The Principal Commissioner Of Income Tax v. Honourable Mr. Justice Bhargav D. Karia

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 791 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX VersusKALPATARU POWER TRANSMISSION LTD. ==========================================================Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 06/01/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.This Tax Appeal under Section 260A of the Income Act, 1961 (for short the “Act”) at the instance of Revenue and is directed against the order dated 10.05.2019 passed by the Income Tax Appellate Tribunal, Ahmedabad “C” Bench, Ahmedabad in ITA No.1463/Ahd/2016 for the assessment year 2011-2012. 2.The Revenue has proposed following substantial questions of law in its Memorandum of Appeal. “2(A) Whether the Appellate Tribunal has erred in the facts and circumstances of the case and in law, in upholding the order of the CIT(A) for deleting the addition of Rs.4,26,95,758/- in holding carbon receipts as capital receipt? “(B) Whether the Appellate Tribunal has erred in the facts and circumstances of the case and in law, in upholding the order of the CIT(A) for deleting the addition of Rs.7,91,352/- on account of assessee's claim of additional depreciation? 3.Question No.2(A) is already considered by us in Tax Appeal No. 790 of 2019 by the order of even date and accordingly, the appeal stands dismissed so far as Question No.2(A) is concerned. 4.With regard to Question No.2(B), the facts in brief are that the assessee had acquired and installed new plant and machinery in Financial Year-2009-10. Since the plant and machinery were used for less than 182 days, the claim of additional depreciation under Section 32(1)(iia) of the Act during assessment year 2010-11 was restricted to 50%. During the assessment proceedings for the assessment year 2011-12, the assessee made an additional claim before the Assessing Officer for allowing the balance 50% of additional depreciation vide letter No.933 dated 17.03.2014. Detailed submissions were made before the Assessing Officer during the course of assessment, however, the Assessing Officer was not convinced with the submissions made by the assessee, and therefore, did not entertain the claim of balance additional depreciation. The Assessing Officer was of the view that additional depreciation can be allowed only in the year in which the assets are acquired and installed and not in the subsequent year. The Assessing Officer, therefore, disallowed the claim made by the assessee. The assessee carried the matter before the CIT (Appeal). The CIT (Appeal) allowed the appeal of the assessee holding that Section 32(1)(iia) clearly says that in case when a new machinery or plant was acquired and installed after 31.03.2005 by an assessee, who is engaged in the business of manufacture or production of article or things, a sum equal to 20% of the actual cost of the machinery and plant shall be allowed as deduction. It is not in dispute that the assessee has acquired and installed themachineryafter31.03.2005.Therefore, CIT(Appeal), after considering the submissions and the facts of the case of the assessee, allowed additional depreciation of 10% for the assessment year 2011-12 adopting purposive approach to the issue. 5. The Revenue preferred the Tax Appeal before the Income Tax Appellate Tribunal “C” Bench, Ahmedabad and the Tribunal, after considering the findings given by the CIT(Appeals), dismissed the appeal filed by the Revenue. 6. In view of the above facts, it would be germane to refer relevant provisions of Section 32(1) of the Act which reads as under:- 5. The Revenue preferred the Tax Appeal before the Income Tax Appellate Tribunal “C” Bench, Ahmedabad and the Tribunal, after considering the findings given by the CIT(Appeals), dismissed the appeal filed by the Revenue. 6. In view of the above facts, it would be germane to refer relevant provisions of Section 32(1) of the Act which reads as under:- “32. (1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed— (i) in the case of assets of an undertaking engaged in generation or C/TAXAP/791/2019 ORDER generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that no deduction shall be allowed under this clause in respect of— a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 but before the 1st day of April, 2001, unless it is used— (i) in a business of running it on hire for tourists ; or (ii) outside India in his business or profession in another country ; and (b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government undersection 42: Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section 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 : Provided also that where an asset referred to in clause (iia)or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia)shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed..... be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed..... (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 or in the business of generation, transmission or distribution of power, 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) :....” 7. On perusal of the aforesaid provision of Section 32(1) of the Act and proviso thereto read with Section 32(1)(iia) of the Act, it is clear that the assessee can claim additional depreciation at the rate of 20% of the actual cost of the plant and machinery purchased during the financial year. However, such allowance of the depreciation can be claimed only to the extent of 10%, if the plant and machinery purchased by the assessee is used for less than 182 days. Accordingly, the assessee has claimed the additional depreciation to the extent of 10% only for Assessment Year 2010-11, and therefore, the claim of remaining 10% additional depreciation is made for the Assessment Year 2011-12. 8.We are, therefore, of the opinion that the assessee can claim remaining additional depreciation C/TAXAP/791/2019 ORDER of 10% in the assessment year 2011-12. The legislature has also thought it fit to clarify the situation by inserting third proviso to Section 32(1) by the Finance Act, 2015 with effect from 01.04.2016. According to third proviso to Section 32(1) of the Act, the assessee can claim the remaining additional depreciation in the subsequent assessment year. 9.Thus, both the authorities below have rightly held that the assessee is entitled to remaining additional depreciation of 10% in the assessment year 2011-12 and there is no infirmity in the impugned orders passed by the CIT(Appeal) as well as the Tribunal. 10. In view of the foregoing reasons, no question of law much less any substantial questions of law arises out of the impugned orders. The appeal is, therefore, dismissed qua the Question No.2(B) also. (J. B. PARDIWALA, J) GIRISH (BHARGAV D. KARIA, J)