The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the depreciation to plant and machinery installed for pilot projects which were added to existing blocks.
The assessee, Indorama Industries Limited was a resident corporate entity engaged in the business of manufacturing spandex yarn in a factory. The Assessing Officer while examining assessee’s claim of depreciation, noticed that the assessee had capitalised investment made in plant and machinery in the second half of the year and claimed depreciation thereon.
The assessee furnished details of plant and machinery installed for the pilot project, the assessee also furnished a certificate from a chartered engineer regarding successful commissioning of the pilot project.
The Assessing Officer was of the view that evidence furnished by the assessee would not conclusively prove that the plant and machinery were put to use before the end of the financial year and commercial production has commenced. Accordingly, he disallowed the claim of depreciation.
Gautam Jain and Monika appeared on behalf of the assessee and submitted that the assessee was having an existing manufacturing. He submitted, that the pilot project undertaken by the assessee was in the same factory premises and plant and machineries were added to the block of assets during the year and since the plant and machinery were put to use, the assessee had claimed depreciation under Section 32 of the Income Tax Act.
He further submitted that no condition of put to use once the asset falls within a particular block included in the definition of block of assets under Section 43(6)(c) of the Income Tax Act.
Anuj Garg,on behalf of the revenue submitted that the certificate issued by the chartered engineer had only spoken of commissioning of the plant and machinery and not of commencement of production
The two member Bench of Saktijit Dey, (Judicial Member) and M. Balaganesh, (Accountant Member) allowed the appeals holding that in subsequent assessment years, the Assessing Officer had allowed assessee’s claim of depreciation on the capitalised plant and machinery of the pilot project.
On a reading of section 43(6)(c) of the Act, the Bench found that as per the definition of block of assets therein, there was no condition that the plant and machinery must have been put to use. The only condition was that the assets must have been acquired during the relevant year.
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