Tribunal affirms assessee's right to claim additional depreciation, aligning with high court rulings.

The Tribunal dismissed the Revenue's appeals, affirming that the assessee is entitled to claim the balance 50% of additional depreciation in the subsequent assessment year if the machinery was used for less than 180 days in the year of installation. This decision aligns with the interpretations of various high courts and the clarificatory amendment effective from 01.04.2016.

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Issues Involved:
1. Eligibility of additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961.
2. Allowance of balance 50% additional depreciation in the subsequent assessment year.

Detailed Analysis:

Issue 1: Eligibility of Additional Depreciation under Section 32(1)(iia)
The primary grievance in both appeals is that the CIT(A) allowed additional depreciation on new machinery and plant acquired and installed in the first year of installation. The Revenue contends that the benefit of additional depreciation is available only in the year of installation and put to use. If the machinery is used for less than 180 days, depreciation should be restricted to 50% as per the second proviso to Section 32(1). The AO observed that the assessee claimed excess additional depreciation, leading to the reopening of the assessment. The AO relied on the decisions of the Chennai Bench and Delhi Tribunal, which held that additional depreciation is allowable only in the year of installation and put to use, and not in subsequent years.

Issue 2: Allowance of Balance 50% Additional Depreciation in the Subsequent Assessment Year
The CIT(A) allowed the balance 50% of additional depreciation in the subsequent assessment year, following the decision of the Hon'ble Jurisdictional High Court in the case of MITC Rolling Mills P. Ltd., and decisions of the Delhi Bench in Cosmo Films Ltd. and SIL Investment Ltd. The CIT(A) directed the AO to allow the remaining 50% of additional depreciation in the subsequent year since the machinery was put to use for less than 180 days in the preceding year.

The Tribunal examined the rival submissions and perused the orders of the authorities below. The AO disallowed the 50% additional depreciation claimed by the assessee in the current assessment year for machinery installed in the preceding year and used for less than 180 days. The CIT(A) held that the assessee is entitled to the remaining 50% additional depreciation in the subsequent assessment year, following the decisions of various tribunals and high courts.

The Tribunal referred to the decision of the Hon'ble Madras High Court in the case of CIT vs. Shri T.P. Textiles (P.) Ltd., which held that the plain language of Section 32(1)(iia) read with the relevant proviso does not limit the assessee from claiming 10% additional depreciation in the subsequent assessment year. The Karnataka High Court in CIT V. Rittal India (P.) Ltd. supported this interpretation, stating that the additional depreciation granted under Section 32(1)(iia) is intended to encourage industrialization, and the proviso only restricts the claim to 50% in the year of installation if used for less than 180 days, without restricting the balance 50% in the succeeding year.

The Tribunal agreed with the view that the amendment made effective from 01.04.2016, which clarifies the allowance of balance 50% additional depreciation in the subsequent year, is clarificatory and not prospective. The Tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeals for both assessment years, concluding that the assessee is entitled to claim the balance 50% additional depreciation in the subsequent assessment year.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming that the assessee is entitled to claim the balance 50% of additional depreciation in the subsequent assessment year if the machinery was used for less than 180 days in the year of installation. This decision aligns with the interpretations of various high courts and the clarificatory amendment effective from 01.04.2016.

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