Tools, moulds, jigs used for manufacturing eligible for additional depreciation u/s 32: ITAT

Tools, moulds, jigs used for manufacturing eligible for additional depreciation u/s 32: ITAT The brief facts of this case is that the assessee during the relevant assessment year had claimed additional depreciation of Rs. 6,11,277/- on the addition of new plant and machinery of Rs. 61,12,77/- as per provisions of section 32(iia). However, the assessing officer held that the assessee had made the addition of tools which can not be treated as installation of plant and machinery and hence disallowed the claim of additional depreciation. The assessee went in appeal before the ld. CIT(A) raising grounds that certain amendments were made regarding additional depreciation by Finance Act, 2005. Kind attention was invited to para 3.6 of the explanatory notes on the provisions of the Finance Act, 2005- Circular No. 3/2006 dated 27.02.2006 which states as under: "in order to encourage investment the Finance Act, 2005 has amended section 32 to increase the rate of additional depreciation to twenty percent on new machinery and plant other than ships and aircraft, acquired and installed after the 31st day of March, 2005 and dispensed with the condition of additional depreciation to be allowed to a new industrial undertaking and the condition of expansion in installed capacity". It claimed that the circular makes it is clear that additional depreciation is to be allowed on new Plant and machinery acquired and installed after the 31st day of March 2005. There is no requirement that additional depreciation is to be allowed for a new industrial undertaking or there should be an expansion of installed capacity. The ld. CIT(A) dismissed the appeal filed by the assessee and upheld the order passed by AO. Aggrieved by the order the assessee preferred an appeal before the tribunal. The ld. AR submitted that the assessee used tools, dies, jigs, etc for its business of manufacturing switchgear products and without this equipment, it is not possible to manufacture switchgear products. Hence, the same is in nature of Plant and Machinery. It was submitted that in the assessment order also tools, dies, jigs, etc. have been treated as Plant & Machinery and 15% depreciation on the same has been allowed. However, the same has not been treated as Plant & Machinery only for the purpose of additional depreciation. ITAT was of the view that parts used for manufacturing the product are not independent of the plant and machinery, once they are worn out the machines cannot turn out the product to the business specifications and this has to be obtained only on a replacement of the tools or the dies and moulds. Further also, in the assessee's own case in the subsequent years, the revenue has allowed the claim of additional depreciation on these tools etc. and thus the ground raised in the appeal is allowed.