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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI N. K. BILLAIYA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Vadodara, vide Appeal No.CAB-1/179/2014-15 dated 28/04/2015 for the Assessment Year (AY) 2011-12.
Assessee has taken following Grounds of appeals: 1. The learned CIT (Appeals) has erred in confirming the action of learned Assessing Officer of disallowing our entire claim of additional depreciation amounting to Rs.17,33,148/-.
ITA No.2033/Ahd/2015 Gujarat Liqui Pharmacaps Pvt. Ltd. vs. DCIT Asst.Year –2011-12 - 2 -
(i). The learned CIT( Appeals) has erred in confirming partly the action of the learned Assessing Officer by retaining the disallowance of the sum of Rs. 1,39,141 (comprising of Rs.75,141 in respect of watering vacuum pump and Rs.64,000/- representing feeder box) out of Rs. 4,75,501/- disallowed by the learned Assessing Officer in respect of our claim of repairs and maintenance expenses relating to plant and machinery. (ii).Without prejudice to above, the learned CIT (Appeals) has erred in considering the sum of Rs.64,000/- towards feeder box as against Rs.57,600/- which is the amount included in the total of Rs.4,75,501/-. (iii). The learned CIT (Appeals) has further erred in directing the learned Assessing Officer in para 5.1 of his order to treat the amount of Rs.3,04,260/- as revenue expenditure whereas amount allowable as per finding of CIT(Appeals) comes to Rs.3,36,360/- [Rs.4,75,501 – Rs.1,39,141 disallowance retained by the CIT'(Appeals)] 3. The learned CIT (Appeals) has erred in not deciding our ground number 4 which is reproduced below. "The learned Assessing Officer has erred in levying and calculating interest of Rs.6,31,173/- under section 234B and Rs.5,29,029/- under section 234C of the Income Tax Act, 1961."
The relevant facts as culled out from the materials on record are as under:- The assessee company is engaged in the business of Manufacturing of Soft Gelatin Capsules. During the year under consideration the assessee has shown gross profit of Rs.1228.13 Lacs on the total turnover ofRs.4026.58 Lacs which works out the gross profit rate at 30.50% as against the gross profit of Rs.707.53 Lacs on the total turnover of Rs.2242.84% lacs which works out the gross profit rate at
ITA No.2033/Ahd/2015 Gujarat Liqui Pharmacaps Pvt. Ltd. vs. DCIT Asst.Year –2011-12 - 3 - 31.55% shown in the immediately preceding assessment year. The details filed by the assessee were verified.
3.1 On perusal of the depreciation chart annexed to tax audit report, it is revealed that the assessee has claimed additional depreciation on new plant and Machinery purchased during the year under consideration, However, it is observed from copy of the ledger A/c submitted by the assessee company in response to detailed questionnaire that all Plants and Machinery on which additional depreciation claimed is not a new plant and machinery but it is part of plant and machinery or capital expenditure related to the existing plant & machinery. In the ledger A/c the expenses are shown as Purchase of KSP-Pump, heater, steam coil, 3 HP Crpmtion graves, flinch Naunted motors, Change parts of Bilsers packings machines, control panel for auto system, waste and Scraps of stainless stills storage tanks, SS Elbow, Ms Scrape spares of Bilser Pack machines, Stream tape Valve, seamless such pipes, butterfly valves, GASket rubber, M.s Nut Bolt nut, Vapour absorption heat pump, power voltage controllersf Spare of Encapsulation machine, purchase of Air blower, lift materials etc, The assessee company vide order sheet dated 14/03/2014 was asked to explain why the additional depreciation on new plant and machinery should not be disallowed. The assessee vide it reply dated 19/03/2014 submitted on 20/03/2014 has contended as follows: - "..... Further to the hearing on 14th March, 2014 we would like to reply on the additional depreciation claimed in A.Y. 2011-12 on plant & machinery. Please find herewith attach plant and machinery ledger on which additional depreciation calculated as per provision of Section 32 of income-tax Act 1961. According to this it includes newly purchased machineries and installation charges and cost directly attributable to
ITA No.2033/Ahd/2015 Gujarat Liqui Pharmacaps Pvt. Ltd. vs. DCIT Asst.Year –2011-12 - 4 - bringing the asset in working conditions. Further we would like to clarify that the machinery on which additional depreciation has been claimed is an independent plant and machinery and it functions independently. These are not in nature of spares of any existing plant and machinery.
Without prejudice to our contention to allow additional depreciation as claimed for A.Y.10-11, we request yourself to increase the opening WDV of the year under reference consequent to denial of our claim for additional depreciation in A.Y.10-11 while calculating depreciation to be allowed for A. Y. 11-12..."
I have duly considered the submission of assesses and have not found it acceptable. Before analyzing issue the section 32(iia) of I.T. Act is reproduced hereunder: [iia] 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 or manufacture or production of any article or thing, a further sum equal to twenty percent of the actual cost of such machinery or plant shall be allowed as deduction under clause(ii): Provided: that no deduction shall be allowed in respect of- A) Any machinery or plant which, before its installation by the assessee, 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 officer 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;] It is clearly mentioned in the provision of the Act that for claiming the additional depreciation that the addition depreciation should be made in new plant or machinery and it should be acquired and installed during the year. This amendment has been introduced to give a thrust to investment in manufacturing sector. But, in the case of the assessee, no
ITA No.2033/Ahd/2015 Gujarat Liqui Pharmacaps Pvt. Ltd. vs. DCIT Asst.Year –2011-12 - 5 - new plant and machinery is installed but it is only parts of machinery or plant or additional capital expense on existing plant or machinery. The existing plant and machinery already falls in the block of section 32(l)(ii) and therefore, any capital expenses or changing of parts will remain in same block and It will not derive the meaning acquired and installed of new plant or machinery to claim additional depreciation u/s.32(l)(iia) of the Act, Further, the item added in plant or machinery could not be said as acquisition or installation of new plant or machinery "as it does not produce or manufacture or work independently. The intention of the legislation here is to give thrust to investment in manufacturing section, benefiting it by providing additional depredation for installation of new plants and machinery. Therefore, the claim of additional depreciation amounting to Rs.l7,33,148/- on plant & machinery to the extent of Rs.1,34,02,795/- does not fall in the provisions of section 32(l)(iia) of the Act. In view of the above, the assessee company has claimed additional depredation on the said plant & machinery @ 20% of Rs.17,33,148/- which is disallowed and added back to the total income.”
Thereafter, assessee preferred first statutory appeal before the ld. CIT(A) for confirming the additional depreciation amounting to Rs.1733148/-.
We have gone through the relevant record and impugned order. In assessee’s own case, we have allowed additional depreciation in ITA No.174/Ahd/2014 for A.Y. 2010-11 with following observation: In the ground No.3 ld. AO&CIT has not allowed the depreciation for parts of the plant and machinery. Though they accepted that existing plants and machineries already falls in the block of under section 32(1)(ii) but they did not accept contention of the assessee that parts are allowable in the same block for additional depreciation under section 32(1)(iia) of the Act. In our opinion when machineries and plants are allowable and why parts of the same cannot be allowed and is no where it is written in the law, the parts of the machineries and
ITA No.2033/Ahd/2015 Gujarat Liqui Pharmacaps Pvt. Ltd. vs. DCIT Asst.Year –2011-12 - 6 - plants are not allowable, therefore, we allow the grounds of appeal in favour of assessee. In the result appeal of the assessee is allowed for statistical purpose.”
5.1 Respectfully considered our own order in assessee’s own case, we allow this ground of appeal.
So far as Ground related to watering vacuum pump and feeder box to be considered as capital expenditure and accordingly depreciation to be allowed to the appellant.
So far as Ground No.2 (ii) is concerned. AO is directed to verify the amount whether sum is 64,000/- or 57,600/-. Therefore, this issue will go back to the file of the assessing officer to decide accordingly.
So far as Ground No.3 is concerned regarding to calculating interest is concerned. AO is directed to give effect to our order and thereafter, calculate the interest.
In the result, appeal filed by the assessee is allowed. This Order pronounced in Open Court on 15/01/2018
Sd/- Sd/- एन.के. �ब�लैया महावीर �साद (लेखा सद�य) (�या�यक सद�य) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 15/01/2018
ITA No.2033/Ahd/2015 Gujarat Liqui Pharmacaps Pvt. Ltd. vs. DCIT Asst.Year –2011-12 - 7 - Priti Yadav, sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-1, Vadodara. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy 1. Date of dictation 12/01/2018. 2. Date on which the typed draft is placed before the Dictating Member …16/01/2018 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………