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Facts
The assessee, Hira Power & Steels Limited, appealed against disallowances confirmed by the CIT(A) for AY 2012-13, which included CSR expenses, donation and charity expenses, disallowance under Section 14A, and additional depreciation. A disallowance related to delayed payment of employees' share of PF/ESI was also challenged.
Held
The Tribunal dismissed Ground 4 (delayed PF/ESI) as not pressed and Ground 6 (general ground) as not calling for adjudication. Ground 1 (CSR expenses), Ground 2 (donation & charity), and Ground 3 (Section 14A disallowance) were allowed, directing the A.O. to delete the respective additions, citing the non-applicability of the Finance Act 2014 embargo for AY 2012-13 on donations/CSR and sufficient interest-free funds for Section 14A. Ground 5 (additional depreciation) was remanded to the A.O. for re-verification regarding eligibility for new plant and machinery.
Key Issues
The key legal issues included the allowability of CSR expenses, donation and charity expenses, disallowance under Section 14A when own interest-free funds are available, and eligibility for additional depreciation under Section 32(1)(iia) for new plant and machinery.
Sections Cited
Section 14A, Rule 8D, Section 80G, Section 37, Section 135 (Companies Act, 2013), Section 32(1)(iia), Section 42, Section 43 (6)(c)
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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI ARUN KHODPIA
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 12.02.2025 for the assessment year 2012-13 as per the following grounds of appeal:
1. Ld. CIT(A) erred in confirming disallowance of Rs.1,69,609/- made by the A.O out of CSR expenses claimed by the appellant. The disallowance made by the A.O and confirmed by the Ld. CIT(A) is arbitrary, baseless and not justified.
2. Ld. CIT(A) erred in confirming disallowance of Rs.1,60,458/- made by the A.O on account of expenses towards donation & charity. The disallowance made by the A.O and confirmed by the Ld. CIT(A) is arbitrary and not justified.
3. Ld. CIT(A) erred in confirming disallowance of Rs.6,46,325/- made by the A.O invoking Section 14A read with rule 8D. The disallowance made by the A.O and confirmed by the Ld. CIT(A) is arbitrary, baseless and not justified.
4. Ld. CIT(A) erred in confirming disallowance of Rs.8,23,418/- made by the A.O on account of delayed payment of employees share of contribution to PF/ESI. The disallowance made by the A.O and confirmed by the Ld. CIT(A) is arbitrary and not justified.
5. Ld. CIT(A) erred in confirming disallowance of Rs.8,06,670/- made by the A.O on account of addition depreciation claimed by the appellant. The disallowance made by the A.O and confirmed by the Ld. CIT(A) is arbitrary, illegal and not justified.
6. The appellant reserves the right to amend, modify or add any of the ground/s of appeal.”
At the very outset, the Ld. Counsel for the assessee submitted that he is not pressing Ground of appeal No.4 in view of the judgment of the Hon’ble Supreme Court in the case of Checkmate Services Ltd. Vs. CIT, 448 ITR 518 (SC). Having heard the submissions of the Ld. Counsel, the Ground of appeal No. 4 is dismissed as not pressed.
Ground of appeal No.6 being general hence adjudication not called 3. for.
Ground of appeal
No.1 pertains to the disallowance of Rs.1,69,609/- on account of CSR expenses as claimed by the assessee. In this regard, the relevant discussion made by the A.O in the assessment order are culled out as follows:
2. On perusal of Profit & Loss Account it was found that the assessee debited Rs.16,74,513/- on account of Corporate Social Responsibility Expenses. On verification of account it was found that besides expenses made on development of airport garden and sulabh sauchalaya. Other expenses were spent on various other purposes which was not found to be spent for the purpose of the business of the assessee and also not on any legal compulsion. It was also not explained as to how the expenditure was linked to the Social Welfare. Therefore, Rs.1,69,609/- is disallowed and added to the total income of the assessee.”
5. That as is discernible from the aforesaid para, the A.O had admitted that the assessee had paid on account of Corporate Social Responsibility Expenses. However, the A.O writes that certain other expenses were spent on various other purposes which was not found to be spent for the purpose of the business of the assessee and accordingly, out of Rs.16,74,513/-, he had disallowed Rs.1,69,609/- and added the same to the total income of the assessee. The Ld. CIT(Appeals)/NFAC had upheld the same.
On a careful perusal of the records, we observe that the A.O had failed to bring out what are those other purposes for which the assessee had spent which are beyond the scope of Corporate Social Responsibility (CSR) expenses. In fact, the case of the assessee is that they have produced entire details of CSR expenses before the A.O for F.Y.2011-12 relevant to A.Y.2012-13 which are annexed at pages 86 to 91 of the paper book. Further, it is not disputed that since the case of the assessee pertains to A.Y.2012-13, the CSR expenses were allowable and it was only from A.Y.2015-16, those expenses were made taxable. Considering all these points, the A.O had failed to record satisfaction for such addition. Similarly, the Ld. CIT(Appeals)/NFAC had summarily upheld the said addition without proper enquiry and verification. Considering the aforesaid facts, we direct the A.O to delete the said addition from the hands of the assessee. Thus, the Ground of appeal No.1 raised by the assessee is allowed.
Ground of appeal No.2 pertains to the addition of Rs.1,60,458/- on account of expenses towards donation & charity. In this regard, the relevant discussion made by the A.O in the assessment order are culled out as follows:
“3. On verification of Profit and Loss Account it was found that Rs.1,60,458/- was debited on account of charity and donation expenses grouped under miscellaneous expenses. On verification the detail of the expenditure not found to be available as business expenditure otherwise allowable u/s 80G of the I.T. Act and supported with required documents. The fact of the case was found that the amount is not allowable as per provisions of section 80G of the IT Act, as the expenditure is not supported with required documents. Therefore, Rs.1,60,458/- is disallowed and added to the total income of the assessee.”
In this regard, the Ld. Counsel for the assessee submitted that the assessee had made various donation expenses and charity. That similar expenses had been allowed in the case of sister concern of the assessee in the case of DCIT-1(2), Raipur (C.G.) Vs. Godawari Power & Ispat Ltd., and CO No.12/RPR/2018 for A.Y.2011-12, dated 01.10.2018 wherein it was held and observed as follows: “31. Facts of the case, in brief, are that during the course of assessment proceedings the Assessing Officer observed that the assessee has incurred an amount of Rs.1,91,79,611/- on account of Corporate Social Responsibility (CSR), the details of which are as under :- S. No. Unit Amount in Rs. 1 CPIL-Siltara 1,19,34,381 GPIL-RR Ispat 11,45,230 GPIL-IOCD 61,00,000 Total 1,91,79,611
He observed that such expenses are regularly being disallowed in the assessment proceedings in earlier years. Further, the payment of Rs.1,19,34,381/- relating to GPIL- Siltara includes payments of Yagyashala, Drinking water hut, purchase of PC for Rajnandgaon Collectorate, donation to NGO, expenses for eye camp, donation/ expenses for Gram Panchayat, payment for supply of drinking water payment to Gram Vikas Samiti, development of village pond, beautification of pond and expenses of similar nature. On perusal of the Ledger Account, he observed that the sum of Rs.11,45,230/- relating to GPIL-RR Ispat includes payments relating to construction expenses for similar work. Similarly, on perusal of Ledger Account, he observed that out of Rs.61,00,000/- relating to GPIL-IOCD, a sum of Rs.55,00,000/- represents donation to Akasnsha Lion School for physically handicapped and Rs.6,00,000/- represents donation to ISKCON. Relying on various decisions, he observed that the above expenses were incurred by the assessee company without any legal obligation and purely as an act of good citizenship and, therefore, it cannot be said to have been laid out wholly and exclusively for the purpose of its business. He accordingly disallowed a sum of Rs.1,91,79,611/- debited to the Profit & Loss Account.
In appeal, the ld. CIT(A) relying on various decisions deleted the addition. While doing so, he observed that the genuineness of the claim of expenditure i.e. incurrence of expenditure and payment thereof has not been doubted. Further, the Finance Act, 2014 brought an amendment in section 37 and the legislature intended to put an embargo on the admissibility of expenses and to achieve the purpose, therefore, there was no such embargo for the preceding years.
Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal.
After hearing both the sides, we find identical issue had come up before the Tribunal in assessee's own case for assessment year 2009-10 and 2010-11. We find the Tribunal vide to 360/RPR/2014 order dated 18.01.2018 has decided the issue at para 47 of the said order by observing as under :- "47. We have heard ld. D.R. and perused the record of the case. We find that the CIT(A) has relied on the decision in the case of Modi Industries (supra) and Hon'ble Karnataka High Court in the case of CIT vs. Infosys Technologies Ltd. (supra), wherein, it has been held that the expenditure incurred on social responsibility was laid out or expended wholly and exclusively for purposes of business. The CIT(A) has referred to the amendment made in Finance Act (No.2) 2014 w.e.f. 1.4.2015 in Section 37, wherein, it is declared that for the purposes of sub-section (1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. The CIT(A) has held that there was no such embargo for the preceding years. In view of the above, the CIT(A) held that the disallowance cannot be sustained. In the instant case, it is submitted that CSR expenses are incurred for the welfare of local community and thereby improve corporate image of the companies incurring such expenditure. We are of the considered opinion that the CIT(A) has rightly considered the decision and deleted the addition made by the Assessing Officer and Ground No.1 of appeal of the revenue is dismissed."
Respectfully following the decision of the Tribunal in assessee's own case and in absence of any contrary material brought to our notice, the order of the ld. CIT(A) is upheld on this issue. The ground raised by the Revenue is accordingly dismissed.”
We observe that as has been recorded in the above referred judgment that vide the Finance Act (No.2) 2014 amendment was brought in Section 37 of the Act and the legislature had put an embargo on the admissibility of expenses and the same was effective from F.Y.2014-15 relevant to A.Y.2015-16 onwards and there was no such embargo for the preceding years. Before us, the case of the assessee pertains to A.Y.2012- 13, therefore, following the aforesaid judgment, we allow the Ground of appeal No.2 of the assessee’s appeal.
Ground of appeal
No.3 pertains to the disallowance of Rs.6,46,325/- u/s.14A of the Act. The Ld. Counsel for the assessee submitted that the assessee had made investment by using its own interest free funds and therefore, no disallowance u/s. 14A of the Act is called for. Demonstrating the same, the Ld. Counsel referred to Page 70 of the paper book and the total investment made by the assessee in this regard at Rs.183,263,035/-. That in the balance sheet of the assessee for the relevant assessment year, the share capital, reserves and surplus was Rs.1,294,365,688/-. It is therefore observed by us that the assessee had its own interest free fund for the said investment and in such scenario, disallowance u/s. 14A r.w.Rule 8D(1) (ii) & (iii) is uncalled for and bad in law, hence deleted. In this respect, we refer to the judgment of the Hon’ble Supreme Court in the case of South Indian Bank Ltd. Vs. CIT (2021) 438 ITR
1. (SC), wherein on the aforesaid issue it has been held and observed as follows: “20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the assessees in bonds/shares using interest free funds, under Section 14A of the Act. In other words, if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax- free securities then in such cases, disallowance under Section 14A cannot be made.”
Also, we find that the Hon’ble High Court of Bombay in the case of 11. Commissioner of Income Tax Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom.) on the aforesaid issue has held and observed as follows:
“4. We do not agree. In the case at hand, as recorded by the ITAT, undisputedly the Assessee's own funds and other non- interest bearing funds were more than the investment in the tax free securities. The ITAT therefore held that there was no basis for deeming that the Assessee had used the borrowed funds for investment in tax free securities. On this factual aspect, the ITAT did not find any merit in the contention raised by the Revenue and therefore, accordingly answered the question in favour of the Assessee…………..”
Considering the aforesaid facts and circumstances and the judicial pronouncements, we are of the considered view that when the investments in securities were made out of common funds and the assessee had available, non-interest-bearing funds larger than the investments then in such cases, disallowance u/s.14A of the Act cannot sustain. Accordingly, we direct the A.O to delete this addition from the hands of the assessee. Thus, the Ground of appeal No.3 raised by the assessee is allowed.
Ground of appeal No.5 12. pertains to the disallowance of Rs.8,06,670/- on account of additional depreciation claimed by the assessee as per Section 32(1)(iia) of the Act.
The Ld. CIT(Appeals)/NFAC on this issue has held and observed as follows:
“5.5 Ground No.5: In this ground the appellant has challenged the disallowance of additional depreciation of Rs.8,06,670/-. The disallowance was made by the AO as no new plant and machinery was found to be installed and put to use during the year under consideration. The AO relied upon the depreciation chart furnished by the appellant. In this proceeding the appellant submitted that the addition was made to the existing plant and machinery and that there is no restriction u/s 32(1)(iia) for such disallowance. The submission made by the appellant is considered. Section 32(1)(iia) specifically refers to "new plant and machinery" for claiming additional depreciation, implying that only fresh acquisitions or installations qualify. This means that additional depreciation can be claimed only on newly purchased machinery and not on the extension or addition of existing machinery. The addition to the existing plant, unless it is a complete replacement or a new unit, does not qualify for additional depreciation. In the assessment order, relying upon the depreciation chart, AO had given a clear finding that no new plant and machinery was added. Therefore there is no merit in the claim of the appellant that the AO was incorrect in disallowing the additional depreciation of Rs.8,06,670/-. This ground of appeal is therefore dismissed.”
14. That as discernible from the aforesaid findings of the First Appellate Authority, the revenue had disallowed the additional depreciation claimed by the assessee holding that such machinery was not new since the applicable provision of additional depreciation is only in case of new plant and machinery. In this regard, we would like to refer to the relevant provision of Section 32(1)(iia) of the Act including proviso which are extracted as follows:
“32. (1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed—
(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that no deduction shall be allowed under this clause in respect of— (a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 but before the 1st day of April, 2001, unless it is used— (i) in a business of running it on hire for tourists ; or (ii) outside India in his business or profession in another country ; and (b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42 : Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub- section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be : Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation.—For the purposes of this proviso,— (a) the expression "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not include "maxi-cab", "motor-cab", "tractor" and "road-roller"; (b) the expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road roller" shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988): Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy- five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991: Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them.
Explanation 1.—Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.—For the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43. Explanation 3.—For the purposes of this sub-section, the expression "assets" shall mean— (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. Explanation 4.—For the purposes of this sub-section, the expression "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income; (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 of manufacture or production of any article or thing or in the business of generation, transmission or 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 that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect, as if for the words "twenty per cent", the words "thirty-five per cent" had been substituted Provided further 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…………”
That on a plain reading of the aforesaid provision and the proviso as extracted aforesaid, it is clear that the said claim of the assessee is only allowable with respect to new plant and machinery. In this regard, the Ld. Counsel relied on the decision of the ITAT, Raipur in the case of Alok Ferro Alloys Ltd. Vs. DCIT, for A.Y.2012-13, dated 18.08.2023 wherein it was held and observed as follows:
“15. We have considered the rival contentions, perused the material available on records and case law pressed before us. Before discussing and deliberating on the issue first we shall go through the relevant provisions of the act and Explanatory notes on the provisions of the Finance Act to understand the intent of the legislature: 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— (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 provisions of clause (iia) of sub-section (1) of section 32, additional depreciation is allowed at the rate of fifteen per cent of the 9 . actual cost of the new machinery and plant (other than ships and aircraft) acquired and installed after the 31st day of March, 2002. Additional depreciation is allowed in the case of a new industrial undertaking during any previous year in which it begins to manufacture or produce any article or thing on or after the 1st day of April, 2002 or to any industrial undertaking existing before that date if it achieves substantial expansion during the previous year by way of increase in its installed capacity by not less than ten per cent.
In order to encourage investment, the Finance Act, 2005 has amended section 32 to increase the rate of additional depreciation to twenty per cent on new machinery and plant other than ships and aircraft, acquired and installed after the 31st day of March, 2005, and dispensed with the condition of additional depreciation to be allowed to a new industrial undertaking and the condition of expansion in installed capacity. Depreciation rates have been modified through a Notification dated 28th February, 2005. The modified depreciation rates are effective from Assessment Year 2006- 07. Among other things, the rate of depreciation on plant and machinery has been reduced from 25 % to 15 %. Applicability: From A.Y. 2006-07 onwards. [Section 8] 16. The sole controversy emerged in the present case is that – “Whether the investment in additions to existing plant and machinery during the year under consideration under the present case should be considered as new machinery acquired and installed or not for the purpose of allowing additional depreciation within the meaning of provisions of clause (iia) of sub-section (1) of section 32.”
On perusal of the orders of authorities below, it is evident that all the other relevant ingredients of section 32(1)(iia) of the Act, were not disputed by the authorities viz. (i) 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, (ii) any machinery or plant which, before its installation by the assesses, was used either within or outside India by any other person, (iii) 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;", 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 new industrial undertakings and expansion in installed capacity were also 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 ITAT Delhi in the case of EFACEC Switchgear India P. Ld.(supra) 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 depreciation. There is no material with respect to use of the impugned plant and machinery for the year under consideration along with relevant details. Though, it is also apparent from records that no such query was raised by the department at any stage may it be assessment stage or appellant stage, in the interest of natural justice, we are of the considered opinion that the matter should be restore back to the files of Ld AO to adjudicate the issue afresh, in terms of our observations herein above. In the result ground no 6 of the appeal of the assessee is partly allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.”
Accordingly, the Ld. Counsel for the assessee submitted that in the case of the assessee verification may be done by the A.O. The Ld. Sr. DR did not raise any objection in this regard.
17. Having heard the submissions of the parties and as per aforesaid judicial pronouncements, Ground of appeal No.5 is remanded to the file of the A.O for verification as per law. Thus, the Ground of appeal No.5 raised by the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 31st day of July, 2025.