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TMI Blog2023 (8) TMI 1523X X X X Extracts X X X X X X X X Extracts X X X X ..... so dispensed with, it can be easily interpreted that addition to plant and machinery, subject to certain conditions under the second proviso to section 32(1)(iia) of the Act, are entitled for additional depreciation. Our interpretation is further fortified by the order of EFACEC Switchgear India P. Ld. [ 2022 (5) TMI 158 - ITAT DELHI ] where in it was the observation that tools, dies, jigs, etc., are used by the appellant for its business of manufacturing switchgear products, it is evident that moulds, dies, and tools are not independent of the plant and machinery, but are parts of the machinery. Once they are worn out, the machines cannot turn out the product to the business specifications and this has to be obtained only on a replacement of the tools or dies and moulds. Accordingly, any addition in the plant and machinery are eligible for additional depreciation but subject to satisfaction of conditions carved out in the amended section 32(1)(iia) and its provisions. In the present case, according to observations of Ld CIT(A), relevant details pertaining to additions in the plant and machinery have not been brought on records by the appellant in the claims made for additional dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Insurance beyond the statutory due date prescribed under the governing statute. The disallowance made by AO and sustained by Ld. CIT(A) is arbitrary baseless and not justified. 5. Ld.CIT (A) erred in confirming addition/disallowance of Rs. 2,16,032/- u/s.40(a)(ia) alleging that the submission made by the company are not tenable and it is clear violation of provision of u/s 40(a)(ia), which is highly arbitrary, unwarranted and unjustified. The disallowance made by AO and sustained by Ld. CIT(A) is arbitrary baseless and not justified. 6. Ld.CIT (A) erred in confirming addition/disallowance of Rs. 4,06,916/- Not considered the additional depreciation on the contention that no new plant and machinery was found to be installed and put to use, which is highly arbitrary, unwarranted and unjustified. The disallowance made by AO and sustained by Ld. CIT(A) is arbitrary baseless and not justified. 3. The brief facts of the case are that the assessee is a company engaged in manufacturing of ferro alloy products and generation and sale of power. Return of income for the AY 2012-13 was filed electronically on 23.09.2012 declaring total income of Rs. NIL . The book profit of Rs. 58,89,100/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved with such order of the Id. CIT(A), the Revenue is in appeal before the Tribunal. 41. We have considered the rival arguments made by both the sides and perused the material available on record. We find identical issue had come up before the Tribunal in assessee's own case wherein the Tribunal, considering the CBDT Circular No. 17(F.No.27(2)-lT/43) dated 06.05.1983 and another CBDT Circular No. 1 3A/20/68-IT(A-Il) dated 03.10.1968 wherein it has been held that the expenses incurred on the occasion of Deepawali and Mahurat are in the nature of business expenditure had allowed and granted relief to Rs. 6,54,900/-. Since in the instant case such relief granted by the Ld.CIT(A) is only Rs. 3,50,000/- towards purchase and distribution of sweets, therefore, following the order of the Tribunal in assessee's own ease for the preceding assessment years 2009-10 and 2010-11 respectively, we do not find any infirmity in the order of the Id. CIT(A). Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. 7. The Ld.AR further placed its reliance on the order of the ITAT, Raipur in the case of M/s.Chhattisgarh Steel Power Ltd., in ITA Nos.91 92/RPR/2020 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the matters of Sanghameshwar Coffee Estates Ltd. (supra) and Kolhapur Sugar Mills Ltd. (supra) held that the company, which is a creation by legal fiction and not a real person made up of flesh and blood, cannot profess any religion and therefore, performance of Puja cannot be said to be need of the business and disallowed the deduction towards Puja expenditure. However, the CIT(A) relying upon the law laid down in Atlas Cycle Industries Ltd. (supra) held that the expenditure incurred in Puja is deductible under s. 37(1) of the Act and accordingly, deleted the disallowance. However, the Tribunal relying upon the decision of Nagpur Bench of the Tribunal in the case of Patrakar Prakashan (P) Ltd. in ITA No. 490/Nag/1997, held that performance of Puja cannot be considered as an expenditure related to the conduct of the business of the assessee. 13. In Chandulal Keshavlal Co. (supra) the assessee-managing agent was entitled to get a particular sum as commission from the managed company as per agreement between them. However, the assessee agreed to accept a part of the commission due to him, which was credited to his account. The AO as well as the CIT(A) held that the total amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ss. 30 to 36; that it should have been incurred in the accounting year; that it should be in respect of a business carried on by the assessee; that it should not be on personal account of the assessee; that it should not be in the nature of capital expenditure and that it should be spent wholly and exclusively for business. 18. We are in respectful agreement with the law laid down by the Karnataka High Court in the matter of Sanghameshwar Coffee Estates Ltd. (supra) and the Bombay High Court in Kolhapur Sugar Mills Ltd. (supra) and accordingly, we hold that the expenditure incurred in Puja/ Vishwakarma Puja by a company cannot be treated as expenditure incurred wholly and exclusively for the purposes of business or profession of a company, and the assessee cannot be allowed any deduction under s. 37(1) of the Act towards such expenditure. We find no illegality or infirmity in the order of the Tribunal restoring the order of the AO. 19. In the result, the appeal being devoid of substance deserves to be dismissed and is, accordingly, dismissed. 10. On perusal of the aforesaid findings of the Hon ble High Court in the case of M/s.Hira Ferro Alloys Ltd., (supra) which were directly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adverting to the observations of the AO, the Ld.AR submitted that since there was addition in plant machinery during the year, therefore, the same should be considered as plant machinery, eligible for depreciation in terms of provisions of Sec.32(1)(iia) of the Act. In this aspect, the Ld.AR placed his reliance to the recent judgment by the ITAT in the case of EFACEC Switchgear India P. Ltd. Vs. ACIT in ITA number 5850/Del/2018 dated 26.04.2022, wherein, the ITAT, Delhi relying on the judgement of the Hon ble Supreme Court in the case of Scientific Engineering House Pvt. Ltd. v CIT reported in [1986] 157 ITR, wherein in accordance with the findings emerged from the House of Lords in IRC v. Barclay, Curie CO. Ltd., reported in [1970] 76 ITR 62 has held as under: 6. Appreciating the matter on record and contentions of counsel it can be observed that Hon'ble Supreme Court of India in Scientific Engineering House (P) Ltd. case has relied the following functional test as laid by House of Lords in IRC v. Barclay, Curie Co. Ltd. [1970] 76 ITR 62: ..In order to decide whether a particular subject is an 'apparatus' it seems obvious that an enquiry has to be made as to what oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 32(iia) of the IT Act and therefore, Rs. 4,06,916/- is disallowed and added to the total income of the assessee. During the appeal it was submitted by the appellant as under: We would like to submit that the appellant claimed additional depreciation on addition to plant and machinery Rs. 4,06,916/-. The learned AO alleging that there is no new plant and machinery was found to be installed and put to use for the year under consideration therefore additional depreciation is not allowable as per provision of section 32(1)(iia). For ease of reference relevant extract of section 32(1)(iia) of the Act is set out below: in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided further that no deduction shall be allowed in respect of 1. any machinery or plant which, before its installati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hineries except those referred to in the proviso to the proposed clause (iia) of section 32 of the Income-tax Act. This amendment will take effect from 1st April, 2006 and will, accordingly, apply in relation to assessment year 2006-07 and subsequent years. [Clause 8] It is apparent from above that for claiming additional depreciation new machinery or plant has to acquired and installed after 31st day Of March 2005. The emphasis supplied by the legislature on new plant and machinery was to restrict additional depreciation on used plant and machinery and accordingly proviso to section 32(1)(iia) excludes depreciation on used plant and machinery. It is an admitted position that during the AY 2012-13 the appellant has incurred expenditure on new plant and machinery and the same was installed in AY 2012-13. The learned AO has disallowed the claim of additional depreciation of the appellant on the alleged ground that Rs. 4,06,916/- related to addition in existing plant and machinery, ignoring the fact that the addition to existing plant and machinery was also new. There is no restriction under section 32(1)(iia) of the Act as amended by the Finance Act 2005 to disallow additional deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stribution of power, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided further that no deduction shall be allowed in respect of (A) any machinery or plant which, before its installation by the assesses, was used either within or outside India by any other person; or (B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or (C) any office appliances or road transport vehicles; or (D) any machinery or plant, the whole of the actual cost of which is allowed as a 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 one previous year; CIRCULAR NO. 3/2006 EXPLANATORY NOTES ON THE PROVISIONS OF THE FINANCE ACT, 2005 F. NO. 153/120/2005-TPL GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES New Delhi, the 27th February, 2006 3.6 Enhancement of the rate of additional depreciation on new machinery and plant and withdrawal of certain conditions Under the existing pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any one previous year; , Accordingly depreciation at normal rates was allowed. 18. If we look into the intent of the legislature while making certain amendments in the provisions of section 32 for Enhancement of the rate of additional depreciation on new machinery and plant and withdrawal of certain conditions, as extracted herein above was to grant relief of additional depreciation to assessee s with the main objective to (i) encourage investment and further have (ii) dispensed with the condition of additional depreciation to be allowed to a new industrial undertaking and (iii) the condition of expansion in installed capacity. On perusal of such indenture of the legislature, it is clearly emanated that the modification in section 32(1)(iia) of the Act, were made with the intent to encourage further investments by the assessee s engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power. Since the conditions pertaining to allowing of additional depreciation to n ..... 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