2010 (7) TMI 808 - AT - Income Tax

Textile Industry: Tribunal grants higher depreciation on Plant & Machinery for texturising & twisting activities

Agarwal Rayons Pvt. Ltd., Versus Income Tax Officer, Ward 1(1),

The appeal was allowed, granting the assessee the benefit of higher depreciation at 50% on their Plant and Machinery used in texturising and twisting of ... Disallowing Depreciation - On Plant and Machinery. Issues involved:The judgment deals with the issue of disallowance of higher depreciation at 50% on Plant and Machinery used in texturising and twisting of yarn.Summary:The only issue in this appeal is the denial of higher depreciation at 50% to the assessee on its Plant and machinery used in texturising and twisting of yarn. The assessee claimed the higher rate of depreciation based on the Textile Upgradation Fund Scheme (TUFS) rules. However, the Assessing Officer (A.O.) disallowed the higher rate, stating that the machinery was not used for weaving or processing of cloth as required by the rules. The Commissioner of Income Tax (C.I.T.) upheld the A.O.'s decision, emphasizing that the rules clearly specify higher depreciation for machinery used in weaving, processing, and garment sectors, not for yarn production processes like texturising and twisting. The C.I.T. referred to a Supreme Court decision emphasizing strict interpretation of incentive provisions. The Appellate Tribunal, considering similar cases, allowed the assessee's claim, stating that texturising and twisting activities are part of processing in the textile industry, thus qualifying for higher depreciation.In support of their arguments, the assessee referred to previous judgments where higher depreciation was allowed for similar activities. The Departmental Representative (D.R.) argued that the assessee's case was different as they were solely engaged in yarn manufacturing without weaving activities. However, the Tribunal found the D.R.'s distinction artificial, stating that texturising and twisting are part of processing in the textile industry. The Tribunal concluded that the rules encompass processing activities beyond just weaving and processing of cloth, thus allowing the assessee's claim for higher depreciation.Therefore, the appeal filed by the assessee was allowed, granting them the benefit of higher depreciation at 50% on their Plant and Machinery used in texturising and twisting of yarn.