2023 (11) TMI 691 - AT - Income Tax

Disallowing the investment allowance claimed u/s 32AC(1A) on Co-generation power plant and Anaerobic Digester - CIT(A) has rejected the appeal of the assessee by observing that the assessee has already claimed 100% depreciation - AR submitted that the assessee did not claim depreciation allowance in any of the prior years other than A.Y 2015-16 and the restriction not to allow the depreciation allowance with retrospective effect is for new asset only on which previously there was claim for allowance - HELD THAT - We find that as per the provision of Section 32AC(4)(v) of the Act, the term new asset means any new plant or machinery but does not include, any plant and machinery, the whole of actual cost for which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head profit and gains of business or profession of any previous year. The plain reading of Section 32AC makes it very clear in case the assessee claim depreciation on new asset then it cannot claim investment allowances on the new asset to the extent of depreciation already claimed as per the provisions of Section 32AC of the Act. In the present case, the appellant claims that it has claimed depreciation for the A.Y 2015-16, but as per the provisions of Section 32AC, if assessee claims depreciation in any previous year then to that extent it cannot claim deduction u/s. 32AC of the Act. In our considered view, the counsel for the assessee misconstrued the provisions of section 32AC(4)(v) of the Act in as much as per said provisions, it is very clear that if assessee claims depreciation then it cannot claim investment allowances on new asset. The A.O and Ld. CIT(A) after considering the facts that the assessee already claimed 80% depreciation on new asset and further 20% additional depreciation giving total 100% depreciation on new asset has rightly re-computed u/s. 32AC of the Act and thus, we are inclined to uphold the order of Ld. CIT(A) and dismiss the appeal filed by the assessee. Higher depreciation @ 80% is allowable even in respect of those machineries which do not form part of Part A (ii) (8) (ix) D of New Appendix-1 of the depreciation table given in the IT Rules - CIT(A) has correctly decided the issue of 80% depreciation issue in favour of the assessee. Thus, we reject the appeal of the Department on that issue. Disallowing the claim of the assessee on the asset of Electrical installation - CIT(A) considered the submission of the assessee as well as the observation of the Ld. AO while disposing of the appeal. The Ld. CIT(A) observed that, the ld. AO did not give any reason while disallowing the depreciation allowance on the Electrical Installations. In our view, the observation of the Ld. CIT(A) should not be interfered as no disallowance should be made without stating any reason. Therefore, we upheld the decision of the Ld. CIT(A) on the issue of depreciation allowance on that Electrical Installation.

Summary

Issues Involved:
1. Eligibility of the assessee for additional depreciation under Section 32AC(1A) of the Income Tax Act, 1961.
2. Eligibility of the assessee for higher depreciation at 80% on certain assets forming part of the cogeneration unit.

Summary:

Issue 1: Eligibility for Additional Depreciation under Section 32AC(1A)

The assessee filed an appeal challenging the disallowance of investment allowance claimed under Section 32AC(1A) amounting to Rs. 11,77,36,432/- on Co-generation power plant and Anaerobic Digester. The Assessing Officer (AO) rejected the claim on the grounds that the assessee had already claimed 100% depreciation on the assets, making them ineligible for further deduction under Section 32AC(1A). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that if the assessee had claimed 100% depreciation on any asset, those assets would not be entitled to any further allowance under Section 32AC(1A). The Tribunal also upheld the CIT(A)'s decision, concluding that the assessee misconstrued the provisions of Section 32AC(4)(v), which clearly states that if depreciation is claimed on new assets, investment allowances cannot be claimed on the same assets.

Issue 2: Eligibility for Higher Depreciation at 80%

The Department filed an appeal against the CIT(A)'s decision to allow higher depreciation at 80% on certain assets forming part of the cogeneration unit. The AO had disallowed the claim, stating that only specific parts of the cogeneration unit were eligible for higher depreciation as per the Income Tax Rules. The CIT(A), however, allowed the claim, relying on various judicial precedents and concluding that the assets in question were integral parts of the cogeneration unit. The Tribunal upheld the CIT(A)'s decision, citing that similar issues had already been decided in favor of the assessee in previous cases.

Conclusion:

Both the assessee's and the Department's appeals were dismissed, upholding the CIT(A)'s decisions on both issues. The Tribunal concluded that the assessee was not eligible for additional depreciation under Section 32AC(1A) but was entitled to higher depreciation at 80% on the specified assets forming part of the cogeneration unit.