DCIT, NEW DELHI vs. M/S. J.P.S. STEEL PVT. LTD., NEW DELHI

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

“1. Whether on the facts and in the circumstances of the case the CIT(A) erred in law and on facts in deleting the addition of Rs. 9,67,404/- being disallowance of additional depreciation on electrical fittings.

1.1. Whether on the facts and in the circumstances of the case the CIT(A) erred in treating electrical fitting being part of plant and machinery in view of the fact that the same are treated distinct and separate block of asset.”

“(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 90[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 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 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;]”

The ld. A.R submitted before the ld. CIT(A) that the assessee company had set up an industry by installing the plant to manufacture MS ingots. The legislation, while defining plant u/s 143(3) of the Act specified that it did not include tea bushes, live-stock or buildings or furniture and fittings. The company was entitled to normal depreciation @15% on entire plant and additional depreciation @ 20% on entire plant. The ld. A.R further argued that once the AO admitted that the assessee company was entitled to depreciation on entire plant @ 15%, instead of 10%, he cannot hold at the same time that the electrical fitting was not part of plant. Satisfied with the submissions of the ld. A.R, the ld. CIT(A) has held as under:

I have perused the assessment order, written submissions of the ld. A.R and discussed the matter with him carefully. The AO had allowed all the normal depreciation at the rate of 15% and additional depreciation @ 20% on plant and machinery, electrical fittings and transformer to the appellant, except additional deprecation at the rate of 20% on electrical fittings of Rs. 9,67,404/-

The grievance of the appellant is restricted to this figure only.

The appellant satisfies all the conditions for obtaining the additional depreciation on electrical fittings. The AO should examine very carefully the conditions laid down for allowing additional depreciation. The Government had allowed additional depreciation to increase manufacture activities in the country. So that we can compete with our neighbours [china] in producing quality produces in international market. Therefore, the AO is directed to allow this additional deprecation of Rs. 9,67,404/- on electrical fittings.”