Commissioner Of Income Tax-Ltu v. Rashtriya Chemicals And Fertilizers Ltd

rsk IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1861 OF 2017 Commissioner of Income Tax-LTU ...Appellant vs. Rashtriya Chemicals and Fertilizers Ltd. ...Respondent ---- Mr. Tejveer Singh for Appellant.Respondent. Mr. Paras Savla a/w Mr. Harsh Shah i/b Mr. Atul K. Jasani for ---- CORAM : K. R. SHRIRAM AND AMIT B. BORKAR, JJ. DATE : 26 OCTOBER 2021 P. C. : Appellant has proposed the following substantial questions of law for our consideration: a)Whether on the facts and in the circumstances of thecase and in law, the Hon'ble ITAT was right in quashing theorder passed under Section 263 of the Act ? b)Whether, on the facts and in the circumstances of thecase and in law, the Hon'ble ITAT was right in extending thebenefit of Section 32(1)(iia) of the Act to the nextAssessment year, when the Income-tax Act does not provide such carryover, thereby violating the legal principles of"Cassus omissus" which states that the Courts cannotcompensate for what the legislature has omitted to enact ? 2.Respondent had preferred an appeal against order passedunder Section 263 of the Income Tax Act, 1961 (the Act) on10/6/2014 before the Income Tax Appellate Tribunal (ITAT).Respondent had challenged jurisdiction of the order passed underSection 263 of the Act as well as on merits of dis-allowance ofadditional depreciation under Section 32(1)(iia) of the Act. 3.Order under Section 143(3) of the Act was passed by theAssessing Officer on 23/1/2013 by which Respondent was grantedadditional depreciation @ 30% on new plant and machinery acquiredand to be used in the Assessment Year 2009-2010. Respondent hadclaimed ½ of the additional depreciation in the Assessment Year2009-2010 since the new plant and machinery was put to use for lessthan 180 days and balance ½ was claimed in the Assessment Year2010-2011. Claim of respondent was rejected in the year underconsideration, i.e., Assessment Year 2010-2011 by order underSection 263 of the Act, since no new plant and machinery was put touse in that Assessment Year. That order under Section 263 of the Actwas subject of appeal before the ITAT. The ITAT allowed the appeal byits order dated 29/6/2016 by relying upon the judgment of KarnatakaHigh Court in Commissioner of Income Tax, Bangalore vs. Rittal India rsk 1 (P) Ltd.1 4.Mr. Singh, counsel for appellant submitted that the IT Actdoes not provide for carry over of depreciation and therefore, the ITATshould not have passed the order relying upon the judgment of theKarnataka High Court. Mr. Singh also submitted that the firstrequirement for being eligible for additional depreciation is that itshould be on new machinery or plant. Machinery is new only when itis first put to use. Once it is used in the Assessment Year 2009-2010, itis no longer a new machinery and therefore the machinery on whichadditional depreciation has been claimed for the Assessment Year2010-2011 can no more be granted. 5.The judgment of Karnataka High Court in Rittal India(supra)has been considered by this Court in an unreported order inPr. Commissioner of Income Tax-14 vs. M/s. Godrej Industries Ltd.2and this Court has followed the view expressed by the Karnataka HighCourt. This Court in Godrej Industries Ltd. (supra) has also reliedupon the judgment of Madras High Court in Commissioner of IncomeTax vs. T. P. Textiles Pvt. Limited,3wherein Madras High Court hasconsidered the additional proviso which was inserted to Section 32(1)(iia) of the Act and has also concurred with the view of the MadrasHigh Court that said newly added third proviso to clause (ii) of sub-section 1 of Section 32 of the Act being clarificatory in nature would 1(2016) 66 taxmann.com 4 (Karnataka) 2Income Tax Appeal No.511/2016 Dated 24/11/2018 3394 ITR 483 rsk apply to case covering past period also. Paragraph 5 to 10 of Godrej(supra) reads as under: 1(2016) 66 taxmann.com 4 (Karnataka) 2Income Tax Appeal No.511/2016 Dated 24/11/2018 3394 ITR 483 rsk apply to case covering past period also. Paragraph 5 to 10 of Godrej(supra) reads as under: "5Having heard Counsel for the Revenue and forthe Assessee, we notice that the Assessee's claim ofadditional depreciation arises out of clause (iia) of sub-section 1 of Section 32 of the Act. Clause (ii) of sub-section1 of Section 32 of the Act recognizes the depreciation onblock of assets. Clause (iia) grants additional depreciationin case of acquisition and installation of new machinery orplant by an Assessee after 31st March, 2005, the Assessee being engaged in business of manufacture or production of an article or things. 6We may also notice that the second proviso toclause (ii) of sub-section 1 of Section 32 of the Act, wouldrestrict Assessee's claim of depreciation to 50% in case, theassets are acquired by the Assessee during the previous year and put to use for the purposes of business or profession for a period less than 180 days in the said previous year. 7In the context of such statutory provisions, the Revenue has raised the question – whether when 50% ofthe additional depreciation is claimed by the Assessee in aparticular Assessment Year, since the acquisition and putting in to use of the assets in the previous Year was for less than 180 days, the Assessee can claim the remaining depreciation in the subsequent Assessment Year. Such aquestion came up for consideration before the DivisionBench of Karnataka High Court in Commissioner of IncomeTax and Another v/s. Rittal India Pvt. Ltd., reported in 380ITR 423. The Court, after referring to thestatutoryprovisions, held and observed in para 8 as under:-“8:-The aforesaid two conditions, i.e., theundertaking acquiring new plant and machineryshould be a new industrial undertaking, or that itshould be claimed in one year, have been done awayby substituting clause (iia) with effect from April 1,2006. The grant of additional depreciation, underthe aforesaid provision, is for the benefit of thequestion came up for consideration before the DivisionBench of Karnataka High Court in Commissioner of IncomeTax and Another v/s. Rittal India Pvt. Ltd., reported in 380ITR 423. The Court, after referring to thestatutoryprovisions, held and observed in para 8 as under:-“8:-The aforesaid two conditions, i.e., theundertaking acquiring new plant and machineryshould be a new industrial undertaking, or that itshould be claimed in one year, have been done awayby substituting clause (iia) with effect from April 1,2006. The grant of additional depreciation, underthe aforesaid provision, is for the benefit of the assessee and with the purpose of encouragingindustrialization, by either setting up a newindustrial unit or by expanding the existing unit bypurchase of new plant and machinery, and putting itto use for the purposes of business. The proviso toclause (ii) of the said section makes it clear that only50 per cent of the 20 per cent would be allowable, ifthe new plant and machinery so acquired is out touse for less than 180 days in a financial year.However, it nowhere restricts that the balance 10 percent would not be allowed to be claimed by theassessee in the next assessment year. The language used in clause (iia) of the saidsection clearly provides that “a further sum equal to20 per cent of the actual cost of such machinery orplant shall be allowed as deduction under clause(ii)”. The word “shall” used in the said clause is verysignificant. The benefit which is to be granted is 20per cent additional depreciation. By virtue of theproviso referred to above, only 10 per cent can beclaimed in one year, if plant and machinery is put touse for less than 180 days in the said financial year.This would necessarily mean that the balance 10 percent additional deduction can be availed of in thesubsequent assessment year, otherwise the verypurpose of insertion of clause (iia) would bedefeated because it provides for 20 per centdeduction which shall be allowed. The language used in clause (iia) of the saidsection clearly provides that “a further sum equal to20 per cent of the actual cost of such machinery orplant shall be allowed as deduction under clause(ii)”. The word “shall” used in the said clause is verysignificant. The benefit which is to be granted is 20per cent additional depreciation. By virtue of theproviso referred to above, only 10 per cent can beclaimed in one year, if plant and machinery is put touse for less than 180 days in the said financial year.This would necessarily mean that the balance 10 percent additional deduction can be availed of in thesubsequent assessment year, otherwise the verypurpose of insertion of clause (iia) would bedefeated because it provides for 20 per centdeduction which shall be allowed. It has been consistently held by this Court,as well as the apex court, that the beneficiallegislation, as in the present case, should be givenliberal interpretation so as to benefit the assessee. Inthis case, the intention of the legislation is absolutelyclear, that the assessee shall be allowed certainadditional benefit, which was restricted by theproviso to only half of the same being granted in oneassessment year, if certain condition was notfulfilled. But,that, in our considered view, would notrestrain the assessee from claiming the balance of the benefit in the subsequent assessment year. TheTribunal, in our view, has rightly held, thatadditional depreciation allowed under Section 32(1)(iia) of the Act is a one-time benefit to encourageindustrialization, and the provisions related to ithave to be construed reasonably, liberally andpurposively, to make the provision meaningful whilegranting the additional allowance. We are in fullagreement with such observations made by theTribunal. In view of the aforesaid, we do not find that anyinterference is called for with the order of theTribunal, or that any question of law arises in thisappeal for determination by this court.” After the said judgment of the Karnataka High Courtin Rittal India Pvt. Ltd., (supra), legislation has alsoamended the statutory provisions by adding the thirdproviso to clause (ii) of sub-section 1 of Section 32 of theAct, which reads as under:- “ Provided also that where an asset referred to inclause (iia) or the first proviso to clause (iia), as thecase may be, is acquired by the assessee during theprevious year and is put to use for the purposes ofbusiness for a period of less than one hundred andeighty days in that previous year, and the deductionunder this sub-section in respect of such asset isrestricted to fifty per cent of the amount calculatedat the percentage prescribed for an asset underclause (iia) for that previous year, then, thededuction for the balance fifty per cent of theamount calculated at the percentage prescribed forsuch asset under clause (iia) shall be allowed underthis sub-section in the immediately succeedingprevious year in respect of such asset.” 8The third proviso, thus, now recognizes theright of an Assessee to claim the remaining 50% depreciation in subsequent year in a case where machineryand plant being acquired and put to use for less than 180days in the previous year, the depreciation was restricted to50%. Such a situation as in the present case, wasconsidered by the Division Bench of the Madras High Courtin Commissioner of Income Tax v/s. Shri T. P. Textiles Pvt.Ltd., 394 ITR 483, the Court referred to the judgment ofthe Karnataka High Court in Rittal India Pvt. Ltd., (supra)as well as the addition of third proviso to clause (ii) of sub-section 1 of Section 32 of the Act and observed as under: “10.1: The plain language of section 32(1)(iia) readalong with relevant proviso would have us come tothe conclusion that, there is no limitation in theassessee claiming the balance 10 per cent ofadditional depreciation in the succeeding assessmentyear. “10.1: The plain language of section 32(1)(iia) readalong with relevant proviso would have us come tothe conclusion that, there is no limitation in theassessee claiming the balance 10 per cent ofadditional depreciation in the succeeding assessmentyear. 10.2:- As a matter of fact, with effect from April 1,20916, the ambiguity, if any, in this regard, in themind of the Assessing Officer, stands removed byvirtue of the Legislature, incorporating in theStatute, the necessary clarificatory amendment. 10.3 .... .... .... .... .... .... .... 11: We may only indicate that during the course ofthe arguments, our attention was drawn to the“Memorandum explaining the provisions in FinanceBill, 2015” whereby, the aforementioned amendmentwas brought about. 11.1: The relevant part of the memorandum isextracted hereafter: “.... To remove the discrimination in the matter ofallowing additional depreciation on plant ormachinery used for less than 180 days and used for180 days or more, it is proposed to provide that thebalance 50 per cent of the additional depreciation onnew plant or machinery acquired and used for lessthan 180 days which has not been allowed in theyear of acquisition and installation of such plant ormachinery, shall be allowed in the immediatelysucceeding previous year. This amendment will take effect from 1 st April, 2016 and will, accordingly,apply in relation to the assessment year 2016-17 andsubsequent assessment years.” 11.2:-A perusal of the extract of thememorandum relied upon would show that thelegislature recognized the fact that the manner inwhich the Revenue chose to interpret the provision,as it stood prior to its amendment would lead todiscrimination, in respect of plant and machinery,which was used for less than 180 days, as againstthat, which was used for 180 days or more itxa-511-2016 11.3:- In our opinion, as indicated above, theamendment is clarificatory in nature and notprospective, as is sought to be contended by theRevenue. The memorandum cannot be read in themanner, in which, the Revenue has sought to read it,which is, that the amendment brought in wouldapply only prospectively. 11.4:- We are, clearly, of the view that thememorandum, which is sought to be relied upon bythe Revenue, only clarifies as to how the unamendedprovision had to be read all along. 11.5:- In any event, in so far as the court isconcerned, it has to go by the plain language of theunamended provision, and then, come to aconclusion in the matter. As alluded to above, ourview, is that, upon a plain reading of the unamendedprovision, it could not be said that the assessee couldnot claim balance depreciation in the assessmentyear, which follows the assessment year, in which,the machinery had been bought and used, albeit, forless than 180 days.” 9It could be thus, to seen that the KarnatakaHigh Court in Rittal India Pvt., Ltd.,(supra) even withoutthe aid of the statutory amendment held that remaining50% unclaimed depreciation would be available to theAssessee in the succeeding Assessment Year. Now thelegislation has amended the provision by adding a proviso which, specifically recognizes the said right. The MadrasHigh Court in Shri T. P. Textiles Pvt. Ltd., (supra) ruled thatsuch proviso being clarificatory in nature, would apply topending cases, covering past period also. 10We have no reason to take view different fromtwo High Courts, examining the situation at considerablelength. In the result, no question of law arises." 6.We have no reason to take a different view from the viewexpressed by our own High Court. In our view, ITAT has notcommitted any perversity or applied incorrect principles to the givenfacts and when the facts and circumstances are properly analysedand correct test is applied to decide the issue at hand, then, we do notthink that question as pressed raised any substantial question of law. 7.Appeal is devoid of merit and is dismissed with no orderas to costs. (AMIT B. BORKAR, J) (K. R. SHRIRAM, J.) 10We have no reason to take view different fromtwo High Courts, examining the situation at considerablelength. In the result, no question of law arises." 6.We have no reason to take a different view from the viewexpressed by our own High Court. In our view, ITAT has notcommitted any perversity or applied incorrect principles to the givenfacts and when the facts and circumstances are properly analysedand correct test is applied to decide the issue at hand, then, we do notthink that question as pressed raised any substantial question of law. 7.Appeal is devoid of merit and is dismissed with no orderas to costs. (AMIT B. BORKAR, J) (K. R. SHRIRAM, J.) Digitally signedbyRAJESHWARIRAJESHWARISUBODHSUBODHKARVEKARVEDate:2021.10.2910:47:22 +0530