2016 (6) TMI 44 - AT - Income Tax

Tribunal grants assessee additional depreciation, emphasizes liberal interpretation of tax laws.

The Tribunal allowed the assessee's appeal regarding the disallowance of additional depreciation under section 32(1)(iia) of the Income Tax Act. It held ... Disallowance of additional depreciation under section 32(1)(iia) - whether the assessee is entitled to carry forward 50% of additional depreciation in the succeeding year when the plant and machinery was put in use less than 180 days in the preceding previous year? - Held that:- We have carefully gone through the order of the Coordinate Bench in the case of Automotive Coaches & Components Ltd. v. DCIT (2016 (4) TMI 34 - ITAT CHENNAI ) and find that the issue involved is squarely covered in favour of the assessee. The ld. DR could not controvert the above findings of the Tribunal or filed any higher Courts decision having modified or reversed the findings to arrive at a conclusion that the assessee is entitled to claim 50% of additional depreciation in the succeeding year when the plant and machinery was put in use for less than 180 days in the preceding previous year. Thus respectfully following the decision in the case of Automotive Coaches & Components Ltd. v. DCIT (supra), we direct the Assessing Officer to allow 50% of additional depreciation in the succeeding year as claimed by the assessee - Decided in favour of assessee Issues Involved:1. Assumption of jurisdiction in issuing notice under section 148 of the Income Tax Act, 1961.2. Disallowance of additional depreciation under section 32(1)(iia) of the Income Tax Act, 1961.Issue-Wise Detailed Analysis:1. Assumption of Jurisdiction in Issuing Notice under Section 148 of the Income Tax Act, 1961:During the hearing, the counsel for the assessee sought permission to withdraw the ground relating to the assumption of jurisdiction in issuing the notice under section 148 of the Act and did not press this ground before the Tribunal. Consequently, the ground relating to the assumption of jurisdiction was dismissed as not pressed.2. Disallowance of Additional Depreciation under Section 32(1)(iia) of the Act:Facts of the Case: The assessee filed its return of income admitting a total income of Rs. 1,21,71,870/-. The Assessing Officer (AO) believed that the income assessable to tax had escaped assessment because the assessee claimed additional depreciation of Rs. 12,97,631/- under section 32(1)(iia) of the Act, which included additional depreciation of Rs. 6,37,670/- from the assessment year 2004-05 that was omitted to be claimed in that year. The AO disallowed this additional depreciation claimed for the assessment year 2005-06.Appeal to CIT(A): On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the disallowance made by the AO.Appeal to ITAT: The assessee appealed to the Tribunal, relying on the decision of the Coordinate Bench of the Tribunal in the case of Automotive Coaches & Components Ltd. v. DCIT and the decision in CIT & Another v. Rittal India Pvt. Ltd. The counsel for the assessee argued that the issue was squarely covered in favor of the assessee.Tribunal's Analysis: The Tribunal examined whether the assessee is entitled to carry forward 50% of additional depreciation to the succeeding year when the plant and machinery were put to use for less than 180 days in the preceding year. The Tribunal reviewed the decisions of the Cochin Bench of ITAT in Apollo Tyres Ltd. v. ACIT and the Karnataka High Court in CIT & Another v. Rittal India Pvt. Ltd., which supported the assessee's claim. The Tribunal noted that section 32(1)(iia) provides for additional depreciation at the rate of 20%, and if the asset is used for less than 180 days, only 50% of the depreciation is allowed in that year, with the balance 50% to be allowed in the subsequent year.The Tribunal observed that the Cochin Bench and the Karnataka High Court had held that the beneficial legislation should be interpreted liberally, allowing the balance additional depreciation in the subsequent year. The Tribunal also noted that the decisions were not contradicted by any higher court ruling.Conclusion: The Tribunal concluded that the assessee is entitled to the remaining 10% of the additional depreciation during the year under consideration. The orders of the lower authorities were set aside, and the AO was directed to allow the balance 50% of additional depreciation in the succeeding year. The ground raised by the assessee was allowed.Final Order: The appeal filed by the assessee was partly allowed, with the order pronounced on 26th April 2016 at Chennai.