Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (12) TMI 442 - ITAT CHENNAI

2016 (12) TMI 442 - ITAT CHENNAI - TMI - Additional depreciation in respect of the plant and machinery - Held that:- Section 32(1)(iia) provides for additional depreciation at the rate of 20%.The Assessing officer allowed 10% of additional depreciation in respect of the plant and machinery purchased during the A.Y.2009-10. The A.O. found that the additions to the fixed assests made in the second half of the financial year ,therefore,50% of the additional depreciation has been claimed.The balance .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ting 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 also found that the intention of the legislation is to allow the 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 assessment year. In view of the above, this tribunal is of the considered op .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lease agreement, the ownership of the asset is transferred to the lessee, then in that case, the lease instalment comprising of the cost of the asset has to be capitalized by the assessee and on that the assessee is entitled to depreciation and the interest portion of the instalment is allowable deduction as revenue expenditure in the computation of income of the assessee. We find that in the instant case, the assessee has claimed deduction of the entire amount of lease rental of ₹ 12,42, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

above after examining the lease agreement of the assessee. Thus, the grounds of appeal of the assessee are allowed for statistical purposes - I.T.A.Nos.2269 & 2270/Mds/2016 - Dated:- 10-11-2016 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri C. Naresh, CA For The Respondent : Shri Supriyo Pal, JCIT ORDER PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER These appeals of the assessee for assessment years 2010- 11 and 2011-12 are directed again .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

only 50% of the eligible additional depreciation was allowed. For the assessment year 2010- 11, the assessee claimed the remaining amount of additional depreciation u/s 32(1)(iia) of the Act. The assessee has acquired the assets during the second half of the assessment year 2009-10 and claimed 50% of the additional depreciation since the assets were put to use less than 180 days and the balance amount of 50% depreciation was claimed in the year under consideration. The Assessing Officer disallow .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee claimed balance additional depreciation during the year under consideration. The ld counsel further clarified that the plant and machinery were installed in the second half of the earlier year and claimed 50% of the additional depreciation, hence, the assessee claimed 50% of additional depreciation during the year under consideration. In other words according to the Ld. Counsel, since the machinery was used for less than 180 days in the earlier A.Y., the assessee claimed 50% depreciation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es & Components Ltd in I.T.A.No. 1789/Mds/2014, dated 12.2.2016 and also the judgment of the Hon'ble Karnataka High Court in the case of CIT vs Rittal India Pvt. Ltd. 380 ITR 423. On the other hand ld. D.R. supported the orders of the lower authorities. 5. We have considered the rival submissions on either side and perused the material placed on record. section 32(1)(iia) provides for additional depreciation at the rate of 20%.The Assessing officer allowed 10% of additional depreciation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

carry forward of the additional depreciation to the subsequent year. This issue was examined by the Cochin Bench of this Tribunal in Apollo Tyres Ltd.v.ACIT reported in [2014] 45 taxmann.com 337 (Cochin - Trib.). The cochin Bench found that additional depreciation could not be allowed at the rate 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 conside .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 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) Any machinery or plant, the whole of the actual cost of which is a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 subsection 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 assessee is eligible for additional depreciation equal to 20% of the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 can .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 section 32(1)(ii) restricts the allowances only to 50% .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rage 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 liberally held that the assessee deserves to get the be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 but restricted for that year to 50% on account of us .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t; 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, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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. 6. We have also carefully gone through the judgment of the Hon'ble Karnataka Hig .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nal depreciation in the subsequent assessment year. Accordingly confirmed the order of the Banalore Bench of this tribunal. In fact Karnataka High 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 01.04.2006. 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 industrial undertaking beg .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ither 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 yea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he said financial year. This would necessarily mean that the balance 10% additional deduction can be availed in the subsequent assessment year, otherwise the 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 well as the Apex Court, that beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit the assessee. In this case, the int .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the Act is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal.. 7. In view of the above, this tribunal is of the considered opinion that the assessee is entitled for remaining 10% of the depreciation during the year under consideration.. Accordingly, we set aside th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

m of ₹ 8,44,362/- and ₹ 8,85,330/- by way of lease rentals paid for the assessment year 2010-11 and 2011-12 respectively. However in its computation statement it has claimed the lease rentals at Rs. .19,46,333/- and ₹ 23,98,983/- respectively for the A.Y.s 2010-11 and 2011-12. The assessee before the A.O explained that the lease rentals represent the lease charges paid on the cars/ equipments taken on lease and used by the executives/employees. Though a portion of it is debited .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8,85,330/- debited to the Profit & Loss Account. 10. Aggrieved by the order, the assessee went in appeal before the CIT(A) and the CIT(A) has confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before this Tribunal. 11. During appeal, the ld. AR argued that the lease rentals were debited to the Profit & Loss Account amounting to ₹ 8,44,362/- being interest component included in lease rentals. In order to get full deduction for the sum of S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ty for income-tax purposes. The entire lease payment was claimed as deduction since the assets taken on lease were not capitalized for the purpose of Income-tax Act, 1961 and also depreciation has not been claimed. Therefore, the ld. AR contended that the assessee has rightly claimed the deduction of lease payment. The ld. AR placed reliance on the decision of the Co-ordinate Bench of this Tribunal in assessee s own case in I.T.A.No. 2245/Mds/2012, dated 2.7.2013 for assessment year 2008-09. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essee could not offer any explanation. Before the DRP, the assessee submitted that according to Accounting Standards-19 issued by the ICAI, the assessee capitalized the cost of the asset involved in the finance lease and claimed depreciation on the same but for income tax purposes, the assessee has claimed the entire amount paid as lease rent as deduction from the computation of income in accordance with CBDT Circular No. 2 of 2001 dated 9.2.2001. On the above facts of the case, we are of the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version