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M/s Automotive Coaches and Components Ltd Versus The Deputy Commissioner of Income Tax, Company Circle – I, Chennai

2016 (4) TMI 34 - ITAT CHENNAI

Disallowance of additional depreciation claimed - Held that:- The assessee is entitled for remaining 10% of the depreciation during the year under consideration. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow balance 50% of depreciation, namely, 10% of additional depreciation during the year under consideration. - Decided in favour of assessee - ITA No.1789/Mds/2014 - Dated:- 12-2-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI .....

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5,88,856/-. 2. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee claimed additional depreciation under Section 32(1)(iia) of the Income-tax Act, 1961 (in short 'the Act') in respect of machinery installed, to the extent of ₹ 5,88,856/- in respect of addition made to the plant and machinery, during the year under consideration. The Ld.counsel further clarified that the plant and machinery were installed in the second half of the year under consider .....

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tion has to be allowed only at 50%. The Assessing Officer, according to the Ld. counsel, further found that there is no provision in the Income-tax Act for allowing 50% in the succeeding assessment year. Placing reliance on the decision of Cochin Bench of this Tribunal in Apollo Tyres Ltd. v. ACIT (2014) 64 SOT 203, the Ld.counsel submitted that an identical issue was considered by the Cochin Bench and the Cochin Bench found that the balance 50% of the additional depreciation has to be allowed i .....

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udgment of Apex Court in CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306, the Ld.counsel submitted that amendment was made in the Income-tax Act in order to remove the discrepancy in the matter of allowing additional depreciation. Therefore, according to the Ld. counsel, the amendment is applicable retrospectively during the year under consideration also. The Ld.counsel has also placed his reliance on the unreported judgment of Karnataka High Court in CIT v. Rittal India Pvt. Ltd. in ITA No.268/2 .....

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on on the ground that the depreciation which was not allowed in the earlier assessment year has to be carried forward. On identical circumstances, this Bench of the Tribunal in I.P. Rings Ltd. v. DCIT in I.T.A. No.729/Mds/2014 dated 26.09.2014, found that the additional depreciation cannot be carried forward. 5. We have considered the rival submissions on either side and perused the relevant material available on record. Section 32(1)(iia) provides for additional depreciation at the rate of 20%. .....

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stalled and used for business of the assessee. There is no provision in the Income-tax Act for carry forward of the additional depreciation to the subsequent assessment year. This issue was examined by the Cochin Bench of this Tribunal in Apollo Tyres Ltd. v. ACIT (supra). The Cochin Bench found that if additional depreciation could not be allowed at the rate of 20% during the year in which the machinery was installed, the balance 50% has to be allowed in the subsequent year. In fact, the Cochin .....

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actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided that no deduction shall be allowed in respect of (A) Any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or (C) Any office appliances or road transport vehicles; or (D) .....

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y 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 .....

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gible for additional depreciation which is equivalent to 20% of the actual cost of such machinery. The dispute is the year in which the depreciation has to be allowed. The assessee has already claimed 10% of the depreciation in the earlier assessment year since the machinery was used for less than 180 days and claiming the balance 10% 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 asse .....

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he assessee is entitled for 50% of the prescribed rate of additional depreciation. The Income-tax Act is silent about the allowance of the balance 10% additional depreciation in the subsequent year. Taking advantage of this position, the assessee now claims that the year in which the machinery was put to use the assessee is entitled for 50% additional depreciation since the machinery was put to use for less than 180 days and the balance 50% shall be allowed in the next year since the eligibility .....

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f section 32(1)(iia) and proviso to section 321)(ii) of the Act found that when there is no restriction in the Act to deny the benefit of balance 50%, the assessee is entitled for the balance additional depreciation in the subsequent assessment year. In fact, the Delhi Bench of this Tribunal has observed as follows at pages 641 and 642 of the ITD: " 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 s .....

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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. v. CIT [1992] 196 ITR 188, 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 li .....

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expression used I "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% in that particular year on account of period usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition .....

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aim raised in ground no.3. The same is dismissed." 13. This issue was also considered by another bench of this Tribunal at Delhi in SIL Investment Ltd (supra). At page 233 of the TTJ, the Tribunal has observed as follows: "40. There is nothing on record to show that the directions given by the learned CIT(A) are not proper. The eligibility for deduction of additional depreciation stands admitted, since 50 per cent thereof had already been allowed by the AO in the asst.yr.2005-06, i.e. .....

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MITC Rolling Mills (P.) Ltd. (supra). In view of the above decisions of the co- ordinate benches of this Tribunal on identical set of facts this Tribunal is of the considered opinion that the balance 50% of the depreciation has to be allowed in the subsequent year, therefore, the orders of the lower authorities on this issue are set side and the assessing officer is directed to allow the claim of balance 50% additional depreciation in the year under consideration. We have also carefully gone th .....

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ditional depreciation in the subsequent assessment year. Accordingly, confirmed the order of the Bangalore Bench of this Tribunal. In fact, the Karnataka High Court has observed as follows:- 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 0l.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 industri .....

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rialization, 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 ne .....

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