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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
ORDER
Per Shri A.T.Varkey, JM
This appeal preferred by the assessee is against the revision order of the Ld. Pr. CIT- 1, Kolkata passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 26.03.2018 for AY 2013-14.
At the outset itself, it has been brought to our notice by the Ld. AR of the assessee company that during the previous year relating to AY 2013-14, addition of fixed assets under the block plant and machinery was made at Rs.1,49,61,119/- (for more than 180 days) and Rs.2,06,33,645/- (for less than 180 days). The assessee company claimed depreciation to the tune of Rs.7,17,72,720/- as per the Act including additional depreciation of Rs.1,62,60,216/- and the same was allowed to be carried forwarded by the AO. However, according to Ld. Pr. CIT, out of the total additional depreciation though the assessee claimed Rs.1,27,20,028/- on account of plant and machinery, the assessee is only entitled to additional depreciation to the tune of Rs.50,55,589/-. After hearing the assessee company, the Ld. Pr. CIT directed the AO to compute the additional depreciation as per the provision Samarth Fablon Private Ltd., AY 2013-14 of sec. 32(1)(iia) read with sec. 32(1)(ii) of the Act existed during the assessment year under consideration i.e. AY 2013-14. Aggrieved, the assessee is before us. 3. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO has given the additional depreciation in accordance to the law laid by the Hon’ble Karnataka High Court wherein the Hon’ble High Court has held that the provision of sec. 32(1)(iia) has been amended by insertion of a provision w.e.f. 01.04.2016 allowing such carry forward of additional depreciation of plant and machinery if it is used for less than 180 days with retrospective in operation. The Hon’ble High Court in the case of Rittal India (P) Ltd. Vs. CIT – Bangalore (2016) 66 taxmann.com 4 (Karnataka) laid as under:
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 purpose 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 put 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. [Para 8] 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 (W. 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 10 per cent additional deduction can be availed 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. [Para 9] It has been consistently held by this court, as well as the Apex Court, that beneficial legislation, as in the instant 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 would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, has rightly held, that additional depreciation allowed under section 32(1) (iia) 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 additional allowance. [Para 10] As new machinery was put to use for business purpose for period of less than 180 days in assessment year 2007-08, assessee claimed 50 per cent of additional 20 percent depreciation (i.e. 10 per cent additional depreciation) under section 32(1)(iia) in assessment year 2007-08 and allowance of balance 10 per cent depreciation in assessment year 2008-09 - Assessing Officer allowed claim of allowance of 10 percent depreciation under section 32(1)(iia) in Samarth Fablon Private Ltd., AY 2013-14 assessment year 2007-08 but disallowed balance 10 per cent depreciation in assessment year 2008-09 - Whether since benefit which is to be, granted under-section 32(1)(iia) is 20 per cent additional depreciation but by virtue of proviso to clause (ii) of section 32(1) only 10 per cent can be claimed in one year, if plant and machinery was put to use for less than 180 days in said financial year, this would necessarily mean that balance 10 per cent additional deduction can be availed in subsequent year - Held, yes - Whether therefore, assessee was entitled to deduction of balance 10 per cent additional depreciation in assessment year 2008-09"
2. The Hon'ble High Court of Karnataka, CIT, Madurai v. Shri T. P. Textiles (P) Ltd. (2017) 79 taxmann.com 411 (Madras) has held that: " As a matter of fact, with effect from 1-4-2016, 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. [Para 10.2] A perusal of the Memorandum explaining provisions in Financial Bill, 2015, would show that the legislature recognised 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. [Para 11.2] 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. [Para 11.31] The memorandum, which is sought to be relied upon by the revenue, only clarifies as to how the unamended provision had tobe read all along .. [Para 11.4]"
The Hon'ble ITAT, Kolkata in the case of Century Enka Ltd. V. DCIT [2015] 58 taxmann.com 318(Kolkata-Trib) has held that where Assessing Officer allowed additional depreciation in immediate preceding assessment year, denial of remaining 50 per cent of additional depreciation in current year for additional depreciation was unjustified.
4. The Hon'ble ITAT, Delhi in the case of Cosmo Films Ltd. V. DCIT, Circle 3(1), New Delhi [2012] 24 taxmann.com 189 (Delhi) has held that benefit of additional depreciation under section 32(1)(iia) is available in full as soon as new assets are purchased and fact that said assets were put to use for less than 180 days, does not affect such benefit. It is further submitted that the issues mentioned in the aforesaid 263 notice have been examined by the Assessing Officer while passing the Assessment Order. Hence there is no scope to pass order u/s. 263 of the Act where the AO has taken one possible view. We would like to rely on following judgments: 1. CIT (Central) Ludhiana Vs. Max India Limited (2007) 295 ITR 282 (SC) 2. Malabar Industrial Co. Ltd. Vs. CIT, Delhi (2000) 243 ITR 83 (SC).”
In view of the aforesaid judicial precedent the view taken by the AO allowing the additional depreciation is in line with the Hon’ble High Court supra, it cannot be held to be erroneous. Therefore, since the order of AO is not erroneous and is definitely a plausible view in the light of the Hon’ble High Court’s ratio, and we taking note that the condition precedent for invoking revisional jurisdiction by Ld Pr CIT is that AO’s order must be both Samarth Fablon Private Ltd., AY 2013-14 erroneous as well as prejudicial to the interest of revenue is obviously absent in this case. We further note in view of the ratio laid by the Hon’ble High Court supra that neither the view of the AO can be held to erroneous nor at any rate as unsustainable in law. So when the order of the AO cannot be held to be erroneous, which is sine qua non for exercise of jurisdiction u/s. 263 of the Act, therefore, we quash the order of the Ld. Pr. CIT which is impugned before us. Therefore, the assessee succeeds.
Other ground i.e. ground no.4 of appeal is general in nature does not require any adjudication hence, the same is dismissed. 6. In the result, appeal of assessee is partly allowed. Order is pronounced in the open court on 13th March, 2019.