Additional depreciation on revenue expenditure on installation of plant and machinery allowable. ITAT directs AO to delete the addition
ABCAUS Case Law Citation:
ABCAUS 3165 (2019) (10) ITAT
Important case law relied upon by the parties:
Trichy Distilleries & Chemicals Ltd. vs. CIT reported in (1999) 235 ITR 194
Additional depreciation on revenue expenditure on installation of plant and machinery
In the instant case, the appeal by the Assessee was directed against the order of the Commissioner of Income Tax (Appeals) in confirming disallowance made by the Assessing Officer (AO) for the alleged excess claim of additional depreciation on plant and machinery.
The return of the assessee was picked for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) was framed. While framing the assessment, the Assessing Officer disallowed additional depreciation on the basis that the certain items of expenditure were neither plant & machinery nor parts thereof on which additional depreciation could be granted.
The CIT(A) dismissed the ground of appeal on the ground that some of the items like; payment for factory visit, payment for vehicle charges, payment for inspection were not relating to plant and machinery, and therefore, could be considered for additional depreciation.
Aggrieved by this the assessee was in further appeal before the Tribunal.
The assessee argued that the authorities below are not justified in disallowing the claim. He submitted that law is very clear that additional depreciation is allowable. He drew attention to Section 32(1)(iia) of the Act. He further submitted that as per this provision actual cost defined u/s 43(1) is to be adopted. He contended that all expenditure relates to the expenditure incurred on installation of the asset.
On the contrary, the Department submitted that the assessee ought to prove the nexus between the expenditure incurred and the installation of the asset. He further contended that the assessee has to prove incurring of the expenditure which would form part of the actual cost of the asset. In the absence of such claim of the assessee it cannot be allowed.
The Tribunal noted that as per the submission of the assessee the disallowance included interest on bank term loan which has been capitalized. Further expenditure had been incurred on the insurance which were verifiable from records hence the Assessing Officer was directed to delete these additions.
However, in respect of the other expenditure, the Tribunal directed that the Assessing Officer would verify whether those were related to installation of the plant and machinery and would delete if they were found to be incurred for the said purpose.
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