The Income Tax Appellate Tribunal (ITAT), Chennai Bench while allowing the relief since non-usage of Machineries due to reasons beyond the control of assessee held that the depreciation allowable on Machineries kept ready for Use.
The assessee company, M/s. Agile Electric Sub Assembly Pvt.Ltd. is engaged in the business of manufacture of components, subassembly for motors and tools etc. filed its return of income for the assessment year 2013-14 admitting total income of Rs. 3,58,42,730/-.
During the year the assessee has made various additions to plant and machinery and such plant and machinery was acquired and installed before 30.03.2013. The assessee has claimed depreciation as per the provisions of section 32 of the Act and further, wherever assets were put to use for less than 182 days, the assessee has claimed half of actual depreciation allowable as per the Act. The Assessing Officer has disallowed depreciation claimed on plant and machinery on the ground that although plant and machinery was installed and commissioned before 30.03.2013, but the same has not been put to use in the business of the assessee.
Therefore, claim of depreciation cannot be allowed unless the assets are put to use in the business of the assessee for the relevant assessment year. To come to said conclusion, the Assessing Officer has relied upon production of finished goods furnished by the assessee and argued that in one day such a huge quantity of finished goods cannot be produced. He has also held that assets were not in fact put to use in the business and hence rejected the depreciation claim on said plant and machinery. However, the CIT(A), on appeal deleted additions made by the Assessing Officer.
The issue raised was in respect of deletion of disallowance of depreciation made by the Assessing Officer on the addition of plant and machinery.
The department submitted that the CIT(A) has erred in deleting disallowance of depreciation, though it was not established that plant and machinery was put to use during the relevant previous year. The department further submitted that although the CIT(A) while agreeing that the assessee could not have produced such volumes of finished goods in one day thereby in agreement with the findings of the Assessing Officer that plant and machinery could not have been put to use on the last day of the relevant assessment year, but erred in holding that depreciation was allowable on plant and machinery, even though the same is ready for use.
The assessee, on the other hand, supporting the order of the CIT(A) submitted that assessee has placed all evidences to prove that plant and machinery was put to use in the business of the assessee and based on the evidences placed by the assessee, the CIT(A) has rightly held that the assessee has put to use the plant and machinery in the business for the relevant assessment year to delete the additions made towards disallowance of depreciation.
The coram of V.Durga Rao and G.Manjunatha noted that the Assessing Officer has erred in disallowing depreciation on plant and machinery on assumption and surmises that in one day so much units of finished goods cannot be produced without understanding fact that in one day so many lakhs of units can be produced depending upon installed capacity of the plant and machinery.
“Even assuming for a moment, the asset was not put to use in the business of the assessee, but when the plant and machinery is installed and ready for use in the business for the relevant assessment year, then claim of depreciation can be allowed. Therefore, we are of the considered view that there is no error in the findings recorded by the learned CIT(A) to delete disallowance of depreciation on plant and machinery,” the ITAT said.
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