The Dy. Commissioner of Income Tax, Sabarkantha Circle, Himatnagar V. The Sabarkantha District Central Co.-Op. Milk Producers Union Ltd., Himatnagar

ITA 1905/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8154 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 19-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: Y H SHAH
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Unabsorbed depreciation
• Section: 14A; 32

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.1905/AHD/2016 / ASSTT. YEAR: 2012-13 DCIT, SABARKANTHA CIRCLE HIMATNAGAR. VS. SABARKANTHA DISTRICT CO-OP. MILK PRODUCERS UNION LTD. SABAR DAIRY, SUB POST BORIYA HIMATNAGAR 383 006. PAN : AAAAS 5265 L / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI SAURABH SINGH, SR.DR ASSESSEE BY : SHRI Y.H. SHAH, AR ! ' / DATE OF HEARING : 15/03/2018 #$% ! ' / DATE OF PRONOUNCEMENT: 06 /06/2018 &' / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF LD.CIT(A)-4, AHMEDABAD DATED 31.5.2016 PASSED FOR T HE ASSTT.YEAR 2012-13. 2. IN THE FIRST GROUND OF APPEAL, REVENUE HAS PLEAD ED THAT THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF DED UCTION UNDER SECTION 80P(2)(D) OF THE INCOME TAX ACT, 1961 AMOUN TING TO RS.2,15,52,068/-. ITA NO.1905/AHD/2016 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30.11.2013 DECLARING TOTAL INCO ME AT RS.8,60,39,800/-. THE ASSESSEE AT THE RELEVANT TIM E WAS ENGAGED IN THE BUSINESS OF PROCUREMENT OF MILK AND ITS RELA TED ACTIVITIES FROM VARIOUS MILK CO-OPERATIVE SOCIETIES AT VILLAGE LEVEL THROUGHOUT SABARKANTHA DISTRICT, AND PROCESSING THE MILK AND M ANUFACTURING MILK PRODUCTS, SUCH AS PASTEURIZED MILK, BUTTER, GH EE, MILK POWDER, BUTTER MILK ETC. THESE MILK PRODUCTS ARE M ARKETED TO THE GUJARAT CO-OPERATIVE MILK MARKETING FEDERATION LTD. , ANAND UNDER THE BRAND NAME OF AMUL. ON SCRUTINY OF THE ACCOUNTS , IT REVEALED TO THE AO THAT THE ASSESSEE HAS CLAIMED DEDUCTION U NDER SECTION 80P(2)(D) OF THE ACT AMOUNTING TO RS.2,15,52,068/-. THE AO DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENSES ATTRIBUTABLE TO EARNING OF INTEREST INCOME AND DIVIDEND INCOME, WHICH WERE CLAIMED AS EXEMPT UNDER SECTION 80P(2)(D), SHOULD N OT BE DISALLOWED UNDER SECTION 14A OF THE INCOME TAX ACT. IN RESPONSE TO THE QUERY OF AO, THE ASSESSEE FILED A LETTER DAT ED 10.9.2014. SUCH LETTER HAS BEEN REPRODUCED BY THE AO, WHICH RE ADS AS UNDER: 'IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS GOIN G IN OUR CASE , WE ARE IN RECEIPT OF YOUR LETTER DATED 20-08-2014 ASKING US FURNISH FURTHER INFORMATION/ DETAILS IN CONNECTION WITH THE ABOVE ASSESSMENT YEAR. AS DESIRED BY YOUR GOODSELF, WE SU BMIT HEREWITH THE VARIOUS INFORMATION AND/OR EXPLANATION S CALLED FOR BY YOUR GOODSELF IN SERIATIM AS UNDER: 1. YOUR GOOD SELF HAS REQUESTED TO SHOW CAUSE AS TO WH Y INTEREST INCOME CLAIMED EXEMPT U/S 80P(2)(D) OF THE IT. ACT SHOULD NOT BE D ISALLOWED. FURTHER YOUR GOOD SELF HAS ASKED US TO PROVE DIRECT NEXUS OF INVESTMENT MADE IN CO-OPERATIVE SECTOR IS OUT OF NO N-INTEREST BEARING FUNDS. IN THIS REGARDS, WE SUBMIT AS UNDER: DURING THE YEAR, WE HAVE CLAIMED TOTAL EXEMPT INCOM E U/S 80P AS UNDER: ITA NO.1905/AHD/2016 3 PARTICULARS AMOUNT RS. AMOUNT RS. BASIC EXEMPTION: 80-P(2)(C) 50,000 INTEREST FROM CO-OPERATIVE SOCIETIES: 80P(2)(D) 95,17,270 LESS: INTEREST PAID (13,202) 95,04,068 DIVIDEND FROM CO-OPERATIVE SOCIETIES: 80P(2)(D) 1,19,98,000 TOTAL EXEMPT INCOME CLAIMED U/S SOP 2,15,52,068 THE DETAILS OF PARTY WISE INTEREST AND DIVIDEND REC EIVED AND CLAIMED EXEMPT U/S.80P OF THE ACT IS ENCLOSED AT AN NEXURE -A. RELEVANT PORTION OF THE SECTION SOP IS REPRODUCED B ELOW. 80P, (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF T HE ASSESSEE. (2)THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE THE FOLLOWING, NAMELY : (A) IN THE CASE ..... (B)IN THE CASE OF A ........... (C)IN THE CASE OF A ....... (D)IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR D IVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER CAR-OPERATIVE SOCIETY, THE INTEREST INCOME OF RS.95,04,068/- WHICH HAS BEEN CLAIMED AS DEDUC TION U/S.80P(2)(D) HAS BEEN EARNED OUT OF THE INVESTMENT OF AMOUNT RECEIVED FOR SALE OF MILK, MILK PRODUCTS ETC. FROM GCMMF LTD. SIMILARLY, THE DIVIDEND OF RS.1,19,98,000/- HAS BE EN CLAIMED AS DEDUCTION U/S.80P(2)(D) OF THE IT. ACT AS THE AMOUN T INVESTED IN EARLIER YEARS FROM OUR OWN FUNDS. PLEASE NOTE THAT WE HAVE NOT BORROWED ANY FUNDS FOR PURCHASE OF SHARES ON WHICH WE EARNED DIVIDEND INCOME AND CLAIMED AS DEDUCTION U/S.80P(2) (D). AS THE INTEREST AND DIVIDEND HAS BEEN RECEIVED FROM THE CO -OPERATIVE ITA NO.1905/AHD/2016 4 SOCIETIES AND EARNED OUT OF INVESTMENT MADE FROM OU R OWN FUNDS, WE ARE ENTITLED TO DEDUCTION U/S 80P(2)(D) OF THE I NCOME-TAX ACT. ACCORDING TO SEC.80P(2)(D) BEING THE CO-OPERATIVE S OCIETY, IF ANY INCOME RECEIVES BY WAY OF INTEREST OR DIVIDENDS FRO M ITS INVESTMENT WITH ANY OTHER CO-OPERATIVE SOCIETY THEN WHOLE OF SUCH INCOME IS DEDUCTIBLE U/S. SOP. IN PRESENT CASE INTE REST INCOME OF RS.95,04,068/- AND DIVIDEND INCOME OF RS.1,19,98,00 0/- HAS BEEN EARNED OUT OF THE INVESTMENT MADE WITH OTHER C O-OPERATIVE SOCIETIES. HENCE SAME ARE ELIGIBLE FOR DEDUCTION U/ S.80P(2)(D). III) TO PROVE THE DIRECT NEXUS OF THE INVESTMENT MA DE IN THE CO- OPERATIVE SECTOR IS OUT OF NON-INTEREST BEARING FUN DS, WE WOULD LIKE TO SUBMIT THAT AS PER THE BALANCE SHEET AS ON 31/03/2012 THE OWN FUNDS AVAILABLE ARE AMOUNTING TO RS.88.62CRORES [RS.35.19 CRORES CAPITAL, RS.53.43 CRORES OF RESERVES AND SUR PLUS] THE INVESTMENTS BY WAY OF FIXED DEPOSITS WITH CO-OP ERATIVE BANKS AND SOCIETIES AS ON 31/3/2012 ARE RS.35.93CRORES(RS .25 CRORES FIXED DEPOSIT+ RS.3.01 CRORES CALL DEPOSITS RS.7.9 2 CRORES INVESTMENT IN CO-OPERATIVE SOCIETY SHARES). THUS, S INCE INTEREST FREE FUNDS WERE MORE THAN THE INVESTMENTS MADE IN S UCH DEPOSITS WITH CO-OPERATIVE BANKS NO REDUCTION SHOULD BE MADE FROM THE DEDUCTION CLAIMED U/S 80P(2)(D) BY THE ASSESSEE UNI ON. IN THIS REGARDS, WE RELY ON THE SUPREME COURT DECIS ION IN THE CASE OF MUNJAL SALES CORPORATION 298ITR 298 AND BOMBAY H IGH COURT DECISION IN THE CASE OF RELIANCE UTILITIES AND POWE R LTD. 313 ITR 340 WHERE IT IS HELD THAT IN CASE OF MIXED FUNDS AV AILABLE I.E. INTEREST FREE AND INTEREST BEARING (LIKE LOAN, ETC. ) THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE O UT OF INTEREST FREE FUNDS, IF INTEREST FREE FUNDS ARE SUFFICIENT T O MEET THE INVESTMENTS AND THEREFORE, NO PROPORTIONATE REDUCTI ON SHOULD BE MADE FROM THE DEDUCTION CLAIMED U/S 80P(2) (D) BY T HE ASSESSEE UNION. WE FURTHER RELY ON THE RECENT IT AT DECISION IN OUR OWN CASE. (ITA2613/AHD/2012)FORA.Y. 2009-10 WHERE DISALLOWANC E U/S.80P(2)(D) WAS DELETED AND NO INTEREST WAS DEDUC TED FROM THE INTEREST RECEIVED AS THERE WERE SUFFICIENT INTEREST FREE FUNDS. ; COPY OF THE SAID DECISIONS ARE ATTACHED HEREWITH AT ANNEXURE-B.' ITA NO.1905/AHD/2016 5 4. THE LD.AO HAS GONE THROUGH THE EXPLANATION OF TH E ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS HUGE BORROWED FU NDS OF RS.29.21 CRORES, WHEREAS IT IS HAVING CAPITAL OF RS .10.19 CRORES AND TOTAL RESERVE OF RS.53.43 CRORES. ACCORDING TO THE AO IF ACCUMULATED PROFITS OF LAST 48 YEARS IS BEING ADDED AGAINST THE ABOVE FUND, THEN NET FIXED ASSETS VALUE WOULD BE R S.118.09 CRORES. HE HARBORED A BELIEF THAT THE ASSESSEE MUS T BE USED INTEREST BEARING FUNDS IN MAKING INVESTMENT WHICH H AS GIVEN RISE TO DIVIDEND INCOME AS WELL AS INTEREST INCOME. HE THEREFORE DISALLOWED ALLEGED DIVIDEND INCOME AS WELL AS INTER EST INCOME FROM DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. 5. ON APPEAL, THE LD.CIT(A) HAS DELETED THE DISALLO WANCE. BASICALLY, THE LD.CIT(A) HAS OBSERVED THAT SIMILAR D ISALLOWANCE WAS MADE BY THE AO IN THE ASSTT.YEAR 2009-10 WHICH WAS DELETED BY THE LD.CIT(A) AND ITAT HAS UPHELD ORDER OF THE LD.C IT(A) IN ITA NO.2613/AHD/2012. FOLLOWING THE ORDER OF THE ITAT, THE LD.CIT(A) HAS DELETED DISALLOWANCE MADE BY THE AO. 6. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE LD.CIT(A) HAS NOT RECORDED ANY I NDEPENDENT FINDING, RATHER BASED HER ORDER ON ORDER OF THE ITA T PASSED IN THE ASSTT.YEAR 2009-10. IN THE ASSTT.YEAR 2009-10, ORD ER OF THE ITAT HAS BEEN UPHELD BY THE HONBLE GUJARAT HIGH COURT. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDER OF THE AO. H E FURTHER SUBMITTED THAT INTEREST INCOME, IF DERIVED FROM INV ESTMENT WITH NATIONALIZED BANKS, THEN SUCH INTEREST INCOME WILL NOT QUALIFY FOR GRANT OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE A CT. FOR BUTTRESSING HIS CONTENTIONS, HE RELIED UPON THE DEC ISION OF THE ITA NO.1905/AHD/2016 6 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ST ATE BANK OF INDIA VS. CIT 389, ITR 578. 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. AS FAR AS RELIANCE OF THE LD.DR ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF STATE BAN K OF INDIA (SUPRA) IS CONCERNED, THE FACTS ARE QUITE DISTINGUI SHABLE. IN THE PRESENT CASE, THE ASSESSEE HAS NOT DERIVED INTEREST FROM NATIONALIZED BANKS, RATHER IT HAS EARNED FROM INVES TMENT MADE WITH OTHER COOPERATIVE SOCIETIES. THE ASSESSEE HAS EARNED DIVIDEND INCOME ON INVESTMENT MADE WITH OTHER COOPE RATIVE SOCIETIES. 8. THE NEXT QUESTION AROSE, WHETHER THE CLAIM MADE UNDER SECTION 80P(2)(D) COULD BE DISALLOWED TO THE ASSESS EE ON REASONING GIVEN BY THE LD.AO ? IN THE SHOW CAUSE, THE LD.AO SOUGHT TO DISALLOW THE DEDUCTION ON THE STRENGTH OF SECTION 14A OF THE ACT, WHICH CONTEMPLATES THAT EXPENDITURE ATTRIB UTABLE TO EARNING OF EXEMPT INCOME WILL NOT BE ALLOWED AS DED UCTION TO THE ASSESSEE. THE AO HIMSELF THEREAFTER EXAMINED THE I SSUE WITH THAT ANGLE. HE OUGHT TO HAVE IDENTIFIED THE EXPENDITURE ATTRIBUTABLE OF EARNING OF INTEREST INCOME AMOUNTING TO RS.95,17,27 0/- AS WELL AS FOR EARNING THE ALLEGED DIVIDEND INCOME FROM OTHER COOPERATIVE SOCIETIES. WE HAVE EXTRACTED THE REPLY GIVEN BY TH E ASSESSEE. IT HAS ALREADY DEDUCTED INTEREST PAID OF RS.13,202/-. MEANING THEREBY, NET INTEREST INCOME OF RS.95,04,068/- HAS BEEN CLAIMED AS EXEMPT UNDER SECTION 80P(2)(D) OF THE ACT. THE AO PRESUMED THAT THE ASSESSEE MUST HAVE UTILIZED INTEREST BEARI NG FUNDS FOR MAKING INVESTMENT, THEREFORE, THE WHOLE OF INCOME E ARNED BY WAY ITA NO.1905/AHD/2016 7 OF DIVIDEND AND INTEREST DESERVES TO BE TREATED AS DISALLOWED WITH HELP OF SECTION 14A. THE AO OUGHT TO HAVE CARVED O UT SPECIFIC EXPENDITURE RELATABLE TO THE EARNING OF SUCH INCOME , AND THEREAFTER WORKED OUT NET DIVIDEND INCOME AS WELL A S INTEREST INCOME ON WHICH DEDUCTION UNDER SECTION 80P(2)(D) C OULD BE ALLOWED. HE DID NOT TAKE SUCH STEP. NEVERTHELESS, WE HAVE EXAMINED THE FACTS IN THE LIGHT OF EARLIER YEARS D ECISIONS. THE ASSESSEE HAS DEMONSTRATED AVAILABILITY OF FUNDS AS HIGHLIGHTED IN SUB-PARAGRAPHS (III) AND (IV) OF ITS REPLY SUBMITTE D BEFORE THE AO VIDE LETTER DATED 10.9.2014. IT IS PERTINENT TO ME NTION THAT THE ASSESSEE HAS MADE FIXED DEPOSITS WITH COOPERATE BAN KS AND SOCIETIES AT RS.35.93 CORES (RS.25 CRORES FIXED DEP OSITS PLUS RS.3.01 CRORES CALL DEPOSITS PLUS RS.7.92 CRORES IN VESTMENT IN COOPERATIVE SOCIETY SHARES). AS AGAINST THESE INVE STMENTS, IT HAS SURPLUS FUNDS OF RS.63.62 CORES (RS.10.19 CRORES C APITAL PLUS RS.53.43 CRORES RESERVES AND SURPLUS). THE LD.AO H AS NOT EXAMINED AVAILABILITY OF THESE FUNDS WITH AN ANALYT ICAL PROCESS. RATHER, HE MADE REFERENCE TO THE GROSS-FIGURE OF VA RIOUS YEARS. HE HAS TO IDENTIFY THE AVAILABILITY OF FUNDS IN THI S YEAR. THE ASSESSEE HAS SPECIFICALLY SUBMITTED THE DETAILS, EX HIBITING NEXUS BETWEEN THE AVAILABILITY OF FUNDS VIS--VIS ITS INV ESTMENT. IT HAS DEMONSTRATED THAT INTEREST FREE FUNDS WERE MORE THA N THE INVESTMENT, AND THEREFORE, NO DISALLOWANCE COULD BE MADE WITH HELP OF SECTION 14A OUT OF DEDUCTION INCOME AND INT EREST INCOME EARNED BY IT FOR CLAIMING DIVIDEND INCOME UNDER SEC TION 80P(2)(D) OF THE ACT. RESPECTFULLY FOLLOWING THE ORDER OF TH E ITAT, WHICH HAS BEEN UPHELD BY THE HONBLE HIGH COURT IN THE ASSESS MENT YEAR 2009-10, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. ITA NO.1905/AHD/2016 8 9. GROUND NO.2: IN THIS GROUND, GRIEVANCE OF THE RE VENUE IS THAT THE LD.CIT(A)) HAS ERRED IN DELETING DISALLOWA NCE OF ADDITIONAL DEPRECIATION OF RS.33,80,446/-. IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION ON MIL K CANES. THE LD.AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON T HE GROUND THAT SUCH CANES WERE USED FOR TRANSPORTING THE MILK FROM VILLAGE TO PLANT, AND THEREFORE, DOES NOT FORM PART OF PLANT & MACHINERY. THE LD.CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT THE AO HIMSELF TREATED MILK CANS AS PLANT AND ALLOWED DEPR ECIATION AT THE RATE OF 15%. IN OTHER WORDS, HE HAS ALLOWED THE DE PRECIATION AT NORMAL RATES AND REFUSED TO ALLOW ADDITIONAL DEPREC IATION. ACCORDING TO THE LD.CIT(A) EXPRESSION PLANT HAS B EEN DEFINED IN SECTION 43(3) WHICH READS ASUNDER: SECTION 43(3) : PLANT INCLUDES SHIPS, VEHICLES, B OOKS, SCIENTIFIC APPARATUS AND SURGICAL EQUIPMENT USED FO R THE PURPOSES OF THE BUSINESS OR PROFESSION (BUT DOES NO T INCLUDE TEA BUSHES OR LIVESTOCK OR BUILDINGS OR FURNITURE A ND FITTINGS) 10. AFTER CONSIDERING THE ABOVE DEFINITION, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE. 11. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE ORD ER OF THE LD.CIT(A) WOULD INDICATE THAT THERE IS NO DISTINCTI ON BETWEEN THE EXPRESSION PLANT FOR ALLOWING NORMAL DEPRECIATION VIS--VIS ADDITIONAL DEPRECIATION ON THAT ITEM. THE LD.AO HA S CREATED AN ARTIFICIAL DISTINCTION ON THAT GROUND. AFTER GOING THROUGH THE ORDER OF THE LD.CIT(A) WE ARE SATISFIED THAT THE LD.CIT(A ) HAS EXAMINED THE ISSUE WITH ALL POSSIBLE ANGLE, AND THEREAFTER H ELD THAT ITA NO.1905/AHD/2016 9 DEPRECIATION IS ADMISSIBLE TO THE ASSESSEE. THEREF ORE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJ ECTED. 13. GROUND NO.3: GRIEVANCE OF THE REVENUES IS THAT THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 1,12,73,290/-. 14. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S MADE ADDITION TO ITS PLANT & MACHINERY WHICH IS ELIGIBLE FOR GRANT OF ADDITIONAL DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT. THIS PLANT & MACHINERY WAS USED FOR LESS THAN 180 DAYS I N THE PRECEDING YEAR. THE ASSESSEE CLAIMED THAT THE ADDI TIONAL DEPRECIATION FOR REMAINING PERIOD OF 180 DAYS OUGHT TO BE ALLOWED IN SUBSEQUENT YEAR I.E. IN THE PRESENT ASSESSMENT Y EAR. THE LD.AO WAS OF THE VIEW THAT SUCH ADDITIONAL DEPRECIATION I S ADMISSIBLE ONE TIME, AND THEREFORE, THE ASSESSEE SHOULD HAVE INSTA LLED THE PLANT & MACHINERY AT THE BEGINNING OF THE YEAR SO THAT IT COULD CLAIM ADDITIONAL DEPRECIATION IN THE YEAR OF INSTALLATION ITSELF. ACCORDINGLY, 50% UNCLAIMED DEPRECIATION HAS BEEN DI SALLOWED TO THE ASSESSEE. ON APPEAL, THE LD.CIT(A) AFTER PUTTI NG RELIANCE ON THE ORDER OF THE ITAT ALLOWED THE CLAIM OF THE ASSE SSEE. 15. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THIS IS SUE HAS BEEN EXAMINED BY THE ITAT, DELHI BENCH IN THE CASE OF DC IT VS. COSMOS FILMS LTD., 24 TAXMANN.COM 189 WHEREIN ONE O F US (JUDICIAL MEMBER) IS PARTY TO THE ORDER. ITAT HAS EXAMINED THIS ASPECT IN DETAIL AND HELD THAT ANY CLAIM OF ADDITIO NAL DEPRECIATION ON ACCOUNT OF NON-USER OF THE MACHINERY OVER A PERI OD OF 180 DAYS OR MORE SHOULD BE CLAIMED IN THE NEXT ASSESSME NT YEARS. ITA NO.1905/AHD/2016 10 THE DISCUSSION MADE BY THE ITAT HAS BEEN REPRODUCED BY THE LD.CIT(A), AND IT IS WORTH TO TAKE NOTE AS UNDER: '17. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. SE CTION 32(1) (IIA) INSERTED BY FINANCE (NO. 2) WITH EFFECT FROM 1.4.2003. IN SPEECH OF FINANCE MINISTER THIS CLAUSE WAS INSERTED TO PROVIDE INCENTIVE FOR FRESH INVESTMENT IN INDUSTRIAL SECTOR. THIS CLAUSE WAS INTENDED TO GIVE IMPETUS TO NEW INVESTMENT IN SETTING UP A NEW INDUSTRIAL UNIT OR FOR EXPANDING THE INSTALLED CAPACITY OF EXISTING UNITS BY AT LEAST 25 % THEREAFTER THESE PROVISIONS WERE AMENDED BY TH E FINANCE (NO.2) ACT OF 2004 W.E.F. 1.4.2005 AND PROV IDED THAT IN THE CASE OF ANY MACHINERY OR PLANT WHICH HAS BEE N ACQUIRED AFTER THE 31ST DAY OF MARCH, 2005 BY AN AS SESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OF PRODUCTIO N OF ANY ARTICLE OR THING A FURTHER SUM EQUAL 15 % OF ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTI ON UNDER CLAUSE (II) OF SECTION 33(1). THIS ADDITIONAL ALLOW ANCE U/S 32(1) (IIA) IS MADE AVAILABLE AS CERTAIN PERCENTAGE OF ACTUAL COST OF NEW MACHINERY AND PLANT ACQUIRED AND INSTAL LED. THIS PROVISION HAS BEEN DIRECTED TO THE SETTING UP NEW I NDUSTRIAL UNDERTAKING MAKING OR FOR EXPANSION OF THE INDUSTRI AL UNDERTAKING BY WAY OF MAKING MORE INVESTMENT IN CAP ITAL GOODS. THUS, THESE ARE INCENTIVES AIMED TO BOOST NE W INVESTMENTS IN SETTING UP AND EXPANDING THE UNITS. THE PROVISO TO SECTION 32(1) (IIA) RESTRICTS THE BENEFI TS IN RESPECT OF FOLLOWING- 'PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF_ (A) ANY MACHINERY OR PLANT WHICH, BEFOR E ITS INSTALLATION BY THE ASSESSES 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 NATUR E OF A GUEST-HOUSE OR (C) ANY OFFICE APPLIANCES OR ROAD TR ANSPORT VEHICLE, OR (D) ANY MACHINERY OR PLANT, THE WHOLE O F THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHE THER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION OF ANY PREVIOUS YEAR.' THUS, THIS INCENTIVE IN THE FORM OF ADDITIONAL SUM OF DEPRECIATION IS NOT AVAILABLE TO ANY PLANT OR MACHI NERY WHICH BEEN USED EITHER WITHIN INDIA OR OUTSIDE INDIA BY A NY OTHER ITA NO.1905/AHD/2016 11 PERSON OR SUCH MACHINERY AND PLANT ARE INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, I NCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE OR ANY OFFICE /APPLIANCES OR ROAD TRANSPORT VEHICLES, OR ANY MACH INERY OR PLANT THE WHOLE OF ACTUAL COST OF WHICH IS ALLOWABL E AS DEDUCTION (WHERE BY WAY OF DEPRECIATION OR OTHERWIS E) IN COMPUTING UNDER THE HEAD 'PROFIT AND GAINS OF BUSIN ESS OR PROFESSION' OF ANY ONE PREVISION YEAR. THUS, THE IN TENSION WAS NOT TO DENY THE BENEFIT TO THE ASSETS WHO HAVE ACQUIRED OR INSTATED NEW MACHINERY OR PLANT. THE SECOND PROV ISO TO SECTION 32(1) (II) RESTRICTS THE ALLOWANCES ONLY TO 50% WHERE THE ASSETS HAVE BEEN ACQUIRED AND PART TO USE FOR A PERIOD LESS THAN 160 DAYS IN THE YEAR OF ACQUISITION. THIS RESTRICTION IS ONLY ON THE BASIS OF PERIOD OF USE. THERE IS NO RESTRICTION, THAT BALANCE OF ONE TIME INCENTIVE IN THE FORM OF A DDITIONAL SUM OF DEPRECIATION SHALL NOT BE AVAILABLE IN THE S UBSEQUENT YEAR. SECTION 32(2) PROVIDES FOR A CARRY FORWARD SE T UP OF UNABSORBED DEPRECIATION. THIS ADDITIONAL BENEFIT IN THE FORM OF ADDITIONAL ALLOWANCE U/S 32(L)(IIA) IS ONE TIME BENEFIT TO ENCOURAGE THE INDUSTRIALIZATION AND IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OFBAJAJ TEMPO VS. CIT, CITED SUPRA, THE PROVISIONS RELATED TO IT HAVE TO B E CONSTRUCTED REASONABLY, LIBERALLY AND PURPOSIVE TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING THE ADDITIONAL ALLOWANCE. THIS ADDITIONAL BENEFIT IS TO GIVE IMPETUS TO INDUS TRIALIZATION AND THE BASIC INTENTION AND PURPOSE OF THESE PROVIS IONS CAN BE REASONABLY AND LIBERALLY HELD THAT THE ASSESSEE DESERVES TO GET THE BENEFIT IN FULL WHEN THERE IS NO RESTRIC TION IN THE STATUTE LO DENY THE BENEFIT OF BALANCE OF 50% WHEN THE NEW PLANT AND MACHINERY WERE ACQUIRED AND USE FOR LESS THAN 180 DAYS. ONE TIME BENEFIT EXTENDED TO ASSESSEE HAS BEE N EARNED IN THE YEAR OF ACQUISITION OF NEW PLANT AND MACHINERY. IT HAS BEEN CALCULATED @ 15% BUT RESTRIC TED TO 50% ONLY ON ACCOUNT OF USAGE OF THESE PLANT & MACHI NERY IN THE YEAR OF ACQUISITION. IN SECTION 32(1 (IIA) THE EXPRESSION USED IS 'SHALL BE ALLOWED'. THUS THE ASSESSEE HAD E ARNED THE BENEFIT AS SOON AS HE HAD PURCHASED THE NEW PLANT A ND MACHINERY IN FULL BUT IT IS RESTRICTED TO 50% IN TH AT PARTICULAR YEAR ON ACCOUNT OF PERIOD OF USAGES. SUCH RESTRICTI ONS CANNOT DIVEST THE STATUTORY RIGHT. LAW DOES NOT PROHIBIT T HAT BALANCE 50% WILL NOT BE ALLOWED IN SUCCEEDING YEAR. THE EXT RA DEPRECIATION ALLOWABLE U/S 32(1) (IIA) IN AN EXTRA INCENTIVE WHICH HAS BEEN EARNED AND CALCULATED IN THE YEAR OF ITA NO.1905/AHD/2016 12 ACQUISITION BUT RESTRICTED FOR THAT YEAR TO 50% ON ACCOUNT OF USAGE. THE SO EARNED INCENTIVE MUST BE MADE AVAILAB LE IN THE SUBSEQUENT YEAR. THE OVERALL DEDUCTION OF DEPRE CIATION U/S 32 SHALL DEFINITELY NOT EXCEED THE TOTAL COST O F PLANT MACHINERY. IN VIEW OF THIS MATTER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT TO EXTEND THE BENE FIT.' 16. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT, W E ARE OF THE VIEW THAT THE LD.CIT(A) HAS RIGHTLY DELETED THE DIS ALLOWANCE AND HAS RIGHTLY DIRECTED THE AO FOR GRANT OF REMAINING ADDITIONAL DEPRECIATION IN THIS ASSESSMENT YEAR. WE DO NOT FI ND ANY ERROR IN FINDING OF LD.CIT(A) ON THIS GROUND OF APPEAL. ACC ORDINGLY, IT IS REJECTED. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 6 TH JUNE, 2018. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER