Freins Engineering Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2311/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7781 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 08-08-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Depreciation; Additional depreciation; Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2311/MDS/2016 / ASSESSMENT YEAR:2012-13 M/S.FREINS ENGINEERING LTD., B-17, FIRST MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, AMBATTUR,CHENNAI. VS. THE DY. COMMISSR. OF INCOME TAX, CORPORATE CIRCLE 2 (1), CHENNAI. [PAN:AAACF 0439 R] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MS. C. NARESH, ADVOCATE /RESPONDENT BY : MS. SHIVA SRINIVAS, JCIT / DATE OF HEARING : 15 .11.2016 / DATE OF PRONOUNCEMENT : 28 .12. 2016 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNA I, DATED 18.12.2015 IN ITA NO.250/CIT(A)-6/2014-15 PERTAINS TO ASSESSMENT YEARS 2012-13. ITA NO.2311/MDS/2016 :- 2 -: 2. THERE WAS A DELAY OF 164 DAYS IN FILING THIS AP PEAL BY THE ASSESSEE. CONSEQUENT TO THIS, THE ASSESSEE FILED A CONDONATION PETITION FOR CONDOANTION OF DELAY STATING THAT THE SAID DELAY IN FILING THE CO IS NEITHER WILLFUL NOR DELIBERATE BUT DUE TO FR EQUENT ILLNESS OF THE EMPLOYEE, WHO HAD FAILED TO TAKE STEPS TO FILE THE APPEAL. IN THE MEANTIME, THE SAID PERSON WAS EXPIRED. AFTER CONSI DERING THE CIRCUMSTANCES, WE ARE SATISFIED ABOUT THE REASONS A DVANCED BY THE LD.A.R FOR DELAY OF 164 DAYS IN FILING THE APPEAL. ACCORDINGLY, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICA TION. 3. THE ONLY GROUND IN THIS APPEAL IS WITH REGARD T O ADDITIONAL DEPRECIATION. 4. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE CO MPANY HAS CLAIMED ADDITIONAL DEPRECIATION OF ` 62,39,650/-, OUT OF WHICH A SUM OF ` 55,75,269/- PERTAIN TO THE ASSETS ACQUIRED DURING T HE SECOND HALF OF THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASS ESSEE HAD CLAIMED 10% (HALF THE NORMAL DEPRECIATION) AS THE A DDITIONAL DEPRECIATION ON THESE ASSETS IN THE EARLIER ASSESSM ENT YEAR. FOLLOWING THE DECISION OF MADRAS TRIBUNAL IN CRI PUMPS P LTD IN [2013] 34 TAXMANN.COM 123(CHENNAI-TRIBUNAL) DATED 04.04.2013, AO DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION. ON APPEAL, TH E LD.CIT(A) RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF M M FORGINGS LTD. IN 349 ITR 673(MAD.) WHEREIN HELD THAT:- ITA NO.2311/MDS/2016 :- 3 -: THE ASSESSING AUTHORITY BY APPLYING THE SECOND PRO VISO TO SECTION 32(1) OF THE ACT, RESTRICTED THE ALLOWABILI TY OF THE DEPRECIATION TO 50 PER CENT. OF THE AMOUNT PERMISSI BLE UNDER SECTION 32(1)(IIA) OF THE ACT. ACCORDING TO THE APP ELLANT, WHEN IT SATISFIED ALL THE CONDITIONS STIPULATED UNDER THE P ROVISOS TO SECTION 32(1)(IIA) OF THE ACT, THE ASSESSING AUTHOR ITY OUGHT NOT TO HAVE RESTRICTED THE DEPRECIATION PERMISSIBLE UND ER THE SAID SECTION BY RESORTING TO THE SECOND PROVISO TO SECTI ON 32(1) OF THE ACT. THE LEARNED COUNSEL, HOWEVER, FAIRLY POINT ED OUT BEFORE US THAT IN THE SECOND PROVISO TO SECTION 32(1) OF T HE ACT, THAT VERY CLAUSE (IIA) ITSELF WAS INSERTED BY THE FINANC E ACT, 2002, WITH EFFECT FROM APRIL 1, 2003. THEREFORE, IT WAS I MPERATIVE THAT ON AND AFTER APRIL 1, 2003, THE CLAIM OF THE APPELL ANT MADE UNDER SECTION 32(1)(IIA) OF THE ACT, HAD TO BE NECE SSARILY ASSESSED BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THEREFORE, WHEN THERE WAS STATUTORY STIPULATIO N PROVIDING FOR RESTRICTION TO 50 PER CENT. OF THE AMOUNT ALLOW ABLE UNDER SECTION 32(1)(IIA) OF THE ACT, NO FAULT CAN BE FOUN D WITH THE CONCLUSION OF THE ASSESSING AUTHORITY AS WELL AS TH AT OF THE APPELLATE AUTHORITY AND THE TRIBUNAL IN HAVING AFFI RMED THE ACTION OF THE ASSESSING AUTHORITY. WE, THEREFORE, D O NOT FIND ANY SCOPE TO ENTERTAIN THE SAID QUESTION OF LAW. IN VIEW OF THE ABOVE BINDING DECISIONS OF JURISDICT IONAL HIGH COURT, LD.CIT(A) CONFIRMED THE ACTION OF LD. ASSESSING OFF ICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE ACQUIRED THE ASS ETS WORTH OF ITA NO.2311/MDS/2016 :- 4 -: ` 55,75,269/- DURING THE SECOND HALF OF THE PREVIOUS ASSESSMENT YEAR, BUT THE ASSESSEE CLAIMED 10% I.E. HALF OF THE NORMA L DEPRECIATION A ADDITIONAL DEPRECIATION IN THAT YEAR UNDER CONSIDER ATION. THE BALANCE 10% OF DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSE E IN THE ASSESSMENT YEAR 2012-13. IT WAS REJECTED BY THE AO . ACCORDING TO AO, ON THE REASON THAT ADDITIONAL DEPRECIATION IS O NLY ALLOWABLE DURING THE YEAR IN WHICH MACHINERIES WERE INSTALLED AND US ED FOR THE PURPOSE OF BUSINESS AND THERE IS NO QUESTION OF CARRY FORWA RD OF ADDITIONAL DEPRECIATION TO THE SUBSEQUENT ASSESSMENT YEAR. TH IS ISSUE CAME FOR CONSIDERATION BEFORE KARNATAKA HIGH COURT IN THE CA SE OF CIT VS. RITTAL INDIA PVT. LTD IN ITA NO.268/2014 DATED 24.11.2015 WHEREIN OBSERVED THAT:- 7. CLAUSE (IIA) OF SECTION 32(1) OF THE ACT, AS IT NOW STANDS, WAS SUBSTITUTED BY THE FINANCE ACT, 2005, APPLICABL E 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 PRO DUCE DURING ANY YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 8. THE AFORESAID TWO CONDITIONS, I.E., THE UNDERTAK ING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDERTAKING, OF THAT IT SHOULD BE CLAIMED IN ONE YE AR, HAVE BEEN DONE AWAY BY SUBSTITUTING CLAUSE (IIA) WITH EF FECT FROM 01.0.2006. THE GRANT OF ADDITIONAL DEPRECIATION, UN DER THE AFORESAID PROVISION, IS FOR THE BENEFIT OF THE ASSE SSEE AND WITH ITA NO.2311/MDS/2016 :- 5 -: THE PURPOSE OF ENCOURAGING INDUSTRIALIZATION, BY EI THER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTI NG 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% WOU LD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIR ED IS PUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOW EVER, IT NOWHERE RESTRICTS THAT THE BALANCE 10% WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSEME NT YEAR. 9. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SE CTION CLEARLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20% OF THE AC TUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTI ON UNDER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLA USE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO R EFERRED TO ABOVE, ONLY 10% CAN. BE CLAIMED IN ONE YEAR, IF PLA NT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS SAID FINANCIAL YEAR. VERY PURPOSE OF INSERTION OF CLAUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20% DEDUCTION WHIC H 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 BEN EFIT THE ASSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISL ATION IS ABSOLUTELY CLEAR, THAT THE ASSESSEE SHALL BE ALLOWE D CERTAIN ADDITIONAL BENEFIT, WHICH WAS RESTRICTED BY THE PRO VISO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YE AR, 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 ITA NO.2311/MDS/2016 :- 6 -: TRIBUNAL, IN OUR VIEW, HAS RIGHLY HELD, THAT ADDITI ONAL DEPRECIATION ALLOWED UNDER SECTION 32(1)(IIA) OF TH E ACT IS A ONE TIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION, AN D PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBE RALLY 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 CO NSIDERED OPINION THAT THE ASSESSEE IS ENTITLED FOR REMAINING 10% OF THE DEPRECIATION DURING THE YEAR UNDER CONSIDERATION AS ADDITIONAL D EPRECIATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 28 TH DECEMBER, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF