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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, AM & SHRI RAVISH SOOD, JM
Kokuyo Camlin Ltd. ACIT – 10(1)(2), 48/2, Hilton House, Aayakar Bhava, Mumbai बिधम/ Central Road, MIDC, Vs. Andheri (East), Mumbai-400 093 स्थायीलेखासं./जीआइआरसं./ PAN No. AAACC1647E (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Rajesh Aathavale, AR प्रत्यथीकीओरसे/Respondentby : Shri Gurbinder Singh, DR सुनवाईकीतारीख/ : 11.02.2021 Date of Hearing घोषणाकीतारीख / : 22.04.2021 Date of Pronouncement आदेश / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER): The present appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-17, in short ‘Ld. CIT(A)’, Mumbai, dated 06.07.18 for AY 2006-07.
Kokuyo Camlin Ltd.
2. The brief facts of the case are, the original assessment under section 143(3) of the Income Tax Act (in short Act) was passed by disallowing the claim of additional depreciation amounting to ₹ 59,10,918/– on the basis that the assessee does not fulfill the conditions under section 32(1) (iia) of the Act. In the second appellate proceedings before ITAT, ITAT after considering the submissions of the assessee, set aside and restored the issue back to the file of AO for consideration of depreciation as per law and taking into account the details submitted by the assessee. The AO passed order giving effect to the order of ITAT, which was further rectified vide order dated 23.3.2017. In the rectification order under section 143(3)/254/147 of the Act, on the issue of additional depreciation the AO granted relief of ₹ 37,48,136/– and sustained the disallowance of ₹ 21,62,782/– with the finding that the twin conditions i.e., the assets should be acquired and installed after 31.03.2005, was not satisfied. In the present case, the asset was acquired before 31.03.2003 but installed after 31.03.2005. As per the opinion of AO, assessee is entitled to claim normal depreciation but not additional depreciation. Accordingly the Kokuyo Camlin Ltd. additional depreciation was disallowed. In response to reliance on the decision of coordinate bench in the case of M/s Euro Pratik Ispat Private Limited (ITA No. 1682/M/2011 dated 02.04.2014), assessing officer observed that the above said decision is challenged before Hon’ble High Court.
Aggrieved with the above order, the assessee preferred an appeal before Ld CIT(A), Ld CIT(A) after considering the submissions of the assessee sustained the disallowance made by the assessing officer. Aggrieved with the above order, the assessee is in appeal before us raising following grounds of appeal:-
The Learned CIT(A) erred in confirming the disallowance of additional depreciation of INR 21,62,782 made by the Learned Assessing Officer out of the total claim of INR 59,10,918 of the appellant as per section 32(1) (iia) of the Income Tax Act, 1961 ('the Act'). "
The Learned CIT(A) erred in not appreciating that the material date for claiming additional depreciation is the date of installation and not the year of acquisition.
Kokuyo Camlin Ltd. 3. The appellant reserves the right to add, alter or delete to the ground of appeal of the time of or before hearing.
4. Before us, Ld AR brought to our notice findings of Ld CIT(A) in para No. 2, 4, 5 and he brought to our notice the purpose of introduction of additional depreciation with effect from 1 April 2006. He brought to notice the reasons for enhancement of the additional depreciation from 10% to 20% and submitted that the main purpose is to encourage new investment in the manufacturing sector and in order to increase the installed capacity for availing the initial depreciation. He stressed the point that the relevance is for installation. Further he brought to our notice following case law:- i) PCIT vrs. IDMC Ltd. (2017) 78 taxmann.com 285 (Guj) ii) JCIT vrs. Lotus Energy (India) Ltd (2016) taxamnn.com 364 (Mum-Trib) iii) Euro Pratik Ispat Pvt. Ltd. vrs. ACIT (ITA No. 1682/Mum/2011)
Kokuyo Camlin Ltd. 5. On the other hand, Ld DR relied on the findings of lower authorities and submitted that all the case law relied by the AR are already considered by Ld CIT(A) and distinguishable.
Considered the rival submissions and material on record. We notice that assessee has purchased the machinery before 31 3 2003 which was part of capital work in progress, which was not installed. Even though assessee has purchased the above said machinery but installed the same after 1.4.2005. The issue before us is whether the assessee is eligible to claim the additional depreciation on the machinery which was installed during the year but purchased before 1.4.2005. We notice that similar issue was considered by the coordinate bench in the case of Euro Pratik Ispat Private Limited (supra) and held as below:-
2.3.We have heard the rival submissions and perused the material before us. Earlier the additional depreciation was allowed in the case of a new industrial undertaking during any previous year in which it would start manufacturing or producing any article or thing on or after the 01.04.2002 or to any industrial undertaking existing before that date if it achieved substantial expansion during the previous Kokuyo Camlin Ltd. year by way of increase in its installed capacity by not less than ten per cent. However,in order to encourage investment,by inserting a new section,AD was allowed to the industry on the condition that the assets should have been acquired and installed after 31.3.2005. In our opinion,provisions of section 32(1)(iia) of the Act,do not requires that the P&M has to be put into use in the year in which it is acquired for the purpose of claiming AD.From the reading the explanatory notes;with regard to introduction of the section in the relevant year;it is evident that what is important and material is the year of acquisition in the case of ships or aircraft and the year of installation in the case of machinery or plant.If the installation of a plant is spread over more than a year,the relevant year for the grant of allowance would be the year in which the installation is completed.As in the case of investment allowance, so also in the case of AD,the material date is the date of installation and not the year of acquisition.Our views are based on the judgment of the Hon’ble Calcutta High Court,delivered in the case of Surama Tubes(P.)Ltd. (201ITR124).In the case under consideration,AD has been disallowed by the FAA on the ground that P&M were acquired before 31.03.2008.In our opinion machinery was installed in the AY.under appeal, though acquisition of the P&M had started in the earlier AY.Till a machine is not Kokuyo Camlin Ltd. assembled in a manner that it could be used to manufacture, it cannot be held that it had been installed. Mere purchasing or shifting it to factory premises is not enough. Assessee had claimed AD @10%,as the P &M had worked for a period less than one year. It is a common phenomenon that in big projects, installation of machinery takes very long time because of the sheer volume of the work to be carried out.If an assessee is not successful in installing P&M in one year and carries forward the installation work in subsequent year/years it cannot be denied any benefit on the ground that it had acquired the P &M in earlier year. The intent of the legislature was to attract investment, so in our opinion the section can be termed as benevolent provision. In the case under consideration production started from 01.01.2006.Before that fabrication and completion of P&M was going on.Treatment given by the assessee in the books of accounts to the P&M was in accordance with the Accounting Standards (AS)and the AO/FAA has not denied the fact that the assessee was following AS.Therefore,in our opinion,assessee was entitled to claim AD @of 10%.Reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee.
Kokuyo Camlin Ltd. 7. We further notice that similar view was also expressed by the Hon’ble Gujarat High Court in the case of IDMC Ltd (supra). Therefore, respectively following the above decisions which are applicable mutatis mutandis to the present case, we are inclined to accept the submission of Ld. AR. Accordingly grounds raised by the assessee are allowed.