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आदेश/Order PER ANNAPURNA GUPTA, A.M. : The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Chandigarh (in short CIT(A) dated 7.3.2017 passed u/s 250(6) of the Income Tax Act, 1961 (in short referred to as ‘Act’).
Ground Nos. 1 and 4 raised by the assessee read as under:
“1. That the order passed under section 250(6) by the Learned Commissioner of Income Tax (Appeals)-I, Chandigarh in Appeal No. 83/14-15 dated 07.03.2017 is contrary to law and facts of the case. 4. That the appellant craves to add, amend or alter any ground of appeal before or at the time of hearing of appeal, with the permission of the Hon'ble Income Tax Appellate Tribunal, Chandigarh.” 3. The above grounds are general in nature and needs no adjudication.
Ground No.2 raised by the assessee reads as under:
2 ITA No.775/Chd/2017 A.Y.2012-13 “2. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) gravelly erred in not allowing the additional depreciation on the additions made in plant and machinery during the year. The appellant is a manufacturing company and as per Section 32 sub-section 1 explanation 5 the provisions of section 32 shall apply whether or not the appellant had claimed deduction in respect of depreciation in computing his total income.” 5. The assessee in the above ground has challenged the denial
of additional depreciation on additions made to plant and
machinery during the year, as per the provisions of section 32(1)
of the Act ,read with Explanation-5 thereto.
Before us the Ld. counsel for assessee pointed out that the
Ld.CIT(A) had dismissed the ground raised to this effect before
him, stating that the said issue had not been discussed in the
assessment order and no addition had been made by the A.O. Our
attention was drawn to para 5 of CIT(A)’s order dismissing the
ground relating to additional depreciation raised by the assessee
as under:
“5. Ground of appeal No. 3: The Ld. Counsel for the appellant has taken an issue of additional depreciation, but no such issue has been discussed in the assessment order and no addition was made by the Assessing Officer. In the absence of any addition being made, there is no reason for the appellant to be aggrieved. Therefore, this ground of appeal is dismissed.” 7. The Ld. counsel for assessee thereafter pointed out that the
above finding of the CIT(A) was incorrect since the assessee had
raised the claim of additional depreciation before the A.O. vide
two letters filed to him. Referring to the submissions made before
the CIT(A), the copy of which was placed before us at pages 1 to
8, the Ld. counsel for assessee pointed out that the details
regarding claim of additional depreciation were made by the
assessee during assessment proceedings as per the letters dated
18.9.2014 and 23.9.2014 and that calculation of revised
depreciation were also submitted alongwith complete books of
account but despite the same,the assessee’s claim was not
3 ITA No.775/Chd/2017 A.Y.2012-13 allowed by the A.O. Our attention was drawn to the relevant
submissions at page 7 of the Paper Book as under:
“ It is submitted that the appellant did not file any claim in respect of additional depreciation on investment of Rs. 3,45,19,230/- in the return of income and has claimed it during the course of assessment proceedings. The Id. Assessing Officer had rejected the claim of the appellant and did not make any observation on it. It is submitted that the depreciation under Section 32 is a mandatory claim which is to be allowed to the appellant even if the same has not been claimed in the return of income. It is submitted that the details regarding claim of additional depreciation was claimed by the appellant proceedings as per appellant's letter dated 18.09.2014 and. 23.09.2014. The calculations of depreciation of revised depreciation chart were also submitted. Complete books of accounts were produced during the course of assessment proceedings. It is submitted that despite all the details were filed the claim by the appellant was not allowed. Despite did not make claim in the return of income, it could still be allowed the same by virtue of explanation 5 of Section 32 which states clearly”
The Ld. counsel for assessee thereafter stated that the
I.T.A.T. in the case of M/s A&A Molular Systems Vs. ITO in ITA
No.401/Chd/2015 vide order dated 25.8.2015 had held that the
claim for additional depreciation was allowable even if not made
in the return of income and claimed for the first time in the
assessment proceedings. Our attention was drawn to the relevant
findings of the I.T.A.T. at paras 15 to 20 of the order as under:
Ground No. 5 is against the disallowance of additional depreciation of Rs. 1,57,71,549/- on investment of Rs. 8,01,10,668/- claimed by the assessee during the assessment proceedings. The fact relating to the issue is that the assessee did not file any claim in respect of additional depreciation on investment of Rs. 8,01,10,668/- in the return of income and had claimed the same for the first time during the assessment proceedings . The AO rejected the claim of the assessee by treating it as a sham claim, an afterthought of the assessee considering the fact that deduction under section 80IC would not be allowed to the assessee. The CIT(A) upheld the disallowance of claim by holding that it was not clear whether the condition laid down in the proviso to Section 32(iia) were fulfilled or not in the case of the assessee. The Ld. CIT(A) stated that since neither Form 3CD nor Form 10CCB mentioned any asset eligible for additional depreciation the assessee’s claim for additional depreciation was not maintainable. 16. Before us AR pleaded that the claim for depreciation under section 32 is a mandatory claim which is to be allowed to the assessee even if same has not been claimed in the return of income. The AR submitted that all details regarding the claim for additional depreciation were filed before the AO during the assessment proceedings itself vide letter dt 20-03-2013 ,in response to the A.O’s letter dt 11-03 2013 asking the assessee to furnish the calculation of depreciation and revised depreciation chart
4 ITA No.775/Chd/2017 A.Y.2012-13 showing the WDV as on 31/03/2010 after the claiming of additional depreciation. 17. The DR relied on the order of the CIT(A). 18. We have heard the Representatives of both the parties and perused the orders of authorities below and also the documents placed before us. 19. We find that the claim of the assesse for additional depreciation has been rejected for the reason that it was not verifiable. The CIT(A) while rejecting the claim of the assesse has held at para 7 of his order as follows:
“7. The issue is pertaining to allowability of additional depreciation u/s 32(iia) of Rs.1,57,71,549/-. As evident from the facts of the case, the assessee did not file any claim in respect of a investment of Rs. 8,01,10,668/- u/s 32(ii) in return of income. A.O. disallowed the same as asssessee claimed it to subsequently, once he realized that assessee’s claim u/s 80IC is not admissible on the basis of substantial expansion. During appellate proceedings, assessee argued that investment in plant & machinery and use for the purpose of business of manufacturing has not been denied by A.O. and it mandatory to provide depreciation u/s 32 whether assessee claims it or not. The burden of proof to justify any claim primarily lies upon assessee. Assessee also filed copy of Form 3CD and copy of Form 10CCB for claim of deduction u/s 80IC. As per Form 3CD details of depreciation allowable (Annexure-A) does not reflect any mention of assets eligible for additional depreciation. Similarly the Form No. 10CCB in column No. 26(e) reflect value of total WDV of plant and machinery used in business, as on 31.03.2010, to be Rs. 9,47,15,967/- and does not reflect any such assets eligible for additional depreciation. Thus the claim of additional depreciation u/s 32(ia) is not substantiated with either of the certificates. It is not clear whether the condition laid down in proviso to 32(iia) are fulfilled or not in case of assessee. Assessee relied upon various case laws which are factually and circumstantially different from facts of the assessee’s case especially in light of fact that assessee’s claim is not maintainable in view of auditor’s report u/s 44AB in Form 3CD and Form 10CCB. The claim of assessee being non verifiable in nature, is not maintainable. Thus this ground of appeal is dismissed.” However our attention was invited to the fact that during assessment proceedings the assessee had vide his letter dt. 20.03.2013 submitted details of additional depreciation in response to the A.O’s letter dt 11-03 2013 asking the assessee to furnish the calculation of depreciation and revised depreciation chart showing the WDV as on 31/03/2010 after the claiming of additional depreciation. Moreover complete books of accounts were also produced during assessment proceedings. But it appears that despite all details filed, the claim of the assessee was not verified. We therefore consider it proper to send the issue of claim of additional depreciation back to the A.O.The A.O is hereby directed to verify the claim of the assesse in the light of conditions prescribed u/s 32(1)(iia) and the Proviso thereto and pass appropriate order in accordance with law after giving the assesse due opportunity of hearing. The assesse is free to file any other evidences in support of his claim.
5 ITA No.775/Chd/2017 A.Y.2012-13 It is pertinent to mention, that though the assessee may not have claimed additional depreciation in its return of income, it can still be allowed the same by virtue of Explanation 5 of Section 32 which states clearly as follows: “ Explanation 5- For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income.” In view of the same we hold that the assessee is entitled to claim additional depreciation u/s 32(i)(iia) subject to verification of fulfillment of condition provided in provisions of section 32(i)(iia). 20. This Ground of appeal of the assesse is therefore allowed for statistical purposes.” Copy of the order was also placed before us. The Ld.
counsel for assessee, therefore, contended that the assessee
having made claim for additional depreciation before the A.O.
and the same being allowable as per the order of the I.T.A.T. in
the case of M/s A&A Molular Systems (supra), the CIT(A) had
erred in denying the said claim by recording incorrect findings
that no such issue had been discussed in the assessment order.
The Ld. DR could not controvert the factual contentions
made by the assessee but at the same time relied upon the order
of the CIT(A).
We have heard the rival contentions .We find that the
contention of the assessee that the claim for additional
depreciation had been made by the A.O. during assessment
proceedings has remained uncontroverted by the Revenue before
us.The said claim was undeniably, not entertained by the
A.O..Therefore the assessee was rightly aggrieved by this action
of the A.O and thus we do not find any merit in the findings of
the Ld.CIT(A) that since this issue has not been discussed in the
assessment order and no addition was made by the A.O., there
was no reason for the assessee to be aggrieved and thus dismiss
the ground raised by the assessee. We have also taken note of
the order passed by the I.T.A.T. in the case of M/s A&A Modular
6 ITA No.775/Chd/2017 A.Y.2012-13 Systems (supra) stating that the claim for additional
depreciation is to be allowed even if not made in the return of
income but made for the first time during assessment
proceedings.
In the light of the above,since the assessee had made a claim for
additional depreciation, we hold that the issue needed to be
considered and examined by the AO and adjudicated upon by
way of a speaking order. We therefore restore the issue back to
the file of the A.O. to verify the facts relating to the issue and
thereafter adjudicate the same afresh in accordance with law.
The ground of appeal No.2 raised by the assessee is, therefore,
allowed for statistical purposes.
Ground Nos.3(a) and 3(b) of the appeal raised by the
assessee read as under:
“3(a) That in the facts and circumstances of the case, the Id. Commissioner of Income Tax Appeals) gravelly erred in upholding the action of the Id. Assessing Officer in making addition of Rs. 17,73,9397- by disallowing the interest paid under Section 36(l)(iii) of the Income Tax Act, 1961. 3(b). Without prejudice to the above ground, the disallowance is highly excessive.”
Briefly stated, the A.O. had disallowed interest amounting
to Rs.17,73,939/- under the proviso to section 36(1)(iii) of the
Act holding that the borrowed funds had been used for
installation of plant and machinery and the assessee had not
capitalized interest on plant and machinery till the date of
putting the asset to use. The CIT(A) had upheld the order of the
A.O.
Before us the only prayer made by the Ld. counsel for
assessee was that the assessee be granted additional
depreciation on the addition so made to the plant and
machinery,as pleaded in ground no.2 above.
7 ITA No.775/Chd/2017 A.Y.2012-13 15. In view of the same,since the issue raised in this ground is connected to that raised in ground no.2 above, we restore this issue also back to the A.O. to be adjudicated alongwith the claim of assessee of additional depreciation raised in ground No.2 above. We direct that the assessee be given due opportunity of hearing and the order be passed by the A.O. after verifying of the facts and in accordance with law. Ground of appeal Nos.3(a) & 3(b) are, therefore, also allowed for statistical purposes. 16. In effect, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court.
�दवा �संह अ�नपणा� ग�ता (ANNAPURNA GUPTA) (DIVA SINGH) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated: 29th November, 2018 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :
अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आय�त / CIT 4. आयकर आय�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar