TaxTMI 
TaxTMI 
2018 (2) TMI 1879
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....rrent assessment year. In the reasons recorded for reopening of assessment the AO observed that the benefit of additional depreciation is available to the assessee only in the year in which the machinery is installed and put to use and if it is less than 180 days then as per second proviso to section 32(1) depreciation shall be restricted to 50%. The assessee company can claim additional depreciation only in the year of installation and put to use the plant and machinery. The assessee cannot claim balance 50% of additional depreciation in the subsequent assessment year. Therefore, it was observed by the AO that since the assessee was allowed excess additional depreciation to the extent of 50% during the current assessment year there is escapement of income. The assessee contended before the AO that the additional depreciation on plant and machinery acquired and installed after 30th September of the previous year is eligible for 50% during the previous year in which the plant and machinery was installed and the remaining 50% of additional depreciation is allowable in the subsequent assessment year. The assessee, in support of its contention, relied on the decision of the Delhi Tribu....
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.... is entitled only for 50% of additional depreciation in the year of installation and the assessee is not entitled for the remaining 50% of additional depreciation in the subsequent assessment year. The learned CIT(A), following the decision of the Coordinate Bench, held that the assessee is entitled for 50% additional depreciation in the subsequent assessment year which was not allowed in the preceding assessment year due to the assessee company used the assets for less than 180 days and also the decision of the Delhi Tribunal in the case of Cosmo Films Ltd. (supra) and SIL Investment Ltd. (supra). The question of whether the assessee is entitled for balance 50% of additional depreciation in the subsequent assessment year has been decided by the Hon'ble Madras High Court in the case of Shri T.P. Textiles (P.) Ltd. (supra). The Hon'ble High Court has held that the plain language of Section 32(1)(iia) read along with the relevant proviso will lead to the conclusion that there is no limitation placed on the assessee claiming 10% of additional depreciation in the succeeding assessment year. While holding so the Hon'ble High Court observed as under: - 7.4. In order ....
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....id case, has come to the conclusion that additional depreciation granted under clause (iia) of Section 32(1) of the Act is for the purpose of affording benefits to the Assessees and, to encourage industrialization, either by setting up a new industrial unit, or, by expanding a new industrial unit, by purchasing and installing a new machinery, or, plant, and putting the same to use for the purposes of business. 8.1. The Court, went on to say, that while, the proviso appearing in Section 32(1) restricts the claim of depreciation to 50% of the amount calculated at the percentage prescribed for an asset referred to in clause (iia), nowhere does it restrict allowance of the balance 50% of the additional depreciation, which in percentage terms, would be 10% in the succeeding A.Y. 8.2. The relevant observations made by the Division Bench of the Karnataka High Court in the case of CIT V. Rittal India (P.) Ltd., as contained in paragraphs 7, 8 and 9 of the said judgment, for the sake of convenience are extracted hereafter : "..... 7. Clause (iia) of Section 32(1) of the Act, as it now stands, was substituted by the Finance Act, 2005, applicable with effect from 01....
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....lain language of Section 32(1)(iia) read along with the relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10% of additional depreciation in the succeeding assessment year. 10.2. As a matter of fact, with effect from 01.04.2016, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment. 10.3. The amendment brought in the relevant proviso obtaining in Section 32, reads as follows: ".... 32. (1) ...... Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of t....