ASSISTANT COMMISSIONER OF INCOME TAX LTU CIRCLE 1 , CHENNAI V. E I D PARRY INDIA LIMITED, CHENNAI

ITA 3118/CHNY/2024

AI Insights

The case involves an appeal by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Chennai, which allowed the claim of additional depreciation by M/s. E I D Parry India Ltd. for the Assessment Year 2011-12. The primary issue was the denial of additional depreciation under section 32(1)(iia) of the Income Tax Act, 1961, by the Assessing Officer (AO), who argued that the machinery for which depreciation was claimed was not new and thus not eligible for additional depreciation in the current financial year. The CIT(A) reversed the AO's decision, leading to the Revenue's appeal to the Tribunal. The Tribunal, referencing several precedents, upheld the CIT(A)'s decision, allowing the depreciation claim.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126649 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Other Referred Cases: Automotive Coaches & Components Limited vs. The Deputy Commissioner of Income Tax, CIT v. Aztec Auto (P) Ltd., Brakes India Ltd. v. Dy. CIT, M.M. Forgings Ltd. v. Addl. CIT, CIT v. Rittal India (P.) Ltd., CIT v. Shri T.P. Textiles (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. RAGHUPATHY
• Assessee Lawyers: SUDARMANI
• Keywords: Question of law; Depreciation; Additional depreciation; Reason to believe
• Section: 147; 148

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी अिमताभ शु\u0018ा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.3118/Chny/2024 िनधा\u000eरण वष\u000e/Assessment Year: 2011-12 The ACIT, Circle-1 (LTU), Chennai. v. M/s. E I D Parry India Ltd., No.234, DARE House, NSC Bose Road, Parrys Corner, Chennai-600 001. [PAN: AAACE 0702 C] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) Department by : Mr.R. Raghupathy, Addl.CIT Assessee by : Mr.Sudarmani, Advocate सुनवाईक तारीख/Date of Hearing : 19.02.2025 घोषणाक तारीख /Date of Pronouncement : 23.04.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as “the Ld.CIT(A)”), Chennai-15, dated 10.10.2024 for the Assessment Year (hereinafter referred to as \"AY”) 2011-12. 2. The only ground raised by the Revenue is against the action of the Ld.CIT(A) directing the AO to allow the claim of additional depreciation brought forward from AY 2010-11. ITA No.3118/Chny/2024 (AY 2011-12) M/s. E I D Parry India Ltd. :: 2 :: 3. The brief facts are that the assessee company filed its return of income (RoI) for AY 2011-12 on 04.11.2011 admitting a loss of Rs.47,17,77,686/- which was processed u/s.143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) and intimation was passed on 16.08.2012. Subsequently, the return was selected for scrutiny and the AO has made, inter alia, additions/disallowance wherein the total income of the assessee was determined at loss of Rs.19,09,53,884/- and book loss of Rs.27,97,93,618/- pursuant to the DRP’s order dated 29.05.2015. 4. In respect of disallowance of additional depreciation u/s.32(1)(iia) of the Act, the AO noted that the assessee had claimed additional depreciation u/s.32(1)(iia) amounting to Rs.6,01,98,797/- during the year @10% [50% of 20%] in respect of the second half additions made to plant & machinery, during the preceding assessment year viz., AY 2010- 11; but the AO denied the claim, since the assets/machinery for which additional depreciation claimed were not new machinery, but purchased in the earlier financial year and noted that the machineries were procured and added to fixed assets in the second half during the earlier year (AY 2010-11) and the balance 50% of the additional depreciation has been claimed during this assessment year (AY 2011-12). According to the AO, as per sec.32(1)(iia) of the Act, the additional depreciation shall be available only for the new assets added during the year and there was no ITA No.3118/Chny/2024 (AY 2011-12) M/s. E I D Parry India Ltd. :: 3 :: provision in the Act permitting the balance depreciation to be allowed in the succeeding year. Therefore, he was of the view that assets/machinery purchased in the second half of the previous financial year was not a new machinery in the current financial year and therefore, the additional depreciation u/s.32(1)(iia) of the Act can’t be allowed. 5. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who allowed the claim by relying on the decision of this Tribunal in the assessee’s own case for the earlier year assessment including AY 2010-11 in ITA Nos. 2370/Chny/2014, 273/Chny/2015, 449/Chny/2012, 274/Mds/2015, 492/Chny/2012, 2470/Chny/2014, 2471/Chny/2014, 2472/Chny/2014, wherein at Page No.23 at Para Nos.53-56 held as under: 53. Disallowance of additional depreciation u/s.32(1)(iia): It was submitted by the learned Authorized Representative that the assessee has acquired new machinery and put the same to use for a period of less than 180 days during the relevant Assessment Year. It was a submission that the Assessing Officer has disallowed the assessee's claim of additional depreciation. It was a submission that the assets had been put to use during the relevant assessment year though less than 180 days, the assessee was entitled to the benefit of the 50% of the additional depreciation. The learned Authorized Representative placed reliance on the decision of the Cochin Benches of this Tribunal in the case of Automotive Coaches & Components Limited vs. The Deputy Commissioner of Income Tax reported in I.T.A. No.1789/Mds/2014 dated 12.02.2016. 54. In reply, the leaned Departmental Representative vehemently supported the order of the learned Assessing Officer and the learned CIT(A). 55. We have considered the rival submission and perused the materials available on record. 56. As it is noticed that the issue is squarely covered by the Co-ordinate Bench of this Tribunal referred to supra, the Assessing Officer is directed to grant the assessee the benefit 50% of the additional depreciation in respect of the assets which have been put to use less than 180 days. ITA No.3118/Chny/2024 (AY 2011-12) M/s. E I D Parry India Ltd. :: 4 :: 6. Further, we note that the Ld.CIT(A) has also taken note of the decision of the Hon’ble Madras High Court in the case of CIT v. Aztec Auto (P) Ltd., reported in [2021] 277 Taxman.com 273 [Madras-HC] wherein the substantial question of law framed by the Hon’ble Madras High Court is noted as under: 3. The appellant/revenue has filed the following substantial questions of law for consideration: 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is eligible to carry forward the unabsorbed additional depreciation as per the provisions of section 32(1)(lia)? 2. Is not the finding of the Tribunal bad especially when as per the proviso to Section 32(0)(1) restricts depreciation allowable to 10% in the year in which the assets was acquired and installed and in the present case the assets was acquired in the 2nd half of the financial year 2007-08 and there being no provisions under the Act permitting the balance to be carry forwarded to be allowed in the succeeding year? 7. And the Hon’ble Madras High Court has answered the question in favour of the assessee by dismissing the appeal of the Revenue by holding as under: 4. We have elaborately heard the learned senior counsel for the appellant/revenue. 5. The assessee is a private limited company had filed its return of income for the assessment year 2009-10 on 28-9-2009 admitting a income of Rs. 71,83,530. The assessee's case was selected for scrutiny and the income returned was accepted, subsequently, the case was re-opened under section 147 of the Act by issuance of notice under section 148 of the Act on 26-3-2014 on the ground that the asset which was purchased and put to use in the previous year for less than 180 days only 10% depreciation was claimed and assessee has claimed the additional depreciation for the assessment year 2009-10 and therefore, there was reason to believe that excess depreciation in respect of additional depreciation of Rs. 4,33,414/- has escaped assessment warranting reopening. 6. The assessing officer was of the view that the assessee has claimed arrears of depreciation under section 32(1)(rio) amounting to Rs. 4,33,414/-in respect of the asset under the head Plant and Machinery acquired in the 2nd half of the financial year 2007-08, for which, additional depreciation at 10% was ITA No.3118/Chny/2024 (AY 2011-12) M/s. E I D Parry India Ltd. :: 5 :: allowed for the assessment year 2008-09. Further, the Assessing Officer was of the view that there was no provision under the Act permitting balance depreciation to be allowed in the succeeding year. The explanation offered by the assessee did not find favour with the assessing officer and accordingly, he disallowed the claim and added the same to the total income of the assessee under the head income or professional and established at the total Income of Rs. 76,16,945/-. 7. The assessee preferred an appeal before the Commissioner of Income-tax [Appeals]-I CIT(A), Chennai, who by order dated 14-7-2016 allowed the appeal. In doing so, followed the decision of Addison & Co. Ltd. v. Dy. CIT [LT. Appeal No. 2198 (Mds.) of 2015, dated 4-3-2016). In this order, the Tribunal noted the decision in the case of Dy. CIT v. Brakes India Ltd. [1.T. Appeal No. 1069 (Mds.) of 2010, dated 6-1-2012], which was decided against the assessee. However, the CIT(A) took note of the decision above mentioned and observed that those were rendered after considering the decisions in Brakes India Ltd. (supra) and CRI Pumps (P) Ltd. v. Asstt. CIT [2013] 34 taxmann.com 123/58 SOT 154 (Chennai Trib.) and it was held that additional depreciation to the extent not claimed by the assessee in the earlier year ought to be allowed. 8. The CIT(A) also followed its own decision in the case of Associated Printers (Madras) (P) Ltd. dated 14-1-2016 and accordingly, the appeal was allowed. The revenue carried the matter by way of appeal to the Tribunal. The Tribunal by the impugned order dismissed the appeal filed by the Revenue taking note of decision of High Court of Karnataka in CIT v. Rittal India (P.) Ltd. [2016] 66 taxmann.com 4/380 ITR 423. 9. As rightly pointed out by Mr. T. Ravikumar, learned senior standing counsel for the appellant, the Tribunal erred in holding that there was no Judgment in any other High Court, which is in favour of the Department. Without noting the fact that there were several decisions, one of which, the decision of the Division Bench of this Court in M.M. Forgings Ltd. v. Addl. CIT [2011] 11 taxmann.com 367/200 Taxman 36 (Mag.)/[2012] 349 ITR 673 (Mad.). It appears that the said decision was not brought to the notice of the Tribunal, which choose to follow the decision of High Court of Karnataka. Though the decision of the jurisdictional High Court in the case of M.M. Forgings Ltd. (supra), was available which was in favour of the revenue and against the assessee. 10. Be that as it may, the decision of the Tribunal in the case of Brakes India Ltd. v. Dy. CIT [T.C. A.No.551 of 2013, dated 14-3-2017], was appealed against before the Division Bench of this Court in and the Division Bench noted the decision in Rittal India Limited as well as M.M. Forgings and ultimately, allowed the appeal filed by the assessee. In doing so, the Division Bench of this Court distinguished the decision in the case of M.M. Forgings Ltd. (supra) by observing that the said case was not concerned with the issue with regard to right to carry forward the balance additional depreciation and followed the decision in the case of CIT v. Shri T.P. Textiles (P.) Ltd. [2017] 79 taxmann.com 411/246 Taxman 324/394 ITR 483 (Mad.), which was decided in favour of the assessee and in which decision, the decision in the case of Rittal India (P.) Ltd. (supra), was also referred to. 11. The learned senior counsel for the revenue also pointed out that so far as the claim of balance 50% of the amount as deduction was provided for inserting the proviso under section 32(1) and such insertion was with effect from 1-4-2016 by Finance Act, 2015. ITA No.3118/Chny/2024 (AY 2011-12) M/s. E I D Parry India Ltd. :: 6 :: 12. In our considered view, the effect of the insertion of the proviso in the year 2016, may not have a bearring on the present issue, as during the relevant assessment year 2009-10, the law which has been settled by the Division Bench of this Court is the case of Brakes India Ltd. (supra), against the said decision, the revenue preferred an appeal before the Hon'ble Supreme Court in S.L.P. (C) No. 033755/2017 which was dismissed by an order dated 24-9- 2018. Thus, the decision of the Division Bench in the case of Brakes India Ltd. (supra) having been approved by the Hon'ble Supreme Court, we are bound by the said decision and accordingly, following the same. For the above reasons, the appeal filed by the Revenue is dismissed and the substantial question of law is answered against the Revenue. No costs. 8. In the light of the aforesaid binding judicial decisions in favour of the assessee, the issue on additional depreciation claimed by the assessee is held to be rightly allowed by the Ld.CIT(A) by passing the impugned order, which we confirm, and therefore, we dismiss the appeal of the Revenue. 9. In the result, appeal filed by the Revenue is dismissed. Order pronounced on the 23rd day of April, 2025, in Chennai. Sd/- (अिमताभ शु\u0018ा) (AMITABH SHUKLA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 23rd April, 2025. TLN आदेश क \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF "