TMI Blog2015 (5) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the business of the assessee, i.e., manufacturing of polyester fibres and yarns - Decided in favour of assesse - I.T.A No.560/Kol/2010, I.T.A No.774/Kol/2011 - - - Dated:- 2-1-2015 - Shri Mahavir Singh Shri Shamim Yahya, JJ. For the Appellant : Shri Nageswar Rao, Advocate For the Respondent : Shri Varinder Mehta , CIT Shri Rajendra Prasad, JCIT ORDER Mahavir Singh (Judicial Member).- Both appeals filed by the assessee are against the separate orders of the Commissioner of Income-tax (Appeals)-VI, Kolkata and the Commissioner of Income-tax-II, Kolkata, in Appeal No. 583/CIT(A)-VI/07-08/Circle-VI dated January 11, 2012 and against revision order passed vide M. No. CIT, Kol-II/ u/s. 263/C-4/2009-10/ 6484-86 dated March 30, 2011 respectively. The assessment was framed by Deputy Commissioner of Income-tax, Circle-6, Kolkata under section 143(3) read with section 115WE(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for the assessment year 2006-07 vide his order dated December 5, 2008. 2. First of all we will deal with I. T. A. No. 560/Kol/2010 for the assessment year 2006-07. The only issue in this appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iia) of the Act. According to the Assessing Officer, an assessee engaged is not eligible for additional depreciation under section 32(1)(iia) of the Act. He admitted that in the assessment year 2005-06, even though the assessee was engaged in the business of generation or generation and distribution of power was allowed additional depreciation under section 32(1)(iia) of the Act. For this he observed that, therefore, notwithstanding the decision taken in assessment for the assessment year 2005-06, the claim of additional depreciation on the assets purchased for the power plant does not qualify for the same. Therefore, claim of additional depreciation is denied for ₹ 78,03,220. Aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), who also confirmed the action of the Assessing Officer. Aggrieved, now the assessee is in the second appeal before Tribunal. 4. We find that now the issue on proposition of law regarding allowance of remaining additional depreciation in the next assessment year under section 32(1)(iia) of the Act is covered in favour of the assessee and against the Revenue by the decision of the co-ordinate Bench of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the immediately subsequent year, i.e., the year under consideration assessment year 2007-08. We are in full agreement with the argument of Shri J. P. Khaitan, senior advocate that a bare reading of section 32(1)(iia) clearly shows that the assessee is eligible for additional depreciation in case the new machinery and plant was acquired and installed after March 31, 2005. There is no restrictive condition in the clause for the eligibility of the assessee to claim additional depreciation. When the assessee is eligible for depreciation at 20 per cent., in the absence of any specific provision, the Assessing Officer cannot cut down the scope of deduction by referring to the second proviso to section 32(1)(ii) of the Act. He also pointed out that even if there is any contradiction between section 32(1)(iia) and the second proviso to section 32(1)(ii), it has to be reconciled so as to give harmonious effect to the legislative intent. The benefits conferred on the assessee by way of incentive provision cannot be taken away by adopting an implied meaning to the second proviso to section 32(1)(ii) of the Act. Since the second proviso to section 32(1)(ii) does not expressly prohibit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation has to be allowed. The assessee has already claimed 10 per cent. of the depreciation in the earlier assessment year since the machinery was used for less than 180 days and claiming the balance 10 per cent. in the year under consideration. Section 32(1)(iia) does not say that the year in which the additional depreciation has to be allowed. It simply says that the assessee is eligible for additional depreciation equal to 20 per cent. of the cost of the machinery provided the machinery or plant is acquired and installed after March 31, 2005. The proviso to section 32(1)(iia) says that if the machinery was acquired by the assessee during the previous year and has put to use for the purpose of business less than 180 days, the deduction shall be restricted to 50 per cent. of the amount calculated at the prescribed rate. Therefore, if the machinery is put to use in any particular year, the assessee is entitled for 50 per cent. of the prescribed rate of additional depreciation. The Income-tax Act is silent about the allowance of the balance 10 per cent. additional depreciation in the subsequent year. Taking advantage of this position, the assessee now claims that the year in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when there is no restriction in the statute to deny the benefit of balance of 50 per cent. when the new machinery and plant were acquired and used for less than 180 days. One time benefit extended to the assessee has been earned in the year of acquisition of new machinery and plant. It has been calculated at 15 per cent. but restricted to 50 per cent. only on account of usage of these plant and machinery in the year of acquisition. In section 32(1)(iia), the expression used is shall be allowed . Thus, the assessee had earned the benefit as soon as he had purchased the new machinery and plant in full but it is restricted to 50 per cent. in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50 per cent. will not be allowed in succeeding year. The extra depreciation allowable under section 32(1)(iia) is an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50 per cent. on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation under section 32 shall definitely not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(2) of the Act for the assessment years 2003-04, 2004-05, 2006-07 and 2007-08 and in each of the assessment year deduction under section 80-IA of the Act was allowed but for the assessment year 2003-04 there was dispute with regard to quantum of deduction under section 80-IA of the Act which was resorted to in favour of this assessee. Learned counsel for the assessee relied on the proposition laid down by various High Courts that once deduction available for a specified number of years is granted in the initial year in that eventuality the Assessing Officer cannot examine the question of allowability again and decide to withdraw the relief already granted, without disturbing the deduction granted in the initial year. 8. Learned counsel for the assessee relied on the decision of the hon'ble Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. v. CIT [1980] 123 ITR 669 (Guj), wherein the ratio laid down was as under (page 674) : 'This takes us to the questions referred to us in Income-tax Reference No. 239 of 1975 at the instance of the Revenue. We do not find any justifying reasons to interfere with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold or withdraw the relief which has been already once granted. The learned advocate for the Revenue, invited our attention to certain observations made by this court in CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208 (Guj), where the court was concerned with the question, whether an industrial undertaking which did not satisfy the prescribed conditions so as to entitle itself to the relief under section 80J in the initial year can successfully claim the relief, if the prescribed conditions are satisfied in the subsequent years. We do not think that this decision of this court in Satellite Engineering Ltd.'s case [1978] 113 ITR 208 (Guj) can be of any assistance to the cause of the Revenue, because the question with which this court was concerned in that case was altogether a different one in the context in which the Division Bench was speaking. It should be understood that this is subject to the right of the Income-tax Officer to adjust the relief by fixing the quantum having regard to the respective capital employed in the new undertaking in the year with which he is concerned. In that view of the matter, therefore, the Tribunal was perfectly justified in taking the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant extract from the said judgment is quoted below (page 329) : We are aware of the fact that strictly speaking res judicata does not apply to Income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter-and, if there was not change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was granted the requisite deduction under section 80J of the Act for the assessment year 1973-74. The Department has sought reference under section 256(1) of the Act which reference application was also rejected by the Tribunal. Likewise, for the assessment years 1974-75 and 1975-76, the claims of the assessee were allowed. The assessee, once given the deduction under section 80J of the Act is entitled to such a deduction for a period of five years. If the assessee has been allowed the benefit of section 80J in the last three preceding years, there is no reason to deny the same for the instant assessment year. We, therefore, answer this issue also in favour of the assessee and against the Revenue. In the present case, the claim of the assessee under section 80-I of the Act was examined and allowed by the Assessing Officer for three years preceding the assessment year 1991-92. It is relevant to note that assessments in the earlier years, i.e., relating to the assessment years 1988-89, 1989-90 and 1990-91 has not been disturbed by the Assessing Officer and there has been no change that could justify the Assessing Officer adopting a different view in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have to be examined in the initial assessment year. In such cases, where the facts on the basis of which the deductions are claimed are subject-matter of an earlier assessment year and do not arise in the current assessment year, it would not be possible for an Assessing Officer to take a different view in the current assessment year without altering or reopening the assessment proceedings in which the eligibility to claim the deduction has been established. In cases where deduction is granted under section 80-I of the Act, the applicability of the section is determined in the year in which the new industrial undertaking is established. The qualification as to whether any industrial undertaking fulfils the condition as specified under section 80-I of the Act has to be determined in the year in which the new industrial undertaking is established. Although the deduction under section 80-I of the Act is available for the assessment years succeeding the initial assessment year, the conditions for availing of the benefit are inextricably linked with the previous year relevant to the assessment year in which the new undertaking was formed. In such circumstances, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the Income-tax Officer cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted. The Division Bench of the Bombay High Court in the case of CIT v. Paul Brothers [1995] 216 ITR 548 (Bombay) has also adopted the view expressed by the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. [1980] 123 ITR 669 (Guj)' 10. We have gone through the provision of section 80-IA of the Act and the relevant sub-section (2) gives mandate to the assessee that deduction as specified in sub-section (1) may at the option of the assessee be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops or begins to operate any infrastructure facility. Sub-section (5) says about initial assessment year and there after in subsequent assessment years for claim of deduction under this section by putting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s appeals. We find that the assessee has claimed additional depreciation under section 32(1)(iia) of the Act in immediately preceding assessment year 2005-06 and claim was allowed by the Assessing Officer. Once the conditions regarding claim of deduction of depreciation are examined by the Assessing Officer in the very first year, subsequently he cannot go back and say that the additional depreciation is not allowed on business of generation or generation and distribution of power whereas the assessee is in the business of manufacturing of polyester fibres and yarns. In such circumstances, we are of the view that the assessee is entitled to additional depreciation under section 32(1)(iia) of the Act. 6. Further, learned counsel for assessee argued on merits of the case also that the assessee is engaged in manufacturing of polyester fibres and yarns and for the same, it has installed captive power plant unit in its industrial unit at Bharuch, Gujarat. The assessee has purchased plant and machinery for its captive power plant and claimed additional depreciation. According to him, now the issue is covered, where the additional depreciation on captive power plants is claimed, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up two wind mills in addition to the already existing four wind mills and thereby increased its power generation capacity by above 50 per cent. It is true that the assessee is a company engaged in the business of manufacture of oil seeds, moulded rubber parts, reed value assemblies apart from generation of power. After the installation of the additional wind mills, both prior to as well as after the installation of the additional wind mills, the assessee was using wind energy for generating power for its captive consumption apart from selling the surplus power generated to the Tamil Nadu Electricity Board. As far as application of section 32(1)(iia) of the Act is concerned, what is required to be satisfied in order to claim the additional depreciation is that the setting up of a new machinery or plant should have been acquired and installed after March 31, 2002, by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of a new machinery or plant, which was acquired and installed up to March 31, 2002, should have any operational connectivity to the article or thing that was alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re two opposite views were equally possible and the Assessing Officer having followed one of the views, the order of the Assessing Officer could not be construed as erroneous, particularly when the order of the Assessing Officer did not suffer from any legal infirmity. 2(d) That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax erred in holding that the order of the Assessing Officer is prejudicial to the interests of the Revenue. 3. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax failed to appreciate that the proceedings under section 263 of the Act could not be initiated, when the Assessing Officer had fully examined the matter pertaining to additional depreciation. It was only after detailed examination, the Assessing Officer had made a disallowance of ₹ 78,03,220 being additional depreciation on energy saving devices in respect of earlier years. 4. That on the facts and the circumstances of the case, the learned Commissioner of Income-tax erred in directing the Assessing Officer to disallow the carry forward unclaimed additional depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year and in the subsequent assessment years. 11. Without prejudice to the above, the appellant humbly submits that the unclaimed additional depreciation for the assets put to use for less than 180 days during the assessment year 2005-06 and claimed in the subject assessment year to the tune of ₹ 78,03,220 has already been disallowed by the Assessing Officer in order under section 143(3) of the Act. It is humbly prayed that the same should not again be disallowed on the basis of order under section 263 of the Act shall since it would amount to double disallowance. 8. We have heard rival contentions and gone through facts and circumstances of the case. We find that exactly on above issues, as decided in I.T. A. No. 560/Kol/2010 for the same assessment year 2006-07 against assessment under section 143(3) of the Act, the Commissioner of Income- tax passed revision order under section 263 of the Act for revising the assessment framed under section 143(3) of the Act dated December 5, 2008 wherein he allowed additional depreciation amounting to ₹ 4,15,48,628 at 7.5 per cent. on the value of general plant and machinery and also the claim of additional depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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