Rockwell Industries Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-3(1), Hyderabad

ITA 1819/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1262 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 05-02-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 10-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Keywords: Depreciation; Additional depreciation; Set aside
• Section: 142(1); 32(1)(iia); 201; 143(2); 20

Judgement Text

1 ITA NO. 1819/HYD/2018 ROCKWELL INDUSTRIES LTD. HYD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1819 /HYD/201 8 ASSESSMENT YEAR: 2 015 - 16 ROCKWELL INDUSTRIES LTD., HYDERABAD. PAN AAB CR 0725M VS. DY. COMMISSIONER OF INCOME - TAX, CIRCLE 3 ( 1 ), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SHRI YVST SAI DATE OF HEARING 05/02/2019 DATE OF PRONOUNCEMENT 20 - 03 - 201 9 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 3, HYDERABAD, DATED 09/07/2018 FOR AY 2015 - 16. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE COMPANY E - FILED ITS RETURN OF INCOME ON 30/09/2015 DECLARING TOTAL INCOME OF RS. 5,42, 72,580/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICES, THE AR OF THE ASSESSEE FURNISHED THE REQUIRED INFORMATION. 2.1 THE ASSESSEE COMPANY IS ENGAGE D IN THE BUSINESS OF MANUFACTURING OF FREEZERS, WATER COOLERS AND CHEST COOLERS FOR COLD DRINKS & ICE CREAMS. IT HA S 2 UNITS AT MEDCHAL, HYDERABAD, THE UNIT - 2 STARTED COMMERCIAL OPERATIONS IN MARCH, 2014. 2 ITA NO. 1819/HYD/2018 ROCKWELL INDUSTRIES LTD. HYD. 2.2 THE AO OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED ADDITIONAL DEPRECIATION OF RS. 1,55,39,462/ - FOR THE YEAR UNDER CONSIDERATION. AFTER OBTAINING THE DETAILS FROM THE ASSESSEE, THE AO NOTICED THAT OUT OF THE TOTAL ADDITIONAL DEPRECIATION, THE ASSESSEE H AD CLAIMED AN AMOUNT OF RS. 1,32,29,356/ - IN RESPECT OF ADDITIONAL DEPRECIATION OF AY 2014 - 15. WHEN THE AO ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF ADDITION AL DEPRECIATION PERTAINING TO AY 2014 - 15 IN THIS YEAR, THE ASSESSEE VIDE LETTER DATED 11/08/2017 CON TENDED THAT IT HAD CLAIMED ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY AND ON MOULDS ON THE ADDITIONS TO FIXED ASSETS MADE DURING FY 2013 - 14 AS PER SECTION 32(1)(IIA), SINCE THE ASSESSEE CLAIMED ONLY 10% (50% OF 20%) ADDITIONAL DEPRECIATION DURING THE F Y 2013 - 14 DUE TO ADDITION MADE DURING THE SECOND HALF OF THE YEAR, THE LEFT OVER ADDITIONAL DEPRECIATION WAS CLAIMED IN SUCCEEDING YEAR I.E. FY 2014 - 15. IN THIS REGARD, THE ASSESSEE RELIED ON THE AMENDMENTS MADE TO SECTION 32(1). 2.3 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AO REFERRING TO THE PROVISIONS OF SECTION 32(1), OBSERVED THAT THE AMENDMENT IS WITH EFFECT FROM 01/04/2016 AND ACCORDINGLY WILL APPLY TO AY 2016 - 17 AND SUBSEQUENT YEARS. HOWEVER, THE ASSESSEE HAD CLAIMED THIS ADDITIONAL D EPRECIATION ON THIS GROUND IN AY 2015 - 1 6 ITSELF, WHICH IS NOT IN TUNE WITH THE AMENDED PROVISION. IN VIEW OF THE OBSERVATIONS, THE AO DISALLOWED THE ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION AMOUNTING TO RS. 1,32,29,356/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSIONS, WHICH WERE EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGES 4 & 5. AFTER CONSIDER ING THE SUB MISSIONS OF THE ASSESSEE, THE CIT(A) BY FOLLOWING VARIOUS CASE LAW, CONFIRMED THE ADDITION MADE BY THE AO. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 3 ITA NO. 1819/HYD/2018 ROCKWELL INDUSTRIES LTD. HYD. 1. ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 3, HYDERABAD, DISMISSING THE APPEAL FILED BY THE APPELLANT IS ERRONEOUS, ILLEGAL AND UNSUSTAINABLE IN LAW. 2. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF C LAIM OF BALANCE ADDITIONAL DEPRECIATION OF RS.1,32,29,356 CLAIMED BY THE APPELLANT IN THE ASST. YEAR UNDER CONSIDERATION. THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THERE IS NO RESTRICTION UNDER SECTION 32(1)(IIA) OF THE I.T.ACT ABOUT THE YE AR IN WHICH THE ADDITIONAL DEPRECIATION IS TO BE ALLOWED. 3. THE COMMISSIONER (APPEALS) ERRED IN NOT DEALING WITH VARIOUS PRECEDENTS CITED BEFORE HIM ON THE ISSUE OF CLAIM OF BALANCE ADDITIONAL DEPRECIATION WHICH COULD NOT BE CLAIMED IN THE EARLIER YEAR A S THE ASSET WAS PUT TO USE FOR LESS THAN 180 DAYS. 4. THE COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT FINANCE ACT 2015 HAS BROUGHT IN AMENDMENT TO SECTION 32(L)(IIA) ALLOWING 50% ADDITIONAL DEPRECIATION IN THE SUBSEQUENT YEAR WHERE THE 50% ADDIT IONAL DEPRECIATION COULD NOT BE AVAILED IN THE FIRST YEAR. THE COMMISSIONER (APPEALS) FURTHER OUGHT TO HAVE APPRECIATED THAT SUCH AMENDMENT IS BROUGHT IN TO ADDRESS THE LACUNA IN THE SECTION AND SINCE THE SAME IS CLARIFICATORY IN NATURE, OPERATES RETROSPEC TIVELY. 5. WITHOUT PREJUDICE, THE COMMISSIONER (APPEALS) OUGHT TO HAVE DIRECTED THE AO TO REVISE W.D.V OF THE ASSETS AND REVISE THE DEPRECIATION FOR AYS.2016 - 17 AND SUBSEQUENT YEARS. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, I T IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLO W THE APPEAL. 6. BEFORE US, THE LD . AR BESIDES REITERATING THE SUBMISSIONS AS MADE BEFORE THE REVENUE AUTHORITIES, RELIED ON THE JUDGMENT OF THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT & ANR VS. RITTAL INDIA (P) LTD. [2016] 380 ITR 423 (KAR.). 7. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE KARNATAK A HIGH COURT IN THE CASE OF CIT VS. RITTAL INDIA (P) LTD. (SUPRA), ON WHICH RELIANCE PLACED BY THE ASSESSEE, OBSERVED THAT PROVISO TO CL. (II) OF SECTION 32(1) MAKES IT CLEAR THAT ONLY 50% OF THE 20% WOULD BE ALLOWABLE, IF THE NEW PLAN T AND MACHINERY ACQUIRED IS PUT TO 4 ITA NO. 1819/HYD/2018 ROCKWELL INDUSTRIES LTD. HYD. 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 AY. THIS WOULD NECESSARILY MEAN THAT THE BALANCE 10% ADDIT IONAL DEDUCTION CAN BE AVAILED IN THE SUBSEQUENT AY, OTHERWISE THE VERY PURPOSE OF INSERTION OF CL. (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20% DEDUCTION WHICH SHALL BE ALLOWED. THE HONBLE HIGH COURT HELD AS UNDER: THE TWO CONDITIONS, I.E., THE U NDERTAKING A CQUI RING 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 CL. (IIA) BY THE FINANCE ACT, 2005 W.E.F. 1 ST APRIL, 2006. THE GRANT OF ADDITIONAL DEPRECIATI ON 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 BUSIN ESS. THE PROVISO TO CL. (II) OF S. 32(1) MAKES IT CLEAR THAT ONLY 50 PER CENT OF THE 20 PER CENT WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY ACQUIRED IS PUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTRICTS THAT THE BA LANCE 10 PER CENT WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. THE LANGUAGE USED IN CL. (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 SHA LL BE ALLOWED AS DEDUCTION UNDER CL. (II)'. THE WORD 'SHALL' USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20 PER CENT ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 1 0 PER CENT CAN BE CLAIME D 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 1 0 PER CENT ADDITIONAL DEDUCTION CAN BE AVAILED IN THE SUBSEQUENT ASSESSMENT YEAR, OTHERWISE THE VERY PURPO SE OF INSERTION OF CL. (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20 PER CENT DEDUCTION WHICH SHALL BE ALLOWED. THE TRIBUNAL HAS RIGHTLY HELD, THAT ADDITIONAL DEPRECIATION ALLOWED UNDER S. 32(I)(IIA) IS A ONE TIME BENEFIT TO ENCOURAGE INDUSTRIALIZATIO N, AND THE PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVELY, TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING ADDITIONAL ALLOWANCE. 8.1 IN THE CASE UNDER CONSIDERATION, THE ASSESSEE MADE THE ADDITION DURING THE SECOND HALF OF THE YEAR IN FY 2013 - 14, HENCE, THE UNCLAIMED ADDITIONAL DEPRECIATION WAS CLAIMED IN SUCCEEDING YEAR I.E. FY 2014 - 15. THEREFORE, FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE HIGH COURT IN THE SAID CASE, WE SET ASIDE ORDER OF CIT(A) AND DIRECT THE AO TO ALLOW THE 5 ITA NO. 1819/HYD/2018 ROCKWELL INDUSTRIES LTD. HYD. ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION AMOUNT TO RS. 1,32,29,356/ - . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE ALLOWED. 7. IN THE RE SULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH , 201 9 . SD/ - SD/ - (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 20 TH MARCH , 2019 KV COPY TO: - 1) ROCKWELL INDUSTRIES LTD., SHRI AV RAGHURAM & SHRI P. VINOD, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD - 50 0 001 2) D IT, CIRCLE 3 ( 1 ), SIGNATURE TOWERS, KONDAPUR ROAD, HYD - 84 3) CIT(A) - 3 , HYDERABAD 4 PR. CIT - 3 , HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6) GUARD FILE