TaxTMI 
TaxTMI 
2022 (2) TMI 395
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....d dissatisfaction about the reasonableness of indirect expenses disallowed by the appellant in the return of income u/s 14A of the Act. 2. Without prejudice to the Ground No. 1, the ld. CIT(A) has erred in law and on facts in not reducing the amount of strategic investments from the average value of investments while calculating disallowance under Rule 8D(2)(iii) of the Rules (Amount of disallowances of expenses Rs. 16,92,897/-). 3. The ld. CIT(A) has erred in law in confirming disallowance of the claim of additional depreciation of Rs. 1,20,21,505/- to the extent of 50% in respect of plant and machineries acquired and installed in immediately preceding financial year 2011-12 for less than 180 days. The appellant craves leave to add to and/or amend and/or to modify and/or to cancel any one or more grounds of appeal at any time before or at the time of hearing." 2. The brief facts of the case are that the assessee is a public limited company engaged in the business of manufacturing and power staring gears and spares thereof for commercial vehicles, passenger buses, multi-activity vehicles, etc. The assessee filed its original return of income on 29-11-2013 declaring total inc....
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.... of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340, it can be held that the tax from investments were made out of own funds of the assessee. The A.O further held that the Act does not emphasise and link the disallowances u/s 14A to the intention to earn exempt income. Hence, even if the assessee has made any strategic investment, it can get exempt dividend from that strategic investment in JV company in future, whether the assessee is intended to get it or not. Therefore, the disallowance u/s 14A of the Act is made with respect to expenditure incurred on earning of exempt income irrespective of the intention of the assessee. The assessee had on its own made a disallowance of Rs. 9,39,317/- in relation to exempt income to which the A.O was not satisfied with the correctness of the same. Thereafter, the A.O calculated and added Rs. 25,26,340/- as disallowance u/s 14A of the Act to the total income of the assessee. The learned CIT(A) has discussed this issue at para 5 page 3 onwards in his order. The ld. CIT(A) at para 10 page 15 of his order has finally upheld the order of the A.O as per the reasons contained therein. In principl....
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....nsideration while computing the disallowance u/s 14A r.w.r. 8D(2)(iii). Accordingly, we set aside the order of the learned CIT(A) and remand the matter back to file of the A.O as indicated hereinabove. The A.O shall comply with principles of natural justice while re-adjudicating the issue. Grounds No. 1 and 2 and additional ground No. 1 are allowed for statistical purpose. 9. That regarding ground No. 3 in the grounds of appeal in the appeal memo, the issue is with regard to confirmation of disallowance of the claim of additional depreciation of Rs. 1,20,21,505/- u/s 32(1)(iia) of the Act. The A.O has discussed this issue at para 4.1 onwards of his order and has given his findings at para 4.2 onwards at page 20. The learned CIT(A) has discussed this issue at para 11.1 and has given his findings at page 17 para 11.5, wherein he has given his reasons which are on record while upholding the disallowances made by the A.O. At the time of hearing, the learned counsel for the assessee has submitted that the issue of additional depreciation is decided in favour of the assessee by the judgment of Hon'ble Bombay High Court in the case of Pr. CIT 14 Vs. Godrej Industries Ltd. In I.T.A. No. 5....
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....Having heard counsel for the Revenue and for the assessee, we notice that the Assessee's claim of additional depreciation arises out of clause (iia) of sub-section 1 of sec. 32 of the Act. Clause (ii) of sub-section 1 of sec. 32 of the Act recognises the depreciation on block of assets. Clause (iia) grants additional depreciation in case of acquisition and installation of new machinery or plant by an assessee after 31-3-2005, the assessee being engaged in business of manufacture or product ion of an article or things. 6. We may also notice that the second proviso to clause (ii) of sub-section 1 of sec. 32 of the Act, would restrict Assessee's claim of depreciation to 50% in case, the assets are required by the assessee during the previous year and put to use for the purposes of business or profession for a period less than 180 days in the said previous year. 7. In the context of such statutory provisions, the Revenue has raised the question - whether when 50% of the additional depreciation is claimed by the assessee in a particular assessment year, since the acquisition and putting in to use of the assets in the previous year was for less than 180 days, the assessee can claim t....
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....hich was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held, that additional depreciation allowed under Section 32(1)(iia) of the Act is a one-time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting the additional allowance. We are in full agreement with such observations made by the Tribunal. In view of the aforesaid, we do not find that any interference is called for with the order of the Tribunal, or that any question of law arises in this appeal for determination by this court." After the said judgment of the Karnataka High Court in Rittal India Pvt. Ltd., (supra), legislation has also amended the statutory provisions by adding the third proviso to clause (ii) of sub-section 1 of Section 32 of the Act, which reads as under:- " Provided also that where an asset referred to in clause (iia....
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....or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year. The amendment will take effect from 1st April 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment year". 11.2 A perusal of the extract of the memorandum relied upon would show that the legislature recognised the fact that the manner in which the Revenue chose to interpret the provision, as it stood prior to its amendment would lead to discrimination, in respect of plant and machinery, which was used for less than 180 days, as against that, which was used for 180 days or more. 11.3 In our opinion as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The memorandum cannot be read in the manner, in which, the Revenue has sought to read it, which is that the amendment brought in would apply only prospectively. 11.4 We are clearly, of the view that the memorandum, which is sought to be relied upon by the Revenue, only clarifies as to how the un-a....
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....ding previous year in respect of such asset." Therefore, the third proviso, thus now recognizes the right of an assessee to claim the remaining 50% depreciation in subsequent year. But the fact remains even without the aid of statutory amendment, the Hon'ble Karnataka High Court in Rittal India Pvt. Ltd. case (supra.) had held that "the assessee can claim the remaining depreciation in the subsequent assessment years." Now with the introduction to the proviso to Section 32 of the Act, it was held by the Hon'ble Madras High Court in the case of CIT Vs. Shri T.P Textiles Pvt. Ltd., 294 ITR 483 that such proviso being clarificatory in nature and hence, would apply to pending cases, covering past period also. The matter before the Hon'ble Jurisdictional High Court pertained to assessment year 2007-08 and accordingly, it was covered by the aforesaid judicial findings. 19. That while considering the view taken by these two Hon'ble High Courts in the above referred judgments, it was held by the Hon'ble Jurisdictional High Court that there is no justification in taking any different view and hence, no question of law arose. 20. The aforesaid decision of the Hon'ble Jurisdictional High....