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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-3’ NEW DELHI
Before: SH. N.K. SAINI
ORDER This is an appeal by the assessee against the order dated 17.11.2015 of learned Commissioner of Income Tax (Appeals)- 6, Delhi. Following grounds have been raised in this appeal: i. On the facts of the case & as per Law, the learned CIT(Appeals) erred in upholding the Order of Assessing Officer assessing loss at Rs.40,13,953/- against returned loss at Rs. 91,37,923/ ii. The Learned CIT(Appeals) erred in upholding the disallowance of additional depreciation u/s 32(l)(iia) of the Act amounting to Rs.51,23,970/- in relation to plant and machinery purchased & installed amounting to Rs.5,12,39,700 (approx.) in financial year 2010-11 relevant to assessment year 2011-12 on which additional depreciation was claimed only @ 10%, during the year of installation and balance 10% was claimed during the Hon. Supreme Court and IT AT. iii. The learned CIT(Appeals) erred in not following the judicial precedents of various Benches of Tribunal. iv. That the appellant craves leave to add, amend or alter any of the grounds of the appeal.
2. From the above grounds, it is noticed that the only grievance of the assessee relates to the upholding of disallowance of additional depreciation claimed by the assessee under Section 32(1)(iia) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).
3. The facts of the case in brief are that the assessee filed its return of income on 29.05.2012, declaring loss of Rs. 91,37,920/- and paid the tax under Section 115JB of the Act on book profit of Rs. 10,05,460/-. Later on, the case was selected for scrutiny. The Assessing Officer during the course of assessment proceedings noticed that the assessee had claimed Rs.51,23,970/- as additional depreciation for the machinery purchased in the assessment year 2011-12. He, therefore, asked the assessee to explain as to why the depreciation should not be disallowed as it was allowable only once. The assessee submitted that it had claimed 50% of depreciation in the assessment year 2011-12 as the machinery was put to use for less than 180 days. The contention of the assessee was not accepted by the Assessing Officer, who disallowed the claim of the assessee. Being aggrieved, the assessee carried the matter to the learned Commissioner of Income Tax(Appeals) and submitted as under:
Company also claimed additional depreciation for Assessment Year 2011-12 for the plant & machinery purchased during the assessment year 2011-12 for the period of less than 180 days, for which the assesses Company claimed only 50% of the additional depreciation i.e. 10% of the actual cost of the machinery. Now remaining 50% additional depreciation claimed in the assessment year 2012-13. Calculation of same is as under:- Particulars Amount Additional Depreciation Plant & Machinery 5,12,39,704.95 5,12,39,704.95*20%* 1/2= purchased during the 51,23,970.49 Assessment year 2011-12 for less than 180 days Total 51,23,970.49 Section 32(1)(iia) of the Act provide the additional depreciation of @20% on new Plant & machinery purchased during the year but new plant & machinery put to use for less than 180 days than deduction under this section in respect of such assets shall be restricted to 50% of the amount calculated at the 20%. This restriction is only on the basis of period use. There is no restriction on availability of balance depreciation of 10% in the subsequent year. The legislature has provided the incentive scheme the manufacturer by giving them benefit of additional depreciation @20% on new plant & machinery to encourage the industrialization in India. This additional benefit to give impetus to industrialization and the basic intention and purpose of these provisions can be fulfilled only when the assessee get the full benefit and this is possible only when there is no restriction in the statute to deny benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days. Onetime benefit extended to assessee has been earned in the year of acquisition new plant and machinery. In section 32(1)(iia) the expression used is “shall be allowed". Thus the assessee had earned the benefit as soon as he had 50% in that particular year on account of period of usages. Law does not prohibit that balance 50% will not be allowed in succeeding year.”
3.1 The learned Commissioner of Income Tax(Appeals) after considering the submissions of the assessee upheld the view taken by the Assessing Officer by making the following observations: “5.3 A plain reading of the above explanation in the Memorandum indicates that the amendment was made to the remove the discrimination between the new plant & machinery put to use for less than 180 days and new plant & machinery put to use for 180 days or more in the matter of allowing additional depreciation. It was explained unequivocally that under the preamended provision of section 32, new plant & machinery which were put to use for less than 180 days during the previous year were not entitled for 100% of additional depreciation. To discourage the assessees from deferring the decision for investment in plant & machinery to the next PY for availing 100% additional depreciation, it has been provided that with effect from 01.04.2016 i.e AY 2016-17, the new plant & machinery which have been put to use for less than 180 days shall be eligible for 50% additional depreciation in the year of acquisition and installation and balance 50% additional depreciation in the succeeding year. The amendment was not given retrospective effect, therefore, it shall only apply prospectively to the new plant & machinery acquired and installed during the previous years relevant to the AY 2016-17 and subsequent assessment years. In the present case the new plant & machinery were acquired and installed during the previous year 2010-11 relevant to the AY 2011-12 i.e. before the AY 2016- 17. In view of the unmistakable clarification provided by the Finance Act, 2015 read with Memorandum explaining the provisions of Finance Bill, 2015, the appellant is not entitled to claim 50% additional depreciation in the AY 2012-13 for new plant & machinery which were put to use for less than 180 days during the PY 2010-11 relevant to A.Y.2011-12.” 3.2 Being aggrieved from the above findings of learned Commissioner of Income Tax (Appeals), the assessee is in appeal before the ITAT.
Learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that this issue is squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of Commissioner of Income Tax vs. Rittal India Pvt. Ltd, reported in (2016) 380 ITR 423 (Ker.). The reliance was also placed on the decision of the ITAT, Delhi Benches, New Delhi, in the case of Deputy Commissioner of Income Tax Vs. Cosmo Films reported at 139 ITR 628 and the ITAT Calcutta in the case of Universal Cables Ltd. Vs DCIT reported at 68 SOT 307.
It was further submitted that the legislature made the amendment in the Act vide Finance Act, 2015 and inserted a proviso to Section 32(1)(iia) w.e.f. 01.04.2016. The proviso, inter alia, provides that balance 50% of the additional depreciation on new allotted machinery acquired or used for less than 180 days, which has not been allowed in the year of acquisition and installation of such plant and machinery shall be allowed in the immediately succeeding previous year. It was contended that the said amendment is clarificatory in nature so the intention of the legislation was very much clear therefore, the assessee was eligible to claim the deduction of the depreciation in the succeeding year because the machinery was used for less than 180 days in the year of installation and 50% of depreciation was claimed. Reliance was also placed on the judgment of the Hon’ble Supreme Court in the case of Allied Motors Pvt. Ltd. Vs. Commissioner of Income Tax (1997), 224 ITR 677(SC).
In his rival submissions, the learned Departmental Representative strongly supported the orders of the authorities below and reiterated the observations made by the learned Commissioner of Income Tax(Appeals) in para 5.3 of the impugned order.
It was further submitted that the amendment made vide the Finance Act, 2015 was not retrospective but prospective from 01.04.2016. Therefore, the amendment will take effect from the 1st April, 2016 and will accordingly apply in relation to the assessment year 2016-17 and subsequent years. However, for the year under consideration, the assessee was not eligible to claim the 50% of the additional depreciation which was not claimed in the year of acquisition and installation of the plant and machinery since it was put to use for less than 180 days. Reliance was placed on the judgment of the Hon’ble Supreme Court in the case of Pandian Chemicals Ltd. Vs. Commissioner of Income Tax, (2003) 262 ITR 278 (SC).
I have considered the submissions of both the parties and carefully gone through the material available on record. It is noticed that an identical issue having similar facts was a Hon’ble Karnataka High Court in the case of Commissioner of Income Tax and Another Vs. Rittal India Pvt. Ltd., (2016) 380 ITR 423, wherein it has been held as under: “……..that the beneficial legislation should be given liberal interpretation so as to benefit the assessee. The intention of the legislation is absolutely clear that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to half being granted in 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 had 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 made the provision meaningful while granting the additional allowance.”
In the present case also, the assessee could not claim 100% of the depreciation in the year of installation of plant and machinery because it was put to use for the purpose of business for a period of less than 180 days and claimed 50% of depreciation in the year of installation of plant and machinery, the remaining 50% was claimed in the year under consideration. The Hon’ble Karnataka High Court in the aforesaid referred case held that the intention of the legislation is absolutely clear that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to half being granted in one assessment year, if certain condition was not fulfilled, but that would not restrain the assessee from claiming balance of the benefit in the subsequent assessment year. In the present case also, the assessee claimed 50% of depreciation allowable @ 20% under Section 32(1)(iia) of the Act and the remaining 50% was claimed in the year under consideration. Therefore, by following the ratio laid down by the Hon’ble Karnataka High Court in the aforesaid referred case, the impugned order is set aside and the Assessing Officer is directed to allow the claim of the assessee. For the aforesaid view, I am also fortified by the decision of ITAT, Kolkata Tribunal, in the case of Universal Cables Ltd. Vs. Deputy Commissioner of Income Tax, reported in (2015) 68 SOT 0307 (Kolkata), wherein earlier order of the ITAT, Delhi Benches, New Delhi, in the case of Deputy Commissioner of Income Tax Vs. Cosmos Films Ltd., reported in 139 ITD 628 (Del.) has been followed.
In the result, appeal of assessee is allowed. The decision is pronounced in the open court on 12th September, 2016.