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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI
Before: SHRI ABRAHAM P. GEORGE & SHRI G. PAVAN KUMAR
आदेश / O R D E R
SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:
These are appeals filed by the Department directed against orders dated 14.07.2016 of Commissioner of Income Tax (Appeals)-1, Chennai.
ITA Nos.2751 & 2752/2016 :- 2 -:
Facts apropos are that assessee during the previous year 2. relevant to assessment year 2009-2010 claimed additional depreciation of 10% on plant and machinery which were purchased and put to use in the previous year relevant to the preceding assessment year relying on section 32(1)(iia) of the Income Tax Act, 1961 ( in short ‘’the Act’’).
Assessee had used such plant and machinery for a period less than 180 days in the preceding year and therefore it could claim only 50% of the additional depreciation. The, claim for additional depreciation in the preceding assessment year in respect of new plant and machinery purchased in that year was restricted to 10%. Balance 10% coming to �4,33,414/- was claimed by the assessee in the impugned assessment year as carried forward additional depreciation from the preceding assessment year. There was a similar claim made by the assessee for assessment year 2012-2013 for plant and machinery acquired in previous year relevant to assessment year 2011-2012. This claim came to �14,06,042/-. Both these were disallowed by the ld. Assessing Officer holding that the Act did not permit carry forward of additional depreciation on new plant and machinery to the extent it could not be availed due to usage less than 180 day.
ITA Nos.2751 & 2752/2016 :- 3 -:
In its appeals before ld. Commissioner of Income Tax (Appeals), argument of the assessee was that Co-ordinate Benches of this Tribunal in the cases of M/s. Addison and Company vs. DCIT (ITA no.2198/Mds/2015, dated 4.3.2016), M/s. Hinduja Foundaries Ltd vs. ACIT (ITA No.1590, 1591, 1592 and 1593/Mds/2015, dated 19.02.2016) and M/s. Devi Polymers Pvt. Ltd vs. ACIT (ITA No.165/Mds/2014, dated 09.4.2014 allowed similar claim for carried forward additional depreciation.
Ld. Commissioner of Income Tax (Appeals) after considering 4. the submissions of the assessee was of the opinion that there were contrary decisions of Co-ordinate Benches of this Tribunal on the issue. As per ld. Commissioner of Income Tax (Appeals) though the decisions mentioned in the preceding para were in favour of the assessee, in the cases of CRI Pumps Pvt. Ltd vs. ACIT 58 SOT 134 (Chennai) and DCIT vs. IP Rings (ITA No.1328/Mds/2014, dated 26.09.2014), a view in favour of the Revenue was taken. However, he held that assessee could take advantage of decisions which were in its favour. He directed the ld. Assessing Officer to allow the claim of the assessee.
ITA Nos.2751 & 2752/2016 :- 4 -:
Now before us, ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that the wordings of Sec. 32(1)(iia) of the Act did not allow a claim of carry forward unabsorbed additional depreciation.
. Per contra, ld. Authorised Representative once again relied 6. on the very same decisions on which assessee had banked before ld. Commissioner of Income Tax (Appeals). Reliance was also placed on the judgment of Hon’ble Karnataka High Court in the case of CIT vs. Rittal India Pvt. Ltd 380 ITR 423. According to him, the decision of the ld. Commissioner of Income Tax (Appeals) was in accordance with law.
We have considered the rival contentions and perused the 7. orders of the authorities below. In so far as claim of carry forward of additional depreciation to the extent it could not be allowed in earlier year due to use lesser than 180 days, no doubt there are decisions of Co-ordinate Bench which are for and against the assessee. However, in our opinion the issue is no more res integra due to the judgment of Karnataka High Court in the case of Rittal India Pvt. Ltd(supra). Their lordship after considering Sec. 32(1)(iia) of the Act held at para 3 to 10 as under:-
3. The dispute in the present appeal is with regard to the allowance of the balance 10 per cent. depreciation in the next
ITA Nos.2751 & 2752/2016 :- 5 -: assessment year 2008-09, so that the benefit of the total 20 per cent. allowable depreciation under section 32(1)(iia) of the Act was given. The Assessing Officer, as well as the Appellate Commissioner, disallowed the claim of the assessee, whereas the Tribunal, vide its order dated January 28, 2014, has allowed the appeal of the assessee. Challenging the same, this further appeal has been filed by the Revenue.
We have heard Sri K. V. Aravind, learned counsel for the appellants as well as Sri T. Suryanarayana, learned counsel appearing for the respondent-assessee and perused the record.
5. This appeal has been filed raising the following two substantial questions of law : "(i) Whether the Tribunal is correct in extending the benefit of section 32(1)(iia) of the Act to the next assessment year when the Income tax Act does not provide for such carryover, thereby violating the legal principles of 'casus omissus' which states that the courts cannot compensate for what the Legislature has omitted to enact ? (ii) Whether the Tribunal was correct in holding that additional depreciation allowed under section 32(1)(iia) is a one-time benefit to encourage industrialisation and the relevant provisions has been construed reasonably and purposive without appreciating that the additional depreciation is allowed in the year of purchase and if in the year of purchase the assessee is eligible only for 50 per cent. depreciation, the balance 50 per cent. cannot be carried forward for the subsequent year on the claim cannot be allowed in any other year ?"
The relevant provisions of section 32 are reproduced below : "32.(1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets ; ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998,
ITA Nos.2751 & 2752/2016 :- 6 -: owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed— (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed ; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed : . . . Provided further that where an asset referred to in clause (i) or clause(ii) or clause (iia), as the case may be, is acquired by the asses see during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be . . . (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power, a further sum equal to twenty per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)."
Clause (iia) of section 32(1) of the Act, as it now stands, was substituted by the Finance Act, 2005, applicable with effect from April 1, 2006. Prior to that, a proviso to the said clause was there, which provided for the benefit to be given only to a new industrial undertaking, or only where a new industrial undertaking begins to manufacture or produce during any year previous to the relevant assessment year.
The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 2006. The grant of additional
ITA Nos.2751 & 2752/2016 :- 7 -: depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialisation, 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.
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 (ii)". 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 of 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.
It has been consistently held by this court, as well as the apex court, that the beneficial legislation, as in the present 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, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held, that additional depreciation allowed under section 32(1)(iia) of the Act is a one-time benefit to encourage industrialisation, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting the additional allowance. We are in full agreement with such observations made by the Tribunal.
ITA Nos.2751 & 2752/2016 :- 8 -:
We are of the opinion that as on date there is no judgment of any other High Courts which is in favour of the Department. Hence, we do not find any reason to disturb the view taken by the ld. Commissioner of Income Tax (Appeals).
In the result, appeals of the Revenue for both the 8. assessment years are dismissed.
Order pronounced on Wednesday, the 21st day of December, 2016, at Chennai.