THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S.FCI OEN CONNECTIONS LTD.
What did the High Court hold?
The High Court of Kerala, while admitting the appeal on substantial questions of law, noted that these questions were similar to those raised in a previous appeal, ITA No. 138/2014. This prior appeal, decided on August 5, 2021, had answered the questions in favour of the Assessee. By adopting the reasoning from ITA No. 138/2014, the High Court answered the present substantial questions of law in favour of the Assessee and against the Revenue. Consequently, the appeal filed by the Revenue was dismissed. The specific reasoning of the Tribunal, which was upheld by the High Court, was that the second proviso to Section 32(1)(ii) mandates that half of the admissible additional depreciation is allowed in the year of acquisition and installation, with the balance half implicitly allowed in the subsequent year.
What were the facts?
The Revenue, represented by the Principal Commissioner of Income Tax, Kochi, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated December 26, 2016. The appeal pertains to Assessment Year 2011-12 and concerns M/s. FCI OEN Connectors Ltd. The core of the dispute revolves around the allowance of additional depreciation on new plant and machinery. The ITAT had previously ruled on the matter, and the Revenue is challenging this ruling. The High Court of Kerala admitted the appeal on specific substantial questions of law.
What were the issues?
The Tribunal had to decide two substantial questions of law: 1. Whether the Tribunal was correct in holding that the balance 50% of additional depreciation must be allowed in the subsequent year, as per Section 32(1)(iia) read with the second proviso to Section 32(1)(ii), and if this finding was against law and perverse. 2. Whether the Tribunal's interpretation that the second proviso to Section 32(1)(ii) implies that half of the admissible additional depreciation is allowed in the year of acquisition/installation and the remaining half is implicitly allowed in the subsequent year, was against law and the legislative intent. The Revenue contended that the Tribunal's interpretation was incorrect and against law. The Assessee's arguments are not explicitly detailed in the judgment, but the outcome indicates they supported the Tribunal's view.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
J U D G M E N T S.V. Bhatti, J. Heard learned Standing Counsel Mr.Jose Joseph and Adv.Anil D.Nair for parties.
The Principal Commissioner of Income Tax/Revenue is the appellant. M/s. FCI OEN Connectors Ltd/Assessee is the respondent. The subject appeal is at the instance of Revenue from the order of Income Tax Appellate Tribunal (for short ‘the Tribunal') Cochin Bench in ITA No.70/Coch/2016 dated 26.12.2016. The controversies canvassed in the appeal relate to the Assessment Year 2011-12. 3. The appeal is admitted on the following substantial
ITA NO. 37 OF 2017 -3- questions of law:
“1. Whether, on the facts and in the circumstances of the case and on an interpretation of Sec. 32(1)(iia) read with the second proviso to Section 32 (1) (ii), is the Tribunal right in law in holding that "the balance 50% of the additional depreciation has to be allowed in the subsequent year" and is not the above finding against law and perverse?
Whether, on the facts and in the circumstances of the case and in law, is the Tribunal right in holding that "the second proviso to section 32(1)(ii) is to mean that half of the admissible additional depreciation should be allowed in the year in which the new plant & machinery is acquired and installed and the balance half has to be impliedly allowed in the subsequent year" and is not the above interpretation and approach of the Honourable ITAT against law and the intention of the legislature?”
The learned Counsel appearing for the parties state that the substantial questions of law raised in the instant appeal are similar to substantial questions raised in I.T.A No.138/2014. On 05.08.2021, the I.T.A No.138/2014 was dismissed answering the questions in favour of the Assessee. By adopting the reasons stated therein, the questions are ITA NO. 37 OF 2017 -4- answered in favour of the Assessee and against the Revenue. Accordingly, the appeal filed by the Revenue fails and dismissed. No order as to costs. S.V.BHATTI JUDGE VIJU ABRAHAM JUDGE JS
ITA NO. 37 OF 2017 -5-
Appendix — schedule of exhibits
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