ITAT dismisses Revenue's appeal on additional depreciation & excise duty, upholds assessee's claim.

The ITAT dismissed the Revenue's appeal regarding the disallowance of additional depreciation claimed on a wind mill for manufacturing tiles, upholding the assessee's claim based on precedents allowing additional depreciation for setting up new machinery. Additionally, the ITAT upheld the CIT(A)'s decision to delete excise duty on the closing stock of finished goods, citing CBDT instructions prohibiting appeals below a specified tax effect threshold. The ITAT allowed the Department to seek a recall if the tax effect exceeded the threshold. The appeals were dismissed for the Assessment Years 2006-07 and 2009-10.

---

---

Issues:
1. Disallowance of additional depreciation claimed by the assessee on wind mill for manufacturing tiles.
2. Deletion of excise duty on closing stock of finished goods.

Analysis:
1. The first issue pertains to the disallowance of additional depreciation claimed by the assessee on a wind mill for manufacturing tiles. The Revenue contended that the wind mill did not qualify for additional depreciation under section 32(1) as the power generated was controlled and purchased by a different entity, not used for the assessee's manufacturing business. The ITAT referred to a similar case where the Tribunal had dismissed the Revenue's appeal on identical grounds. The Tribunal held that the wind mill installation date was undisputed, and the claim for additional depreciation was valid based on precedents where setting up new machinery unrelated to the existing business qualified for additional depreciation. Consequently, the ITAT dismissed the Revenue's appeal in line with the previous decision, upholding the assessee's claim for additional depreciation on the wind mill.

2. The second issue involved the deletion of excise duty on the closing stock of finished goods by the CIT(A). The Revenue challenged this deletion, arguing that excise duty should be applicable to the entire closing stock of finished goods. However, the ITAT noted that the CBDT had issued instructions prohibiting appeals where the tax effect is less than a specified amount, applicable retrospectively. As the tax effect of the excise duty deletion fell below the threshold, the ITAT dismissed the Revenue's appeal, citing violation of CBDT instructions. The ITAT also allowed the Department to approach the Tribunal for a recall if the tax effect exceeded the threshold or fell within exceptions provided in the instructions. Consequently, the ITAT upheld the CIT(A)'s decision to delete excise duty on the closing stock of finished goods, dismissing the Revenue's appeal.

In conclusion, the ITAT, comprising Shri Rajpal Yadav and Shri Manish Borad, dismissed all three appeals - two by the Revenue and one Cross Objection by the assessee - against the orders of CIT(A)-VIII, Ahmedabad, for the Assessment Years 2006-07 and 2009-10. The judgments were pronounced on 2nd March 2016.

---