TMI Blog2014 (1) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... he structure was used for less than 180 days - The CIT(A), after taking note of the fact has allowed only 50% of the expenditure as depreciation – There was no infirmity in the order – Decided against Revenue. Additional Depreciation u/s 32(1)(iia) of the Act – Held that:- Following Apollo Tyres Ltd. Versus The ACIT., Range 1, Kochi [ 2014 (1) TMI 33 - ITAT COCHIN] - the assessee is entitled for additional depreciation of 10% in the subsequent assessment year - The balance 50% of the depreciation has to be allowed in the subsequent year, therefore, the orders of the lower authorities set side and the assessing officer is directed to allow the claim of balance 50% additional depreciation in the year under consideration – Thus, the assessee is entitled for additional depreciation of 10% in the year under consideration – Decided against Revenue. - ITA No. 75/Coch/2012 - - - Dated:- 31-12-2013 - Shri N. R. S. Ganesan (JM) And Shri B. R. Baskaran (AM),JJ. For the Appellant : Shri K. K. John For the Respondent : Shri R. Krishna Iyer ORDER Per N. R. S. Ganesan (JM) This appeal of the revenue is directed against the order of the C.I.T.(A)-II, Kochi dated 20-12- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.representative, the assessee is entitled for 100% depreciation. The ld.representative further submitted that the temporary structure was put to use for less than 180 days, therefore, the assessee claimed 50% of the total expenditure as depreciation. In other words, what was claimed by the assesasee is only 50% of the expenditure as depreciation, however, the assessing officer without understanding this, disallowed the entire expenditure of Rs.38,68,518. The CIT(A), after verifying the material available on record found that the assessee has claimed depreciation only at 19,34,259 and not Rs.38,68,518. Accordingly, he allowed the claim of the assessee. 5. We have considered the rival submissions on either side and also perused the material available on record. A temporary structure constructed for the purpose of carrying out a massive construction project is eligible for depreciation at 100% in view of Item I(4) of Part A of New Appendix I of the Income-tax Rules, 1962. For the purpose of convenience, we reproduce the language employed in Item I(4) of Part A of New Appendix I of the Income-tax Rules, 1962. "(4) Purely temporary erections such as wooden structures" In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly, Item I(4) of Part A of New Appendix I was not brought to the notice of the Gauhati High Court. The Gauhati High Court observed that depreciation is with regard to the nature of construction such as 1st class, 2nd class, and 3rd class. Nowhere in the Income-tax Rules, more particularly, Item I(4) of Part A of New Appendix I, the nature of construction such as 1st class, 2nd class and 3rd class is used. The Gauhati High Court proceeded on the footing that the assessee used G.I. pipes, M.S. rods, etc. for construction and therefore, the assessee is entitled only for 7.5% depreciation. Since the language employed by the legislature, more particularly, Item I(4) of Part A of New Appendix I, was not brought to the notice of the High Court, this Tribunal is of the considered opinion that the judgment of the Gauhati High Court may not be of any assistance to the Revenue. 8. Let us now examine whether wooden structure would only be entitled for depreciation at 100% and not any other structure. The words "purely temporary erections" was further quantified with the words "such as wooden structures". Therefore, what is entitled for 100% depreciation is purely temporary erections i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... longer than R.C.C. construction. It is also a common knowledge that the R.C.C. construction would last only for 75 to 90 years, if it is maintained properly. However, the teak wood and rose wood frames would last for several hundred years even after demolition of the R.C.C construction. Therefore, it may not be the intention of the rule making authority to grant 100% depreciation to all wooden structures. If the intention of the rule making authority is to grant depreciation only to wooden structures, the words "purely temporary erections" may not have any meaning. Therefore, a harmonious construction should be given to the language employed by the rule making authority in exercise of their rule making power under the Income-tax Act. This Tribunal is of the opinion that the purpose for which the construction is made would play an important role in deciding whether the structure is temporary or not? Therefore, this Tribunal is of the considered opinion that the department is not correct in saying that the wooden structure alone is entitled for 100% depreciation. If that is the intention of the rule making authority, then the structure made of teak wood and rose wood which would las ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions on either side and also perused the material available on record. An identical issue came up before this Tribunal in the case of Apollo Tyres Ltd in ITA No.616/Coch.2011 order dated 20-12-2013. This Tribunal after considering the provisions of section 32(1)(ii) and 32(1)(iia) of the I.T.Act, 1961 found that the assessee is entitled for additional depreciation of 10% in the subsequent assessment year. This Tribunal has observed as follows at paragraphs 7 to 13 of the order: "7. The ld.senior counsel placed his reliance on the decision of the Delhi Bench of this Tribunal in the case of DCIT vs Cosmo Films Ltd 139 ITD 628 (Del) and in the case of ACIT vs SIL Investment Ltd 148 TTJ 213 (Del). Further reliance was placed on the decision of the Mumbai Bench of this Tribunal in MITC Rolling Pvt Ltd vs ACIT ITA No.,2789/Mum/2012, copy of which is available at pages 26 to 28 of the paper book. The ld.senior counsel has also relied upon the unreported decision of the Hyderabad Bench of this Tribunal in the case of Divis Laboratories Ltd vs DCIT ITA No.11/Hyd/2012, copy of which is available at pages 29 to 41 of the paper book. 8. On the contrary, Shri M Anil Kumar, the ld.DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny one previous year." 10. We have also carefully gone through the Second Proviso to section 32(1)(ii) of the Act, which reads as follows: "Provided further that where an asset referred to 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 purpose 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." 11. A bare reading of this section 32(1)(iia) clearly says that in case a new machinery or plant was acquired and installed after 31-03-2005 by an assessee, who is engaged in the business of manufacture or produce of article or thing, then, a sum equal to 20% of the actual cost of the machinery and plant shall be allowed as a deduction. It is not in dispute that the assessee has acquired and installed the machinery after 31-03-2005. It is also not in dispute that the assessee is engaged in the manufacture of ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......Thus, the intention was not to deny the benefit to the assessees who have acquired or installed new machinery or plant. The second proviso to section 32(1)(ii) restricts the allowances only to 50% where the assets have been acquired and put to use for a period less than 180 days in the year of acquisition. This restriction is only on the basis of period of use. There is no restriction that balance of one time incentive in the form of additional sum of depreciation shall not be available in the subsequent year. Section 32(2) provides for a carry forward set up of unabsorbed depreciation. This additional benefit in the form of additional allowance u/s 32(1)(iia) is one time benefit to encourage the industrialization and in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd (supra), the provisions related to it have to be construed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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