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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M. :
These two appeals filed by the assessee are directed against the orders of the Commissioner of Income Tax (Appeals)–5, Hyderabad, dated 27-02-2017 & 27-06-2017 for the AYs. 2012-13 & 2013-14 respectively. Since the issue is common in these appeals, we have heard together and adjudicated by this common order. For the sake of convenience, the facts for the AY. 2012-13 have been taken for consideration.
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Brief facts of the case are that the assessee-company, Dhanlaxmi Iron Industries Private Limited having its registered office at D.No. 15-9-358/9, Muktyargunj, Hyderabad is engaged in the business of manufacturing CTD/TMT Bars. In assessing the total income for the AY. 2012-13, the Assessing Officer has made the following additions:
i. Assessing Officer has disallowed additional depreciation claimed on Plant & Machinery to the extent of Rs. 14,00,891/-; ii. Assessing Officer has disallowed work execution expenses to the extent of Rs. 5,14,596/-;
2.1. Aggrieved with the order of the Assessing Officer, the assessee filed an appeal before the CIT(A). After analysing the facts of the case and grounds of appeal raised by assessee, CIT(A) partly allowed the appeal of the assessee.
2.2. Aggrieved with the order of the CIT(A), the assessee filed an appeal before us with the following ground(s) of appeal:
In computing the total income for the A.Y. 2012-13, A. The Commissioner of Income Tax (Appeals) has erred in upholding the disallowance of additional depreciation made by the Assessing Officer on plant & machinery to the extent of Rs. 14,00,891/-; Ground No. 2 is general in nature.
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Ld.AR submitted that assessee has claimed regular depreciation u/s. 32 and additional depreciation u/s. 32(1)(iia) of the Income Tax Act [Act]. In the depreciation schedule as per Income Tax rules, these new assets were purchased during the year and installed as new machinery and the Assessing Officer has accepted the addition on the new machinery and allowed the regular depreciation u/s. 32, but refused to allow the additional depreciation as the addition of new Plant & Machinery during this assessment year is nothing but parts and spares of Plant & Machinery. He submitted that all the bills and vouchers relating to the above additions were already submitted before the Assessing Officer.
3.1. Further, he submitted that Ld.CIT(A) verified all the submissions submitted by the assessee and he himself in his order expressed contradictory view at Pg. No.8 of his order. He mentioned that – There can be no dispute that the ordinary meaning of “machinery” includes the working parts of machinery which are utilised or the component part of a machinery or plant. But that is not decisive of the matter, since we have to construe the word with reference to the language of the clauses and the scheme of the section. With regard to clause (iia), there are also certain significant features which support the opinion that the additional depreciation allowances are not permissible in regard to parts of a machinery. Accordingly, he upheld the view of the Assessing Officer by the following words:
“In order that additional depreciation should be allowable on plant and machinery, it must be a self-contained unit capable of being put
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to use in the business, profession or vocation for the benefit of which it is installed”.
3.2. Since the Ld.CIT(A) brought on record a new definition that the additional depreciation can be allowed only on self- contained unit, capable of being put to use in the business. In this regard, he relied on the following case law to support the view that the spare parts also forming part of the additions made to the machinery.
i. Mrs. George Mathew Vs. CIT [43 ITR 535] (1961) (Kerala High Court); ii. Mangalore Ganesh Beedi Works Vs. CIT [52 ITR 615] (Mysore High Court);
On the other hand, Ld.DR relied on the orders of the Revenue authorities and in particular, he submitted that Ld.CIT(A) has clearly indicated that the additions were nothing but spare parts. Assessee cannot claim additional depreciation on spare parts.
Considered the rival submissions and facts on record. We noticed that the assessee has purchased new machinery and claimed depreciation and additional depreciation during this assessment year. The Assessing Officer and Ld.CIT(A) has no issue with allowing the regular depreciation u/s. 32 of the Act, whereas the same additions were not accepted to allow the additional depreciation. Ld.CIT(A) has distinguished the definition of the Plant & Machinery to say that to claim the additional depreciation, the Plant & Machinery must be a
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self-contained unit, capable of being put to use in the business, profession or occasion for the benefit of which it is installed. He concluded that the additions were nothing but spare parts, whereas he also allowed the regular depreciation u/s. 32 on the same addition, which may comprise all spare parts. In our considered opinion, there is only one definition given under the Income Tax Act relevant to Plant & Machinery. There cannot be two separate set of definitions to claim the regular depreciation as well as the additional depreciation. When tax authorities intend to disallow the set of assets, treating the same as not eligible to claim additional depreciation, they cannot allow regular depreciation. In our view, Ld.CIT(A) cannot bring in a new set of definition to disallow the additional depreciation and allow regular depreciation. We are in agreement with the Ld.AR that the additions made to Plant & Machinery which are rolls and energy saving devices, which can be classified as self-contained units, which can be installed independently and also he brought to our notice, rates of depreciation chart which has a separate classification for Iron and Steel Industry - rolling mill rolls and energy saving devices. Therefore, assessee cannot be denied the benefit of claiming additional depreciation on the same machinery when the same machinery is accepted as additions during the year and allowed the regular depreciation and denied the additional depreciation. Therefore, we allow the additional depreciation claimed by assessee during this assessment year. Accordingly, we direct the Assessing Officer
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to allow the additional depreciation and set aside the order of the Ld.CIT(A). Ground of appeal in this regard is allowed.
5.1. Coming to the appeal for the AY. 2013-14, since facts are also identical, as discussed in the earlier paragraphs herein above and as per the directions given for the AY.2012-13, the appeal for the AY. 2013-14 is also allowed.
In the result, both the appeals are allowed.
Order pronounced in the open court on 3rd October, 2018
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 3rd October, 2018 TNMM
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Copy to :
M/s. Dhanlaxmi Iron Industries Pvt. Limited, 15-9-358/9, Muktyar Gunj, Hyderabad. 2. Dy. Commissioner of Income Tax, Circle-17(1), Hyderabad.
Asst. Commissioner of Income Tax, Circle-17(1), Hyderabad. 4. CIT(Appeals)-5, Hyderabad.
Pr.CIT-5, Hyderabad.
D.R. ITAT, Hyderabad.
Guard File.