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Facts
The assessee filed a return of income declaring Rs. 4,67,560/-. During processing u/s 143(1), depreciation was disallowed, leading to an income determination of Rs. 14,21,930/-. The assessee had claimed 15% depreciation on assets used for less than 180 days, which was disallowed as only 7.5% was permissible.
Held
The Tribunal held that the assessee had inadvertently claimed excess depreciation and also failed to claim additional depreciation in the original return. However, considering the bonafide mistake and the legal provisions, the appeal was allowed.
Key Issues
Whether additional depreciation can be allowed when not claimed in the original return and if the initial disallowance of depreciation due to incorrect rate applied for assets used less than 180 days was justified.
Sections Cited
250, 143(1), 32(1)(iia), 32
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI SIDDHARTHA NAUTIYAL
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the assessee against the order dated 17.10.2024, passed by the Ld. ADDL/JCIT(A), Prayagraj (hereinafter referred to as "CIT(A)" for short), u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as "the Act" for short) for the Assessment Year 2020-21.
The assessee has raised the following grounds of appeal:
1. The Ld.CIT(A), NFAC, Delhi has erred in confirming the income under the head business and profession at Rs.14,80,783/- as against that of Rs.5,26,408/- shown in the return of income filed.
2. The Ld.CIT(A), NFAC, Delhi has erred in not granting additional depreciation of Rs.12,72,500/- to which the appellant is eligible and entitled.
3. The Ld.CIT(A), NFAC, Delhi has erred in not granting deduction of Rs.12,72,500/- as additional depreciation in terms of Explanation 5 to Sec. 32(1) of the I.T. Act, 1961.
4. The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal.
3. The brief facts of the case are that the assessee filed return of income for the year under consideration on 01.02.2021, declaring a total income at Rs.4,67,560/-. The return was processed u/s 143(1) of the Act on 02.12.2021, determining the income at Rs.14,21,930/-. The primary reason for the variation was disallowance of excess depreciation of Rs. 9,54,375/-, as the assessee had claimed depreciation at 15% on plant and machinery put to use for less than 180 days during the previous year.
4. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the Ld. CIT(A) who dismissed the appeal of the assessee by observing as under:-
“6.1 The statement of facts, grounds of appeal, the order appealed against, and the submissions of the appellant have been thoroughly examined. The grounds of appeal pertain to the disallowance of depreciation by the Assessing Officer (AO) during the processing of the return. 6.2 During the appellate proceedings, the appellant contended that they inadvertently claimed depreciation of Rs. 19,08,750 (Rs. 1,27,25,000 @ 15%), exceeding the eligible depreciation of Rs. 9,54,375. This discrepancy resulted in the disallowance of the alleged excess depreciation of Rs. 9,54,375 while processing the return under Section 143(1) of the Income Tax Act. The appellant clarified that the plants and machinery were used for less than 180 days, thereby qualifying for a depreciation allowance of 50%, rather than the 100% initially claimed. 6.3 However, during the proceedings, the appellant raised a new claim for additional depreciation under Section 32(1)(iia) of the Act. They argued that they are eligible for additional depreciation at a rate of 20% of the cost of the plant and machinery according to the cited provisions. Since the assets were used for less than 180 days, the appellant asserted they would be eligible for additional depreciation of 10% of the cost of acquisition. Consequently, the appellant claimed additional depreciation of Rs. 12,72,500 (10% of Rs. 1,27,25,000). The appellant noted that this additional depreciation was inadvertently not claimed when filing the return. Thus, they contend they are legally entitled to a total depreciation of Rs. 22,26,875 (Rs. 9,54,375 + Rs. 12,72,500) compared to the Rs. 19,08,750 claimed in the return. This means the appellant has actually claimed lesser depreciation by Rs. 3,18,125 (Rs. 22,26,875 Rs. 19,08,750). Nonetheless, the disallowance of Rs. 9,54,375 as per the intimation issued under Section 143(1) of the Act has caused financial repercussions for the appellant.
6.4 The appellant's contentions have been duly considered. It is noted that the appellant itself acknowledged the inadvertent claim of depreciation amounting to Rs. 19,08,750 (Rs. 1,27,25,000 @ 15%), while the allowable depreciation per the Act was Rs. 9,54,375 (Rs. 1,27,25,000 @ 7.5%). Given this acceptance, I find no fault in the AO's order regarding the disallowance of the excess depreciation claimed by the appellant, totaling Rs. 9,54,375. 6.5 Regarding the claim for additional depreciation, it is noted that this claim was not included in the return filed by the appellant. The AO cannot entertain claims not raised in the return. The Income Tax Act does not permit amendments to a return during the assessment stage without submitting a revised return. This position is supported by the ruling of the Hon'ble Supreme Court in Goetze (India) Ltd. vs. CIT, which established that any modifications to a return must be made through a revised return. Therefore, I find no infirmity in the AO's order.”
Aggrieved by the order of the Ld. CIT(A), the assessee has preferred the present appeal before the Tribunal
Before us, Ld. AR submitted that the assessee, which is engaged in manufacturing plastic products, filed the return of income declaring total income of Rs. 4,67,560/-. The Ld. AR submitted that the depreciation was inadvertently claimed at 15% i.e. Rs. 19,08,750/- on new plant and machinery used for less than 180 days, instead of the eligible 7.5% i.e. Rs. 9,54,375/-. The Ld. AR submitted that the assessee is eligible for additional depreciation of Rs. 12,72,500/- (10% of Rs. 1,27,25,000/-) under section 32(1)(iia), which was not claimed in the return due to bonafide oversight. Thus, the total allowable depreciation is Rs. 22,26,875/-, exceeding the amount claimed in the return by Rs. 3,18,125/-.
5.1 The Ld. AR further submitted that as per Explanation 5 to section 32, depreciation is mandatory and must be allowed irrespective of whether it was claimed in the return. For this proposition, he relied upon the judicial precedents in the case of Vedanta Ltd. v. PCIT 93 taxmann.com 392 (Del) and Bhagwati Sponge (P) Ltd. v. DCIT, 72 taxmann.com 40 (Kol.). The AR, therefore, prayed that the disallowance of Rs. 9,54,375/- be deleted, and the eligible additional depreciation of Rs. 12,72,500/- be allowed.
The Ld. DR, on the other hand, relied upon the orders of the authorities below.
We have heard the rival contentions and perused the material available on record. We find that the assessee claimed depreciation at 15% on new plant and machinery that was used for less than 180 days. As per the law, only 7.5% depreciation is allowed in such cases. The assessee admitted this as a bonafide mistake. Hence, keeping in view the fact that there is no ineligibility to the assessee, we hold that additional depreciation shall be allowed.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 31.07.2025