Ita/268/2014 Of The Commissioner Of Income-Tax v. M/S Rittal India Pvt Ltd

( IN THE HIGH COURT OF KARNATAKA AT BBNGALURU DATED THIS THR 24 DAY OF NOVEMBER, 2015. PRESENT THR HON'BLE MR. JUSTICK VINEBT SARAN| AND THR HON’BLE MRS. JUSTICE S.SUJATHA| ITA NO.268/2014 BETWEEN: 1]THERE COMMISSIONBR OF INCOME-TALTU, JSS TOWERS, BsK III STAGE,LTU, JSS TOWERS, BsK III STAGE, BANGALORE. oD THE ASST. COMMISSIONER OF INCOME-TAX.(LTU), JSS TOWERS, BSK III STAGE,BANGALORE.»(LTU), JSS TOWERS, BSK III STAGE,BANGALORE.» ... APPELLANTS| (BY SRI.K.V.ARAVIND, ADV.) AND: M/s. RITTAL INDIA PVT. LTD.,NO.23 & 24, KIADBINDUSTRIAL AREA, VEERAPURA,DODDABALLAPUR-D61 203| .. RESPONDEN (BY SRI T.SURYANARAYANA, ADV.,) THIS APPEAL Is FILED UNDER SECTION 260A OF I-T.ACT,1961, ARISING OUT OF ORDER DATED 28.01.2014 PASSED IN-ITA NO.278/BANG/2013, FOR THE ASSESSMENT YEAR 2008-09PRAYING TO I) FORMULATE THE SUBSTANTIAL QUESTIONS OF)LAW II) ALLOW THE APPEAL AND SET ASIDE THE ORDERPASSEDBY|THREINCOMETAXAPPBRLLAT TRIBUNAL,|BANGALORE IN ITA NO.278/BANG/2013 DATED 28.01.2014.ANT)CONFIRMTH EORDEROF.THEAPPEBLLATKCOMMISSIONBR CONFIRMING THRE ORDEBR PASSBD BY THASST. COMMISSIONER OF INCOME TAX, LTU, BANGALORE. THIS APPEAL COMING ON FOR ADMISSION THIS DAY,|VINE ET SARAJ.,DELIVERED THE FOLLOWING: JUDGMENT This appeal has been filed by the Revenue challenging|the order of the Tribunal whereby full benefit of Section|32(1)(iia) of the Income Tax Act, 1961 (for short ‘Act’ has)been given to the assessee. 2.The undisputed facts of this case are that the|respondent-assessee was an existing industrial undertaking,when it had acquired and installed new plant and machineryin the financial year 2006-07 and claimed 50% of additional|20% depreciation (i.e. 10% additional depreciation) undersection 32(1)(iia) of the Act in the corresponding assessmentyear 2007-08. This was so claimed because admittedly thenew machinery was acquired aiter 01.10.2006 and before|31.03.2007, meaning thereby that it was put to use for the|purpose of business for a period of less than 180 days.There is also no dispute with regard to the fact that undersection 32(1)(iia), read with second proviso to 32(1)(ii) of theAct>for the assessment year 2007-08, the respondent-assessee could have been, and was granted benefit of 50% of the 20% of the amount of depreciation allowable under |sub-section (11) of Section 32(1) of the Act. 3.The dispute in the present appeal is with regardto the allowance of the balance 10% depreciation in the nextassessment year 2008-09, so that the benefit of the total|20% allowable depreciation under Section 32(1)(iia) of the|Act was given. The Assessing Officer, as well as theAppellate Commissioner, disallowed the claim of theassessee, whereas the Tribunal, vide its order dated|28.01.2014, has allowed the appeal of the assessee.|Challenging the same, this further appeal has been filed by the Revenue. 4.We have heard Sri K.V.Aravind, learned counsel|for the appellants as well as Sri T.Suryanarayana, learnedcounsel appearing for the respondent-assessee and perusedthe record. 5.This appeal has been filed raising the followingtwo substantial question of law: .1Whether the Tribunal 1s correct inextending the benefit of Section 32(1)(tia) of theAct to the next assessment year when the incometax Act does not provide for such carryover,thereby violating the legal principles of “cassusomissus” which states that the courts cannot compensate for what the legislature has omittedto enact?| 11.Whether the Tribunal twas correct inholding that additional depreciation allowedu/s.32(1)(ua) is a one time benefit to encourageindustrialization and the relevant provisions hasbeen|construedreasonablyandpurposivewithoutappreciatingthatthe.additionaldepreciation is allowed in the year of purchaseand if in the year of purchase the assessee 1seligible only for 50% depreciation, the balance50% cannot be carriedforward for the subsequentyear on the claim cannot be allowed in any otheryear?” 6.The relevant provisions of Section 32 are| compensate for what the legislature has omittedto enact?| 11.Whether the Tribunal twas correct inholding that additional depreciation allowedu/s.32(1)(ua) is a one time benefit to encourageindustrialization and the relevant provisions hasbeen|construedreasonablyandpurposivewithoutappreciatingthatthe.additionaldepreciation is allowed in the year of purchaseand if in the year of purchase the assessee 1seligible only for 50% depreciation, the balance50% cannot be carriedforward for the subsequentyear on the claim cannot be allowed in any otheryear?” 6.The relevant provisions of Section 32 are| reproduced below: 4Section 32.(1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, beingtangible assets; (u) know-how, patents, copyrights, trade marks,licences, franchises or any other business orcommercial| rightofsimilarnature,beingintangible assets acquired on or after the lst dayof April, 1998, owned, wholly or partly, by the assessee andused for the purposes of the business orprofession, the following deductions shall beallowed— (i) in the case of assets of an undertaking|engaged|in|generationOTgenerationanddistribution of power, such percentage on theactual cost thereof to the assessee as may beprescribed ; (tt)in the case of any block of assets, such.percentage on the written down value thereof asmay be prescribed : Provided .... (A).....(3)ee Provided further‘that where an asset referred toin clause (i) or clause (it) or clause (ua), as thecase may be, is acquired by the assessee duringthe previous year and is put to use for thepurposes of business or profession for a period ofless than one hundred and eighty days in thatprevious year, the deduction under this sub-section in respect of such asset shall be restrictedto fifty per cent of the amount calculated at thepercentage prescribed for an asset under clause(i) or clause (it) 1 or clause (ila), as the case maybe3 Provided also......Provided also.....Provided also......Provided also......Explanation 1.....Explanation 2.....Explanation 3.....Explanation 4.....Explanation 5..... (tta)in the case of any new machinery or plant(other than ships and aircraft), which has beenacquired and installed after the Slst day ofMarch, 2005, by an assessee engaged in thebusiness of manufacture or production of anyarticle or thing or generation or generation anddistribution of power, a further sum equal totwenty per cent of the actual cost of suchmachinery or plant shall be allowed as deductionunder clause (i1).~ Provided...... T.Clause (iia) of Section 32(1) of the Act, as it nowstands, was substituted by the Finance Act, 2005, applicablewith effect from 01.04.2006. Prior to that, a proviso to thesaid Clause was there, which provided for the benefit to be|siven only to a new industrial undertaking, or only where a_new industrial undertaking begins to manutacture or'produce during any year previous to the relevant assessmentYCal. 8.TheaforesaidTWOconditions,1.€.,.theundertaking acquiring new plant and machinery should be a|new industrial undertaking, or that it should be claimed in|one year, have been done away by substituting clause (iia)|with effect from 01.04.2006. 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 industrial unit|or by expanding the existing unit by purchase of new plantand machinery, and putting it to use for the purpose of business. The proviso to Clause (ii) of the said Sectionmakes 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 assessement year. restricts that the balance 10% would not be allowed to be|claimed by the assessee in the next assessement year. QO.The language used in Clause (iia) of the said)section clearly provides that “a further sum equal to 20% otfthe actual cost of such machinery or plant|shall be allowedas deduction under Clause (i1)”. 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 oneyear, if plant and machinery is put to use for less than 180days in the said financial year. This would necessarily|mean that the balance 10% additional deduction can beavailed 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 beallowed. 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 intention of the)legislation is absolutely clear, that the assessee|shall be366AC5:certain additional benefit, which was restricted by the proviso to only half of the same being granted in oneassessment year, if certain condition was not fulfilled. But,that, in our considered view, would not restrain the assesseefrom claiming the balance of the benefit in the subsequentassessment year. The Tribunal, in our view, has rightly|held, that additional depreciation allowed under Section32(i)(lia) of the Act is a one time benefit to encourageindustrialization, and the provisions related to it have to beconstrued reasonably, liberally and purposively, to make theprovision meaningful while granting additional allowance.We are in full agreement with such observations made by theTribunal. | 11.In view of the aforesaid, we do not find that anyinterference is called for with the order of the Tribunal, or)that any question of law arises in this appeal for'determination by this Court. The appeal is accordinglydismissed.No order as to Costs. TTL Sd/- | JUDGE| sd/-.JUDGE|