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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI ASHWANI TANEJA (ACOUNTANT MEMBER)
O R D E R Per ASHWANI TANEJA, AM
This appeal has been filed against the order passed u/s 263 by the Commissioner of Income-tax (LTU), Mumbai (hereinafter called CIT) dt 10-06- 2014 for A.Y. 2010-11 revising the original assessment order passed u/s 143(3) dt 23-01-2013.
We have heard both the parties on the grounds raised before us with regard to the validity of order passed u/s 263.
The solitary issue raised in this appeal is whether the assessee was entitled or benefit of additional depreciation in the impugned order @30% u/s 32(1)(iia). The Assessing Officer had allowed the depreciation vide order u/s 143(3) dt 23-01-2013. In the order passed u/s 263, the ld.CIT observed that the additional depreciation was claimed and allowed on new plant & machinery which were acquired and put to use in the year relevant to assessment year 21009-10. Therefore, no depreciation can be allowed in the subsequent year i.e. impugned assessment year, i.e. A.Y. 2010-11 since no new plant & machinery has been acquired during the year under consideration. The assessee submitted that the new plant & machinery acquired in A.Y. 2009- 10 was put to use for less than 180 days, therefore, the assessee claimed one- half of the additional depreciation that was allowable to the assessee. Therefore, the balance amount of additional depreciation would be allowable to the assessee in the year under consideration as per provisions contained in clause (ii) of sub section (1) of section 32. But the ld.CIT was not satisfied with the reasoning given by the assessee and he found that assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue and, therefore, order passed by Assessing Officer was set aside with the direction to the Assessing Officer to disallow the claim of additional depreciation made during the year under consideration. During the course of hearing before us, the ld.counsel brought to our notice that this issue has been decided in favour of the assessee by the judgement of Hon’ble Karnataka High Court in the case of CIT vs Rittal India Pvt Ltd 380 ITR 4243 (Kar) and various other judgements of the Tribunal on this issue, as per details given below: 1. Dy.CIT, Cir 3(1) VS Cosmo Films Ltd (2012) 24 taxmann.com 189 (Del)
2. M/ Divis Laboratories Ltd vs The Dy.CIT – ITA O.11/Hyd/2012 order dt 12-07-2013 3. ITO vs M/s Aswani Industries – ITA O.210/Ahd/2013 order dt 31- 05-2013 4. Apollo Tyres Ltd vs ACIT – order dt 2012- 2013 5. M/a MITC Rolling Mills P. Ltd vs ACIT 10(2), Mumbai order dt 13- 05-2013 4. Per contra, the ld.DR relied upon the decision of the Tribunal in the case of CRI Pumps Pvt Ltd vs ACIT 58 sot 154 (Chen).
We have gone through the orders of lower authorities and considered the submissions made by both the sides. In our view, this issue has been decided by the Hon’ble Karnataka High Court in the case of CIT vs Rittal India Pvt Ltd (supra) with the following observations:
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 question 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 "cassus 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 u/s.32(l)(iia) is a one time benefit to encourage industrialization 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% depreciation, the balance 50% cannot be carried forward for the subsequent year on the claim cannot be allowed in any other year?' 6. The relevant provisions of Section 32 are reproduced below: "Section 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 1 st day of April, 1998, 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 . .......... (a) . ............ (b) .............
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 assessee 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) I or clause (iia), as the case may be: Provided also .............. Provided also .............. Provided also .............. Provided also .............. Explanation I. .............. Explanation 2 . .......... Explanation 3 ............ Explanation 4 ............ Explanation 5 ............ (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31 st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing or 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).
Provided................. " 7. Clause (iia) of Section 32(1) of the Act, as it now stands, was substituted by the Finance Act, 2005, applicable with effect from 01.04.2006. 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 01.04.2006. The grant of additional epreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialization, 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% of the 20% 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% 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% 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% additional depreciation. By virtue of the proviso referred to above, only 10% 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% additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed.
It has been consistently held by this Court, as well as the Apex Court, that 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 cel1ain 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 industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal.
In view of the aforesaid, we do not find that any interference is called for with the order of the Tribunal, or that any question of law arises in this appeal for determination by this Court.”
The aforesaid judgement of the Hon’ble Karnataka High Court has aptly discussed the provisions of section 32. The judgement has been followed by various benches of this Tribunal, whose names have been mentioned above as were relied upon by the ld.counsel. In our considered opinion, the view adopted by the ld.CIT is contrary to law and facts. The Assessing Officer had rightly allowed the benefit of additional depreciation in the year under consideration. Under these circumstances, the order passed by the ld.CIT is hereby quashed.
As a result, the appeal filed by the assessee is allowed.
Order pronounced in the court on this29th day of June, 21016.