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2023 (11) TMI 501 - AT - Income TaxAdditional depreciation on the plant and machinery - number of days asset is used - 50% of the additional depreciation was only claimed, since the plant and machinery were purchased and used less than 180 days, which was allowed by the A.O. in the AY 2014-15, therefore the assessee claimed balance 50% of the additional depreciation during this AY 2015-16 - HELD THAT - As decided in COSMO FILMS LTD. 2012 (9) TMI 281 - ITAT DELHI Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s. 32 shall definitely not exceed the total cost of plant machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit. As following the decision of Rittal India (P) Ltd. 2016 (1) TMI 81 - KARNATAKA HIGH COURT and also considering the amendment brought in by way of proviso to section 32(1) wherein it has been specifically stated that 50% of additional depreciation which was not allowed in the preceding assessment year shall be allowed in the subsequent assessment year, concluded that the assessee is entitled for additional 50% depreciation in the assessment year which follows the assessment year in which the machinery had been bought and put to use for less than 180 days. Decided in favour of assessee. Additional depreciation - processing of Milk and the milk products - whether assessee only engaged in the processing of Milk and not manufacturing of any item ? - HELD THAT - The assessee is a Milk Purchaser Co.Op. Society and milk is procured from various farmers and villagers. Thereafter the said milk processed under various machines and manufactured into various milk products. Thus the activity carried out by the assessee is not only processing of milk but involved detailed technical machineries and manufacturing different kind of milk products. It is in the case of CIT Vs. Gujarat Co.op. Milk Marketing Federation Ltd 2014 (1) TMI 1938 - GUJARAT HIGH COURT held that processing of Milk and the milk products amounts to manufacture and assessee is entitled for additional depreciation. End product manufactured by the assessee is not the same raw milk that is collected from the farmers and villagers. The end product are entirely distinct with that of the raw milk. Thus the assessee cannot be denied the claim of additional depreciation. Decided in favour of assessee. Depreciation on substation, DG set, Exhaust pedestal fans, street lighting, additional electrical equipment, transformers - at the rate applicable to plant machinery OR electrical fitting as treated by the A.O - HELD THAT - It is seen from the certificate issued by the Senior General Manager (Project) of Engineering Department of the assessee company, the manufacturing units are located in remote places at Palanpur where supply of electricity was not regular and often, there is power cut in supply of electricity. It is for this reason, sub-station, DG set, and transformers are required for manufacture of milk products. Similarly, exhaust pedestal fans are required for cooling of the milks. Hence the same cannot be categorized as pure electrical items but to be treated as part and parcel of the plant and machinery for the manufacture of milk products. As in the case of CIT Vs. Starlight Silk Mills Pvt. Ltd. 2005 (8) TMI 40 - GUJARAT HIGH COURT held that AC plants, electric installation and transformers form integral part of plant and machinery and eligible for depreciation. Similarly, the Co-ordinate Bench of this Tribunal in the case of Raw flints (P.) Ltd 1987 (1) TMI 490 - ITAT AHMEDABAD held that electrical installations are an integral part of manufacturing process and cannot be divorced from plant and machinery . We hold that the electrical fittings are integral part of the plant and machinery and the assessee is eligible for depreciation and additional depreciation accordingly. Thus the Grounds raised by the assessee is hereby allowed.
Issues Involved:
1. Claim of additional depreciation on plant and machinery. 2. Eligibility for additional depreciation under Section 32(1)(iia). 3. Classification of electrical items as part of plant and machinery. Summary: Issue 1: Claim of Additional Depreciation on Plant and Machinery The assessee, a society engaged in processing and manufacturing milk and milk products, claimed additional depreciation of Rs. 32,65,56,918/- for plant and machinery purchased in the previous year, of which only 50% was claimed earlier due to less than 180 days of use. The Assessing Officer (A.O.) denied the claim on the grounds that additional depreciation can only be claimed in the year of installation and that the amendment to Section 32(1)(iia) was applicable from Assessment Year (A.Y.) 2016-17. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the A.O.'s decision, stating that the assessee is not engaged in manufacturing an "article or thing" but only processing milk. The Tribunal, however, allowed the claim, citing that the balance 50% of additional depreciation is allowable in the subsequent year if the machinery was used for less than 180 days initially, as per the precedent set by the Hon'ble Supreme Court and various Tribunal decisions. Issue 2: Eligibility for Additional Depreciation under Section 32(1)(iia) The CIT(A) denied the additional depreciation on the grounds that the assessee is not engaged in manufacturing but only in processing milk. The assessee argued that it manufactures various milk products, which involves significant transformation of raw milk into different consumable items. The Tribunal, referencing the Jurisdictional High Court's decision in CIT Vs. Gujarat Co.op. Milk Marketing Federation Ltd., concluded that the assessee's activities amount to manufacturing and production, thus entitling it to additional depreciation under Section 32(1)(iia). Issue 3: Classification of Electrical Items as Part of Plant and Machinery The A.O. and CIT(A) disallowed depreciation on electrical items such as substations, DG sets, exhaust and pedestal fans, street lighting, and transformers, treating them as electrical fittings rather than part of plant and machinery. The Tribunal, however, accepted the assessee's contention that these items are integral to the manufacturing process, essential for the operation of the plant, and should be classified as part of the plant and machinery. The Tribunal relied on the Gujarat High Court's ruling in CIT Vs. Starlight Silk Mills Pvt. Ltd., which held that such items form an integral part of plant and machinery and are eligible for depreciation. Conclusion: The Tribunal allowed the appeal, granting the additional depreciation claimed by the assessee and classifying the electrical items as part of the plant and machinery, thus eligible for depreciation. The Tribunal's decision was based on established legal precedents and a thorough interpretation of the relevant provisions of the Income Tax Act.
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