Tools, dies, etc. used to manufacture products to be treated as part of machinery: ITAT

Case Details: Efacec Switchgear India (P.) Ltd. v. ACIT - [2022] 140 taxmann.com 247 (Delhi-Trib.)

Judiciary and Counsel Details

• • R.K. Panda, Accountant Member & Anubhav Sharma, Judicial Member
  • Yogesh Jain & Sahil Bhalla, CA’s for the Appellant.
  • Atiq Ahmad, Sr. DR for the Respondent.

Facts of the Case

Assessee was engaged in business of manufacturing switchgear products. It claimed additional depreciation on plant and machinery comprising of tools, dies, jigs, etc. The assessee had submitted that it was complying with all the provisions of section 32(iia) and thus was entitled to additional depreciation.

The Assessing Officer (AO) allowed additional depreciation on plant and machinery but denied it on tools, dies, jigs, etc. CIT(A) also upheld the order of AO. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that it was evident that moulds, dies, and tools were not independent of the plant and machinery, but are parts of the machinery. Once they are worn out, the machines cannot turn out the product to the business specifications and this had to be obtained only on a replacement of the tools or the dies and moulds.

Further, the stand taken in the assessment order was contradictory in itself, in-as-much-as, as on the one hand the new plant & machinery and tools, dies, jigs, etc. have been considered as ‘Plant & Machinery’ and normal depreciation @ 15% had been allowed on the other hand the same had not been considered as eligible for additional depreciation.

Thus, the claim of the assessee was to be allowed.

List of Cases Reviewed

• • Scientific Engg. House (P.) Ltd. v. CIT [1985] 23 Taxman 66/[1986] 157 ITR 86 (SC) (para 6) followed.

List of Cases Referred to

• • Scientific Engg. House (P.) Ltd. v. CIT [1985] 23 Taxman 66/[1986] 157 ITR 86 (SC) (para 5.1)
  • Niko Resources Ltd. v. Asstt. CIT [2017] 88 taxmann.com 691/395 ITR 301 (Guj.) (para 5.1)
  • Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480/196 ITR 188 (SC) (para 5.1)
  • IRC v. Barclay, Curie & Co. Ltd. [1970] 76 ITR 62 (HL) (para 6).