TMI Blog2023 (8) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing income chargeable to tax under the head Profits and gains of business or profession of any previous year. It is merely because the aforesaid Pollution Control Equipment s were acquired and installed after 30th September, 2013 and were put to use for less than 180 days during the year under consideration, the depreciation allowed shall be 50% in the year under consideration while the remaining 50% depreciation shall be allowed in the subsequent assessment year, but the facts remains which cannot be negated is that the whole of the actual cost of Pollution Control Equipment s is deducted at the prescribed rate of depreciation @100%, and is hit by clause (v) sub-section (4) of Section 32AC, and shall be ineligible for claim of deduction u/s 32AC. The assessee, if it meets all other conditions for grant of deduction u/s 32AC, shall be allowed deduction u/s 32AC in the subsequent year, for which the assessee has to meet all the statutory requirements as mandated by Section 32AC, and the onus is entirely on the assessee to demonstrate and prove with evidence before the AO that it is eligible and entitled for deduction u/s 32AC in the immediately succeeding year as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... har, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri Bandish S. Soparkar, Advocate And CA Shri Parin S Shah,AR For the Revenue : Shri Kamlesh Makwana, CIT-D.R. ORDER PER : RAMIT KOCHAR, ACCOUNTANT MEMBER: - This appeal bearing ITA No. 856/Ahd/2018 for assessment year (ay) : 2014-15 filed by the assessee company arises from the appellate order dated 09th February, 2018 passed by ld. Commissioner of Income-tax (Appeals)-6, Ahmedabad(hereinafter called the CIT(A) ) in Appeal No. CIT(A)-6/ 286/ 16-17, the appellate proceedings had arisen before ld. CIT(A) from assessment order dated 20.10.2016 passed by ld. Assessing Officer for assessment year 2014-15 u/s. 143(3) of the Income-tax Act, 1961 (hereinafter called the 1961 Act ). 2. The grounds of appeal raised by assessee company in memo of appeal filed with Income-Tax Appellate Tribunal, Ahmedabad (hereinafter called the Tribunal ) in ITA No. 856/Ahd/2018 for assessment year: 2014- 15, reads as under:- 1. Ld. CIT(A) erred in law and on facts confirming action of AO disallowing deduction of Rs. 16,08,70,789/- claimed u/s 32AC of the Act. 2. Ld. CIT(A) erred in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and machinery. The AO referred to Section 32AC, and observed that the as per provisions of Section 32AC, the tax-payer being a manufacturing company is entitled to an investment allowance @15% of actual cost of new plant and machinery acquired and installed during the financial year 2013-14, if the actual cost of new plant and machinery exceeds Rs. 100 Crore. The AO observed that new asset means new plant or machinery (other than ship or aircraft), but does not include any plant or machinery the whole of the actual cost of which is allowed as 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 previous year. Their are other conditions also before any deduction is allowed u/s 32AC of the 1961 Act, but presently we are not concerned with the same. The AO observed from the fixed assets addition chart of the assessee company, that the assessee has made total additions of Rs. 151,64,97,046/- under the head of fixed assets. The AO observed that , out of that, an combined additions of Rs. 44,37,47,481/- was made in the Block of Factory Building, Vehicles, Office Equipment s, Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Straw Products Limited v. ITO (1968) 98 ITR 227(SC). The AO rejected the contentions of the assessee company , because in the opinion of the AO , Block of Pollution Control Equipment s is eligible for depreciation @100%. Therefore as per AO, keeping in view clause (v) of sub-section (4) of Section 32AC of the 1961 Act, the said block of Pollution Control Equipment s carrying depreciation @100% shall not be included while considering the aggregate amount of actual cost of such new assets acquired and installed by the assessee company, while computing deduction u/s. 32AC. The AO concluded that by excluding investments made by the assessee company in Factory Building, Vehicles, Office Equipment s, Computers , Furniture and Fixture as well Pollution Control Equipment s , the assessee has made investment in new assets being Plant and Machinery to the tune of Rs. 96,46,85,197/- which is eligible for deduction u/s 32AC, but since the assessee company has failed to meet the condition of acquisition and installation of new assets, actual cost of which exceeds Rs. 100 crores, the assessee company was not granted deduction u/s 32AC by the AO for the impugned assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. the actual cost of investment made by the assessee would be allowed as deduction, and if the assessee is allowed deductions u/s. 32AC, then it will be a case of double deduction claimed beyond the prescribed limits of the statute, which could not be the intention of the legislature. The assessee company in the instant case will be claiming 50% depreciation on pollution control equipment s due to acquisition and installation after 30th September, 2013, and the remaining 50% depreciation will be claimed by the assessee company in the immediately succeeding financial year. Thus, if the assessee company is also allowed deduction u/s 32AC by including Block of Pollution Control Equipment s in the new assets , then the assessee will get additional deduction on the Block of the Pollution Control Equipment s , which will be over and above regular 100% depreciation, which certainly could not be the intention of the statute . Thus, AO rejected the entire claim of deduction of Rs. 16,08,70,789/- claimed by the assessee company u/s 32AC of the 1961 Act which stood added by the AO to the income of the assessee company , vide assessment order dated 20.10.2016 passed by AO u/s 143(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled after 30th September, 2013 having been put to use for less than 180 days in the financial year 2013-14, depreciation @50% was claimed by the assessee and allowed by Revenue , keeping in view the second proviso to Section 32(1). Thus, it was submitted that the actual depreciation allowed on the Pollution Control Equipment for the impugned assessment year was 50% and not 100% , keeping in view second proviso to Section 32(1) , and hence Pollution Control Equipment cannot be excluded while computing threshold limit of Rs. 100 crores in acquiring and installing new assets being eligible plant and machineries as provided u/s 32AC(4). It was submitted that if investment in Pollution Control Equipment s is included, then total investment made by the assessee company in acquiring and installing new assets being plant and machinery as provided u/s 32AC(4) shall be Rs. 107,24,38,524/- which is in excess of Rs. 100 crores and hence the assessee shall be eligible for deduction u/s 32AC. It was further submitted by ld. Counsel s for the assessee as an alternate argument that the depreciation claimed by assessee company and allowed by Revenue was 50% on total investment of Rs. 10,80,64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated assets as allowable depreciation . Although the rate of depreciation prescribed for Pollution Control Equipment s is 100% , but since it was put to use for less than 180 days having being acquired and installed after 30th September, 2013, the assessee company claimed and was allowed deduction towards depreciation @50% on Pollution Control Equipment. Reference was also drawn to Provision of Section 43(6) , and it was submitted that w.d.v. of Pollution Control Equipment as at year end after allowing depreciation claimed , was Rs. 5,40,32,184/- and even if the same is added to remaining eligible new assets, it shall cross threshold limit of Rs. 100 crores and hence the assessee company should be allowed deduction u/s 32AC. It was also submitted, as an alternative plea by ld. Counsel s for the assessee, that if the deduction is not to be allowed u/s 32AC for the impugned assessment year, then directions be issued for granting deduction u/s 32AC for immediately succeeding assessment year as the investments made by the assessee in new assets eligible for deduction u/s 32AC even after excluding aforesaid Pollution Control Equipment s , had exceeded Rs. 100 crores if the investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. (3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of sub-section (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company. (4) For the purposes of this section, new asset means any new plant or machinery (other than ship or aircraft) but does not include (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits and gains of business or profession of any previous year.'. 7.2 If the Pollution Control Equipment s to the tune of Rs. 10,80,64,368/- which carries depreciation rate of 100% is excluded, the remaining investment made by the assessee in acquiring and installing eligible new assets during the year under consideration shall come below threshold limit of Rs. 100 crores prescribed u/s 32AC to claim deduction u/s 32AC, to Rs. 96,46,85,197/- , and the assessee will become ineligible for claim of deduction u/s 32AC of the 1961 Act for the impugned assessment year. So far, there is no dispute between rival parties. The dispute has arisen between rival parties, as the assessee has contended that this Pollution Control Equipment s of Rs. 10,80,64,368/- acquired and installed during the year under consideration , were all acquired and installed after 30th September, 2013 and was put to use for less than 180 days during the year under consideration , and hence by virtue of second proviso to Section 32(1), the assessee is entitled to claim 50% of the depreciation on Pollution Control Equipment s of Rs. 10,80,64,368/- acquired and installed during the year under consideration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he threshold limit of Rs. 100 crores to be eligible for deduction u/s 32AC, and hence the assessee is entitled for deduction u/s 32AC. Before we proceed further , it will be relevant to reproduce Section 32AC of the 1961 Act, which reads as under: 7.3 Thus, before proceeding further, it will be appropriate to reproduce provisions of Section 32AC again, which reads as under:- '32AC. Investment in new plant or machinery. (1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction, (a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and (b) for the assessment year commencing on the 1st day of April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an assessee, being a company, (a) is engaged in the business of manufacture of an article or thing; and (b) invests a sum of more than Rs. 100 crore in new assets (plant or machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then, the assessee shall be allowed (i) for assessment year 2014-15, a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year 2013-14, if the cost of such assets exceeds Rs. 100 crore; (ii) for assessment year 2015-16, a deduction of 15% of aggregate amount of actual cost of new assets, acquired and installed during the period beginning on 1st April, 2013 and ending on 31st March, 2015, as reduced by the deduction allowed, if any, for assessment year 2014-15. The phrase new asset has been defined as new plant or machinery but does not include (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee andit must be interpreted in favour of t he revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled. 7.6 In the taxing statute there is no scope for intendment, and if the language is simple, plain, unambiguous and clear, the same has to be applied howsoever harsh the consequences may be. There is no equity in taxing statute, and literal rule of interpretation is to be followed if there is not ambiguity in the provisions and is in simple clear and plain language. Thus, as could be seen from clause(v) of sub-section (4) of Section 32AC, the new asset shall not include any plant or machinery, the whole of the actual cost of which is allowed as 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 previous year. Thus, in the instant case , Pollution Control Equipment s admittedly carry prescribed rate of depreciation @100% , a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is fist put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery of plant to the assessee: Provided that no deduction shall be allowed under this section in respect of (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in, the nature of a guest-house; (b) any office appliances or road transport vehicles; (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33; and (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or profession of any previous year. The objective of exclusion of such new assets being that these new assets are already been granted benefit of some other beneficial provision in the 1961 Act by way of deduction of the whole of the actual cost being allowed as deduction while computing income chargeable to tax under the head Profits and gains of business or profession of any previous year, and therefore again allowing benefit of deduction u/s 32AC will lead to double deduction which was hence excluded by virtue of clause (v) of sub-section (4) of Section 32AC . In the taxing statute there is no scope for intendment, and if the language is simple , plain, unambiguous and clear, the same has to be applied howsoever harsh the consequences may be.There is no equity in taxing statute, and literal rule of interpretation is to be followed when there is no ambiguity in the provision itself . The second contention of the assessee that since it was allowed deduction of Rs. 5,40,32,184/- being @50% on Pollution Control Equipment s acquired and installed during the current year , the written down value to be carried forward w.r.t. Pollution Control Equipment s was Rs. 5,40,32,184 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceeded threshold of one hundred crores rupees, the assessee will not be eligible for deduction u/s 32AC for the year under consideration. The assessee has relied on the judgment and order of Hon ble Supreme Court in the case of Mahindra Mills(supra) , there is no quarrel so far as the manner of computation of written down value, which shall be computing by deducting depreciation actually allowed from the actual cost of the fixed assets, but that does not have any bearing on our decision w.r.t. allowability of deduction u/s 32AC on the ground that 50% depreciation was allowed owing to second proviso to Section 32(1) or as to inclusion of written down value of the asset for computing aggregate of actual cost of eligible new assets , as are adjudicated by us in this order as above. to The assessee has submitted , as an alternate plea, that if the benefit of deduction u/s 32AC cannot be allowed in the current year, then the same be allowed in the immediately succeeding assessment year as is provided u/s 32AC. In our considered view, the assessee, if it meets all other conditions for grant of deduction u/s 32AC, shall be allowed deduction u/s 32AC in the subsequent year, for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year were Rs. 4.05 crores. The dividend income were Rs. 0.12 crores from the investment made by the assessee company. The investments made were from cash accruals of the earlier years. The assessee submitted cash flow statement to demonstrate that no fresh investments were made during the year under consideration, old investments were liquidated and it has cash accruals from operations during the year under consideration. The assessee also relied upon ld. CIT(A) orders for assessment year s 2005-06, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12 in assessee s own case, where ld. CIT(A) held that the entire investment in shares have come from interest free funds and presumption is to be applied and no disallowance is required to be made u/s 14A. The assessee also relied upon orders passed by ITAT for assessment years 2005-06 and 2007-08 in assessee s own case, where the Tribunal decided this issue in favour of the assessee. The assessee also relied upon orders passed by Hon ble Courts to reiterate its aforesaid submissions, which are duly found mentioned in assessment order. The AO rejected the contentions of the assessee, as the funds as per AO which were used for making investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2015(financial year 2014-15) filed in the PB/page 100-125. The assessee has filed audited annual accounts for the year ended 31.03.2015(financial year 2014-15) , while the assessee was required to file audited annual accounts for the year ended 31.03.2014 ( Financial Year 2013-14) , as presently we are concerned with assessment year 2014- 15(financial year 2013-14). The complete information could not be gathered even from preceding year figures given in the audited accounts for the financial year 2014-15 filed by the assessee. There is substantial increase in the issue of share capital, the old investments as at 01.04.2013 are not discernible from the audited accounts for financial year 2014-15 filed by the assessee. Moving forwards, the argument advanced by the ld. Counsel s for the assessee is that the owned funds by way of share capital and reserves are much more than the investments made in the securities/mutual funds , and hence no disallowance could be made for interest expenses u/s 14A read with Rule 8D(2)(ii) , as presumption will apply that the assessee has invested in the securities/mutual funds, out of own interest free funds available with the assessee. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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