2018 (5) TMI 355

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....eafter "the 1961 Act"] read with Rule 8D(2)(iii) of the Income Tax Rules, in the facts and circumstances? (ii) Did the Tribunal fall into error in holding that the transactions between the assessee and its Associated Enterprise (AE) had to be disregarded for the purpose of Arm's Length Price (ALP) determination under Section 92C of the 1961 Act?" 2. The third question urged by the assessee is with respect to the interpretation of Section 32(1)(iia). This is the compulsory allowance of the claim of additional depreciation amounting to Rs.538,66,55,780/- under Section 32 (iia) of the Act holding the same as mandatory. 3. Facts in respect of this issue are that the assessee claimed depreciation amounting to Rs.503.24 crore apart from ....

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....21. The Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Mahendra Mills (2000) 243 ITR 56 (SC), has held that "if an assessee does not claim the depreciation and does not furnish particulars for claiming depreciation, as prescribed, depreciation cannot thrust upon him." To remedy the situation flowing from such judgment, the Legislature brought in Explanation 5 to Section 32 (ii) through the Finance Act, 2001 w.e.f. 01.04.2002. The Explanation provides that the "... provisions of this sub-section shall apply whether or not the assessee has claimed deduction in respect of depreciation in computing his total income". The effect of this Explanation is that deduction on account of depreciation has to be mandatorily allowe....

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....ef provided u/s 32(1)(iia) is a separate incentive de hors depreciation. 25. A cursory look at clause (iia) divulges that the assessee is entitled to deduction equal to 20% of the actual cost of such machinery or plant, which shall be allowed as a deduction under clause (ii). Contention of the ld. Authorized Representative that the mandate of Explanation 5 does not apply to relief under clause (iia) as the same has been placed under clause (ii), in our view, is far-fetched. It is no doubt clear that Explanation 5 granting mandatory depreciation is placed in clause (ii) of Section 32 (1) of the Act, but when we consider the language of clause (iia) providing further deduction for depreciation @ 20%, it becomes vivid that such further clai....

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....(iia). We, therefore, hold that the Assessing Officer was fully justified in granting additional depreciation amounting to Rs. 538.66 crore under ITA No.1459/Del/2016 clause (iia) read with clause (ii) of Section 32 (1). This ground is not allowed." 4. Mr. Ajay Vohra, learned senior counsel urged that an Explanation must be interpreted having regard to the context, purpose and legislative history. Reliance was placed on M/s. Patel Roadways Ltd. v. MIS. Prasad Trading Co. (AIR 1992 SC 1514) and Mohanlal Hargovinddas v. State of M.P.(AIR 1967 SC 1022) and Deputy Commissioner of Income Tax v. Bagri Foundation (2012) 344 ITR 193 (Del), to advance this proposition. It was further argued that additional depreciation under Section 32(l)(iia) of....

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.... is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income; (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 or generation and 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) : ............" 6. This court is of opinion that the plain text of the explanation leaves no room for admit....