Sudarshan Jeans Pvt. Ltd. Vs ITO (ITAT Chandigarh)
Electrical Installations That Run the Factory Are Plant: ITAT Allows ₹41.11 Lakh Additional Depreciation
Function of the Installation Decides Its Classification
The Chandigarh Bench of the Income Tax Appellate Tribunal allowed additional depreciation of ₹41.11 lakh under section 32(1)(iia) on electrical installations forming an integral part of the assessee’s plant and machinery.
Following its decision in the assessee’s own case for the preceding year, the Tribunal held that installations indispensable to the manufacturing process and functionally inseparable from machinery were properly classified as plant and machinery.
The decision distinguishes such installations from ordinary electrical fittings covered by the depreciation entry for furniture and fittings. The description “electrical installation” did not, by itself, determine the applicable treatment.
₹4.11 Crore Capitalised With Plant and Machinery
The assessee had incurred expenditure of approximately ₹411.17 lakh on additions to electrical installations. It capitalised the expenditure along with plant and machinery on the ground that the installations were integral to that machinery.
It claimed additional depreciation at 10%, amounting to ₹41.11 lakh, under section 32(1)(iia).
To support the classification, the assessee furnished a Chartered Engineer’s certificate.
The Assessing Officer rejected the additional depreciation claim, treating the certificate as an afterthought. The CIT(A), NFAC, upheld that decision by an order dated 17 December 2025.
The assessee consequently appealed to the Tribunal. A delay of 25 days in filing the appeal was condoned.
Regular Depreciation at 15% Had Already Been Allowed
A significant feature was that the Assessing Officer had fully allowed regular depreciation at 15%, the rate applicable to plant and machinery, on these very electrical installations.
The dispute therefore concerned the additional depreciation claim rather than a denial of all depreciation.
Before the Tribunal, the assessee submitted that the issue was covered by the decision in its own case for AY 2015-16, ITA No. 1070/Chandi/2024, dated 30 December 2025.
The Revenue opposed the claim, pointing out that the Chartered Engineer’s certificate had been obtained substantially after installation and was unsupported by technical drawings.
The Tribunal nevertheless found that the issue on merits was covered by the earlier decision and that the facts were materially the same.
Ordinary Electrical Fittings Differ From Manufacturing Installations
The earlier order, reproduced in the present decision, examined the distinction in the depreciation schedule.
Appendix I to the Income-tax Rules prescribes 10% depreciation for furniture and fittings, including electrical fittings. Note 5 describes electrical fittings as including wiring, switches, sockets, other fittings and fans.
However, the expenditure examined in the assessee’s earlier case included transformers, machine panel boards for transformer connectivity, metal detectors, spark detectors and yarn-conditioning machines.
The detectors were critical safety devices intended to prevent fire hazards in a textile factory. The yarn-conditioning machines regulated moisture in yarn.
These assets performed functions directly connected with manufacturing. They were consequently distinguishable from ordinary electrical fittings serving general premises requirements.
Installations Were Functionally Inseparable From Machinery
In the preceding-year decision, the Tribunal found that the installations were indispensable for running the manufacturing process and functionally inseparable from the plant and machinery.
It therefore held that the expenditure was correctly classified as part of plant and machinery.
That decision relied on Oswal Woollen Mills Ltd., (289 ITR 261), Punjab and Haryana High Court, which held, in the context of investment allowance, that air-conditioning plants, electrical installations and transformers constituted an integral part of plant and machinery.
The Tribunal also referred to Nalwa Steel Power Ltd., ITA No. 4559/Del/2010, dated 9 August 2016, as supporting a similar view.
These authorities supported the functional classification of the installations. The earlier Tribunal order expressly upheld both regular depreciation at 15% and additional depreciation on the relevant assets.
Additional Depreciation Allowed Following the Earlier Year
Finding the facts materially identical, the Tribunal followed its preceding-year decision and directed the Assessing Officer to allow the additional depreciation as claimed.
No other ground was urged before it. The appeal was recorded as partly allowed, although the disputed additional depreciation claim succeeded.
The order did not separately examine why the claim was made at 10%. Its adjudication concerned the eligibility of the electrical installations as integral components of plant and machinery.
Author’s Comments
The decision offers a practical lesson for manufacturing businesses: asset classification should reflect what an installation does in the production process.
An electrical expenditure ledger may contain both ordinary fittings and installations that power, control, protect or support manufacturing machinery. Treating every item identically merely because it is electrical can obscure that distinction.
Technical documentation remains valuable. Equipment specifications, invoices, installation records and engineering explanations should establish the connection with production machinery.
The allowance of regular depreciation at 15% was a relevant feature here, but additional depreciation remains subject to its own statutory conditions. The judgment should therefore not be read as extending that benefit automatically to every electrical asset.
Where an installation is part of the manufacturing system, its electrical character does not reduce it to an ordinary fitting.
Cases Discussed
- Oswal Woollen Mills Ltd. (289 ITR 261) (Punjab & Haryana High Court)
- Nalwa Steel Power Ltd. (ITA No.4559/Del/2010, dated 09-08-2016) (ITAT Delhi)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT CHANDIGARH
1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 17.12.2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 147 r.w.s. 144B of the Act on 21.03.2022. The registry has noted delay of 25 days in the appeal which stand condoned. The sole issue that fall for our consideration is assessee’s claim of additional depreciation on electrical installations u/s 32(1)(iia) which are stated by the assessee to be integral part of Plant & Machinery which is eligible for additional depreciation. The Ld. AR stated that this issue is covered in assessee’ favor by the decision of this Tribunal in assessee’s own case for AY 2015-16, ITA No.1070/Chandi/2024 dated 30.12.2025. A copy of the same has been placed on record. The Ld. Sr. DR, on the other hand, referred to the certificate of Chartered Engineer which was furnished much after installation of machinery and not supported by any technical drawings. Having heard rival submissions and upon perusal of case record, the appeal is disposed-off as under.
2. The assessee claimed additional depreciation u/s 32(1)(iia) for Rs.41.11 Lacs on electrical installations. The addition to electrical installation was to the extent of Rs.411.17 Lacs and the same was capitalized along with Plant & Machinery on the ground that entire electrical installations were integral to Plant & Machinery. The assessee furnished certificate of Chartered Engineer to that effect. However, the same was held to be mere after-thought. Finally, the claim of additional depreciation of 10% was denied. Pertinently, regular depreciation of 15% as applicable to Plant & Machinery as claimed by the assessee was fully allowed by Ld. AO on these electrical installations. The Ld. CIT(A) upheld the action of Ld. AO against which the assessee is in further appeal before us.
3. We find that this issue, on merits, is covered in favor of the assessee by the aforesaid decision of this Tribunal for AY 2015-16. The bench held as under: –
8. We find substantial force on merits also. It could be seen that Appendix-1 Depreciation Schedule of Income Tax Rules, prescribes depreciation rate of 10% for Furniture and fittings which include electrical fittings. The electrical fittings as defined in Note-5 include electric wirings, switches, sockets, other fittings and fans etc. The material on record would indicate that electrical installation expenditure included purchase and installation of transformers, machine panel boards for transformer connectivity, metal detectors and spark detectors (which are critical safety devises to prevent fire hazards in a textile factory) and yarn conditioning machines used for moisture regulation in yarn. These installations are indispensable for running the manufacturing process and are functionally inseparable from the plant and machinery. The expenditure incurred under this head is thus integral to Plant & Machinery and correctly been classified as such. This being so, the ratio of decision of Hon’ble Punjab & Haryana High Court in the case of Oswal Woollen Mills Ltd. (289 ITR 261) would apply holding that air conditioning plants, electrical installations and transformers constitute an integral part of Plant & Machinery and therefore, eligible for investment allowance. Similar is the view of Delhi Tribunal in the case of Nalwa Steel Power Ltd. (ITA No.4559/Del/2010 dated 09-08-2016) taking the same view. Respectfully following the same, we would hold that the assessee’s claim of depreciation @15% and claim of additional depreciation on electrical installation was in order. The assessee succeeds on merits also.
Facts being pari-materia the same, taking the same view, we direct Ld. AO to allow impugned additional depreciation to the assessee as per its claim. No other ground has been urged in the appeal.
4. The appeal stands partly allowed.
Order pronounced on 01st October, 2026
