THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. KALPATARU POWER TRANSMISSION LTD.

This Tax Appeal under Section 260A of the Income Act, 1961 (for short the “Act”) at the instance of Revenue   and   is   directed   against   the   order   dated 10.05.2019   passed   by   the   Income   Tax   Appellate Tribunal,   Ahmedabad   “C”   Bench,   Ahmedabad   in   ITA No.1463/Ahd/2016 for the assessment year 2011­2012. 2. The   Revenue   has   proposed   following   substantial questions of law in its Memorandum of Appeal. “2(A) Whether the Appellate Tribunal has erred in the facts and circumstances  of the case and in law,   in   upholding   the   order   of   the   CIT(A)   for deleting   the   addition   of   Rs.4,26,95,758/­   in holding carbon receipts as capital receipt? “(B) Whether the Appellate Tribunal has erred in the facts and circumstances  of the case and in law,   in   upholding   the   order   of   the   CIT(A)   for deleting the addition of Rs.7,91,352/­ on account of assessee's claim of additional depreciation?

Question No.2(A) is already considered by us in Tax Appeal No. 790 of 2019 by the order of even date and accordingly, the appeal stands dismissed so far as Question No.2(A) is concerned.

With   regard   to   Question   No.2(B),   the   facts   in brief   are   that   the   assessee   had   acquired   and installed new plant and machinery in Financial Year­ 2009­10. Since the plant and machinery were used for less   than   182   days,   the   claim   of   additional depreciation   under   Section   32(1)(iia)   of   the   Act during assessment year 2010­11 was restricted to 50%. During the assessment proceedings for the assessment year 2011­12, the assessee made an additional claim before the Assessing Officer for allowing the balance 50%   of   additional   depreciation   vide   letter   No.933 dated   17.03.2014. Detailed   submissions   were   made before   the   Assessing   Officer   during   the   course   of assessment,   however,   the   Assessing   Officer   was   not convinced with the submissions made by the assessee, and therefore, did not entertain the claim of balance additional depreciation. The Assessing Officer was of the view that additional depreciation can be allowed only in the year in which the assets are acquired and installed   and   not   in   the   subsequent   year.   The Assessing   Officer,   therefore,   disallowed   the   claim made by the assessee. The assessee carried the matter before the CIT (Appeal). The CIT (Appeal) allowed the appeal   of   the   assessee   holding   that   Section   32(1) (iia) clearly says that in case when a new machinery or plant was acquired and installed after 31.03.2005 by   an   assessee,   who   is   engaged   in   the   business   of manufacture or production of article or things, a sum equal to 20% of the actual cost of the machinery and plant   shall   be   allowed   as   deduction.   It   is   not   in dispute that the assessee has acquired and installed the machinery

2005. Therefore, CIT(Appeal),   after   considering   the   submissions   and the   facts   of   the   case   of   the   assessee,   allowed additional   depreciation   of   10%   for   the   assessment year   2011­12   adopting   purposive   approach   to   the issue.

The  Revenue  preferred   the  Tax  Appeal  before  the Income   Tax   Appellate   Tribunal   “C”   Bench,   Ahmedabad and   the   Tribunal,   after   considering   the   findings given by the CIT(Appeals), dismissed the appeal filed by the Revenue.

In view of the above facts, it would be germane to refer relevant provisions of Section 32(1) of the Act which reads as under:­ “32. (1) In respect of depreciation of— (i)   buildings,   machinery,   plant   or furniture, being tangible assets; (ii) know­how, patents, copyrights, trade marks,   licences,   franchises   or   any   other business   or   commercial   rights   of   similar nature,   being   intangible   assets   acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for   the   purposes   of   the   business   or   profession, the following deductions shall be allowed— (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that no deduction shall be allowed under this clause in respect of— a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 but before the 1st day of April, 2001, unless it is used— (i) in a business of running it on hire for tourists ; or  (ii) outside India in his business or profession in another country ; and (b)   any   machinery   or   plant   if   the   actual   cost thereof is allowed as a deduction in one or more years   under   an   agreement   entered   into   by   the Central Government under section 42 : Provided further  that where an asset referred to in clause (i) or clause (ii) or clause (iia) or the first proviso to clause (iia), as the case may be,   is   acquired   by   the   assessee   during   the previous year and is put to use for the purposes of   business   or   profession   for   a   period   of   less than one hundred and eighty days in that previous year,   the   deduction   under   this   sub­section   in respect of such asset shall be restricted to fifty per   cent   of   the   amount   calculated   at   the percentage   prescribed   for   an   asset   under   clause (i) or clause (ii) or clause (iia), as the case may be : Provided also  that where an asset referred to in clause (iia)or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub­section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of   the   amount   calculated   at   the   percentage prescribed for such asset under clause (iia)shall be   allowed   under   this   sub­section   in   the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st   day   of   April,   1999   for   the   purposes   of business or profession, the deduction in respect of such asset shall be allowed on such percentage on   the   written   down   value   thereof   as   may   be prescribed..... (iia) in the case of any new machinery or plant (other   than   ships   and   aircraft),   which   has   been acquired   and   installed   after   the   31st   day   of March,   2005,   by   an   assessee   engaged   in   the business   of   manufacture   or   production   of   any article or thing or in the business of generation, transmission or distribution of power, a further sum equal to twenty per cent of the actual cost of such   machinery   or   plant   shall   be   allowed   as deduction under clause (ii) :....”

On perusal of the aforesaid provision of Section 32(1)   of   the   Act   and   proviso   thereto   read   with Section 32(1)(iia) of the Act, it is clear that the assessee   can   claim   additional   depreciation   at   the rate   of   20%   of   the   actual   cost   of   the   plant   and machinery   purchased   during   the   financial   year. However,   such   allowance   of   the   depreciation   can   be claimed only to the extent of 10%, if the plant and machinery purchased by the assessee is used for less than 182 days. Accordingly, the assessee has claimed the additional depreciation to the extent of 10% only for Assessment Year 2010­11, and therefore, the claim of remaining 10% additional depreciation is made for the Assessment Year 2011­12. 8. We   are,   therefore,   of   the   opinion   that   the assessee can claim remaining additional depreciation of   10%   in   the   assessment   year   2011­12. The legislature  has  also   thought   it fit  to  clarify  the situation by inserting third proviso to Section 32(1) by the Finance Act, 2015 with effect from 01.04.2016. According  to  third  proviso  to  Section  32(1)  of  the Act, the assessee can claim the remaining additional depreciation in the subsequent assessment year.

Thus,   both   the   authorities   below   have   rightly held   that   the   assessee   is   entitled   to   remaining additional depreciation of 10% in the assessment year 2011­12   and   there   is   no   infirmity   in   the   impugned orders   passed   by   the   CIT(Appeal)   as   well   as   the Tribunal.

In view of the foregoing reasons, no question of law much less any substantial questions of law arises out of the impugned orders. The appeal is, therefore, dismissed qua the Question No.2(B) also. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) GIRISH