Investment Allowance claimed u/s. 32AC of Income Tax Act towards new asset shall not allowable if assessee already claim depreciation on New Asset: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Chennai bench held that investment allowance claimed under Section 32AC of the Income tax Act,1961 towards the new asset should not be allowable if the assessee already claimed depreciation on the new asset.

Assessee ,Bannari Amman Sugars Ltd.is a resident company and is engaged in manufacturing of sugar, alcohol, granite and cogeneration of power from co-generation Unit.After filing the return of income assessee case was selected for scrutiny.

During the proceedings AO noted that assessee claimed  20% depreciation on the plant and machinery installed in the cogeneration Unit by him. However the AO rejected the claim and completed the assessment .

Aggrieved by the order, the assessee filed an appeal  before the commissioner of Income Tax Appeal(CIT(A), who dismissed  the appeal and observed that assessee has already claimed 100% depreciation.

Thereafter the assessee filed another appeal before the tribunal.

Before the bench R. Vijayaraghavan , counsel for the assessee submitted that the assessee did not claim depreciation allowance in any of the prior years other than A.Y 2015-16 and the restriction not to allow the depreciation allowance with retrospective effect is for new assets only on which previously there was claim for allowance.

N. Senthil Kumar, Department Representative (DR)  argued that Assessee has to invest in new plants or machinery. The plant and machinery so invested in are termed as new assets.

According to clause (iv) of sub-section 4 of section 32AC, if in any previous year, the assessee had claimed the cost of asset as depreciation in computing income under the head business or profession, then the portion on which claim is already made cannot be part of the new asset.

Thus in the present case, assessee  in the case machineries used in cogeneration of power and anaerobic digester  had already claimed 100% depreciation. Therefore the DR argued that if assessee claimed 100% depreciation on any asset, those assets would not be entitled for any further allowance under section 32AC of the Income Tax Act

After considering the submissions of both parties the  tribunal observed that  the appellant claims that it has claimed  depreciation for the assessment year 2015-16, but as per the provisions of Section 32ACof the Income Tax Act, if assessee claims depreciation in any previous year then to  that extent it could not claim deduction under Section 32AC of the Income Tax Act.

Thus if the assessee claims depreciation then it could not claim investment allowances on new assets.

After considering  the facts submitted by both parties, the two member bench of Manjunatha. G, (Accountant Member ) and Manmohan Das (Judicial Member) dismissed the appeal of the assessee.

To Read the full text of the Order CLICK HERE

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