. The appellant argued that these assets were used in the software development process, which should qualify as "manufacture or production of articles or things" under Section 32(1)(iia). The Lower Authorities (LAO and LAA) disallowed this claim on the grounds that the computers were installed in office premises and thus did not qualify for additional depreciation. The Tribunal noted that the definition of "plant" under Section 43(3) is inclusive and encompasses any equipment used for business purposes, including computers. However, the Tribunal concluded that the development activity carried out by the appellant did not constitute manufacturing. The Tribunal upheld the disallowance but allowed the appellant's alternative plea to claim depreciation in subsequent years on the enhanced Written Down Value (WDV) of the block of assets at prevailing rates. 2. Denial of Deduction under Section 80G: The appellant claimed a deduction of ?7,71,505 under Section 80G for donations made as part of its Corporate Social Responsibility (CSR) program. The LAO disallowed this deduction on the basis that CSR expenditure is not allowable under Section 37(1) and hence should not be allowed under Section 80G either. The Tribunal referred to a previous decision in the case of First American (India) Pvt. Ltd. vs. ACIT, which clarified that deductions under Section 80G and expenditures under Sections 30 to 36 are distinct and should be treated separately. The Tribunal directed the LAO to verify the payments made towards CSR and grant the deduction under Section 80G accordingly, provided the necessary conditions are met. 3. Charging of Interest under Section 234D: The appellant contested the charging of interest under Section 234D on the assessed income. The Tribunal noted that this issue is consequential to the main issues discussed and does not require separate adjudication. 4. General Grounds and Procedural Requests: The appellant raised general grounds challenging the legality and factual correctness of the LAO and LAA's orders. Additionally, the appellant requested permission to add, amend, or alter grounds of appeal within 60 days of receiving the appellate order. These grounds were deemed general in nature and did not require specific adjudication. Conclusion: The appeal was partly allowed. The Tribunal upheld the disallowance of additional depreciation under Section 32(1)(iia) but permitted depreciation on the enhanced WDV in subsequent years. The Tribunal also directed the LAO to verify and allow the deduction under Section 80G for eligible CSR payments. The issue of interest under Section 234D was noted as consequential and did not require separate adjudication. General grounds were acknowledged but not specifically adjudicated.
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