June 2013
(2011) 133 ITD 306 (Mum.) NRB Bearings vs. DCIT A.Y.: 2005-06. Dated : 20th September, 2011
By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi, Chartered Accountants
Reading Time 2 mins
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Section 32(1)(iia) – Allowability of Additional Depreciation Claim – enhanced capacity has to be considered unit wise and not in relation to entire business
Facts:
The assessee acquired plant & machinery in a manufacturing unit at Waluj, Ahmedabad on which additional depreciation was claimed. The claim mentioned was rejected by the AO on grounds that the enhanced capacity can only be considered with reference to the overall capacity of the company and not a single unit.
Held:
The increase in capacity is to be compared with reference to the concerned undertaking where the machinery was installed and not the whole business. This was because the additional depreciation was claimed on only one unit where the machinery was installed. This made the manufacturing unit a separate industrial undertaking for the purpose of allowability of depreciation. Also the allowability of additional depreciation nowhere requires that the capacity increase is to be compared with reference to the operational activities of all the units which have already been set up earlier by the assessee. The intention of the legislature is only to examine the increase in capacity of the undertaking where the machinery was installed and not of the entire business. The claim of the assessee was thus justified.
