TaxTMI 
TaxTMI 
2010 (7) TMI 953
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....and thereby confirming the addition of Rs. 87,739/-. The learned C.I.T.(A) ought to have accepted the plea of the appellant that various items of addition related to the Plant and Machinery and hence depreciation at the rate of 25% was correctly claimed. It be so held now." 3. We have heard both the sides and perused the materials on record. We find that the Assessing Officer restricted the claim of depreciation on electrical installation at 15% as against claimed by the assessee at 25% by stating the reasons that the assessee has purchased various stitching machines for which it had also purchased cable and other parts for installation. According to the AO, the allowable rate of depreciation on electrical installation is 15% and accordingly he disallowed 10% of depreciation. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) confirmed the action of the Assessing Officer by giving following finding in para-2.2 of his appellate order:- "2.2 I have considered the submissions of the Authorized Representative. The appellant was asked to give details of electrical installation and copies of invoices. On perusal of details filed. It is seen that the electrical installat....
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....ances are at Rs. 3,29,94,449/. Even otherwise, the assessee has filed before us the copies of ledger account of suppliers at pages No.31 to 44 and 66 to 69 of the assessee's paper book, from where we have gathered that these loans are to the suppliers as advance for purchase. In view of the above facts, once there is surplus share capital and reserve & surplus available with the assessee, the interest on advances cannot be disallowed. Accordingly, we reverse the order of lower authorities on this issue. This issue of the assessee's appeal is allowed. 6. The next issue in this appeal of assessee is against the order of CIT(A) in confirming the disallowance of additional depreciation on plant and machinery. For this, assessee has raised the following ground No.3:- "3. The learned C.I.T.(Appeals) also further erred in confirming the disallowance of additional depreciation of Rs. 5,31,797/- u/s.32(1)(iia) on the Plant & Machinery by holding that combined capacity was to be seen irrespective of the items for which the machinery was purchased. On the facts and in view of the correct legal position, additional depreciation ought to have been allowed and the same be directed to be al....
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....and towels of 5,45,000. Thus expansion is for 21,05,000 to 25,345,000 by 4,40,000 which is 20.90% of 21,45,000 and less than 25% of 21,45,000 which is 5,26,250, hence the required expansion has not been achieved, so the appellant is not eligible for addition al depreciation. Accordingly the disallowance made by the Assessing Officer is confirmed." 9. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the case records that the lower authorities have disallowed the claim of additional depreciation on the premise that, no doubt the installed capacity of "made-ups" i.e. the bed sheets etc. have increased on the basis of sewing machines installed at 20,00,000 as against the capacity as on 31-03- 2002 at 15.60 lakhs. According to the lower authorities, as per schedule 24 of the annual accounts of the assessee the combined capacity of bed sheets of 15,60,000 and towels of 5,45,000 was 21,05,000 in the F.Y. 2002-03 and towels of 5,45,000. Thus expansion is for 21,05,000 to 25,345,000 by 4,40,000 which is 20.90% of 21,45,000. According to the lower authorities the capacity is increased at less than 25% of 21,45,000 which is at 5,26,....
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....n 288 certifying that the deduction has been correctly claimed in accordance with the provisions of this clause. Explanation, - For the purposes of this clause,- (1) "new industrial undertaking" means an undertaking which is not formed,- (a) by the splitting up, or the reconstruction, of a business already in existence ; or (b) by the transfer to a new business of machinery or plant previously used for any purpose ; (2) "installed capacity" means the capacity of production as existing on the last day of any previous year commencing on or after the 31st day of March, 2002". We find from the above provision that any Industrial Undertaking existing before 1-4- 2002, and during the previous year in which it achieves the substantial expenses by way of increase in installed capacity by not less than 25% an additional depreciation will be allowed at 15%. For this, the assessee has to furnish the details of machinery or plant and increase in the installed capacity of production. We find from the facts of the case that the assessee has filed audit report in Form No.3AA under rule 5A as prescribed in respect of "made-ups" division of the assessee-company, whereby the assess....