Assessee cannot claim investment allowance under Section 32AC after claiming 100% depreciation on new assets

ITAT Chennai dismissed assessee's appeal regarding investment allowance under Section 32AC(1A) for co-generation power plant and anaerobic digester. The tribunal held that since assessee claimed 100% depreciation (80% regular plus 20% additional) on new assets in A.Y. 2015-16, investment allowance cannot be claimed under Section 32AC(4)(v) which excludes assets where depreciation was already allowed. The tribunal upheld CIT(A)'s decision allowing 80% depreciation on eligible machinery and permitting depreciation on electrical installations where AO failed to provide reasons for disallowance.

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Issues Involved:
1. Eligibility of the assessee for additional depreciation under Section 32AC(1A) of the Income Tax Act, 1961.
2. Eligibility of the assessee for higher depreciation at 80% on certain assets forming part of the cogeneration unit.

Summary:

Issue 1: Eligibility for Additional Depreciation under Section 32AC(1A)

The assessee filed an appeal challenging the disallowance of investment allowance claimed under Section 32AC(1A) amounting to Rs. 11,77,36,432/- on Co-generation power plant and Anaerobic Digester. The Assessing Officer (AO) rejected the claim on the grounds that the assessee had already claimed 100% depreciation on the assets, making them ineligible for further deduction under Section 32AC(1A). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that if the assessee had claimed 100% depreciation on any asset, those assets would not be entitled to any further allowance under Section 32AC(1A). The Tribunal also upheld the CIT(A)'s decision, concluding that the assessee misconstrued the provisions of Section 32AC(4)(v), which clearly states that if depreciation is claimed on new assets, investment allowances cannot be claimed on the same assets.

Issue 2: Eligibility for Higher Depreciation at 80%

The Department filed an appeal against the CIT(A)'s decision to allow higher depreciation at 80% on certain assets forming part of the cogeneration unit. The AO had disallowed the claim, stating that only specific parts of the cogeneration unit were eligible for higher depreciation as per the Income Tax Rules. The CIT(A), however, allowed the claim, relying on various judicial precedents and concluding that the assets in question were integral parts of the cogeneration unit. The Tribunal upheld the CIT(A)'s decision, citing that similar issues had already been decided in favor of the assessee in previous cases.

Conclusion:

Both the assessee's and the Department's appeals were dismissed, upholding the CIT(A)'s decisions on both issues. The Tribunal concluded that the assessee was not eligible for additional depreciation under Section 32AC(1A) but was entitled to higher depreciation at 80% on the specified assets forming part of the cogeneration unit.

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