Additional depreciation for new plant and machinery can be carried forward to the next year when first-year use is under 180 days.

Section 32(1) and clause (iia) were construed to mean that where new plant and machinery is put to use for less than 180 days in the previous year, the proviso restricts only the deduction available in that year to 50% of additional depreciation. The remaining entitlement is not extinguished and may be claimed in the subsequent assessment year so as to preserve the incentive for investment in new plant and machinery and avoid discrimination between assessees. Relying on prior Division Bench precedent and the Finance Act, 2015 explanatory memorandum, the HC held that the balance 50% additional depreciation is allowable in the next year.

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Issues: Whether an assessee is entitled to claim the balance 50% of additional depreciation in the subsequent assessment year in respect of new plant and machinery acquired in the previous year and put to use for less than 180 days, notwithstanding the proviso to Section 32(1) restricting deduction to 50% in the previous year.

Analysis: The Court examined Section 32(1) and clause (iia) which grant additional depreciation for new plant and machinery and the proviso which restricts the deduction to fifty per cent where the asset is put to use for less than 180 days in the previous year. The Court relied on prior Division Bench decisions of this Court and the explanatory memorandum to the Finance Act, 2015, which indicate the legislative intent to avoid discrimination and to incentivise investment in new plant and machinery. Applying that statutory framework and precedent, the Court held that the proviso limits the quantum allowable in the first year but does not extinguish the remaining entitlement; the balance fifty per cent can be carried forward and allowed in the subsequent assessment year to ensure parity and effectuate the incentive.

Conclusion: The assessee is entitled to claim the balance 50% of the additional depreciation in the subsequent assessment year; the appeal is allowed in favour of the assessee.

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