2015 (8) TMI 566 - HC - Income Tax

Additional depreciation claim - Held that - We find clause (iia) of section 32(1) provides for further depreciation on any new machinery or plant which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing at the rate provided to be allowed as a deduction under clause (ii) of the said section. There is no dispute on facts regarding the assessee having acquired and installed the plant and machinery for the purpose of generation of power necessary for the production of the items it manufactures. The assessee having satisfied those conditions is entitled to claim the additional depreciation as provided by the said clause (iia) irrespective of its original claim for depreciation having been made under clause (i) of the said section. We do not find any relation of clause (iia) of the said section with the head of deduction claimed by the assessee in the matter of determining whether it is entitled to a claim for additional depreciation. Decided in favour of the assessee.

Summary

Issues Involved:
- Interpretation of section 32(1)(iia) of the Income-tax Act, 1961 regarding additional depreciation on new machinery or plant acquired and installed after March 31, 2005.
- Determination of eligibility for additional depreciation under clause (iia) in relation to original depreciation claim made under clause (i) of section 32(1).
- Adjudication on whether the assessee is entitled to additional depreciation under clause (ii) irrespective of the original claim for depreciation under clause (i) of section 32(1).

Analysis:

The High Court of Calcutta heard an appeal under section 260A of the Income-tax Act, 1961, against a consolidated order passed by the Income-tax Appellate Tribunal regarding the addition of Rs. 4,17,27,868 made by the Assessing Officer on the ground of additional depreciation. The main issue was whether the assessee, engaged in the business of manufacturing, was entitled to additional depreciation under clause (iia) of section 32(1) for new machinery or plant acquired after March 31, 2005. The Assessing Officer disallowed the claim, stating that the power plant depreciation was under clause (i) of section 32(1), and hence, additional depreciation under clause (iia) was not applicable.

The appellant argued that the definition of block of assets under section 2(11) supported the Assessing Officer's decision and cited a judgment of the Madras High Court. On the other hand, the respondent relied on a Gujarat High Court judgment to support the eligibility for additional depreciation under clause (iia). The Court analyzed the provisions of section 32(1)(iia) and concluded that the assessee, having acquired and installed the necessary machinery for power generation, was entitled to claim additional depreciation under clause (iia) irrespective of the original depreciation claim under clause (i).

The Court found that clause (iia) of section 32(1) provides for additional depreciation on new machinery or plant acquired after March 31, 2005, without a direct link to the original depreciation claim. Therefore, the Court ruled in favor of the assessee, dismissing the appeal and the application. The judgment clarified that the eligibility for additional depreciation under clause (iia) is independent of the initial depreciation claim made under clause (i) of section 32(1).