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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI S. JAYARAMAN
This appeal by the assessee is directed against the order of CIT(A) dated 11.02.2016 for the assessment year 2009-10. The assessee has raised the following grounds:
2. The only issue raised in the appeal of the revenue is regarding claim of additional depreciation under section 32(1)(iia) in the subsequent year of installation of the new machinery.
3. During the course of scrutiny assessment, the AO noted that the assessee has claimed additional depreciation of Rs.6,83,163/- in respect of machinery which was installed during the financial year relevant to the earlier AY i.e., 2008-09. Accordingly, the AO has disallowed this claim of additional depreciation. The assessee challenged the order of the AO before the CIT(A) and contended that since this machinery was installed in the latter half of the financial year relevant to the assessment year 2008-09 and consequently only 10% being 50% of the additional depreciation was claimed by the assessee in the earlier assessment year, therefore the balance of 10% of additional depreciation has been claimed by the assessee in the present assessment year. The CIT(A) has not accepted the claim of the assessee and confirmed the disallowance made by the AO.
Before us, the learned counsel for the assessee submitted that this issue is covered by the decision of the Hon’ble jurisdictional High Court in the case of CIT Vs. Rittal India Pvt. Ltd., 380 ITR 423 wherein the Hon’ble High Court, in the identical facts and circumstances, has held that this provision is a beneficial legislation and should be given liberal interpretation. Accordingly, the Hon’ble High Court has upheld the decision of this Tribunal in allowing the additional depreciation being onetime benefit to encourage the industrialization in the subsequent year. On the other hand, the learned DR has submitted that there is no provision under section 32(1)(iia) to extend the benefit of additional depreciation in the subsequent year of the installation of new machinery. He has relied upon the orders of the authorities below.
Having considered the rival submissions as well as relevant material on record, we note that the assessee has installed this machinery during the financial year relevant to the assessment year 2008-09 and since the machinery was put to use for less than 180 days during the financial year 2009-08, the assessee claimed only 10% additional deduction on this account. For the year under consideration, the assessee has again claimed balance 10% additional depreciation on the said machinery which was disallowed by the AO as well as by CIT(A).
At the outset, we note that an identical issue fell for the consideration in Hon’ble jurisdictional High Court in the case of CIT(A) Vs. Rittal India Pvt. Ltd., (supra). The Hon’ble High Court, after analyzing the provisions of Section 32(1)(iia) of the Act, has held in paras 7 to 11 as under: 7. Section 10A was further amended by the Finance Act of 2003 with retrospective effect from 1.04.2001. For the purposes of the present case, the amendments introducing Section (1A); making the provisions of sub-section (4) subject to the provisions of Sections (1) and (1A) and making the benefit of the provisions of Sections 32, 32A, 33, 35 and clause (ix) of Section 36(1) and also Sections 72(1) and 74(1) and (3) operative from the assessment year 2001-2002 alone would be significant. 8. The cardinal principles of interpretation of taxing statutes centers around the opinion of Rowlatt, J. in Cape Brandy Syndicate v. Inland Revenue Commissioner [1921] 1 KB 64 which has virtually become the locus classicus. The above would dispense with the necessity of any further elaboration of the subject notwithstanding the numerous precedents available inasmuch as the evolution of all such principles are within the four corners of the following opinion of Rowlatt, J. ". . . . . . . . . in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 9. The amendment of Section 10A of the Act, by the Finance Act, 2000 with effect from 1.4.2001, specifically uses the words 'deduction of profits and gains derived by an eligible unit …… from the total income of the assessee'. There are other provisions of Section 10A, as amended, which could be suggestive of the fact that by the amendment made by Finance Act, 2000, Section 10A had changed its colour from being an exemption section to a provision providing for deduction. Yet, Section 10A continued to remain in Chapter III of the Act which Chapter deals with incomes which do not form part of the total income. There are several Circulars that have been placed before us by the contesting parties to explain the purpose and object of the amendment. Having looked at the aforesaid Circulars, issued from time to time, what we find is a fair amount of ambiguity therein as to the true nature and effect of the amendment. Specifically, we may refer to Circular No. 7 dated 16.07.2013 as well as Circular No. 01/2013 dated 17.01.2013 which appear to be conflicting and contradictory to each other; in the former Circular the provision, i.e., Section 10A is referred to as providing for deductions whereas the later Circular uses the expression "exemption" while referring to the provisions of Sections 10A and 10B of the Act. Even the Income Tax Return Forms i.e. Form No. 1 dated 17.08.2001 and Form No. 6 for the assessment year 2012-13 are equally contradictory. The appellant Revenue would, however contend that, ex facie, from the language appearing in Section 10A it is crystal clear that the aforesaid provision of the Act, as amended by Finance Act, 2000 provides for deductions from the gross total income, notwithstanding the use of the words 'total income' in Section 10A. Exemptions provided for under the old Section 10A have been discontinued by the Legislature. According to the Revenue, where the purport and effect of the statute is clear from the language used there is no scope to turn to Chapter notes or the marginal notes so as to understand Section 10A to be an exemption section on the basis that the said provision is still included in Chapter III of the Act. Reliance in this regard has been placed on the decision of this Court in Tata Power Co. Ltd. v. Reliance Energy Ltd. [Civil Appeal Nos. 3510-3511 of 2008, dated 6-5-2009] wherein at page 687, it is held that: '89. Chapter headings and the marginal notes are parts of the statute. They have also been enacted by Parliament. There cannot, thus, be any doubt that it can be used in aid of the construction. It is, however, well settled that if the wordings of the statutory provision are clear and unambiguous, construction of the statute with the aid of "chapter heading" and "marginal note" may not arise. It may be that heading and marginal note, however, are of a very limited use in interpretation because of its necessarily brief and inaccurate nature. They are, however, not irrelevant. They certainly cannot be taken into consideration if they differ from the material they describe.' 10. The Revenue further contends that by virtue of the amendment made by Finance Act, 2000, deductions under Section 10A are required to be made and allowed at the stage of computation of total income under Chapter VI of the Act notwithstanding the absence of any specific provision in Chapter VI to the said effect. In fact, the Revenue contends that in view of the clear language of Section 10A, as brought about by the amendment, a parallel or consequential amendment in Chapter VI of the Act was wholly unnecessary.
On the other hand, on behalf of the assessees, it is contended that though there may be some features of deduction brought in by the amendment to Section 10A, as for example, disallowance of profits in regard to domestic sales, the legislative intent in retaining Section 10A in Chapter III of the Act would clearly demonstrate the true nature of the said provision of the Act even after amendment thereof by the Finance Act of 2000.
Deductions from the total income which is nowhere envisaged under the Act and the reference to the total income of the undertaking, referred to in several sub- sections of Section 10A, would indicate that the total income referred to in Section 2(45) has no application to the computation under Section 10A and the reference therein is only to the total income of the eligible unit/undertaking. The provisions of Section 10A(6), as amended by Finance Act of 2003 retrospectively with effect from 1.4.2001, has also been stressed upon to contend that with effect from the assessment year 2001-02 losses and unabsorbed depreciation of eligible units would be allowable for set off immediately on the expiry of the period of tax holiday i.e. 10 years. The provisions of Sections 32, 32A, 33, 35 and part of 36 do not separately apply to an eligible unit during the period of tax holiday. During the said period the deduction under the aforesaid sections of the Act are deemed to have been made. Similarly, under Section 10A(6)(ii) losses referred to in Section 72(1) or 74(1) and 74(3) are also eligible to be carried forward to the assessment year following the end of the holiday period commencing from the assessment year 2001-02. All these, according to the learned counsels for the assessees, suggest that, though heterogeneous elements exist in Section 10A, the provision is really an exemption provision. Alternatively, according to the learned counsels, even if Section 10A is understood to be providing for deductions, the stage of such deductions would be immediately after computation of profits and gains of business and before the aggregate of incomes under different heads of other loss making eligible units or non-eligible units of the assessee are taken into account. In other words, it is immediately after the computation of profits and gains of business of the undertaking that the deduction under Section 10A is required to be made. There is no question of such deductions being computed at the stage of application of provisions of Chapter VI of the Act.”
4. Respectively following the decision of the Hon’ble jurisdictional High Court, we set aside the orders of the authorities below qua this issue and allow the claim of the assessee regarding the additional depreciation.
In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 15th day of February, 2017.