Associated Printers (Madras) (P) Ltd., CHENNAI V. DCIT, CHENNAI

ITA 109/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9600 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 14-01-2015
• Court: TRIBUNAL
• Department Lawyers: MRS S VIJAYA PRABHA
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Unabsorbed depreciation
• Section: 143(3); 14A; 32; 10

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 109/MDS/2015 / ASSESSMENT YEAR :2008 - 09 M/S. ASSOCIATED PRINTERS (MADRAS) (P) LTD., NO. 114, ANNA SALAI, CHENNAI 600 00 2 . [PAN: A A A C A7962L ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , C OMPANY CIRC LE 1 (1), CHENNAI 600 0 34 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SAROJ KUMAR PARIDA , ADVOCAT E / RESPONDENT BY : MRS. S. VIJAYA PRABHA, J CIT / DATE OF HEARING : 06 . 0 4 .201 6 / DATE OF P RONOUNCEMENT : 26 . 0 4 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I , CH ENNAI , DATED 24 . 0 9 .20 1 4 RELEVANT TO THE ASSESSMENT YEAR 200 8 - 0 9. T HE ASSESSEE HAS RAISED TWO EFFECTIVE GROUNDS VIZ., (1) DISALLOWANCE UNDER SECTION 14A INCOME TAX ACT, 1961 [ ACT IN SHORT] BY APPLYING RULE 8D(III) AND (2) DISALLOWANCE OF ADDITIONAL DEPREC IATION UNDER SECTION 32(1)(IIA) OF THE ACT. I.T.A. NO . 109 /M/ 15 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRINTING AND FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF .2,82,68,850/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 11.02.2010. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 19.08.2010. AFTER CONSI DERING THE DETAILS SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY MAKING VARIOUS ADDITIONS. 3. ON APPEAL, THE LD. CIT(A), PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING ON THE DECISION IN THE CASE OF REI AGRO LTD. V. DCIT 144 ITD 141 (KOL), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) WENT IN WRONG TO CONFIRM THE ORDER OF THE ASSESSING OFFICE R SINCE THE DISALLOWANCE SHOULD HAVE BEEN COMPUTED BY TAKING INTO CONSIDERATION ONLY SUCH INVESTMENTS FROM WHICH THE ASSESSEE HAD ACTUALLY RECEIVED THE INCOME WHICH IS EXCLUDED FROM THE TOTAL INCOME . FURTHER, HE HAS SUBMITTED THAT THE LD. CIT(A) SHOULD NOT HAVE CONFIRMED THE DISALLOWANCE UNDER RULE 8D(2)(III) SINCE THE ASSESSEE ITSELF HAS MADE DISALLOWANCE OF .2,57,780/ - . THEREFORE, HE PLEADED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. I.T.A. NO . 109 /M/ 15 3 5. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON R ECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF .20,62,729/ - AND .74,01,390/ - AS LONG TERM CAPITAL GAINS ON SALE OF MUTUAL FUNDS, BOTH ARE EXEMPT UNDER SECTION 10(3 4) AND 10(38) OF THE ACT RESPECTIVELY. UNDER THE PROVISIONS OF SECTION 14A OF THE ACT, NO EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING AN EXEMPT INCOME SHALL BE ALLOWED AGAINST THE TAXABLE PROFITS. WHILE THE ENTIRE DIVIDEND INCOME AND LONG TERM CAPITAL GAIN HAVE BEEN CLAIMED AS EXEMPT, THE ASSESSEE HAS NOT ATTRIBUTED ANY PORTION OF THE EXPENDITURE DEBITED TO THE P&L ACCOUNT TOWARDS THE SAME. THE ASSESSEE INCURS ROUTINE EXPENDITURE TO MAINTAIN ITS ESTABLISHMENT AND TOWARDS ADMINISTRATION, A PORTION OF WH ICH CAN BE ATTRIBUTED TOWARDS INVESTMENTS. THE ASSESSEE ALSO INCURS MANAGERIAL REMUNERATION AND CLAIMS THE WHOLE OF THE SAME AS EXPENDITURE . THE MANAGERIAL STAFF AND THE DIRECTORS ARE INVOLVED IN MAKING DECISIONS ON INVESTMENTS. SUCH BEING THE CASE, A PORT ION OF THIS MANAGERIAL REMUNERATION AND DIRECTORS REMUNERATION SHOULD ALSO BE ATTRIBUTED TOWARDS THE INVESTMENTS, THE RETURN ON WHICH IS EXEMPT UNDER SECTION 10 OF THE ACT. BEFORE THE ASSESSING OFFICER, THE AR OF THE ASSESSEE HAS SUBMITTED THAT NO EXPENDIT URE WAS INCURRED FOR EARNING THE EXEMPT INCOME. TO TIDE OVER THIS DIFFICULTY IN DETERMINING THE EXPENSES ATTRIBUTABLE TO EARNING AN EXEMPT INCOME I.T.A. NO . 109 /M/ 15 4 AND TO BRING IN UNIFORMITY IN THE DIFFERENT APPROACHES ADOPTED BY THE ASSESSING OFFICERS, THE FINANCE ACT, 200 6 HAS BROUGHT IN THE PROVISIONS OF SECTION 14A(2) WHICH REQUIRES THE ASSESSING OFFICER, TO DETERMINE THE EXPENSES ALREADY RELATING TO AN EXEMPT INCOME IN ACCORDANCE WITH RULE 8D. IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYC E VS. DCIT, WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE UNDER RULE 8D R.W.S. 14A(2) IS 'FAIR AND REASONABLE', THE ASSESSING OFFICER HAS WORKED OUT THE DISALLOWANCE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) HAS OBSERVED THAT T H E DISALLOWANCE OF .2,57,780 MADE BY THE ASSESSEE ITSELF SHOWS THAT THE PROVISIONS OF SECTION 14A OF THE ACT ARE APPLICABLE IN THE ASSESSEE S CASE. WHEN THERE IS NO DISPUTE WITH REGARD TO APPLICABILITY OF SECTION 14A OF THE ACT, THE DISALLOWANCE HAS TO BE MADE BY INVOKING R ULE 8D IN VIEW OF THE DECISION IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (SUPRA). WITH REGARD TO LIMB (II) OF RULE 8D(2), ON PERUSAL OF THE BALANCE - SHEET, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS TO TAKE CARE OF ITS IN VESTMENTS. FURTHER, THE SHARE CAPITALS AND RESERVES PUT TOGETHER THE AVAILABLE OWN FUNDS WORKS OUT TO .1732.32 LAKHS ( .60 LAKHS + .1672.32 LAKHS) AND THE INVESTMENTS WAS FOUND TO BE ONLY .729.34 LAKHS. THE LD. CIT(A) HAS FURTHER NOTICED FROM THE BALANCE - SHEET THAT THESE OWN FUNDS OF THE ASSESSEE CAN TAKE CARE OF INVESTMENT EVEN AFTER TAKING INTO ACCOUN T INVESTMENT IN FIXED ASSETS ( .597.98 LAKHS). FURTHER, THE AMOUNT BORROWED FROM THE BANK IS FOR A SPECIFIC PURPOSE I.E., CASH CREDIT AND OVER DRAFT. THEREFORE, THE INTEREST DEBITED OF .2,37,570 CANNOT BE ATTRIBUTED TO ANY BORROWINGS WHICH HAVE GONE I.T.A. NO . 109 /M/ 15 5 INTO INVESTMENTS OF EXEMPT INCOME EARNING AVENUES. THEREFORE, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE DISALLOWANCE MADE UNDER LIMB (II). HOWEVER, THE LD. CIT(A) HAS OBSERVED THAT LIMB (III) TO RULE 8D(2) IS APPLICABLE IN THE ASSESSEE S CAS E. BY RELYING ON THE DECISION I N THE CASE OF ESCORTS LTD, 102 TTJ 522, WHEREIN, THE ITAT DELHI HAS CLEARLY HELD THAT INDIRECT MANAGEMENT AND ADMINISTRATION EXPENSES QUALIFY FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT, THE LD. CIT(A) HAS HELD THAT THERE I S NO DECISION SO FAR BY ANY SIMILAR FORUM CONTRADICTING TILE ABOVE FINDINGS . SIMILAR LY, BY FOLLOWING THE DECISION OF THE ITAT CHENNAI IN THE CASE OF SOUTHERN PETROCHEMICAL INDUSTRIES (93 TTJ 161) , THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE UNDER LIMB ( III) TO RULE 8D(2), WHEREIN, THE CHENNAI BENCHES OF THE TRIBUNAL HAS HELD AS UNDER: ' ... WHETHER TO INVEST OR NOT TO INVEST AND WHETHER TO RETAIN THE INVESTMENTS OR TO LIQUIDATE THE SAME ARE VERY STRATEGIC DECISIONS WHICH THE MANAGEMENT IS CALLED UPON TO TAKE. THESE ARE MIND - BOGGLING DECISIONS AND TOP MANAGEMENT IS INVOLVED IN TAKING THESE DECISIONS. THIS DECISION - MAKING PROCESS IS VERY COMPLICATED AND REQUIRES VERY CAREFUL ANALYSIS. MOREOVER, THE ASSESSEE HAD TO KEEP TRACK OF VARIOUS DIVIDEND INCOMES DECL ARED BY THE INVESTEE COMPANIES AND ALSO TO KEEP TRACK OF THE DIVIDEND INCOME HAVING BEEN REGULARLY RECEIVED BY THE ASSESSEE. THAT ACTIVITY ITSELF CALLED FOR CONSIDERABLE MANAGEMENT ATTENTION AND COULD NOT BE LEFT TO A JUNIOR CLERK. ' 7. THE CONTENTION OF THE ASSESSEE IS THAT THE DISALLOWANCE SHOULD BE COMPUTED BY TAKING INTO CONSIDERATION ONLY SUCH INVESTMENT FROM WHICH THE ASSESSEE HAS ACTUALLY RECEIVED INCOME AND NO DISALLOWANCE CAN BE MADE FOR THE INCOME NOT RECEIVED IS NOT ACCEPTABLE , BECAUSE, WHETHER THE ASSESSEE HAS EARNED ANY EXEMPT INCOME OR NOT, ONCE THE ASSESSEE MADE INVESTMENT, THE I.T.A. NO . 109 /M/ 15 6 DIRECT/INDIRECT MANAGEMENT AND ADMINISTRATIVE EXPENSES QUALIFY FOR DISALLOWANCE UNDER SECTION 14A OF THE ACT. 7. I N THE CASE OF CHEMINVEST LTD. V. ITO 121 ITD 318 (DEL), THE DELHI BENCHES OF THE TRIBUNAL HELD THAT EVEN IF THE INVESTMENT DID NOT YIELD ANY DIVIDEND IN THE YEAR UNDER CONSIDERATION, THE DISALLOWANCE UNDER SECTION 14A OF THE ACT ON THE EXPENDITURE INCURRED FOR EARNING INCOME IS WARRANTED, NOTWITHSTANDING THE FACT THAT NO SUCH INCOME WAS EARNED. FURTHER, WE FIND THAT WHILE MAKING INVESTMENT, THE ELEMENT OF EXPENDITURE INVOLVED IN THE PROCESS CANNOT BE RULED OUT. HOWEVER, T HIS EXPENDITURE MAY NOT BE DIRECT. THUS, THERE IS AN EXPENDITURE INVOLVED IN MAKING T HESE INVESTMENTS. THEREFORE, THERE IS A NEED TO IDENTIFY AND APPORTION A REASONABLE AMOUNT OF EXPENSES AS ATTRIBUTABLE FOR EARNING THE EXEMPTED INCOME. IN THE CASE OF DCIT V. SREI INTERNATIONAL FINANCE LTD. (2006/10 SOT 722 (DELHI) - TRIB.) , THE DELHI BENCH ES OF ITAT HAS HELD AS UNDER: IN LIGHT OF CLEAR PROVISIONS OF SECTION 14A, EVEN IN CASE IT IS NOT POSSIBLE TO IDENTIFY EXPENSES INCURRED IN EARNING INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME, DISALLOWANCE HAS TO BE MADE ON SOME BASIS. FURTHER, IN THE CASE OF MAREZBAN BHARUCHA V. ASSTT. CI T [2007/12 SOT 133 (MUM. - TRIB.), THE MUMBAI BENCHES OF ITAT HAS HELD AS UNDER: WHERE AN EXPENDITURE IS COMPOSITE ONE, I.E., RELATING TO TAXABLE RECEIPTS AS WELL AS NON - TAXABLE RECEIPTS, ASSESSING OFFICER IS DUTY - BOUND TO DISALLOW PROPORTIONATE AMOUNT OF EXPENDITURE RELATABLE TO NON - TAXABLE OR EXEMPTED INCOME BY INVOKING PROVISIONS OF SECTION 14A. I.T.A. NO . 109 /M/ 15 7 8. IN ORDER TO ARRIVE AT A REASONABLE AMOUNT OF EXPENDITURE, WHICH MAY VARY FROM CASE TO CASE AND SITUATION TO SITU ATION, THE LEGISLATURE, AFTER TAKING VARIOUS FACTORS INTO CONSIDERATION, CAME TO A CONCLUSION THAT SUCH EXPENSES CAN BE REASONABLY CALCULATED @ 0.5% OF THE AVERAGE INVESTMENTS MADE BY THE ASSESSEE. FOR THIS PURPOSE, THE LEGISLATURE HAS ARRIVED AT A COMMON FORMULA TO CALCULATE THE EXPENSES @ 0.5% OF THE AVERAGE INVESTMENTS MADE AS PER STEP - 3 OF THE FORMULA GIVEN IN RULE - 8D. ACCORDINGLY THE LEGISLATURE INCORPORATED AND INTRODUCED THE RULE - 8D. FURTHER, AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS RIGHTLY QUANTIFIED THE EXPENDITURE UNDER RULE 8D(2)(III) AND DISALLOWED UNDER SECTION 14A OF THE ACT. 9. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 10. THE NEXT GROUND RAISED IN THIS APPEAL IS WITH REGARD TO CONFIRMATION OF DISALLOWANCE OF ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT. THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE ACT AMOUNTING TO .15,95,635/ - DURING THE YEAR OUT OF WHICH A CLAIM AMOUNTING TO . 70,486/ - WAS MADE ON THE ADDITIONS TO PLANT AND MACHINERY MADE DURING THE PRECEDING PREVIOUS YEAR. SINCE THE ADDITIONS WERE MADE DURING THE SECOND HALF OF THE YEAR, 50% OF THE ADDITIONAL DEPRECIATION HAD BEEN CLAIMED DURING THAT YEAR I.T.A. NO . 109 /M/ 15 8 (BEING LESS THAN 180 DAYS). THE ASSESSEE HAS CLAIMED THE BALANCE AMOUNT IN THE RELEVANT ASSESSMENT YEAR 2008 - 09. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GRO UND THAT ADDITIONAL DEPRECIATION IS ALLOWABLE TO AN ASSESSEE ONLY ON NEW PLANT AND MACHINERY AND IT WILL NO MORE BE NEW IN THE NEXT YEAR TO CLAIM REMAINING DEPRECIATION. HE ALSO OBSERVED THAT THERE IS NO PROVISION IN THE ACT PERMITTING THE BALANCE ADDITION AL DEPRECIATION TO BE ALLOWED IN THE SUBSEQUENT YEARS. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 11. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY RELIED ON THE DECI SION IN THE CASE OF APOLLO TYRES LTD. V . ACIT [2014] 64 SOT 203 (COCHIN) AND DECISION IN THE CASE OF CIT & ANOTHER V. RITTAL INDIA PVT. LTD. [2016] 380 ITR 423 (KARN.). BY RELYING ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF AUTO MOTIVE COACHES & COMPONENTS LTD. V. DCIT IN I.T.A. NO. 1789/MDS/2014 FOR THE ASSESSMENT YEAR 2008 - 09 VIDE ORDER DATED 12.02.2016, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 12. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 13. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE POINT AT ISSUE BEFORE US IS WHETHER I.T.A. NO . 109 /M/ 15 9 THE ASSESSEE IS ENTITLED TO CARRY FORWARD 50 % OF ADDITIONAL DEPRECIATION IN THE SUCCEEDING YEAR WHEN THE PLANT AND MACHINERY WAS PUT IN USE LESS THAN 180 DAYS IN THE PRECEDING PREVIOUS YEAR. BY FOLLOWING THE DECISION OF COCHIN BENCHES OF ITAT IN THE CASE OF APOLLO TYRES LTD. V. ACIT (SUPRA) AND THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER V. RITTAL INDIA PVT. LTD. (SUPRA), THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF AUTOMOTIVE COACHES & COMPONENTS LTD. V. DCIT (SUPRA) HAS OBSERVED AND HELD AS UNDER: 5. WE HAV E CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SECTION 32(1)(IIA) PROVIDES FOR ADDITIONAL DEPRECIATION AT THE RATE OF 20%. THE ASSESSING OFFICER ALLOWED 10% OF ADDITIONAL DEPRECIATION IN RESPECT O F THE PLANT AND MACHINERY PURCHASED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FOUND THAT THE ADDITIONS TO FIXED ASSETS WERE MADE IN THE SECOND HALF OF THE FINANCIAL YEAR, THEREFORE, 50% OF ADDITIONAL DEPRECIATION HAS BEEN CLAIMED. THE BA LANCE 50% WAS CARRIED FORWARD IN THE NEXT YEAR. THE ASSESSING OFFICER FOUND THAT THE ADDITIONAL DEPRECIATION IS ALLOWABLE ONLY DURING THE YEAR IN WHICH THE MACHINERY WAS INSTALLED AND USED FOR BUSINESS OF THE ASSESSEE. THERE IS NO PROVISION IN THE INCOME - TAX ACT FOR CARRY FORWARD OF THE ADDITIONAL DEPRECIATION TO THE SUBSEQUENT ASSESSMENT YEAR. THIS ISSUE WAS EXAMINED BY THE COCHIN BENCH OF THIS TRIBUNAL IN APOLLO TYRES LTD. V. ACIT (SUPRA). THE COCHIN BENCH FOUND THAT IF ADDITIONAL DEPRECIATION COULD N OT BE ALLOWED AT THE RATE OF 20% DURING THE YEAR IN WHICH THE MACHINERY WAS INSTALLED, THE BALANCE 50% HAS TO BE ALLOWED IN THE SUBSEQUENT YEAR. IN FACT, THE COCHIN BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS: - 9. WE HAVE CONSIDERED THE RIVAL SUBMIS SIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTION 32(1)(IIA) READS AS FOLLOWS: '32(1)(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, 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): I.T.A. NO . 109 /M/ 15 10 PROVIDED TH AT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST - HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR.' 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT, WHICH READS AS FOLLOWS: 'PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSE OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UNDER THIS SUB - SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSET UNDER CLAUSE (I) OR CLAUSE ( II) OR CLAUSE (IIA) AS THE CASE MAY BE.' 11. A BARE READING OF THIS SECTION 32(1)(IIA) CLEARLY SAYS THAT IN CASE A NEW MACHINERY OR PLANT WAS ACQUIRED AND INSTALLED AFTER 31 - 03 - 2005 BY AN ASSESSEE, WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUC E OF ARTICLE OR THING, THEN, A SUM EQUAL TO 20% OF THE ACTUAL COST OF THE MACHINERY AND PLANT SHALL BE ALLOWED AS A DEDUCTION. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS ACQUIRED AND INSTALLED THE MACHINERY AFTER 31 - 03 - 2005. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF ARTICLE OR THING. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION WHICH IS EQUIVALENT TO 20% OF THE ACTUAL COST OF SUCH MACHINERY. THE DISPUTE IS THE YEAR IN WHICH THE DEPRECIATION HAS TO BE AL LOWED. THE ASSESSEE HAS ALREADY CLAIMED 10% OF THE DEPRECIATION IN THE EARLIER ASSESSMENT YEAR SINCE THE MACHINERY WAS USED FOR LESS THAN 180 DAYS AND CLAIMING THE BALANCE 10% IN THE YEAR UNDER CONSIDERATION. SECTION 32(1)(IIA) DOES NOT SAY THAT THE YEAR I N WHICH THE ADDITIONAL DEPRECIATION HAS TO BE ALLOWED. IT SIMPLY SAYS THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL I.T.A. NO . 109 /M/ 15 11 DEPRECIATION EQUAL TO 20% OF THE COST OF THE MACHINERY PROVIDED THE MACHINERY OR PLANT IS ACQUIRED AND INSTALLED AFTER 31 - 03 - 2005. PROVISO TO SECTION 32(1)(IIA) SAYS THAT IF THE MACHINERY WAS ACQUIRED BY THE ASSESSING DURING THE PREVIOUS YEAR AND HAS PUT TO USE FOR THE PURPOSE OF BUSINESS LESS THAN 180 DAYS, THE DEDUCTION SHALL BE RESTRICTED TO 50% OF THE AMOUNT CALCULATED AT THE PRESCRIBED RAT E. THEREFORE, IF THE MACHINERY IS PUT TO USE IN ANY PARTICULAR YEAR, THE ASSESSEE IS ENTITLED FOR 50% OF THE PRESCRIBED RATE OF ADDITIONAL DEPRECIATION. THE INCOME - TAX ACT IS SILENT ABOUT THE ALLOWANCE OF THE BALANCE 10% ADDITIONAL DEPRECIATION IN THE SUBS EQUENT YEAR. TAKING ADVANTAGE OF THIS POSITION, THE ASSESSEE NOW CLAIMS THAT THE YEAR IN WHICH THE MACHINERY WAS PUT TO USE THE ASSESSEE IS ENTITLED FOR 50% ADDITIONAL DEPRECIATION SINCE THE MACHINERY WAS PUT TO USE FOR LESS THAN 180 DAYS AND THE BALANCE 5 0% SHALL BE ALLOWED IN THE NEXT YEAR SINCE THE ELIGIBILITY OF THE ASSESSEE FOR CLAIMING 20% OF THE ADDITIONAL DEPRECIATION CANNOT BE DENIED BY INVOKING SECOND PROVISO TO SECTION 32(1)(II) OF THE ACT. 12. THIS ISSUE WAS CONSIDERED BY THE DELHI BENCH OF T HIS TRIBUNAL IN THE CASE OF COSMO FILMS LTD (SUPRA). THE REVENUE HAS TAKEN A SIMILAR GROUND AS TAKEN BEFORE THIS TRIBUNAL THAT THE ASSESSEE CANNOT CARRY FORWARD THE ADDITIONAL DEPRECIATION TO BE ALLOWED IN THE SUBSEQUENT ASSESSMENT YEAR. THE DELHI BENCH OF THIS TRIBUNAL AFTER CONSIDERING THE PROVISIONS OF SECTION 32(1)(IIA) AND PROVISO TO SECTION 321)(II) OF THE ACT FOUND THAT WHEN THERE IS NO RESTRICTION IN THE ACT TO DENY THE BENEFIT OF BALANCE 50%, THE ASSESSEE IS ENTITLED FOR THE BALANCE ADDITIONAL DEPR ECIATION IN THE SUBSEQUENT ASSESSMENT YEAR. IN FACT, THE DELHI BENCH OF THIS TRIBUNAL HAS OBSERVED AS FOLLOWS AT PAGES 641 AND 642 OF THE ITD: ' THUS, THE INTENTION WAS NOT TO DENY THE BENEFIT TO THE ASSESSEES WHO HAVE ACQUIRED OR INSTALLED NEW MACHINERY OR PLANT. THE SECOND PROVISO TO SECTION 32(1)(II) RESTRICTS THE ALLOWANCES ONLY TO 50% WHERE THE ASSETS HAVE BEEN ACQUIRED AND PUT TO USE FOR A PERIOD LESS THAN 180 DAYS IN THE YEAR OF ACQUISITION. THIS RESTRICTION IS ONLY ON THE BASIS OF PERIOD OF USE. T HERE I NO RESTRICTION THAT BALANCE OF ONE TIME INCENTIVE IN THE FORM OF ADDITIONAL SUM OF DEPRECIATION SHALL NOT BE AVAILABLE IN THE SUBSEQUENT YEAR. SECTION 32(2) PROVIDES FOR A CARRY FORWARD SET UP OF UNABSORBED DEPRECIATION. THIS ADDITIONAL BENEFIT IN T HE FORM OF ADDITIONAL ALLOWANCE U/S 32(1)(IIA) IS ONE TIME BENEFIT TO ENCOURAGE THE INDUSTRIALIZATION AND IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD. V. CIT [1992] 196 ITR 188 , THE PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVE TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING THE ADDITIONAL ALLOWANCE. THIS ADDITIONAL BENEFIT IS TO GIVE IMPETUS TO INDUSTRIALIZATION AND THE BASIC INTENTION AND PU RPOSE OF THESE PROVISIONS CAN BE REASONABLY AND LIBERALLY HELD THAT THE ASSESSEE DESERVES TO GET THE BENEFIT IN FULL WHEN THERE IS NO RESTRICTION IN THE STATUTE TO DENY THE BENEFIT OF BALANCE OF 50% I.T.A. NO . 109 /M/ 15 12 WHEN THE NEW MACHINERY AND PLANT WERE ACQUIRED AND USED F OR LESS THAN 180 DAYS. ONE TIME BENEFIT EXTENDED TO ASSESSEE HAS BEEN EARNED IN THE YEAR OF ACQUISITION OF NEW MACHINERY AND PLANT. IT HAS BEEN CALCULATED @15% BUT RESTRICTED TO 50% ONLY ON ACCOUNT OF USAGE OF THESE PLANT & MACHINERY IN THE YEAR OF ACQUISI TION. IN SECTION 32(1)(IIA), THE EXPRESSION USED I 'SHALL BE ALLOWED'. THUS, THE ASSESSEE HAD EARNED THE BENEFIT AS SOON AS HE HAD PURCHASED THE NEW MACHINERY AND PLANT IN FULL BUT IT IS RESTRICTED TO 50% IN THAT PARTICULAR YEAR ON ACCOUNT OF PERIOD USAGES . SUCH RESTRICTIONS CANNOT DIVEST THE STATUTORY RIGHT. LAW DOES NOT PROHIBIT THAT BALANCE 50% WILL NOT BE ALLOWED IN SUCCEEDING YEAR. THE EXTRA DEPRECIATION ALLOWABLE U/S 32(1)(IIA) IN AN EXTRA INCENTIVE WHICH HAS BEEN EARNED AND CALCULATED IN THE YEAR OF ACQUISITION BUT RESTRICTED FOR THAT YEAR TO 50% ON ACCOUNT OF USAGE. THE SO EARNED INCENTIVE MUST BE MADE AVAILABLE IN THE SUBSEQUENT YEAR. THE OVERALL DEDUCTION OF DEPRECIATION U/S 32 SHALL DEFINITELY NOT EXCEED THE TOTAL COST OF MACHINERY AND PLANT . IN VIEW OF THIS MATTER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT TO EXTEND THE BENEFIT. WE ALLOW GROUND NO.2 OF THE ASSESSEE'S APPEAL. SINCE WE HAVE DECIDED GROUND NO.2 IN FAVOUR OF ASSESSEE, THERE IS NO NEED TO DECIDE THE ALTERNATE CLAIM R AISED IN GROUND NO.3. THE SAME IS DISMISSED.' 13. THIS ISSUE WAS ALSO CONSIDERED BY ANOTHER BENCH OF THIS TRIBUNAL AT DELHI IN SIL INVESTMENT LTD (SUPRA). AT PAGE 233 OF THE TTJ, THE TRIBUNAL HAS OBSERVED AS FOLLOWS: '40. THERE IS NOTHING ON RECORD TO SHOW THAT THE DIRECTIONS GIVEN BY THE LEARNED CIT(A) ARE NOT PROPER. THE ELIGIBILITY FOR DEDUCTION OF ADDITIONAL DEPRECIATION STANDS ADMITTED, SINCE 50 PER CENT THEREOF HAD ALREADY BEEN ALLOWED BY THE AO IN THE ASST.YR.2005 - 06, I.E. THE IMMEDIATELY PRECED ING ASSESSMENT YEAR. THEREFORE, OBVIOUSLY, THE BALANCE 50 PER CENT OF THE DEDUCTION IS TO BE ALLOWED IN THE CURRENT YEAR, I.E. ASST. YR. 2006 - 07. THE LEARNED CIT(A) HAS MERELY DIRECTED THE VERIFICATION OF THE CONTENTIONS OF THE ASSESSEE AND TO ALLOW THE BA LANCE ADDITIONAL DEPRECIATION AFTER SUCH FACTUAL VERIFICATION. ACCORDINGLY, FINDING NO MERIT THEREIN, GROUND NO.3 RAISED BY THE DEPARTMENT IS REJECTED.' 14. A SIMILAR VIEW WAS TAKEN BY MUMBAI BENCH OF THIS TRIBUNAL IN MITC ROLLING MILLS (P.) LTD. (SUPRA ). IN VIEW OF THE ABOVE DECISIONS OF THE CO - ORDINATE BENCHES OF THIS TRIBUNAL ON IDENTICAL SET OF FACTS THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE BALANCE 50% OF THE DEPRECIATION HAS TO BE ALLOWED IN THE SUBSEQUENT YEAR, THEREFORE, THE ORDERS OF T HE LOWER AUTHORITIES ON THIS ISSUE ARE SET SIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF BALANCE 50% ADDITIONAL DEPRECIATION IN THE YEAR UNDER CONSIDERATION. I.T.A. NO . 109 /M/ 15 13 WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD. (SUPRA). THE KARNATAKA HIGH COURT, AFTER EXTRACTING THE PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT, FOUND THAT BENEFICIAL LEGISLATION HAS TO BE INTERPRETED LIBERALLY SO AS TO BENEFIT THE ASSESSEE. KARNATAKA HIGH COURT HAS ALSO FOU ND THAT THE INTENTION OF THE LEGISLATION IS TO ALLOW ADDITIONAL BENEFIT. THE KARNATAKA HIGH COURT OPINED THAT THE PROVISO WOULD NOT RESTRAIN THE ASSESSEE FROM CLAIMING THE BALANCE OF THE BENEFIT OF ADDITIONAL DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEAR . ACCORDINGLY, CONFIRMED THE ORDER OF THE BANGALORE BENCH OF THIS TRIBUNAL. IN FACT, THE KARNATAKA HIGH COURT HAS OBSERVED AS FOLLOWS: - 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 0L.04.2006. PRIOR TO THAT, A PROVISO TO THE SAID CLAUSE WAS THERE, WHICH PROVIDED FOR THE BENEFIT TO BE GIVEN ONLY TO A NEW INDUSTRIAL UNDERTAKING, OR ONLY WHERE A NEW INDUSTRIAL UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE DURING ANY YEA R PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 8. THE AFORESAID TWO CONDITIONS, I.E., THE UNDERTAKING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDERTAKING, OF THAT IT SHOULD BE CLAIMED IN ONE YEAR, HAVE BEEN DONE AWAY BY SUBSTITUTING CL AUSE (IIA) WITH EFFECT FROM 01.0.2006. THE GRANT OF ADDITIONAL DEPRECIATION, UNDER THE AFORESAID PROVISION, IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENCOURAGING INDUSTRIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTING UNIT BY PURCHASE OF NEW PLANT AND MACHINERY, AND PUTTING IT TO USE FOR THE PURPOSE OF BUSINESS. THE PROVISO TO CLAUSE [II] OF THE SAID SECTION MAKES IT CLEAR THAT ONLY 50% OF THE 20% WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUI RED IS PUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTRICTS THAT THE BALANCE 10% WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. 9. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SECTION C LEA RLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 10% CAN BE CLAIMED IN ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS SAID FINANCIAL YEAR. VERY PURPOSE OF INSERTION OF CLAUSE (IIA) I.T.A. NO . 109 /M/ 15 14 WOULD BE DEFEATED BECAUSE IT PROVI DES FOR 20% DEDUCTION WHICH SHALL BE ALLOWED. 10. IT HAS BEEN CONSISTENTLY HELD BY THIS COURT, AS WELL AS THE APEX COURT, THAT BENEFICIAL LEGISLATION, AS IN THE PRESENT CASE, SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT THE ASSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISLATION IS ABSOLUTELY CLEAR, THAT THE ASSESSEE SHALL BE ALLOWED CERTAIN ADDITIONAL BENEFIT, WHICH WAS RESTRICTED BY THE PROVISO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YEAR, IF CERTAIN CONDITION WAS NOT FULF ILLED. 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 ONETIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION, AND PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVELY, TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED FOR REMAINING 10% OF THE DEPRECIATION DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE ORDERS OF THE LOWER AU THORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW BALANCE 50% OF DEPRECIATION, NAMELY, 10% OF ADDITIONAL DEPRECIATION DURING THE YEAR UNDER CONSIDERATION . 14. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE COORDINATE BENCH IN THE CASE OF AUTOMOTIVE COACHES & COMPONENTS LTD. V. DCIT (SUPRA) AND FIND THAT THE ISSUE INVOLVED IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL OR FILED ANY HIGHER COURTS DECISION HAVING MODIF IED OR REVERSED THE FINDINGS OF THE EITHER THE DECISION OF THE COCHIN BENCHES OF THE TRIBUNAL IN THE CASE OF APOLLO TYRES LTD. V. ACIT (SUPRA) OR THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. RITTAL INDIA PVT. LTD. (SUPRA), WHICH W ERE FOLLOWED BY THE CHENNAI BENCHES OF THE I.T.A. NO . 109 /M/ 15 15 TRIBUNAL IN THE CASE OF AUTOMOTIVE COACHES & COMPONENTS LTD. V. DCIT (SUPRA) TO ARRIVE AT A CONCLUSION THAT THE ASSESSEE IS ENTITLED TO CLAIM 50% OF ADDITIONAL DEPRECIATION IN THE SUCCEEDING YEAR WHEN THE PLANT AN D MACHINERY WAS PUT IN USE FOR LESS THAN 180 DAYS IN THE PRECEDING PREVIOUS YEAR. THUS, RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF AUTOMOTIVE COACHES & COMPONENTS LTD. V. DCIT (SUPRA), WE DIRECT THE ASSESSING OFFICER TO ALLOW 50% OF ADDITIONAL DEPR ECIATION IN THE SUCCEEDING YEAR AS CLAIMED BY THE ASSESSEE. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 26 TH APRIL , 201 6 AT CHENNAI. SD/ - SD/ - ( C HANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 26 . 0 4 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.