Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “C” BENCH, PUNE
Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the assessee emanates from the directions of the Ld. Dispute Resolution Panel (DRP) dated 05.12.2016 for the assessment year 2012-13 as per the grounds of appeal on record.
2 ITA No. 685/PUN/2017 A.Y.2012-13
At the very outset, the Ld. AR of the assessee submitted that ground Nos.1 to 5 raised by the assessee relates to “transfer pricing adjustment”. That further, the Ld. AR submitted that after giving effect to the directions of the Ld. DRP, no TP adjustment is required so far as these grounds are concerned and therefore, they become academic in nature.
We have heard the submissions of the Ld. AR of the assessee and on the basis of these submissions; we hold that the ground Nos. 1 to 5 are academic in nature.
Ground No.6 pertains to the disallowance of expenses u/s.14A of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟).
The Assessing Officer dealt with this issue at Page-5 in Para 5 onwards in his order and has given findings at Para 5.4.1 onwards as per the detailed reasons as appearing in the order of the Assessing Officer which is on record, the Assessing Officer made disallowance under Rule 8D @0.5% of average value of investments as per the provisions of Rule 8D(2)(iii) which works out to Rs.84,79,657/- as per annexure-1. The assessee has already disallowed Rs.33,52,000/- and therefore, the Assessing Officer disallowed remaining amount of Rs.51,27,657/- u/s.14A of the Act and added back to the total income of the assessee ( Rs.33,52,000/-+ Rs.51,27,657/-) = Rs.84,79,657/-.
At the time of hearing, the Ld. AR of the assessee invited our attention to the decision of the Pune Bench of the Tribunal in assessee‟s own case in ITA No.556/PUN/2015 & ITA No.574/PUN/2015 for the assessment year 2010-11 and ITA No.834/PUN/2016 & ITA No.821/PUN/2016 for the
3 ITA No. 685/PUN/2017 A.Y.2012-13
assessment year 2011-12 decided on 25.09.2018 wherein at Para 44 of the said order, the Tribunal has given its findings on the issue of disallowance of expenses u/s.14A of the Act which is as follows:
“44. The issue raised in grounds of appeal No.8.1 and 8.2 is against disallowance of expenses under section 14A of the Act. The assessee in assessment year 2010-11 has raised similar issue vide ground of appeal No.7.1. The learned Authorized Reprehensive for the assessee pointed out that details are placed at page 385 of Paper book and disallowance in the year would work out to Rs.49,16,894/-. Applying the same as in ground of appeal No.7.1 in assessment year 2010-11, we disallow Rs.49,16,894/- under section 14A of the Act.”
We have perused the case records and given considerable thought to the judicial pronouncement placed before us. We find that while adjudicating this issue, the Tribunal has placed reliance on the decision in assessee‟s own cases in ITA No.2417/PUN/2012 for the assessment year 2008-09 & in ITA No.309/PUN/2014 for the assessment year 2009-10. The same parity of reasoning to be applied and we remit the issue back to the file of the Assessing Officer to adjudicate the issue in lines of the order of the Tribunal in assessee‟s own case for assessment year 2011-12. Thus, ground No.6 raised in appeal by the assessee is allowed for statistical purposes.
Ground No.7 raised by the assessee pertains to claim of deduction u/s.35(2AB) of the Act.
The Assessing Officer discussed this issue at Page 18, Para 6 onwards of his order and final findings are at Page 25, Para 6.3 onwards wherein the Assessing Officer disallowed proportionate weighted deduction claimed u/s.35(2AB) of the Act at Rs.9.34 Crore by the assessee company and added back the same to the total income of the assessee company. The Assessing
4 ITA No. 685/PUN/2017 A.Y.2012-13
Officer while doing so has given detailed reasoning as appearing in his order which is on record.
The Ld. AR of the assessee at the very outset submitted that this issue is covered by the decision of the Pune Bench of the Tribunal in assessee‟s own case in ITA No.556/PUN/2015 & ITA No.574/PUN/2015 for the assessment year 2010-11 and ITA No.834/PUN/2016 & ITA No.821/PUN/2016 for the assessment year 2011-12 decided on 25.09.2018 vide Para 45 of the said order.
We have perused the case records and heard the submissions of the parties herein. We have also analyzed the judicial pronouncement placed on record. The Tribunal vide Para 45 of the said order (supra.) has held as follows:
“45. The issue in grounds of appeal No.9.1 and 9.2 against claim of weighted deduction under section 35(2AB) of the Act is similar to grounds of appeal No.8.1 and 8.2 raised in assessment year 2010-11. Following the same parity of reasoning, we direct the Assessing Officer to allow weighted deduction under section 35(2AB) of the Act.”
Both the parties herein agreed, the facts and circumstances in this year are absolutely same as that for assessment year 2011-12. Therefore, maintaining the parity of reasoning since relief granted to the assessee by the Tribunal for assessment year 2011-12, following the same, we allow this ground of appeal of the assessee. Thus, ground No.7 raised in appeal by the assessee is allowed.
Ground No.8 raised in appeal by the assessee pertains to the disallowance of additional depreciation.
5 ITA No. 685/PUN/2017 A.Y.2012-13
The Assessing Officer dealt with this issue at Page 35, Para-7.2 onwards and has given detailed reasoning which is on record as to why he has disallowed the additional depreciation claimed by the assessee and added back the same to the total income of the assessee. While doing so, the Assessing Officer has referred amendment of Section 32 of the Act reproducing the provision in his order and mentioning thereto that in this regard claim of the assessee that it is clarificatory in nature has no merit. It is substantive in nature and that‟s why the same has been granted to assessee from A.Y.2016-17. The intention of legislature is clear and has been in conformity with the view taken by the undersigned that earlier, balance additional depreciation was not allowable in subsequent year.
The Ld. AR of the assessee invited our attention to the decision of the Hon‟ble Bombay High Court in the case of the Pr. Commissioner of Income Tax-14 Vs. M/s. Godrej Industries Ltd., Income Tax Appeal No.511 of 2016 for assessment year 2007-08 wherein the question before the Hon‟ble High Court was as follows:
“Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in holding that the Assessee is entitled to 50% of the additional depreciation under section 32(1)(iia) of the IT Act, 1961?”
The Hon‟ble Bombay High Court on this issue has held and observed as follows: “5. Having heard Counsel for the Revenue and for the Assessee, we notice that the Assessee's claim of additional depreciation arises out of clause (iia) of sub-section 1 of Section 32 of the Act. Clause (ii) of sub- section 1 of Section 32 of the Act recognizes the depreciation on block of assets. Clause (iia) grants additional depreciation in case of acquisition and installation of new machinery or plant by an Assessee after 31St March, 2005, the Assessee being engaged in business of manufacture or production of an article or thing.
6 ITA No. 685/PUN/2017 A.Y.2012-13
We may also notice that the second proviso to clause (ii) of section 1 of sub-Section 32 of the Act, would restrict Assessee's claim of depreciation to 50% in case, the assets are acquired by the Assessee during the previous year and put to use for the purposes of business or profession for a period less than 180 days in the said previous year. 7. In the context of such statutory provisions, the Revenue has raised the question - whether when 50% of the additional depreciation is claimed by the Assessee in a particular Assessment Year, since the acquisition and putting in to use of the assets in the previous Year was for less than 180 days, the Assessee can claim the remaining depreciation in the subsequent Assessment Year. Such a question came up for consideration before the Division Bench of Karnataka High Court in Commissioner of Income Tax and Another V/s. Rittal India Pvt. Ltd., reported in 380 ITR 423. The Court, after referring to the statutory provisions, held and observed in Para 8 as under: “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 done away by substituting clause (iia) with effect from April 1, 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 purposes of business. The proviso to clause (ii) of the said section makes it clear that only 50 per cent of the 20 per cent would be allowable, if the new plant and machinery so acquired is out to use for less than 180 days in a financial year. However, it nowhere restricts that the balance 10 per cent would not be allowed to be claimed by the assessee in the next assessment year. The language used in clause (iia) of the said section clearly provides that "a further sum equal to 20 per cent 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 per cent additional depreciation. By virtue of the proviso referred to above, only 10 per cent 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 1 0 per cent additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. It has been consistently held by this Court, as well as the apex court, that the beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held, that additional depreciation allowed under Section
7 ITA No. 685/PUN/2017 A.Y.2012-13
32(1)(iia) of the Act is a one- time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting the additional allowance. We are in full agreement with such observations made by the Tribunal. In view of the aforesaid, we do not find that any interference is called for with the order of the Tribunal, or that any question of law arises in this appeal for determination by this court." After the said judgment of the Karnataka High Court in Rittal India Pvt. Ltd.,(supra), legislation has also amended the statutory provisions by adding the third proviso to clause (ii) of sub-section 1 of Section 32 of the Act, which reads as under:- “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 sub-section 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 sub-section in the immediately succeeding previous year in respect of such asset.” 8. The third proviso, thus, now recognizes the right of an Assessee to claim the remaining 50% depreciation in subsequent year in a case where machinery and plant being acquired and put to use for less than 180 days in the previous year, the depreciation was restricted to 50%. Such a situation as in the present case, was considered by the Division Bench of the Madras High Court in Commissioner of Income Tax v/s. Shri T. P. Textiles Pvt. Ltd., 394 ITR 483, the Court referred to the judgment of the Karnataka High Court in Rittal India Pvt. Ltd., (supra) as well as the addition of third proviso to clause (ii) of sub-section 1 of Section 32 of the Act and observed as under:- "10.1:- The plain language of section 32(1)(iia) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. 10.2:- As a matter of fact, with effect from April 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. 10.3:- ……. …………. ………… …….. 11:- We may only indicate that during the course of the arguments our attention was drawn to the "Memorandum explaining the provisions in Finance Bill 2015" whereby the aforementioned amendment was brought about.
8 ITA No. 685/PUN/2017 A.Y.2012-13
11.1:- The relevant part of the memorandum is extracted hereafter:- "To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more it is proposed to provide that the balance 50 per cent of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery shall be allowed in the immediately succeeding previous year. This amendment will take effect from 1st April 2016 and will accordingly apply in relation to the assessment year 2016-17 and subsequent assessment years." 11.2:- A perusal of the extract of the memorandum relied upon would show that the legislature recognized the fact that the manner in which the Revenue chose to interpret the provision as it stood prior to its amendment would lead to discrimination in respect of plant and machinery which was used for less than 180 days as against that which was used for 180 days or more. 11.3:- In our opinion, as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The memorandum cannot be read in the manner, in which, the Revenue has sought to read it, which is, that the amendment brought in would apply only prospectively. 11.4:- We are, clearly, of the view that the memorandum, which is sought to be relied upon by the Revenue, only clarifies as to how the unamended provision had to be read all along. 11.5:- In any event, in so far as the court is concerned, it has to go by the plain language of the unamended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the assessee could not claim balance depreciation in the assessment year, which follows the assessment year, in which, the machinery had been bought and used, albeit, for less than 180 days.” 9. It could be thus, to seen that the Karnataka High Court in Rittal India Pvt., Ltd., (supra) even without the aid of the statutory amendment held that remaining 50% unclaimed depreciation would be available to the Assessee in the succeeding Assessment Year. Now the legislation has amended the provision by adding a proviso which, specifically recognizes the said right. The Madras High Court in Shri T.P.Textiles Pvt. Ltd.,(supra) ruled that such proviso being clarificatory in nature, would apply to pending cases, covering past period also. 10. We have no reason to take view different from two High Courts, examining the situation at considerable length. In the result, no question of law arises.”
In this judgment of the Hon‟ble Bombay High Court, there is reference made to the decision of the Hon‟ble Karnataka High Court in the case of
9 ITA No. 685/PUN/2017 A.Y.2012-13
Commissioner of Income Tax and another Vs. Rittal India Pvt. Ltd., 380 ITR 423 and the decision of the Hon‟ble Madras High Court in the case of in the case of Commissioner of Income Tax Vs. Shri T.P. Textiles Pvt. Ltd., 394 ITR 483 and in both these cases, it has been unanimously observed and held that the assessee can claim balance depreciation in the subsequent assessment year. The Hon‟ble Bombay High Court was of the opinion that there emerges no reason to take a different view from that taken by the aforesaid two High Courts, examining the situation at considerable length. Therefore, appeal of the Revenue was dismissed by the Hon‟ble Jurisdictional High Court. Respectfully, following the binding judgment of the Hon‟ble Jurisdictional High Court, we allow ground No.8 raised by the assessee.
Ground No.9 raised by the assessee in appeal pertains to initiation of penalty proceedings u/s.271(1)(c) of the Act. At this stage, this issue becomes premature and hence, liable to be dismissed. We order accordingly.
In the result, appeal of the assessee partly allowed for statistical purposes.
Order pronounced on 22nd day of November, 2019.
Sd/- Sd/- R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER ऩुणे / Pune ; ददनाांक / Dated : 22nd November, 2019. SB
10 ITA No. 685/PUN/2017 A.Y.2012-13
आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT (Appeals)-13, Pune. 4. The Pr.CIT-5, Pune. , आयकर अऩीऱीय अधधकरण, “सी” बेंच, 5. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “C” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
11 ITA No. 685/PUN/2017 A.Y.2012-13
Date 1 Draft dictated on 21.11.2019 Sr.PS/PS 2 Draft placed before author 22.11.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order