2019 (10) TMI 145 - AT - Income Tax

Additional depreciation u/s 32 - CIT(A) dismissed the ground of appeal on the ground that some of the items like; payment for factory visit, payment for vehicle charges, payment for inspection are not relating to plant and machinery, and therefore, could be considered for additional depreciation - HELD THAT - Assessee submitted that the amount which has been incurred for purchase and installation is reproduced in the impugned order that includes interest on bank term loan which has been capitalized from the month of April to month of October. Further expenditure have been incurred on the insurance. We find that so far as the interest and insurance is concerned same is verifiable from records hence the Assessing Officer would delete this addition however, in respect of the other expenditure the Assessing Officer would verify whether this expenditure is related to installation of the plant and machinery and would delete if it is found to be incurred for the said purpose. The ground raised in appeal is allowed in the terms indicated above.

Summary

Issues:
1. Dismissal of the ground of appeal against the computation of total income.
2. Disallowance of additional depreciation and subsequent rectification.
3. Claim for additional depreciation disallowed by the Assessing Officer.
4. Appeal against the dismissal of the claim for additional depreciation.
5. Interpretation of Section 32(1)(iia) of the Income Tax Act.

Analysis:

1. The appeal pertains to the Assessment Year 2013-14 challenging the order of the Commissioner of Income Tax (Appeals) regarding the computation of total income. The Assessee contested the rectification of total income by the Assessing Officer, leading to a disparity in the declared and assessed figures. The Commissioner dismissed the appeal, citing it as a general issue not requiring adjudication.

2. The main contention in this appeal revolves around the disallowance of additional depreciation by the Assessing Officer, which was later rectified to a lesser amount. The Assessing Officer disallowed a significant sum for alleged excess claim of additional depreciation, which was subsequently reduced. The Commissioner upheld the disallowance based on the nature of the items claimed for depreciation.

3. The facts of the case reveal that the Assessing Officer disallowed additional depreciation amounting to a substantial sum, contending that the items in question did not qualify for additional depreciation. The subsequent rectification reduced the disallowed amount, prompting the Assessee to appeal the decision.

4. The Assessee challenged the dismissal of the claim for additional depreciation before the Appellate Tribunal, arguing that the disallowance was unjustified. The Assessee's representative emphasized the clear allowance of additional depreciation under Section 32(1)(iia) of the Act and referred to relevant legal precedents to support the claim.

5. The Tribunal, after considering the arguments presented by both parties, found merit in the Assessee's contentions regarding the expenditure related to the installation of assets. The Tribunal directed the Assessing Officer to verify the nature of the expenditure in question and allowed the appeal in favor of the Assessee, granting relief in line with the arguments presented.

In conclusion, the Appellate Tribunal ruled in favor of the Assessee, allowing the appeal related to the claim for additional depreciation for the Assessment Year 2013-14. The decision highlighted the importance of establishing a nexus between expenditure and asset installation to qualify for additional depreciation under the relevant provisions of the Income Tax Act.