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TMI Blog2023 (11) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The learned CIT(A) without considering the legislative intent to provide incentive benefits to manufactures and intention of inserting sub-section 4 of section 32AC which specifically denies the allowance only for those assets which have been claimed 100% deduction in any previous years and not to restrict the claim in the same year under consideration. 5. For the purposes of this section, new asset means any new plant and machinery (other than ship or aircraft) but does not include- I. any plant or machinery which before its installation by the Appellant was used either within or outside India by any other person; II. any plant or machinery installed in any office premises or any residential accommodation in the nature of a guest house; III. any office appliances including computers or computer software; IV. any vehicle; or V. any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any previous year. 6. It is submitted that the exclusion mentioned in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examining the depreciation chart it is noticed that depreciation at 80% and additional depreciation at 20% has been claimed on the assets installed in the cogeneration unit. Depreciation has been claimed at 100% on the Anaerobic Digester. Thus, 100% of the cost of these assets have been claimed as depreciation in the year under consideration. 6b. Deduction under section 32AC(1A) is allowed on acquisition of new assets, after satisfying the conditions mentioned in the section. Section 32AC(4) reads as follows; For the purposes of this section, new asset means any new plant or machinery (other than ship or aircraft) but does not include (i) Any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) Any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) Any office appliances including computers or computer software; (iv) Any vehicle; or (v) Any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatever manner including depreciation during prior years, which does not affect the nature of being a new asset, and (ii) the exclusion mentioned in section 32AC(4) w.r.t. new asset , is only to restrict the claim already made prior to the current previous year i.e. where depreciation has already been allowed in the earlier years. As far as this assessee is concerned, it is reiterated that no depreciation was claimed in any of the prior year s other than AY 2015-16. Further, it is an incentive deduction given besides the depreciation claim admissible to the assessee. 6. The Ld. CIT(A) after consideration of the findings of the Ld. AO and submissions of the assessee vide order dated 17-08-2022 rejected the claim of the assessee by observing that, the assessee already claimed for 100% depreciation as stated in the order of Ld. AO dated 28-12-2018. The observations of Ld. CIT(A) read as under:- 5.3 I have considered the matter. For claiming deduction under section 32AC, Assessee has to invest in new plant or machinery. The plant and machinery so invested on are termed as new asset. Section 32AC(4) defines new assets as under: .(4) For the purposes of this section, ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the submissions made by both the parties and findings of the lower authorities. We find that the assessee has claimed investment allowance u/s. 32AC of the Act amounting to Rs. 11,98,85,981/- towards plant and machinery and other assets acquired and installed during the impugned assessment year on the ground that in addition to depreciation of assets, the assessee can claim investment allowances as per the provisions of Section 32AC of the Act. The A.O has re-worked investment allowances by observing that the assessee has already claimed 80% depreciation on new plant and machinery and further, 20% additional depreciation, in total 100% depreciation on new asset and thus, the assessee cannot claim investment allowances as per the provisions of Section 32AC of the Act. Having considered rival contentions, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had not satisfied the conditions stipulated in section 32AC(4) of the IT Act, on the issue of claim of depreciation and place of installation of the equipment s. 3.1 The learned CIT(A) erred in allowing deduction u/s. 32AC(1A) of the IT Act on electrical installations, without appreciating the fact that the assessee had claimed depreciation at the rate of 10% on electrical installations, thereby the electrical installations shall not come under the purview of new assets for the purpose of deduction u/s. 32AC(4) of the IT Act. 4. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored. 12. The brief facts of the case are that the assessee vide his return of income dated 08-11-2015 claimed depreciation at the rate of 80% on the below mentioned assets. Name of the Asset WDV Depreciation @80% Coal Conveyor Flayash 569952 455962 Bagasse Handling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA 1289 / Chny / 2019 of DCIT vs. Bannari Amman Sugars Ltd. and decision of the Hon ble M.P. High Court passed in the case of DCIT vs. VippySolvex Products Ltd [164 taxman 483]. The Ld. CIT(A) considered the aforesaid decisions in his order at page Nos. 6 to 10 and thereafter has passed his order in favour of the assessee. 16. The ITAT, Chennai vide order dated 21-03-2022 in ITANo.1289/Chny/2019 have decided the issues of allowance of 80% depreciation and additional depreciation at the rate of 20% in favour of the assessee which read as under: 8.1 The Ld. AO proceeded to disallow higher depreciation of 80% as claimed by the assessee on Chimney, Bagasse Handling System, Distribution Control Systems, Air Compressor, Ash Handling Systems, Front end loader and fuel handling systems. The assessee submitted that these assets were part and parcel of power generation unit. To support the same, the work involved in the process of generation of power along with the usage of each of this part was elaborately explained in its reply. The Engineering plan for the whole cogeneration system was also enclosed to explain the process of whole cogeneration unit and the essential / eminent int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence falls under the 80% depreciation slab. e. Ash handling systems : The ash produced from combustion of coal and bagasse, is to be disposed off rightly. In order to do that the ash handling system is used. This transports the ash from the furnace to the ash yards. This is one of the strenuous tasks in a cogeneration plant and since this does hand in hand with the power generation, 80% depreciation is claimed. Finally, it was held that the assets mentioned above form part of co-generation plant for which depreciation @ 80% is admissible. Accordingly, Ld. AO was directed to grant depreciation of Rs. 423.29 Lacs. Aggrieved, the revenue is in further appeal before us. 17. After considering the aforesaid decision, the Ld. CIT(A) vide para No. 5.3.1 observed that items of asset forming part of cogeneration unit are to be considered as part and parcel of integrated systems as each separate unit would not have function by themselves. The contents of the para No. 5.3.1 read as under :- It is seen that on similar issue, Hon ble ITAT, in assessee s own case taken a view that items of asset forming part of cogeneration unit are to be considered as part and parc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO during the assessment proceeding noticed that the assessee has claimed deduction under section 32AC(1A) of Rs. 38,18,07,764/- while working out the taxable income. The classification of assets on which the deduction is claimed is as below: Plant and machinery Rs. 161,70,34,890/- Electrical Installations Rs. 1,43,30,324/- Co-generation Power Plant Rs. 87,55,92,987/- Anaerobic Digester Rs. 3,84,26,891/- 22. The assessee submitted before the Ld. CIT(A) as recorded at page 12 of the Ld. CIT(A) s order is read as under: It is submitted that the exclusion mentioned in Section 32AC(4) w.r.t new asset , is only to restrict the claim already made prior to the current previous year i.e. where depreciation has already been allowed in the earlier years. As far as this appellant is concerned, it is reiterated that no depreciation was claimed in any of the prior year s other than AY 2015-16. Further, it is an incentive deduction given besides the depreciation claim admissible to the appellant. It is submitted that the Appellant has acquired and installed the plant and machinery during ..... X X X X Extracts X X X X X X X X Extracts X X X X
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