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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
(PAN : AACCC6993K) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri M.K. Giri, Advocate REVENUE BY : Shri S.L. Anuragi, Senior DR Date of Hearing : 11.07.2022 Date of Order : 15.07.2022 ORDER
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the assessee is directed against the order of the ld. CIT (A)-2, New Delhi dated 12.09.2019 pertaining to assessment year 2013-14.
The grounds of appeal
raised by the assessee read as under :-
1. That the order passed by the learned Commissioner of Income Tax (Appeals) is bad in law, equity and justice.
2.2 That the learned CIT (A) erred in concluding that the wrong or incorrect claim made by the appellant amounts to failure in full and true disclosure of material facts, by ignoring the submissions made by the appellant before CIT (A) that the appellant had made complete disclosure regarding the claim of addl. Depreciation before the AO in its return of income/ tax audit report for the year under assessment i.e. AY 2013-14 and that the said claim had been allowed by the AO in assessment proceedings for the preceding assessment years i.e. AY 2011- 12 & 2012-13, after considering full facts and detailed submissions made by the appellant. The learned CIT (A) relied upon the decision of CIT (A) in assessee's case for AY 2014-15 in re-opening the assessment. .
That the learned CIT (A) erred in upholding the disallowance of additional depreciation of Rs. 1,79,92,149/- claimed by the assessee company @ 10% in respect on new plant & machinery acquired by it after September 30, 2011, ignoring the various judicial decisions relied upon by the appellant. The quantum of additional depreciation allowable in respect of these assets was restricted to 50 percent of 2G percent of the actual cost of machinery in assessment year 2012-13 in view of the restrictive provision provided under the Act (i.e. as per the second proviso to section 32(1) of the Act). The balance 50% of additional depreciation amounting to Rs.1,79,92,149/- has been claimed during the year under assessment and forms part of the figure of total depreciation claim of Rs.18,36,65,770/-.” 3. At the outset, in this case, ld. counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT in assessee’s own case for Assessment Year 2014-15 in vide order dated 11.11.2021.
We have heard both the parties and perused the records. upon assessment order for AYs 2011-12 and 2012-13, but he held that every year has to be decided on its own merits. He further noted that addition on account of additional depreciation made in the assessment year 2014-15 was upheld by ld. CIT (A).
The ld. CIT (A) for the present assessment year has decided the issue by holding as under :-
“ This ground is directed against addition of Rs.1,79,92,149/- on account of disallowance of additional depreciation on new plant and machinery. The appellant has also relied on decision in the case of Apollo Tyres Ltd vs CIT, ITAT Kochi and Cosmo Films Ltd vs DCIT, ITAT, Delhi.
6.8 As is clear from the discussion in Ground no. 2 above, the assets were put to use after 30.09.2011 and were not eligible for full depreciation according to Sec. 32(1) proviso II. According to this proviso, only the assets put to use on/before September 30 are eligible for full amount of depreciation. If they are put to use after this date, they are eligible for half the rate of depreciation only. All depreciations follow this proviso. Similarly, additional depreciation is eligible for depreciation at the full rate if the assets are put to use on/before 30.09.2011.
6.9 It is true that the provision for additional depreciation was brought to encourage investment, but S. 32(1)proviso II is a restrictive provision and it still operates as a measurement to decide the eligible amount of depreciation depending on the date the assets are put to use. According to this proviso, only the eligible amount of depreciation I additional depreciation are allowable. Therefore, when assets are put to use after the deadline, it cannot be said that the appellant has earned full amount of depreciation.
6.10 It is, therefore, very logical that only the eligible amount of depreciation / additional depreciation allowable as per Act ./2019 can be carried forward as unabsorbed depreciation. The amount of depreciation I additional depreciation not eligible and disallowed under this proviso cannot be carried forward as unabsorbed depreciation. With full respect to the decision relied on by the appellant, the addition made by the AO is confirmed following the restrictive legal provisions of Sec. 32(1) proviso II and following the order of my predecessor. This ground is ruled against the appellant.”
We note that in the appeal for AY 2014-15 in assessee’s own case, the issue was decided as under :-
“7. We have heard both the parties and perused the material available on record. It is pertinent to note that this issue is already considered by the Hon’ble Madras High Court in case of Brakes India Pvt. Ltd. (supra) and M/s Aztec Auto Pvt. Ltd. (supra) and further the additional depreciation claimed was already imbibed in Section 32(1) (iia) of the Act. The Hon’ble Madras High Court in case of Brakes India Pvt. Ltd. held as under:
8. Pertinently, the Karnataka High Court, in a decision rendered in the case of CIT V. Rittal India (P.) Ltd., [2016] 66 taxmann.com 4 (Karnataka), has interpreted the aforesaid provision, in particular, the proviso incorporated therein. The Karnatake High Court, in the said case, has come to the conclusion that additional depreciation granted under clause (iia) of Section 32(1) of the Act is for the purpose of affording benefits to the Assessees and, to encourage industrialization, either by setting up a new industrial unit, or, by expanding a new industrial unit, by purchasing and installing a new machinery, or, plant, and putting the same to use for the purposes of business.
8.1. The Court, went on to say, that while, the proviso appearing in Section 32(1) restricts the claim of depreciation to 50% of the amount calculated at the percentage prescribed for an asset referred to in clause (iia), nowhere does it restrict allowance of the balance
8.2. The relevant observations made by the Division Bench of the Karnataka High Court in the case of CIT V. Rittal India (P.) Ltd., as contained in paragraphs 7, 8 and 9 of the said judgment, for the sake of convenience are extracted hereafter :
"..... 7. Clause (iia) of Section 32(1) of the Act, as it now stands, was substituted by the Finance Act, 2005, applicable with effect from 01.04.2006. Prior to that, a proviso to the said Clause was there, which provided for the benefit to be given only to a new industrial undertaking, or only where a new industrial undertaking begins to manufacture or produce during any year previous to the relevant assessment year.
8. The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been down away by substituting clause (iia) with effect from 01.04.2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialization, by either setting up a new industrial unit or by expanding the existing unit by purchase of new plant and machinery, and putting it to use for the purpose of business. The proviso to Clause (ii) of the said Section makes it clear that only 50% of the 20% would be allowable, if the new plant and machinery so acquired is put to use for less than 180 days in a financial year. However, if nowhere restricts that the balance 10% would not be allowed to be claimed by the assessee in the next assessment year.
9. The language used in Clause (iia) of the said Section clearly provides that "a further sum equal to 20% of the actual cost of such machinery or plant shall be allowed as deduction under Clause (ii)". The word "shall" used in the said Clause is very significant. The benefit which is to be granted is 20% additional depreciation. By ./2019 virtue of the proviso referred to above, only 10% can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10% additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed....."
9. We are in respectful agreement with the view taken by the Division Bench of the Karnataka High Court, passed in CIT V. Rittal India (P.) Ltd.
According to us, these are provisions included by the Legislature in the Statute to give a fillip to new industries as also to existing industries, which seek to expand its sway, by investing in and making use of new plant and machinery.
10.1. The plain language of Section 32(1)(iia) read along with the relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10% of additional depreciation in the succeeding assessment year.
10.2. As a matter of fact, with effect from 01.04.2016, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment.
Thus, the additional depreciation is allowable depreciation and the amendment is not applicable in present assessment year i.e. A.Y. 2014-15 in assessee’s case. Further, no distinguishing facts were presented before us by the Ld. DR. Therefore, Ground Nos. 1 and 2 are allowed. As regards Ground No. 3 and 4, the same are not pressed, hence dismissed.”
After reading the above order, we find that in the present assessment, the issue of depreciation is same as the one decided by ITAT in assessee’s own case for AY 2014-15. On query about the grounds no.3 However, he had no objection if the issue is remanded to the AO with a direction to following the aforesaid ITAT order.
The ld. DR did not have any objection in this regard. 10. Accordingly, upon careful consideration, we remit the issue raised on merits to the file of AO. The AO is directed to follow the above decision of ITAT in assessee’s own case for AY 2014-15 as applicable to the assessment year under appeal. Needless to add, the assessee should be granted adequate opportunity of being heard. 11. Since ld. counsel of the assessee has not pressed the issue of reopening, the same is dismissed as not pressed. 12. In the result, the appeal by the assessee is partly allowed. Order pronounced in the open court on this 15th day of July, 2022.