Tribunal restricts depreciation claims on tools, dies, and jigs, and disallows deductions under sections 32(1)(iii) and 80HHC.

Deputy Commissioner of Income-tax, Circle 3(1), Hyderabad Versus SAMKRG Pistons & Rings Ltd.

Deputy Commissioner of Income-tax, Circle 3(1), Hyderabad Versus SAMKRG Pistons & Rings Ltd. - [2009] 34 SOT 401 (HYD.) Issues Involved:
1. Disallowance of depreciation u/s 32(1)(iii)
2. Disallowance of depreciation on furniture and fixtures
3. Restriction of deduction u/s 80HHC
4. Disallowance of deduction u/s 80HHC on duty drawback

Summary:

1. Disallowance of Depreciation u/s 32(1)(iii):
The first issue revolves around the disallowance of depreciation claimed by the assessee on tools, dies, and jigs. The Assessing Officer (AO) disallowed excess depreciation of Rs. 1,92,66,564, allowing only 25% instead of the claimed 50% on the opening WDV and 100% on additions. The CIT(A) allowed depreciation on scrapped dies but disallowed Rs. 73,57,863 for dies scrapped in earlier years. The Tribunal concluded that terminal allowance u/s 32(1)(iii) is applicable only to power generating units and not to other units like the assessee. Consequently, the Tribunal disallowed the claim of the assessee and upheld the revenue's appeal.

2. Disallowance of Depreciation on Furniture and Fixtures:
The next issue was the disallowance of depreciation of Rs. 4,83,045 on false ceiling, wooden partition, racks, and storage bins, classified as furniture and fixtures. The AO allowed depreciation at 10% instead of the claimed 25%. The CIT(A) confirmed this, and the Tribunal upheld the CIT(A)'s order, agreeing that these items pertained to furniture and fixtures.

3. Restriction of Deduction u/s 80HHC:
The assessee's claim for deduction u/s 80HHC was restricted to Rs. 5,93,898 against the claimed Rs. 36,12,744. The AO computed the deduction for the assessee as a whole, not unit-wise, and the CIT(A) confirmed this. The Tribunal upheld the CIT(A)'s order, rejecting the assessee's ground, and supported the view that deduction u/s 80HHC is available to an assessee and not to any undertaking.

4. Disallowance of Deduction u/s 80HHC on Duty Drawback:
The AO excluded duty drawback of Rs. 15,98,327 from the total turnover, stating it accrued in the subsequent year. The CIT(A) confirmed this. The Tribunal restored the issue to the AO to recompute the deduction in accordance with law, considering the correct amount of duty drawback.

Conclusion:
The appeal of the assessee (ITA No. 351/Hyd./06) is partly allowed for statistical purposes, and the appeal of the Department (ITA No. 304/Hyd./06) is allowed.