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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This appeal has been filed by the revenue against the order of ld. CIT(A)-IV Baroda dated 26th June, 2017 in deleting the disallowance of Rs. 5,42,80,303/- made by the assessing officer on account of expenses claimed against the animal breeding and co-operative development expenses that incurring of such expenses resulted in benefit of enduring nature, therefore, the same was treated as capital expenditure by the assessing officer. The I.T.A No. 2144/Ahd/2017 A.Y. 2014-15 Page No 2 ACIT vs. M/s. Panchmahal District Co-operative Milk Producers Union Ltd.
second ground of appeal of the revenue is also against the order of ld. CIT(A) in deleing the additional depreciation claimed by the assesssee of Rs. 27,54,799/- that the asset was put to use for a period of less than 180 days in the previous year.
At the time of hearing of this matter, the ld. authorized representative has brought to our notice that the identical issue on similar facts on both the aforesaid issues have been adjudicated in favour of the assessee by the Co- ordinate Bench of the ITAT vide ITA No. 168/Ahd/2017 dated 6th Sep, 2018 and vide ITA No. 140/Ahd/2013 dated 31st May, 2013. The ld. authorized representative therefore contended that after considering the aforesaid decision of the Co-ordinate Benches of the ITAT, the issues may be decided in favour of the assessee. On the other hand, ld. departmental representative has simply relied on the order of assessing officer. With the assistance of ld. representatives, we have gone through the aforesaid orders of the Co- ordinate Benches of the ITAT and noticed that both the issues have been decided in favour of the assessee. The relevant part of the decisions of the ITAT vide aforesaid orders are reproduced as under:- Vide ITA No. 168/Ahd/2017 in the case of the assessee itself:- “5. A perusal of the order of the co-ordinate bench in assessee's own case for AY 2010-11 shows that the issue was adjudicated in favour of the assessee from AY 2008-09 onwards in the decisions concerning the earlier assessment years, the action of the AO in making disallowance of the expenses incurred towards an animal breeding and cooperative development expenses on the ground that expenses resulted in benefit of enduring nature and therefore capital in nature, was set aside and it was concurrently held by the first appellate authority as well as the second appellate authority that such expenditure are revenue in nature. Thus, the issue is no longer res integra. Consistent with the view taken by the co-ordinate bench in earlier years, the appeal of the revenue is found to be devoid of any merit.”
Vide ITA No. 140/Ahd/2013 in the case of ITO vs. M/s. Ashwani Industries dated 31/05/2013:-
I.T.A No. 2144/Ahd/2017 A.Y. 2014-15 Page No 3 ACIT vs. M/s. Panchmahal District Co-operative Milk Producers Union Ltd.
“4. The Second issue relates to additional depreciation of Rs. 4,98,859/-. Assessing officer has disallowed the balance additional depreciation claimed by assessee on the machinery installed in the second half of the previous year relevant to the A.Y. 2007-08. The assessee’s contention was that he was eligible for additional depreciation @ 20 % on the plant and machinery purchased in the second half of the financial year 2006-07 but being used less than 180 days, only 10 % depreciation was allowed by A.O. The balance 10 % additional depreciation was carried forward in the year under appeal and claimed in the computation of income which was disallowed by A.O. on the ground that carried forward of such additional depreciation is inadmissible as per provisions of section 32(1)(iia). The Ld. CIT(A) has given relief to the assessee by following the decision of ITAT, Delhi in the case of DCIT vs. Cosmo Films Ltd (124 Taxman.com 189) wherein it has been held that the additional depreciation cannot be restricted to 50 % and it has to be allowed in succeeding years if it is not allowed full in the relevant year. For the sake of convenience the relevant portion of the order is as under:- “17. We have heard both the sides on this issue. Section 32(1)(iia) inserted by Finance (No. 2) with effect from 1.4.2003. In speech of Finance Minister this clause was inserted to provide incentive for fresh investment in industrial sector. This clause was intended to give impetus to new investment in setting up a new industrial unit or for expanding the installed capacity of existing units by at least 25 % thereafter these provisions were amended by the Finance (No.2) Act of 2004 w.e.f. 1.4.2005 and provided that in the case of any machinery or plant which has been acquired after the 31st day of march, 2005 by an assessee engaged in the business of manufacture of production of any article or thing a further sum equal 15 % of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) of section 33(1). This additional allowance u/s 32(1) (iia) is made available as certain percentage of actual cost of new machinery and plant acquired and installed. This provision has been directed to the setting up new industrial undertaking making or for expansion of the industrial undertaking by way of making more investment in capital goods. Thus, these are incentives aimed to boost new investments in setting up and expanding the units. The proviso to section 32(1)(iia) restricts the benefits in respect of following- 'Provided that no deduction shall be allowed in respect of_ (A) Any machinery or plant which, before its installation by the assesses was used either within or outside India by any other person; or (B) Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house or (C) Any office appliances or road transport vehicle, or (D) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “profits and gains of business or profession of any previous year." Thus, this incentive in the form of additional sum of depreciation is not available to any plant or machinery which been used either within India or outside India by any other person or such machinery and plant are installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house or any office appliances or road transport vehicles, or any machinery or plant the whole of actual cost of which is allowable as deduction (where by way of depreciation or otherwise) in computing the total income under the head "Profit and gains of business or profession" of any one prevision year. Thus, the intension was not to deny the benefit to the assets who have acquired or instated new machinery or plant. The second proviso to section 32(1)(ii) restricts the allowances only to 50% where the assets have been acquired and part to use for a period less than 160 days in the year of acquisition. This restriction is only on the basis of period of use. There is no restriction, that balance of I.T.A No. 2144/Ahd/2017 A.Y. 2014-15 Page No 4 ACIT vs. M/s. Panchmahal District Co-operative Milk Producers Union Ltd.
one time incentive in the form of additional sum of depreciation shall not be available in the subsequent year. Section 32(2) provides for a carry forward set up of unabsorbed depreciation. This additional benefit in the form of additional allowance u/s 32(1)(iia) is one time benefit to encourage the industrialization and in view of the decision of Hon’ble Supreme Court in the case of Bajaj Tempo vs. CIT, cited supra, the provisions related to it have to be constructed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute lo deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 18O days. One time benefit extended to assessee has been earned in the year of acquisition of new plant and machinery. It has been calculated @ 15% but restricted to 50% only on account of usage of these plant & machinery in the year of acquisition. In section 32(1(iia) the expression used is "shall be allowed". Thus the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit.” In view of the above, we feel no need to interfere with the order passed by Ld. CIT(A) in respect of deletion of disallowance on account of additional depreciation of Rs. 4,98,859/- also and the order passed by Ld. CIT(A) is hereby upheld.”
Respectfully following the aforesaid decisions of Co-ordinate Benches as reproduced above on similar issues and identical facts, we do not find any error in the decision of ld. CIT(A), therefore, both the grounds of the appeal of revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 07-03-2019 (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 07/03/2019
I.T.A No. 2144/Ahd/2017 A.Y. 2014-15 Page No 5 ACIT vs. M/s. Panchmahal District Co-operative Milk Producers Union Ltd.
आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद