MAXXIS RUBBER INDIA PVT. LTD.,AHMEDABAD vs. THE PR. CIT, AHMEDABAD-1, AHMEDABAD

4. The Ld. PCIT has further erred in law and on facts in not appreciating that the view taken by the AO is a possible view and hence the proceedings are illegal and bad in law.

5. The ld. PCIT has further erred in law in not coming to any concrete conclusion and without conducting any inquiry or investigating the issue, merely directed the AO to frame the assessment order afresh. Without there being any positive finding about order being erroneous and prejudicial to the interest of the revenue, the action of Id. PCIT is without jurisdiction and illegal and hence deserves to be deleted.

6. Ld. PCIT has erred in not considering various facts, submissions, explanations and clarifications as given by the appellant and further erred in not appreciating the facts and law in their proper perspective.

7. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal

at the time of or before the hearing of the appeal.”

3. The order of the Ld. PCIT reveals that the assessment order passed in the case of the assessee under Section 143(3) of the Act was found to be erroneous causing prejudice to the Revenue on account of having allowed excess claim of depreciation to the assessee as per Section 32(1) of the Act. The order reveals that in the preceding assessment year the assessee had acquired Plant & Machinery on which alongwith normal depreciation @ 15%, it was eligible to claim additional depreciation also@ 20% of the cost of the asset in terms of section 32 of the Act. However, since those assets were put to use for less than 180 days the assessee had claimed 50% of the eligible additional depreciation, i.e 10% of the cost of eligible assets in the preceding year as per law and the balance 50% was claimed in the impugned year. The Ld. PCIT noted that while computing the normal Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 3 - depreciation allowable for impugned year the assessee had applied the applicable rate of depreciation, i.e 15% to the opening written down value (WDV) of the assets. As per the Ld. PCIT, however, the opening written down value of such assets ought to have been reduced by the balance additional depreciation of the preceding year claimed in the impugned year and on the remaining WDV of the assets the assessee ought to have claimed depreciation as per rate applicable. The assessee’s entitlement to claim of additional depreciation was 20% of the cost of the new assets purchased i.e. Plant & Machinery, while its entitlement to normal depreciation on Plant & Machinery was 15% of WDV of the assets. As per the Ld. PCIT, the assesee had claimed excess depreciation pertaining to 15% of the remaining 50% additional depreciation, which as per his calculation amounted to Rs. 3,03,22,137/-. The entire facts relating to the calculation of the excess depreciation are mentioned in Para 5.1 to 5.1.2 of his order.

4. Ld. Counsel for the assessee pointed out that the issue raised in the present appeal stands squarely covered in favour of the assessee by the decision of the ITAT in the case of Suzuki Motor Gujarat Pvt. Ltd. vs. PCIT (2025) 172 taxmann.com 469 (Ahmedabad-Trib.). Copy of the order was placed before us. Referring to the same Ld. Counsel for the assessee pointed out that the facts of the said case was identical, in which revisionary power was exercised by the Ld. PCIT noting that the fact that the assessee had been allowed excess depreciation on account of the carry forward of additional depreciation to the impugned year to the extent of 50% which was not set off from its opening written down value of assets Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 4 - for the purpose of calculating depreciation for the impugned year. Ld. Counsel of the assessee pointed out that the ITAT categorically held that the proposition advanced by the Ld. PCIT was not in accordance with law. He pointed out that the ITAT referred to all relevant provisions of law pertaining to depreciation and written down value of assets under Section 32 and 43(6) of the Act and pointed out that the said calculation nowhere prescribed set off of the carried forward additional depreciation from the preceding year, to be set off from the opening written down value of assets ,for calculating depreciation for the impugned year. Our attention was drawn to the findings of the ITAT at Para 7.1 to 7.4 of the order as under:

7.1 The assessee is engaged in the business of manufacture of passenger cars. During the preceding assessment year 2017-18, the assessee had claimed additional depreciation @10% (50% of the prescribed rate) aggregating to Rs. 156,00,22,181/- on 'plant and machinery' put to use for a period of less than 180 days. Closing Written Down Value ('WDV') of the block 'Plant and Machinery' as on 31.03.2017 amounted to Rs.1419,66,02,772/-. The balance additional depreciation of Rs.156,00,22,181/- was carried forward to be claimed in assessment year 2018-19 as per the third proviso to section 32(1)(ii) of the Act. A working of the total depreciation charged during the year under consideration is tabulated as under:- Block of assets Plant and Machinery S.No. 15 30 40 Rate (%) (i) (ii) (iii) 3a Written down value on the first day 14,19,66,02,772 - of previous year 3b Written down value on the first day - - 23,10,31,519 of previous year, of those block of assets which were eligible for depreciation @ 50%, 60% or 80% as per the old Table 4 Additions for a period of 180 days 1,33,91,27,790 - 3,08,38,247 or more in the previous year 5 Consideration or other realization - - - during the previous year out of 3 or 4 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 5 - 6 Amount on which depreciation at 15,53,57,30,562 - 26,18,69,766 full rate to be allowed (3a+3b + 4 -5) 7 Additions for a period of less than 6,65,82,83,901 - 3,02,59,885 180 days in the previous year 8 Consideration or other - - - realizations during the year out of 7 9 Amount on which depreciation at 6,65,82,83,901 - 3,02,59,885 half rate to be allowed (7 - 8) 10 Depreciation on 6 at full rate 2,33,03,59,584 - 10,47,47,906 11 Depreciation on 9 at half rate 49,93,71,293 - 60,51,977 12 Additional depreciation, if any, on 25,60,45,955 - - 4 13 Additional depreciation, if any, on 64,83,02,170 - - 7 14 Additional depreciation relating to 1,56,00,22,181 - - immediately preceding year' on asset put to use for less than 180 days 15 Total depreciation 5,29,41,01,183 - 11,07,99,883 (10+11+12+13+14) 16 Depreciation disallowed under - - section 38(2) of the I.T. Act (out of column 15) 17 Net aggregate depreciation (15- 5,29,41,01,183 - 11,07,99,883 16) 18 Proportionate aggregate - - depreciation allowable in the event of succession, amalgamation, demerger etc. (out of column 17) 19 Expenditure incurred in - connection with transfer of asset/ assets 20 Capital gains/ loss under section - - 50(5+ 8-3a-3b -4 -7-19) 21 Written down value on the last day 16,89,99,13,280 - 18,13,29,768 of previous year (6+ 9-15) 7.2 For the year under consideration, the assessee claimed aggregate depreciation of Rs.529,41,01,183/- which included additional depreciation of Rs.156,00,22,181 pertaining to assets put to use for less than 180 days in the preceding assessment year 2017-18. The aforesaid depreciation, it is submitted, was computed in accordance with income tax return utility prescribed by CBDT. The Ld. PCIT, in the impugned order, however held that the assessee should, at first, have reduced the additional depreciation pertaining to AY 2017-18 from the WDV as on 01.04.2017 and then computed the normal depreciation @ 15% for the year under consideration. As a Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 6 - consequence thereof, the Ld. PCIT has alleged that the assessee has claimed excess normal depreciation for the year under consideration. In this regard, we hold that the aforesaid method of computation provided by the Pr. CIT is not correct as Section 32(1)(ii) of the Act provides that depreciation has to be charged on the written down value of any block of assets as per the rates prescribed. Further section 43(6)(c) of the Act provides that the written down value of a block of asset shall be computed by taking the WDV as on the opening date, which shall be increased by the actual cost of the assets acquired during the year and be reduced by the moneys payable in respect of assets sold during the year and no further adjustment is allowed to be made to the WDV computed as per the provisions of the said section. It is on such WDV so computed that the depreciation has to be computed. The format of income tax return utility notified by the CBDT, the amount of depreciation chargeable on plant and machinery is auto computed in Schedule DPM. An assessee is meant to submit the figure of opening WDV of the block, details of additions made during the year classified by the period for which such asset is put to use (more than or less than 180 days) and the details of assets sold during the year. Basis the aforesaid details submitted, the utility as conceived by the Income-tax Department, calculates the amount of normal and additional depreciation allowable on the block of asset. 7.3 For the sake of ready reference, the Schedule of DPM and the sequence of computation is mentioned below:- 1. Block of assets 2. Rate % 3. Written^down value on the first day of previous year 4. Additions for a period of 180 days or more in the previous year 5. Consideration or other realization during the previous year out of 3 or 4 6. Amount on which depreciation at full rate to be allowed 3+4-5 (enter 0, if result is negative 7. Addition for a period of less than 180 days in the previous year 8. Consideration or other realizations during the year out of 7 9. Amount on which deprecation at half rate to be allowed (7-8) 10. Depreciation on 6 at full rate 11. Depreciation on 9 at half rate 12. Additional deprecaition, if any, on 4 13. Additional depreciation, if any, on 7 14. Additional deprecaition relating to immediately preceidng year on asset put to use for less than 180 days 15. Total depreciation (10+11+12+13+14) 16. Depreciation disallowed under section 38(2) of the I.T. Act (out of column 15) 7.4 Even on going through the above, it can be found that no mechanism for the assessee to first compute and reduce the additional depreciation for the preceding year from the opening WDV and then compute the normal depreciation for the relevant Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 7 - year, as directed by the Ld. PCIT. The said computation of depreciation, as provided in the income tax return utility, has also been found to be in consonance with the Clause 18 of the Tax Audit Report. If the method suggested by the Ld. PCIT in the impugned order were to be followed, in that case, the total depreciation allowable to the assessee, would be higher in subsequent years since the closing WDV would be higher. Being so, the assessee would be allowed higher depreciation is subsequent years. In view these facts, we hold that that there is no error in the depreciation claimed by the assessee, hence no case of order being erroneous inasmuch as it is prejudicial to the interest of revenue could be made out.

3.1 Ld. Counsel for the assessee, therefore, contended that the order of the Ld. PCIT, passed in the present case was not sustainable, being covered in favour of the assessee by the decision of the ITAT as above.