Bannari Amman Sugars Ltd. Vs DCIT (ITAT Chennai)
ITAT Chennai held that in case the assessee claims depreciation on the new asset, then, it cannot claim investment allowance under Section 32AC of the Income Tax Act.
Facts- The assessee is a resident company and is engaged in manufacturing of sugar, alcohol, granite and cogeneration of power from co-generation Unit. It was observed that there was a claim for additional depreciation at 20% by the assessee on the plant and machinery installed in the co-generation Unit by him. However, AO rejected the claim of the assessee and completed the assessment vide order dated 28-12-2018. CIT(A) rejected the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that the assessee misconstrued the provisions of section 32AC(4)(v) of the Act in as much as per said provisions, it is very clear that if assessee claims depreciation then it cannot claim investment allowances on new asset. The A.O and Ld. CIT(A) after considering the facts that the assessee already claimed 80% depreciation on new asset and further 20% additional depreciation giving total 100% depreciation on new asset has rightly re-computed u/s. 32AC of the Act and thus, we are inclined to uphold the order of Ld. CIT(A) and dismiss the appeal filed by the assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
1. Aforesaid two appeals Nos. ITA/939/Chny/2022 and ITA 946/Chny/ 2022 filed by assessee and Department respectively arises out of the order of the learned Commissioner of Income Tax (Appeals)- 16, Chennai [hereinafter “CIT(A)”] dated 17-08-2022 for the Assessment Year 2015-16 in the matter of assessment order passed by Ld. Assessing Officer [AO] under section 143(3) r.w.s. 92CA of the Income Tax Act, 1961 [hereinafter “the Act”] on 28-12-2018. At first we adjudicate the appeal of the assessee and thereafter the appeal of the Department would be adjudicated.
ITA No. ITA 939/Chny/2022:
2. The grounds of appeal of the assessee read as under:
1. The order of the Commissioner of Income Tax (Appeals)-16 relevant to the AY 2015-16 dt. 17-08-2022 is opposed to law, facts and circumstances of the case.
2. The learned Commissioner of Income Tax (Appeals)-16 has erred in disallowing the investment allowance claimed by the appellant under section 32AC(1A) amounting to Rs. 11,77,36,432/- on Co-generation power plant and Anaerobic Digester.
3. The learned CIT(A) ought to have considered that the Appellant had claimed the allowance only on new asset acquired during the year which is well within the ambit of new asset as defined under section 4 of Section 32AC.
4. The learned CIT(A) without considering the legislative intent to provide incentive benefits to manufactures and intention of inserting sub-section 4 of section 32AC which specifically denies the allowance only for those assets which have been claimed 100% deduction in any previous years and not to restrict the claim in the same year under consideration.
5. For the purposes of this section, “new asset” means any new plant and machinery (other than ship or aircraft) but does not include-
I. any plant or machinery which before its installation by the Appellant was used either within or outside India by any other person;
II. any plant or machinery installed in any office premises or any residential accommodation in the nature of a guest house;
III. any office appliances including computers or computer software;
IV. any vehicle; or
V. any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.
6. It is submitted that the exclusion mentioned in Section 32AC(4) r.t. “new asset”, only to restrict the claim already made prior to the current previous year i.e. where depreciation has already been allowed in the earlier years. As far as the Appellant Company is concerned, it is reiterated that no depreciation was claimed in any of the prior years other than AY 2015-16. Further, it is an incentive deduction given besides the depreciation claim admissible to the Appellant.
7. The learned Commissioner of Income Tax erred in stating that the Appellant has incorrectly claimed allowance under section 32AC which is not tenable.
8. For these and such other rounds that may be adduced at the time of hearing, it is prayed that the disallowance made in the order dated 17-08-2022 may kindly be deleted.
3. The brief facts of the matter are that the assessee is a resident company and is engaged in manufacturing of sugar, alcohol, granite and cogeneration of power from co-generation Unit. It filed return of income on 08-11-2015 declaring taxable income as Nil under normal provisions and book profit of Rs. 39,96,773/- which was subjected for scrutiny through CASS. Accordingly, requisite notices under the Act were served upon the assessee. The assessee responded such notices by submitting the details as called for. The case was also referred to the Transfer Pricing Officer for ascertaining the Arms Length Price. However, the Ld. TPO did not propose/suggest any adjustment. There was a claim for additional depreciation at 20% by the assessee on the plant and machinery installed in the co-generation Unit by him. However, the Ld. AO rejected the claim of the assessee and completed the assessment vide order dated 28-1 2-201 8. The Ld. AO added Rs. 8,38,71,478/- and Rs. 11,98,85,981/- respectively, to the total income of the assessee. While completing the assessment, the Ld. AO observed as under:-
“6a. On perusal of the records it is noticed that assessee has claimed deduction under section 32AC(1A) of RS. 38,18,07,764/- while working out the taxable income. The classification of assets on which the deduction is claimed is as below:
