2015 (5) TMI 647 - AT - Income Tax

Tribunal allows appeal for additional depreciation, upholding original assessment

The Tribunal allowed the assessee's appeal, affirming the entitlement to claim the balance 50% of additional depreciation in the subsequent year. The ... Additional depreciation - Held that:- Respectfully following the judgment of CIT v. Texmo Precision Castings [2009 (10) TMI 140 - MADRAS HIGH COURT] we are of the view that the assessee is entitled for additional depreciation under section 32(1)(iia) on business of generation or generation and distribution of power as captive power plant to be used for the business of the assessee, i.e., manufacturing of polyester fibres and yarns. Accordingly, the assessee is entitled for additional depreciation under section 32(1)(iia) - Decided in favour of assesse. Revision u/s 263 - AO allowed additional depreciation at 7.5 per cent. on the value of general plant and machinery and also the claim of additional depreciation at 7.5 per cent. on the value of energy saving devices - Held that:- Revision u/s 263 need to be quased as assesse is entitled for additional depreciation under section 32(1)(iia) on business of generation or generation and distribution of power as captive power plant to be used for the business of the assessee, i.e., manufacturing of polyester fibres and yarns - Decided in favour of assesse Issues Involved:1. Denial of additional depreciation under section 32(1)(iia) of the Income-tax Act, 1961.2. Validity of the revision order passed under section 263 of the Act.Detailed Analysis:Issue 1: Denial of Additional DepreciationBackground:The assessee, engaged in manufacturing polyester fibers and yarns, claimed additional depreciation under section 32(1)(iia) of the Act for assets procured in the financial year 2004-05. The claim was partially allowed (50%) for the assessment year 2005-06 as the assets were used for less than 180 days. The remaining 50% was claimed in the assessment year 2006-07, but the Assessing Officer (AO) disallowed it, arguing that the assessee was not eligible under section 32(1)(iia).Tribunal's Findings:- The Tribunal referred to the decision of the co-ordinate Bench in Birla Corporation Ltd. v. Deputy CIT, which allowed the balance 50% of additional depreciation in the subsequent year.- The Tribunal emphasized that section 32(1)(iia) does not restrict the carry forward of unutilized additional depreciation to the next year. It stated that the additional depreciation is a one-time benefit, and the restriction to 50% is only due to the period of usage.- The Tribunal also cited the decision in Apollo Tyres Ltd. v. Asst. CIT, which supported the claim of additional depreciation in the subsequent year when the asset was used for less than 180 days in the initial year.- The Tribunal further relied on the Delhi Bench's decision in Deputy CIT v. Cosmo Films Ltd., which held that the statutory right to additional depreciation earned in the year of acquisition should be allowed in the subsequent year if not fully utilized initially.Conclusion:The Tribunal concluded that the assessee is entitled to claim the balance 50% of additional depreciation in the subsequent year (assessment year 2006-07) as per section 32(1)(iia). It also upheld that once the additional depreciation was allowed in the initial year, it could not be denied in the subsequent year without disturbing the initial allowance.Issue 2: Validity of the Revision Order under Section 263Background:The Commissioner of Income-tax (CIT) issued a revision order under section 263, revising the AO's assessment order on the grounds that excess additional depreciation was allowed.Assessee's Arguments:- The assessee contended that the conditions for initiating revision proceedings under section 263 were not satisfied.- It was argued that the AO had already examined the matter in detail, and the CIT's order was erroneous and prejudicial to the interests of the Revenue.- The assessee also argued that once the additional depreciation was allowed in the initial year, it could not be withdrawn in subsequent years without disturbing the initial year's assessment.Tribunal's Findings:- The Tribunal referred to its earlier decision in Deputy CIT v. Selvel Advertising Pvt. Ltd., which held that once a deduction is granted in the initial year, it cannot be withdrawn in subsequent years without disturbing the initial year's assessment.- The Tribunal cited the Gujarat High Court's decision in Saurashtra Cement and Chemical Industries Ltd. v. CIT, which supported the principle that the AO cannot refuse to continue the relief granted in the initial year without valid grounds.- The Tribunal also referred to the Delhi High Court's decision in CIT v. Delhi Press Patra Prakashan Ltd., which emphasized that settled issues should not be revisited in subsequent years unless there is a material change.Conclusion:The Tribunal quashed the revision order passed by the CIT under section 263, holding that the AO's original assessment was neither erroneous nor prejudicial to the interests of the Revenue. The assessee's appeal was allowed, affirming the entitlement to additional depreciation.Final Judgment:- The appeals of the assessee were allowed.- The assessee was entitled to claim the balance 50% of additional depreciation in the subsequent year (assessment year 2006-07).- The revision order passed under section 263 was quashed as the AO's original assessment was upheld.