11 Section 32 read with section 43(3) – Depreciation – Assessee being in the business of manufacture and sale of soft drinks and required to supply the product to far off places in chilled condition. Visicoolers purchased by it and installed at the site of distributors to keep the product in cold saleable condition was entitled for additional depreciation.

[2017] 192 TTJ (Kol) 361

DCIT vs. Bengal Beverages (P) Ltd.

ITA NO : 1218/Kol/2015

A.Y. : 2010-11

Dated: 6^th October, 2017

FACTS

–    The assessee company was
engaged in the business of manufacture of soft drinks, generation of
electricity through wind mill and manufacture of PET bottles for packing of
beverages. The assessee had installed visicoolers at distributors premises so
as to deliver product to ultimate consumer in its consumable form, i.e.,
chilled form. The assessee claimed additional depreciation on Visicooler.

–    The AO disallowed the claim
of additional depreciation on the ground that these Visicoolers were kept at
distributors premises and not at the factory premises of the assessee company.
The assessee submitted before the AO that Visicoolers were required to be
installed at the delivery point to deliver the product to the ultimate consumer
in chilled form, therefore these were part of assessee’s plant. However, the AO
rejected the assessee’s contention and held that assessee was not carrying out
manufacturing activity on the product of the retailer at retailer’s premises
and merely chilling of aerated water could not be termed as manufacturing
activity and even that chilling job was the activity of the retailer and not of
the assessee.

–    Aggrieved by the AO’s order
the assessee preferred an appeal before CIT(A). The CIT(A) deleted the addition
made by AO. The assessee’s contention that usage of visicooler at the
distributor’s premises so as to ensure that the drink is served ‘cold’ to the
ultimate consumer tantamounts to usage in the course and for the purposes of
business, was upheld by CIT(A).

HELD

–     The Tribunal held that the
benefit of additional depreciation is available to an assessee engaged in the
business of manufacture of article or thing. It is therefore clear that the
additional deprecation is available only to those assessees who manufacturer,
on the cost of plant & machinery. Additional depreciation allowance is not
restricted to plant & machinery used for manufacture or which has first
degree nexus with manufacture of article or thing. The condition laid down in
section 32(1)(iia) is that if the assessee is engaged in manufacture of article
or thing then it is entitled to additional depreciation on the amount of
additions to plant & machinery provided the items of addition do not fall
under any of the exceptions provided in clauses (A) to (D) of the proviso. ln
this case, the assessee was engaged in the business of manufacture of cold
drinks. This fact had not been disputed by the AO. Therefore, the assessee was
legally entitled to avail the benefit of additional depreciation u/s. 32(1)(iia).

–    The “visicooler”
is a “plant & machinery”. The said item falls within the category
of “plant & machinery” as laid down in the I.T. Rules, 1962. The
“visicooler” also does not fall within the exceptions provided in
clauses (A) to (D) of the proviso to section 32(1)(iia).

–    In the result, the appeal
filed by the Revenue was dismissed.