Ashok Narayan Bhosale, Pune V. Deputy Commissioner of Income-tax, Circle - 8, Pune

ITA 1501/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6958 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Question of law; Rule 8D
• Section: 32; 14A; 32(1)(iia); 143(2)

Judgement Text

आयकर अपीलीय अिधकरण “ए” ᭠यायपीठ पुणे मᱶ । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM AND DR. DIPAK P. RIPOTE, AM आयकरअपीलसं. / ITA No.1501/PUN/2017 िनधाᭅरण वषᭅ / Assessment Year : 2013-14 Ashok Narayan Bhosale, Ashok Narayan Bhosle Bunglow at Kaveri Nagar, Pratham Housing Society, Wakad, Pune – 411057. PAN: AASPB 3588 Q Vs The Deputy Commissioner of Income Tax, Cirlce-8, Pune. Appellant/ Assessee Respondent /Revenue Assessee by None Revenue by Shri S.P.Walimbe - DR Date of hearing 10/03/2022 Date of pronouncement 14/03/2022 आदेश / ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeals)-9, Pune Appeal Number PN/CIT(A)6/DCIT Cir 8/355/2015-16/420 dated 24.02.2017 for the Assessment Year 2013-14. The Assessee raised following grounds of appeal: “1. The learned CIT Appeals (Appeals VI), Pune has erred in law as well as in facts while confirming the order of Ld. AO Circle 8, Pune making the addition of Rs.85,47,488/-- being the additional depreciation claimed of the assessee in relation to the assets purchased by the assessee in the year FY 2011-12 after 30.09.2011 on which only 50% of the additional depreciation was allowed in AY 2012-13 and balance 50% of the Additional Depreciation is claimed in the AY 2013- 14- since in view of the decision passed by Hon ITAT bench B ITA 2789/mum/2012 the said balance 50% depreciation is allowable in the assessment year as claimed by the assessee. 2. The learned CIT (Appeals VI), Pune has erred as well as in facts while confirming the order of Ld.AO Circle 8, Pune making the addition of Rs.2,84,917/- under Rule 8D read with Sec. 14A in respect of dividend income being exempt u/s.10 since the assessee has invested the funds in shares and mutual funds out of surplus generated from business and no borrowed funds are utilized for the same and in ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 2 particular since no expenditure of whatsoever nature is claimed in the books of accounts in respect of earning the said dividend income and in effect provision of Rule 8D read with Sec. 14A are not applicable in the instant case of the assessee. 3. Alternatively and without prejudice to the ground of Appeal No.2 hereinabove the addition be reduced to the reasonable extent by applying correct interpretation of Rule 8D read with section 14A of the Income Tax Act. 4. The Appellant craves the rights to add, delete, modify, alter any of the aforesaid grounds of appeal.” 2. Brief facts of the case, as emanating from the order of the Ld.CIT(A), are that the assessee is engaged in the business of Manufacturing and Job Works of Press Tools, Jigs Fixtures Windmill Parts & Labours Job and trading in shares who has e-filed its return of income on 30.09.2013 by declaring total income at Rs.33,56,37,240/-. The case was selected for scrutiny through CASS. The notice under section 143(2) of the Act was issued on 08.09.2014 to the assessee. The Assessment Order was passed on 29/09/2015 making addition of Rs.85,47,488/- on account of Disallowance of Additional Depreciation claim,Rs.2,84,917/- u/s14A, and Rs.1,26,000/- under the head Income from House Property. 3. None appeared on behalf of the appellant. However, the appellant had filed written submission on 19/07/2021. The appellant has mentioned as under: Quote “Considering the judgment passed by Honorable Income Tax Appellate Tribunal, Bench B (ITA No.2789/Mum/2012) AY 2009-10, in the case of Mitc Rolling Mills Pvt. Ltd., additional depreciation on machineries purchased after 30 th September of the financial year, in the earlier year where only 50% additional depreciation was allowed, then balance unclaimed 50% additional depreciation will be allowed in the subsequent year as deduction. Applying the said ratio of the case, in this year the assessee has debited to Profit and Loss Account balance 50% additional depreciation not claimed in FY 2011-12. Due to claim ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 3 of additional depreciation in current financial year, e overall impact of this transaction is Rs.85,47,189/- as an additional expenditure of current year debited to Profit and Loss Account.” unquote 4. Ground No.1: The brief facts pertaining to Ground No.1 are that the appellant had purchased certain assets on 30/09/2011.As per clause (iia) of sub-section 1 of Section 32 of the Act, assessee is eligible for additional depreciation in case of acquisition and installation of new machinery or plant by an Assessee after 31 March, 2005. Clause (ii) of subsection 1 of Section 32 of the Act recognizes the depreciation on block of assets. The second proviso to clause (ii) of sub-section 1 of Section 32 of the Act, would restrict Assessee's claim of depreciation to 50% in case, the assets are acquired 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. 4.1 The assessee had acquired the said assets on 30/09/2011 as mentioned in the assessment order. Therefore, the assessee claimed 50% of the additional depreciation in AY 2012-13 and remaining 50% in AY 2013-14( year under consideration). 5. The Assessing Officer disallowed the claim of the assessee of additional depreciation for AY 2013-14. 6. The Ld.CIT(A) confirmed the disallowance made by the assessing officer of the Additional Depreciation. The CIT(A) in para 5.3 of the order has mentioned as under : Quote , “On this issue law is clear the existing provision of Section 32(1)(iia) does not allow /provide 50% additional depreciation in the subsequent year. In fact in this regard amendment has been made in the ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 4 said section by inserting proviso after the second provision to sub section (1) of Section 32 by Finance Bill 2015. This amendment has been made effective from 1 st April 2016 and accordingly will apply for AY 2016-17 and subsequent years. In this regard it is important to note that this is incentive granted to encourage investment in plant and machinery by the manufacturing and power sector. This is not hardship removal and cannot be retrospective. ” Unquote. 7. This issue has been decided by Hon’ble Pune ITAT in the case of Damodar Jagannath Malpani v/s DCIT Cir 3 in ITA No. 2182/PUN/2017 vide order dated 07.10.2021. The relevant part of the said order is reproduced as under : Quote , “ In this regard, the Ld. Counsel for the assessee brought to our notice the decision of the Hon‟ble Jurisdictional High Court in the case of Pr. CIT Vs. M/s. Godrej Industries Ltd., Income Tax Appeal No. 511 of 2016 wherein the issue before the Hon‟ble High Court was as follows: 9 ITA No.2182/PUN/2017 A.Y.2014-15 “2. Revenue has challenged the Judgment of Income Tax Appellate Tribunal (the Tribunal) dated 1 June, 2015. Following question is presented for our consideration:— “Whether, on the facts and circumstances of the case and in law, the Tribunal is right in law in holding that the Assessee is entitled to 50% of the additional depreciation under Section 32(1)(iia) of the IT Act, 1961?” 17. That the issue pertains to assessment year 2007-08 and on this issue the Hon‟ble Jurisdictional High Court has held as follows: “5. 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 Section 32 of the Act. Clause (ii) of subsection 1 of Section 32 of the Act recognizes 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 March, 2005, the Assessee being engaged in business of manufacture or production of an article or things. 6. We may also notice that the second proviso to clause (ii) of sub-section 1 of Section 32 of the Act, would restrict Assessee's claim of depreciation to 50% in case, the assets are acquired 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 the remaining depreciation in the subsequent Assessment Year. Such a question came up for consideration before the Division Bench of Karnataka High Court in Commissioner of Income Tax v. Rittal India Pvt. Ltd., reported in 380 ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 5 ITR 423. The Court, after referring to the statutory provisions, held and observed in para 8 as under:— “8:- The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 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 purposes of business. The proviso to clause (ii) of the said section makes it clear that only 50 per cent of the 20 per cent would be allowable, if the new plant and machinery so acquired is out to use for less than 180 days in a financial year. However, it nowhere restricts that the balance 10 per cent would not be allowed to be claimed by the assessee in the next assessment year. The language used in clause (iia) of the said section clearly provides that “a further sum equal to 20 per cent 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 per cent 10 ITA No.2182/PUN/2017 A.Y.2014-15 additional depreciation. By virtue of the proviso referred to above, only 10 per cent can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. It has been consistently held by this Court, as well as the apex court, that the 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 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 onetime 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) ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 6 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 the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset.” 8. The third proviso, thus, now recognizes the right of an Assessee to claim the remaining 50% depreciation in subsequent year in a case where machinery and plant being acquired and put to use for less than 180 days in the previous year, the depreciation was restricted to 50%. Such a situation as in the present case, was considered by the Division Bench of the Madras High Court in Commissioner of Income Tax v. Shri T.P. Textiles Pvt. Ltd., 394 ITR 483, the Court referred to the judgment of the Karnataka High Court in Rittal India Pvt. Ltd., (supra) as well as the addition of third proviso to clause (ii) of sub-section 1 of Section 32 of the Act and observed as under:— “10.1:- The plain language of section 32(1)(iia) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. 10.2:- As a matter of fact, with effect from April 1, 20916, 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 .... .... .... .... .... .... .... 11:- We may only indicate that during the course of the arguments, our attention was drawn to the “Memorandum explaining the provisions in Finance Bill, 2015” whereby, the aforementioned amendment was brought about. 11.1:- The relevant part of the memorandum is extracted hereafter:— “.... To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50 per cent of the additional depreciation on new plant 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. This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.” 11.2:- A perusal of the extract of the memorandum relied upon would show that the legislature recognized 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 ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 7 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 unamended provision had to be read all along. 11.5:- In any event, in so far as the court is concerned, it has to go by the plain language of the unamended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the assessee could not claim balance depreciation in the assessment year, which follows the assessment year, in which, the machinery had been bought and used, albeit, for less than 180 days.” 9. It could be thus, to seen that the Karnataka High Court in Rittal India Pvt., Ltd., (supra) even without the aid of the statutory amendment held that remaining 50% unclaimed depreciation would be available to the Assessee in the succeeding Assessment Year. Now the legislation has amended the provision by adding a proviso which, specifically recognizes the said right. The Madras High Court in Shri T.P. Textiles Pvt. Ltd., (supra) ruled that such proviso being clarificatory in nature, would apply to pending cases, covering past period also. 10. We have no reason to take view different from two High Courts, examining the situation at considerable length. In the result, no question of law arises.” The Hon‟ble Jurisdictional High Court observed that after the decision in the case of Rittal India Pvt. Ltd. (supra.) by the Hon‟ble Karnataka High Court, there has been legislative amendment wherein the third proviso to clause (ii) of sub section 1 of Section 32 of the Act had been added which is as follows: “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 the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding 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 ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 8 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 Court was also referred by the Pune Bench of the Tribunal in the case of Cummins India Limited Vs. DCIT, ITA No.685/PUN/2017 dated 22.11.2019 wherein the Tribunal on the issue has held as follows: “.................In this judgment of the Hon’ble Bombay High Court, there is reference made to the decision of the Hon’ble Karnataka High Court in the case of Commissioner of Income Tax and another Vs. Rittal India Pvt. Ltd., 380 ITR 423 and the decision of the Hon’ble Madras High Court in the case of in the case of Commissioner of Income Tax Vs. Shri T.P. Textiles Pvt. Ltd., 394 ITR 483 and in both these cases, it has been unanimously observed and held that the assessee can claim balance depreciation in the subsequent assessment year. The Hon’ble Bombay High Court was of the opinion that there emerges no reason to take a different view from that taken by the aforesaid two High Courts, examining the situation at considerable length. Therefore, appeal of the Revenue was dismissed by the Hon’ble Jurisdictional High Court. Respectfully, following the binding judgment of the Hon’ble Jurisdictional High Court, we allow ground No.8 raised by the assessee.” Therefore, the view that emerges from the aforesaid judicial precedent is that the Hon‟ble Karnataka High Court in the Rittal India Pvt. Ltd. case had given the right to the assessee to claim the remaining unclaimed 50% depreciation in the subsequent assessment year and at that time the proviso to section 32 was also not there but right now with the insertion of such proviso, this right has been statutorily recognized. That as regards, whether such proviso would apply to past periods or not, the judgment of the Hon‟ble Madras High Court (supra.) which is still operational and it has been held that the said proviso was only clarificatory in nature and would thus apply to pending cases covering past periods also.” Unquote. 7.1 The facts of the appellant case are similar to the facts of the case mentioned above. The Ld.DR has not brought any contrary judgment to our notice on this issue. Therefore, respectfully following the Hon’ble High Courts and Hon’ble ITAT Pune, it is held that the appellant is eligible to claim the balance additional depreciation in AY 2013-14 on the new assets purchased in AY 2012-13 but only half the additional depreciation were claimed by the appellant in AY 2012-13 as the assets were used for less than 6 months. Thus, the appeal in Ground No.1 of the assessee is allowed. ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 9 8. Ground No.2 is relates to disallowance under Rule 14A of the Act. The Ld.CIT(A) in para 6 of the order has mentioned as under: “6. Ground No.2 relates to addition of Rs.2,84,917/- on account of disallowance u/s 14A of the I.T.Act. The AO as discussed in para (iii) of the assessment order has made addition of Rs.2,84,917/-. The relevant para is reproduced below: “(iii) Issue of disallowance u/s.14A: The assessee has made following submission. Submission of the assessee is considered. The assessee has not able to bring out the correct evidence in support of the contention as made above. I am therefore not satisfied with the claim made. Disallowance is therefore worked out as per the procedure laid down in rule 8D, working of which is provided below: 8D (i) 8D (ii) (A) Interest claimed in P&L 20,503,141 (B) Investment as on 31/03/2013 13,512,492 15,64,1657 277,096 (=) A*B/C) Investment as on 31/03/2012 17,770,821 (Avg) (C) Assets on 31/3/2013 1,233,122,859 1,157,372,224 Assets on 31/3/2012 1,081,621,588 (Avg) 8 (iii) 05% of investment value 8,821 Total 284,917 Disallowance u/s 14A of Rs.2,84,917/- is therefore made u/s.14A. On the issue the submissions made by the appellant have been considered carefully. However, this is a fact that no disallowance is made by the appellant in respect of the income which does not form part of the total income. At least some expenditure is required to earn such income and to manage the investment portfolio. This is an admitted fact that the appellant has not shown any expenditure against such income and therefore the provisions of the section are attracted and disallowance made as per Rule 8D by the Assessing Officer is confirmed. Thus, appeal on this ground is dismissed.” Unquote. 8.1 On the other hand, the ld.Departmental Representative(ld.DR) for the Revenue relied upon the order of ld.CIT(A). ITA No.1501/PUN/2017 for A.Y. 2013-14 Ashok Narayan Bhosale (A) 10 8.2 We have heard the ld. DR for the Revenue and perused the written submissions made by the assessee and have gone through the orders of Lower Authorities carefully. We find that there is exempt income earned by the appellant. No new facts have been brought to our notice. Therefore, the order of the ld.CIT(A) is confirmed. Accordingly, the appeal in Ground No.2 of assessee is dismissed. 9. In the result, appeal of the Assessee is Partly Allowed. Order pronounced in the open Court on 14 th March, 2022. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 14 th March, 2022/ SGR* आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-9, Pune. 4. The Pr. CIT cocerned, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “ए” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.