RASHTRIYA CHEMICAL & FERTILIZERS LTD,MUMBAI vs. CIT LTU, MUMBAI

This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the HCommissioner of Income Tax (CIT)-(LTU), Mumbai u/s 263 of the Income Tax Act 1961, (the ‘Act’).

The sole ground raised by the assessee in this appeal is that the CIT has erred in holding the assessment order dated 10.10.2011 passed by the AO was erroneous and prejudicial to the interest of revenue and in passing an order u/s 263 of the Act in respect of the same. Without prejudice to the above, it is stated that the CIT has erred in directing the AO to disallow the balance 50% of the additional depreciation of Rs. 1,47,67,610/- claimed u/s 32(1)(iia) in respect of new assets put to use in the 2nd half of the financial year 2007-08. It is submitted that considering the facts and circumstances of the case and the law prevalent on the subject, the allowance of additional depreciation is correct and valid in law.

The CIT, after verification of the case records, noticed that the assessee had claimed and was allowed an additional depreciation @10% of an amount of Rs. 1,47,67,610/-. This additional depreciation was claimed and allowed on new plant and machinery which was acquired and put to use in the previous year relevant to the A.Y. 2008-09. But these were put to use for less than 180 days in A.Y. 2008-09 and therefore additional depreciation of only 10% was claimed in that year. The CIT observed that there is no provision in the Act to claim the balance of the additional depreciation in the succeeding year. Therefore the CIT came to a finding that the additional depreciation claimed by the assessee and allowed by the AO in the A.Y. 2009-10 was erroneously granted. In response to a query raised by the CIT, the assessee filed a written submission which has been extracted at page 2 – 5 of the order dated 26.03.2014 passed by the CIT. It is found that the CIT was not convinced with the explanation given by the assessee. Therefore, he set aside the order of the AO and directed him to disallow the claim additional depreciation of Rs. 1,47,67,610/- in the impugned assessment year.

The learned AR relied on the judgement of the Hon'ble Karnataka High Court in the case of CIT vs. Rittal India Pvt. Ltd. (2016) 66 taxmann.com 4 (Karnataka) and the order of the Co-ordinate Bench in the case of the assessee for the A.Y. 2010-11 (ITA No. 5160/Mum/2014). 5. The learned DR supported the order of the CIT. 6. We have heard the rival submissions and perused the relevant material on record. We find that in the case of Rittal India Pvt. Ltd. (supra), the Hon'ble Karnataka High Court held as under: “ If plant and machinery eligible for additional depreciation under section 32(1)(iia) is put to use for less than 180 days in said financial year and, therefore, only 50 per cent of additional depreciation can be claimed in that year, balance 50 per cent can be availed in subsequent year’’.

Respectfully following the judgement of the Hon'ble Karnataka High Court as narrated at para 6 and the order of the Co-ordinate Bench thereafter, we set aside the order u/s 263 passed by the CIT and restore the order of the A.O.

In the result, the appeal filed by the assessee is allowed.