2013 (12) TMI 1357 - AT - Income Tax

Denial of additional depreciation claim beyond asset utilization year upheld by Tribunal

M/s CRI Pumps(P) Ltd Versus The Assistant Commissioner of Income Tax

The Tribunal upheld the decision of the CIT(Appeals) to deny the claim of additional depreciation on machinery acquired in previous years. The assessees' ... Denial of claim of additional depreciation u/s 32(1)(iia) of the act – New Plant and machinery eligible for depreciation – Held that:- First requirement for being eligible for the claim of additional depreciation is that it should be on a new machinery or plant - A machinery is new only when it is first put to use - Once it is used, it is no longer a new machinery - the machinery on which additional depreciation has been claimed, was already used in various preceding previous years – thus, for the assessment year, it is no more a new machinery or plant - Relying upon The Deputy Commissioner of Income-tax Versus M/s. Brakes India Ltd. [2012 (3) TMI 31 - ITAT, CHENNAI] - Once it is not a new machinery or plant, allowance under Section 32(1)(iia) cannot be allowed - There is nothing in the statute which allows such claim of additional depreciation every year on machinery acquired in earlier year - CIT(Appeals) was justified in confirming the disallowance of additional depreciation – Decided against Assessee. Issues:Appeal against denial of claim of additional depreciation.Analysis:The appeals were filed by the assessees challenging the orders of CIT(Appeals) confirming the denial of the claim of additional depreciation. The assessees sought adjournments multiple times, citing various reasons, which were not granted due to continuous delays. The main issue was the disallowance of additional depreciation claimed on machinery acquired in previous years. The Assessing Officer and CIT(Appeals) both held that additional depreciation was only allowable in the year of purchase and installation of new plant and machinery. The assessees argued that the law did not restrict the admissibility of such depreciation to the initial year of acquisition only. The key contention was the interpretation of Section 32(1)(iia) of the Income-tax Act, 1961, which introduced additional depreciation for new machinery or plant acquired and installed after a certain date.The assessees claimed that additional depreciation should be allowable once the assets were installed and in every year thereafter, as per the amended law effective from 1.4.2005. However, the CIT(Appeals) and the Departmental Representative supported the view that additional depreciation was only available in the initial year of purchase and installation to promote investment in new plant and machinery. The Tribunal considered the provisions of Section 32(1)(iia) and emphasized that the eligibility for additional depreciation was on new machinery or plant, which ceased to be new once used. The Tribunal cited a previous decision where it was held that each assessment year is separate, and there is no provision for carry forward of residual additional depreciation. The Tribunal concluded that the intention of the Legislature was to provide additional depreciation in the year assets were put to use and not in subsequent years on machinery acquired earlier. The Tribunal upheld the CIT(Appeals)' decision to disallow the additional depreciation claimed by the assessees, dismissing their appeals.In conclusion, the Tribunal dismissed the appeals filed by the assessees, upholding the decision to disallow the claim of additional depreciation on machinery acquired in previous years. The judgment was pronounced in Chennai on the 4th of April, 2013.