In DCIT, Cir.1 (1)(1) vs. M/s.Ahmedabad Strips P.Ltd, the Ahmedabad bench of the ITAT held that depreciation under section 32 of the Income-tax Act is allowable on lab equipment and electrical installation as they can be treated as ‘plant and machinery’ used for the manufacturing process.
The bench comprising Rajpal Yadav, Judicial member, and Pradip Kumar Kedia Accountant member were held so while dealing the Revenue’s appeal against orders of CIT (A) for the Assessment Year 2010-11 and 2011-12 respectively.
In instant appeal, Assessee has installed lab equipment and certain electrical items and claimed an additional depreciation at the rate of 20% on these items. The AO had an opinion that lab equipment and electrical installations would not be considered as part of plant & machinery used for manufacturing purpose. Hence, AO disallowed additional depreciation and made addition of Rs.1,10,025/-
Aggrieved Assessee approached the CIT (A) and they deleted the addition made by AO. Revenue carried the matter before ITAT wherein Tribunal bench observed the fact that AO has not disputed regarding the nature of the business or certain installation made by the Assessee.
Allowing the Assessee’s contentions, the Tribunal stated that since this electrical machine required additional power and it is interconnected with its manufacturing activity, it cannot be said that these cables etc. would not be part of manufacturing process.
Finally, the bench declared that Assessee rightly claimed for additional depreciation on lab equipment and electrical items which were already allowed by CIT (A). Accordingly, the Tribunal dismissed Revenues appeal.
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