TMI Blog2016 (5) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... porated and introduced the Rule-8D. Further, as could be seen from the assessment order, the Assessing Officer has rightly quantified the expenditure under Rule 8D(2)(iii) and disallowed under section 14A of the Act. - Decided against assessee Disallowance of additional depreciation under section 32(1)(iia) - whether the assessee is entitled to carry forward 50% of additional depreciation in the succeeding year when the plant and machinery was put in use less than 180 days in the preceding previous year? - Held that:- Assessee is entitled to claim 50% of additional depreciation in the succeeding year when the plant and machinery was put in use for less than 180 days in the preceding previous year. Thus, respectfully following the decision in the case of Automotive Coaches & Components Ltd. v. DCIT (2016 (4) TMI 34 - ITAT CHENNAI ), we direct the Assessing Officer to allow 50% of additional depreciation in the succeeding year as claimed by the assessee. - Decided against revenue - I.T.A.No.109/Mds/2015 - - - Dated:- 26-4-2016 - Shri Chandra Poojari, Accountant Member and Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Shri Saroj Kumar Parida, Advocate For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 14A of the Act, no expenditure incurred for the purpose of earning an exempt income shall be allowed against the taxable profits. While the entire dividend income and Long Term Capital Gain have been claimed as exempt, the assessee has not attributed any portion of the expenditure debited to the P L account towards the same. The assessee incurs routine expenditure to maintain its establishment and towards administration, a portion of which can be attributed towards investments. The assessee also incurs managerial remuneration and claims the whole of the same as expenditure. The managerial staff and the Directors are involved in making decisions on investments. Such being the case, a portion of this managerial remuneration and Directors remuneration should also be attributed towards the investments, the return on which is exempt under section 10 of the Act. Before the Assessing Officer, the AR of the assessee has submitted that no expenditure was incurred for earning the exempt income. To tide over this difficulty in determining the expenses attributable to earning an exempt income and to bring in uniformity in the different approaches adopted by the Assessing Officers, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries (93 TTJ 161), the ld. CIT(A) confirmed the disallowance made under limb (iii) to Rule 8D(2), wherein, the Chennai Benches of the Tribunal has held as under: ... Whether to invest or not to invest and whether to retain the investments or to liquidate the same are very strategic decisions which the management is called upon to take. These are mind-boggling decisions and top management is involved in taking these decisions. This decision-making process is very complicated and requires very careful analysis. Moreover, the assessee had to keep track of various dividend incomes declared by the investee companies and also to keep track of the dividend income having been regularly received by the assessee. That activity itself called for considerable management attention and could not be left to a junior clerk. 7. The contention of the assessee is that the disallowance should be computed by taking into consideration only such investment from which the assessee has actually received income and no disallowance can be made for the income not received is not acceptable, because, whether the assessee has earned any exempt income or not, once the assessee made investment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the assessee is dismissed. 10. The next ground raised in this appeal is with regard to confirmation of disallowance of additional depreciation under section 32(1)(iia) of the Act. The assessee has claimed additional depreciation under section 32(1)(iia) of the Act amounting to ₹.15,95,635/- during the year out of which a claim amounting to ₹. 70,486/- was made on the additions to plant and machinery made during the preceding previous year. Since the additions were made during the second half of the year, 50% of the additional depreciation had been claimed during that year (being less than 180 days). The assessee has claimed the balance amount in the relevant assessment year 2008-09. The Assessing Officer has disallowed the claim of the assessee on the ground that additional depreciation is allowable to an assessee only on new plant and machinery and it will no more be new in the next year to claim remaining depreciation. He also observed that there is no provision in the Act permitting the balance additional depreciation to be allowed in the subsequent years. On appeal, the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 Bench of this Tribunal has observed as 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 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-h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 of the assessee for claiming 20% of the 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account 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 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. the immediately preceding assessment year. Therefore, obviously, the balance 50 per cent of the deduction is to be allowed in the cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, 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. 9. 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 said financial year. very purpose of insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed. 10. It has been consistently held by this Court, as we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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