Assessee is Entitled to Additional Depreciation even if the Plant & Machinery not Installed: Bombay HC [Read Judgment]

Business Income - Bombay High Court 2 - Tax Scan

In a recent ruling, the division bench of the Bombay High Court held that additional depreciation under section 32(1)(iia) of the Income Tax Act can be claimed in respect of plant & machinery even if the same is not installed by the assessee.

The assessee, M/s.Industrial Credit & Investment Corpn., is a financial institution engaged in the business of leasing of machinery, claimed investment allowance under Section 32A of the Income Tax Act Act and additional depreciation under Section 32(1)(iia) of the Act.

The assessee also claimed extra shift allowance in respect of the plant and machinery leased out by it. However, the AO denied all these claims and completed assessment against the assessee, which was quashed by the first appellate authority on appeal. Before the Tribunal, the Revenue agreed to allow the claim for investment allowance. With regard to the other claims, the Tribunal upheld the order of the CIT(A).

Regarding the claim of additional depreciation, the bench noted that the leased plant and machinery was not installed by the assessee.

“The language of Section 32(1)(iia) being in pari materia with Section 32A(1), in respect of investment allowance, there is no requirement for claiming additional depreciation under Section 32(1)(iia) that the plant and machinery must be installed and used by the Assessee for manufacture of articles or things, as in the case of investment allowance under Section 32A of the Income Tax Act.”

The bench, further noted that the ratio laid down in CIT vs. First Leasing Co. of India Ltd. and Shaan Finance (P.) Ltd are squarely applicable to this case also and therefore, the assessee is entitled to claim additional depreciation.

Allowing the claim of the assessee on extra shift allowance, the division bench comprising of Justice M.S Sanklecha and S.C Gupte noted that “The Supreme Court, in the case of CIT vs. Maharashtra Apex Corporation Ltd. (254 ITR 98), following the ratio of Shaan Finance (P.) Ltd. (supra), has held that the assessee was entitled to extra shift allowance of depreciation, even though it was the lessee, and not the assessee, who had used the machinery in double shift. The decision squarely covers the Assessee’s case herein. There is no dispute that the respective lessees of the Assessee had worked in extra shift. In his order,the CIT(A) has clearly recorded that “the lessees had worked extra shift and relevant certificates were produced before the Assessing Officer.”

Read the full text of the Judgment below.