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2016 (5) TMI 572 - ITAT CHENNAI

2016 (5) TMI 572 - ITAT CHENNAI - TMI - Additional depreciation under Section 32(1)(iia) in respect of the new plant and machinery installed and used for manufacturing activity - asset put to use - Held that:- The assessee is eligible for remaining 10% additional depreciation under Section 32(1)(iia) of the Act. The orders of the lower authorities are set aside and the Assessing Officer is directed to allow the balance 50% depreciation, namely, 10% additional depreciation during the year under c .....

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Since common issue arises for consideration in these appeals, we heard these appeals together and disposing of the same by this common order. 2. Shri S. Sridhar, 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 the new plant and machinery installed and used for manufacturing activity. Since the machinery was used for less than 180 days, the Assessing Office .....

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itted that on identical set of facts, this Tribunal by referring to the decision of Cochin Bench of this Tribunal in Apollo Tyres v. ACIT (2014) 64 SOT 203, directed the Assessing Officer to allow the remaining 10% additional depreciation for the subsequent year. The Ld.counsel further submitted that the assessee has raised other grounds in the appeal. However, the same are not pressed. 3. We have heard Dr. Milind Madhukar Bhusari, the Ld. Departmental Representative also. According to the Ld. D .....

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ing Officer disallowed the claim of the assessee. 4. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the machinery was installed and used for manufacturing activity for less than 180 days. Therefore, the Assessing Officer allowed the additional depreciation at the rate of 10%. The question arises for consideration is whether the assessee can claim the remaining 10% under Section 32(1)(iia) of the Act in the .....

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ditional depreciation in respect of the plant and machinery purchased during the year under consideration. The Assessing Officer found that the additions to fixed assets were made in the second half of the financial year, therefore, 50% of additional depreciation has been claimed. The balance 50% was carried forward in the next year. The Assessing Officer found that the additional depreciation is allowable only during the year in which the machinery was installed and used for business of the ass .....

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follows:- 9. We have considered the rival submissions on either side and also perused the material available on record. Section 32(1)(iia) reads as follows: "32(1)(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant .....

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actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any 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 .....

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quired 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 article or thing. Therefore, the assessee is eligible for additional depreciation which .....

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tion equal to 20% of the cost of the machinery provided the machinery or plant is acquired and installed after 31-03- 2005. Proviso to section 32(1)(iia) says that if the machinery was acquired by the assessing 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% 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% of the p .....

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additional depreciation cannot be denied by invoking Second Proviso to section 32(1)(ii) of the Act. 12. This issue was considered by the Delhi Bench of this Tribunal in the case of Cosmo Films Ltd (supra). The revenue has taken a similar ground as taken before this Tribunal that the assessee cannot carry forward the additional depreciation to be allowed in the subsequent assessment year. The Delhi Bench of this Tribunal after considering the provisions of section 32(1)(iia) and proviso to sect .....

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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 I 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 bene .....

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o get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new machinery and plant were acquired and used for less than 180 days. One time benefit extended to assessee has been earned in the year of acquisition of new machinery and plant . It has been calculated @15% but restricted to 50% only on account of usage of these plant & machinery in the year of acquisition. In section 32(1)(iia), the expression used I "shall be allowed& .....

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ccount of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of machinery and plant . In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit. We allow ground no.2 of the assessee's appeal. Since we have decided ground no.2 in favour of assessee, there is no need to decide the alternate claim raised in ground no.3. The same is di .....

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. Therefore, obviously, the balance 50 per cent of the deduction is to be allowed in the current year, i.e. asst. yr. 2006-07. The learned CIT(A) has merely directed the verification of the contentions of the assessee and to allow the balance additional depreciation after such factual verification. Accordingly, finding no merit therein, ground No.3 raised by the Department is rejected." 14. A similar view was taken by Mumbai Bench of this Tribunal in MITC Rolling Mills (P.) Ltd. (supra). In .....

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t in Rittal India Pvt. Ltd. (supra). The Karnataka High Court, after extracting the provisions of Section 32(1)(iia) of the Act, found that beneficial legislation has to be interpreted liberally so as to benefit the assessee. Karnataka High Court has also found that the intention of the legislation is to allow additional benefit. The Karnataka High Court opined that the proviso would not restrain the assessee from claiming the balance of the benefit of additional depreciation in the subsequent a .....

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roduce during any year previous to the relevant assessment year. 8. The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, OF that it should be claimed in one year, have been done away by substituting clause (iia) with effect from 01.0.2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialization, by either setting up a new i .....

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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 said financial year. &hell .....

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