Additional depreciation allowable qua industrial undertaking and not qua the whole business of the assessee.

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NRB Bearings Ltd Vs DCIT (ITAT Mumbai) -The Tax Payer was conducting manufacturing activities at four different locations across India. It had installed additional machinery to increase capacity at one of the locations i.e. the Aurangabad unit. The assessee claimed additional depreciation on the new machinery as per the provisions of the Income Tax Act which permits the assessee to additional depreciation on installation of new machinery. The same was allowed by the Tax Officers (TO) as well.

Later, The Commissioner of Income-tax (CIT) initiated revision proceedings under the powers given to him under the Act. The TO disallowed the additional depreciation as the increased installed capacity of the new machinery to the assessee’s entire business was less than10% which was a requirement under the conditions mentioned in the IT Act.

The Tax Court observed that each of the assessee’s units, even though manufacturing similar automobile components, were located in different places and were independent in their existence and manufacturing activity. Accordingly, each unit could be considered an independent industrial undertaking. Since, the assessee had claimed additional depreciation for only one unit and not on the entire assets of all the units, it will not be practical to consider

the capacity of the entire business if the assessee was manufacturing different products in different places. The TO was not justified in comparing the increased capacity with the entire business of the assessee. For granting additional depreciation to an existing unit, the increased capacity considered, should be with reference to the products manufactured in that particular undertaking. There was no dispute that the production capacity of the Aurangabad unit had increased by more than 10%. Accordingly, the assessee was eligible to claim additional depredation for the Aurangabad unit.