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Facts
The assessee claimed the balance 10% additional depreciation of Rs. 2.48 crores in AY 2014-15 for plant and machinery put to use for less than 180 days in the preceding financial year. The AO disallowed this, but the CIT(A) deleted the disallowance. Additionally, the revenue challenged the CIT(A)'s deletion of a transfer pricing adjustment of Rs. 1.93 crores related to the sale of power from the assessee's Captive Power Plant, where the assessee had incurred an overall business loss and claimed no deduction under Section 80-IA.
Held
The Tribunal upheld the CIT(A)'s decision regarding additional depreciation, stating that the issue is settled law allowing the claim in the subsequent year. For the transfer pricing adjustment, the Tribunal found the revenue's grounds to be academic and infructuous, as the assessee had no taxable income and claimed no deduction under Section 80-IA, making the adjustment have no tax consequence.
Key Issues
1. Whether the balance 10% additional depreciation for assets put to use for less than 180 days in the previous year can be claimed in the subsequent assessment year. 2. Whether a transfer pricing adjustment is academic when the assessee has declared an overall business loss and claimed no deduction under Section 80-IA.
Sections Cited
250, 144C, 143(3), 32(1)(iia), 32(1), 80IA(8), 80-IA, 14A, 68, 115JB, 92CA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: Shri Duvvuru RL Reddy & Shri Rajesh Kumar
Assessment Year: 2014-15 JCIT(OSD), Circle-11(1), Kolkata........................…...........................……….……Appellant vs. M/s Philips Carbon Black Ltd.............…..….…..….........……........……...…..…..Respondent Duncan House, 31 Netaji Subhas Road, Kol-1. [PAN: AABCP5762E] Appearances by: Shri Praveen Kishore, CIT-DR, appeared on behalf of the appellant. Shri Akkal Dudhewala, AR, appeared on behalf of the Respondent. Date of concluding the hearing : June 30, 2025 Date of pronouncing the order : August 29th, 2025 ORDER Per Rajesh Kumar, Accountant Member:
The present appeal is filed by the revenue for the assessment year 2014-15 against the order dated 30.09.2021 of the Commissioner of In- come Tax (Appeal)-22, Kolkata [hereinafter referred to as ‘CIT(A)’] u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’) which is in connection with the assessment order passed u/s 144C r.w.s 143(3) of the Income-tax Act, 1961 dated 18.12.2017 for Assessment Year 2014- 15.
The first issue raised in ground nos. 1 & 2 by the Revenue is against the Ld. CIT(A) deleting the disallowance of additional depreciation of Rs.2,48,47,865/-.
The brief facts of this issue are that, the assessee during the financial year 2012-13 purchased and installed new plant and machinery for its manufacturing business. Some of such plant and M/s Philips Carbon Black Ltd machinery were put to use for a period of less than 180 days during the said financial year and in respect of such plant and machinery, the assessee claimed only 50% of additional depreciation u/s 32(1)(iia) of the Act in view of the second proviso to section 32(1) of the Act. Now, during the year under appeal i.e. assessment year 2014-15, the assessee has claimed balance additional depreciation of Rs.2,48,47,865/- (i.e. balance 10% which is 50% of 20%) on this plant and machinery on the plea that it is entitled to get the same in this year. The AO disallowed the assessee’s claim by observing that there was no such enabling provision in Section 32(1)(iia) of the Act which allowed the assessee to claim the balance 10% of the additional depreciation in the relevant year in relation to the asset which were put to use for less than 180 days in preceding AY.
Being aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A) who deleted the impugned disallowance by relying on the decisions of Hon’ble Madras High Court in the case of CIT Vs Rittal India Pvt Ltd (380 ITR 423) and the Hon’ble ITAT, Kolkata in the case of DCIT Vs Hindustan Gum & Chemicals Ltd (ITA No. 462 & 752/K/14)involving identical issue. Being aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us.
We have heard the rival parties and perused the materials on records. We find that the ssue under dispute is covered by decision of the coordinate bench in assessee's own case for the AY 2013-14 in wherein it was held as under:-
4.3. After hearing the rival parties and perusing the material on record, we find that the issue is squarely settled by the various judicial forums in several cases namely CIT vs. Rittal India (P) Ltd. [2016] 66 taxmann.com 4 (Karnataka), DCIT vs. National Engineering Industrial Ltd. [2022] 135 taxmann.com 193 (Kolkata-Trib.), Century Enka Ltd. vs. DCIT [2015] 58 taxmann.com 318 (Kolkata-Trib.) and Universal Cables Ltd. vs. DCIT [2015] 57 taxmann.com 95 (Kolkata-Trib.). In all the above citations, it has been held that the assessee is entitled to remaining 50% of the depreciation in the subsequent year which was not claimed in the year of addition M/s Philips Carbon Black Ltd because of the reasons that the asset was put to use for less than 180 days. The assessee has claimed 50% of the depreciation in consonance with second proviso to section 32(1)(ii) of Act. Accordingly we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground no. 3 of revenue.
Respectfully following the same, we hold that the Ld. CIT(A) had 6. rightly deleted the disallowance and had rightly granted the relief to the assessee. Accordingly, ground nos.1& 2 raised by the revenue are dismissed.
The next issue raised by the Revenue in Ground Nos. 3 to 8 of their appeal relate to the Ld. CIT(A)’s action of deleting the transfer pricing adjustment of Rs.1,93,21,509/- made to the sale of power by the eligible Captive Power Plant [in short ‘CPP’] of the assessee in terms of Section 80IA(8) of the Act.
The Ld. AR for the assessee, at the onset, submitted that, the assessee had declared overall business loss of Rs.(-) 131,04,88,074/- in the return of income and accordingly did not make any claim qua profit as deduction u/s 80-IA of the Act in respect of the profits derived by their eligible CPP. He also pointed out that, the AO, after making addition(s)/disallowance(s) had assessed loss at Rs.126,04,19,265/- u/s 144C/143(3) of the Act and likewise no deduction u/s 80-IA of the Act was allowed by the AO. He thus argued that the impugned transfer pricing adjustment made by the TPO to the sale of power was artificial having no ultimate impact or effect on the final assessable income of the assessee, for the reason that there is no claim made u/s 80-IA of the Act, in view of losses. He thus submitted that these grounds raised
by the Revenue were only of academic nature and therefore deserves to be dismissed as infructuous.
9. Per contra, though the Ld. CIT, DR acknowledged that the impugned adjustment made to the eligible profits of the CPP ultimately was of no consequence because the assessee itself had not claimed as deduction u/s 80-IA of the Act, but according to him, any decision M/s Philips Carbon Black Ltd rendered on merits will have an impact on the same issue(s) which is involved in subsequent year(s) also and therefore urged us to deal with the same on merits.
We have heard both the parties and perused the records as placed before us. We observe that, the assessee had returned a figure of loss in the return of income and there was no deduction claimed u/s 80-IA of the Act in the income-tax return filed for the relevant AY 2014-15. Even the AO had assessed the total income at a loss figure and therefore there was no occasion for him to quantify and allow any deduction u/s 80-IA of the Act, as the gross total income continued to remain NIL. Considering factual matrix , there is merit in the plea raised by the Ld. AR that the impugned transfer pricing adjustment made by the TPO was of no consequence, for the reason that no deduction had been claimed or allowed u/s 80-IA of the Act. It is not in dispute that thetransfer pricing adjustment made to the sale of power was required to be adjusted from the eligible profits of CPP, which would have gone on to reduce the eligible deduction u/s 80-IA of the Act. Now when the assessee itself has not claimed any deduction u/s 80-IA of the Act, Accordingly we hold that the impugned adjustment to the eligible profits was academic having no tax consequence. It is noted that similar issue was dealt with by the Hon’ble jurisdictional Calcutta High Court in the case of Pr.CIT Vs Kesoram Industries Ltd in GA No. 2/2022 dated 20th December 2022 in which it was held that, where the gross total income was NIL due to losses and no deduction was claimed u/s 80-IA of the Act, then the question of any TP adjustment to the arm’s length price of power sold by eligible unit u/s 80IA(8) of the Act was academic in nature. The relevant extracts of the judgment is as follows :- “It is pointed out by the learned Senior Counsel appearing for the respondent/assessee that the substantial questions of law (a), (c), (d), (f) and (g) in the stay application though raised by the revenue, have become academic in the instant case as no deduction has been allowed by the Assessing Officer as there was no gross total income during the assessment 4 M/s Philips Carbon Black Ltd year under consideration namely, Accounting Year 2015-16. In this regard, our attention has been drawn to the assessment order dated 31st December, 2018 and on perusal of the computation of total income under normal provisions, we find no gross total income had arisen in the said assessment year. For better appreciation, the same is quoted hereinbelow:-
Computation of Total Income under Normal Provisions Amount(Rs) Amount(Rs) Total Income as per Modified Computation of Income Add: (i) Delay in employee's contribution 30,132 (ii) Disallowance u/s 14A 1,29,47,275 (iii) Disallowance of discount 2,16,05,442 (iv) Disallowance u/s 68 1,82,30,000 5,28,12,849 Total Income 5,28,12,849 Less : Unabsorbed Depreciation set off (5,28,12,849) As- sessed Income - Tax - Determination of Book Profit u/s 115JB Amount(Rs) Amount(Rs) Book Profit u/s 115JB as per modified computation of Income (2,99,80,07,511) Add : Disallowance u/s 14A 1,29,47,275 Revised Book Profit (2,98,50,60,236) Tax @ 18.5% Assessed u/s. 143(3) r.w. 92CA of the Income Tax Act, 1961 at Rs.Nil/-. Issue copy of order, computation of tax, demand notice and penalty notice to the assessee.
In the light of the above undisputed position, the substantial questions of law (a), (c), (d), (f) and (g) have become academic and need not be decided in this appeal”
In light of the above and having regard to the facts of the case before us testifying that there was no deduction claimed or allowed u/s 80-IA of the Act, these grounds raised
by the Revenue regarding the transfer pricing adjustment to be made to the eligible profits of the CPP are found to be academic and are dismissed as infructuous. Before M/s Philips Carbon Black Ltd departing we would like to stat that we have not expressed our opinion/views on the merits of the impugned adjustment.
12. In the result, the appeal of the Revenue is dismissed. Kolkata, the 29th August, 2025.