2017 (2) TMI 1100 - AT - Income Tax

Additional depreciation on diagnostic/service equipments claimed as a deduction u/s. 32 (1) (iia) - Held that - Section 32(1)(iia) does not state that setting up of a new machinery or a plant, which was acquired and installed after 31.03.2005, should have an operational connectivity to the article or thing that was already being manufactured by the assesse. Therefore, the reasoning of the Ld. AO that the vaporizers, has nothing to do with the manufacturing of articles etc., is totally not germane to the specific provision contained in section 32 (1) (iia) of the Act. In the light of the above that discussion, we hold that the assessee is eligible for additional depreciation on vaporizers u/s. 32(1) (iia) of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of re-assessment proceedings
2. Additional depreciation on diagnostic/service equipments claimed as a deduction u/s. 32 (1) (iia)

Issue 1: Validity of re-assessment proceedings:
The appeal was filed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 23.11.2012, passed against the order of the Assessing Officer u/s 143 (3) r.w.s. 147 of the Income Tax Act, 1961 for AY 2006-07. The appellant contested the re-opening of the assessment u/s. 148 of the Income-Tax Act, claiming it was beyond jurisdiction. The appellant argued that the proceedings were not in accordance with the law and should be struck down. The Appellate Tribunal noted the grounds raised by the appellant but decided to address the issue of additional depreciation first.

Issue 2: Additional depreciation on diagnostic/service equipments:
The appellant, engaged in pharmaceuticals, nutritional, and diagnostic products business, claimed additional depreciation on medical equipment placed at hospitals. The Assessing Officer disallowed the depreciation stating that additional depreciation was only for manufacturers, which the appellant was not. The Ld. CIT (A) upheld this disallowance. During the proceedings, the appellant cited a case where a similar issue was decided in favor of another company in the group. The Tribunal reviewed the relevant provisions of Section 32 (1) (iia) and previous judgments. It was observed that the provision aimed to encourage fresh investments in the industrial sector. The Tribunal held that the appellant, despite not being engaged in manufacturing, was eligible for additional depreciation on vaporizers installed at hospitals. The Tribunal emphasized that operational connectivity to existing manufacturing activities was not a prerequisite for claiming additional depreciation under Section 32 (1) (iia). Therefore, the claim of the appellant was allowed, and the ground regarding reopening was dismissed as infructuous.

In conclusion, the Appellate Tribunal allowed the appeal partly, granting relief to the appellant on the issue of additional depreciation on diagnostic/service equipment. The Tribunal's decision was based on the interpretation of Section 32 (1) (iia) and relevant case laws, emphasizing the aim of the provision to encourage investments in the industrial sector.