Case Law Details
The Second issue relates to additional depreciation of Rs. 4,98,859/-. Assessing officer has disallowed the balance additional depreciation claimed by assessee on the machinery installed in the second half of the previous year relevant to the A.Y. 2007-08. The assessee’ s contention was that he was eligible for additional depreciation @ 20 % on the plant and machinery purchased in the second half of the financial year 2006-07 but being used less than 180 days,
only 10 % depreciation was allowed by A.O. The balance 10 % additional depreciation was carried forward in the year under appeal and claimed in the computation of income which was disallowed by A.O. on the ground that carried forward of such additional depreciation is inadmissible as per provisions of section 32(1)(iia). The Ld. CIT(A) has given relief to the assessee by following the decision of ITAT, Delhi in the case of DCIT vs. Cosmo Films Ltd (124 Taxman.com 189) wherein it has been held that the additional depreciation cannot be restricted to 50 % and it has to be allowed in succeeding years if it is not allowed full in the relevant year. For the sake of convenience the relevant portion of the order is as under:-
“17. We have heard both the sides on this issue. Section 32(1)(iia) inserted by Finance (No. 2) with effect from 1.4.2003. In speech of Finance Minister this clause was inserted to provide incentive for fresh investment in industrial sector. This clause was intended to give impetus to new investment in setting up a new industrial unit or for expanding the installed capacity of existing units by at least 25 % thereafter these provisions were amended by the Finance (No.2) Act of 2004 w.e.f. 1 .4.2005 and provided that in the case of any machinery or plant which has been acquired after the 31st day of march, 2005 by an assessee engaged in the business of manufacture of production of any article or thing a further sum equal 15 % of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) of section 33(1). This additional allowance u/s 32(1) (iia) is made available as certain percentage of actual cost of new machinery and plant acquired and installed. This provision has been directed to the setting up new industrial undertaking making or for expansion of the industrial undertaking by way of making more investment in capital goods. Thus, these are incentives aimed to boost new investments in setting up and expanding the units. The proviso to section 32(1)(iia) restricts the benefits in respect of following- ‘Provided that no deduction shall be allowed in respect of_
(A) Any machinery or plant which, before its installation by the assesses was used either within or outside India by any other person; or
(B) Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house or
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