Visicoolers Classified as Plant & Machinery for Additional Depreciation under Section 32(1)(iia)

The Tribunal dismissed the Revenue's appeal, affirming that the visicoolers qualified as plant and machinery under Section 32(1)(iia) and were eligible for additional depreciation. The visicoolers were deemed essential for delivering the soft drinks in a consumable, chilled state, supporting the assessee's business operations. The Tribunal upheld the Commissioner of Income Tax (Appeals) decision, emphasizing that the visicoolers were integral to the assessee's business and satisfied the conditions for claiming additional depreciation.

---

---

Issues Involved:

1. Disallowance of additional depreciation on visicooler machines under Section 32(1)(iia) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Additional Depreciation on Visicooler Machines:

The Revenue's appeal concerns the deletion of the disallowance of additional depreciation amounting to Rs. 90,56,200 on visicooler machines claimed by the assessee under Section 32(1)(iia) of the Income Tax Act, 1961. The Assessing Officer (AO) had disallowed this claim on the grounds that the visicoolers were not used at the assessee's factory premises but at the distributors' premises and that chilling the soft drinks at the distributors' premises did not constitute a manufacturing activity.

The assessee, engaged in the manufacture of soft drinks, generation of electricity through windmills, and manufacture of pet bottles, argued that visicoolers were essential for delivering the product in a consumable, chilled state to the ultimate consumer. The assessee contended that the law did not mandate the assets to be installed at the factory premises, and the twin conditions of owning the assets and using them for business purposes were sufficient for claiming depreciation. The assessee emphasized that visicoolers were integral to the manufacturing process as they ensured the soft drinks were served chilled, aligning with consumer preferences and the business slogan "Thanda Matlab Coca-Cola."

The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's arguments, noting that Section 32 only required the asset to be owned by the assessee and used for business purposes, without specifying that the asset must be used at the assessee's premises. CIT(A) cited the Supreme Court's decision in ICDS Ltd vs. CIT, which held that the asset need not be used by the assessee itself as long as it was used for business purposes. Consequently, CIT(A) deleted the addition made by the AO.

The Revenue appealed against CIT(A)'s decision, reiterating the AO's stance. The Tribunal examined the provisions of Section 32(1)(iia) and noted that the benefit of additional depreciation was available to manufacturers on the actual cost of plant and machinery, without restricting it to assets used directly in manufacturing. The Tribunal found that the visicoolers, essential for maintaining the soft drinks in a saleable condition, fulfilled the function of a plant in the assessee's trading activity, as defined by the Supreme Court in Scientific Engineering vs. CIT. The Tribunal concluded that the visicoolers were indeed part of the plant and machinery and that the assessee was entitled to additional depreciation.

The Tribunal upheld CIT(A)'s order, confirming that the visicoolers were integral to the assessee's business and satisfied the conditions for additional depreciation under Section 32(1)(iia). The appeal filed by the Revenue was dismissed.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming that the visicoolers qualified as plant and machinery under Section 32(1)(iia) and were eligible for additional depreciation, as they were essential for delivering the soft drinks in a consumable, chilled state, thereby supporting the assessee's business operations.

---