DCIT, CHENNAI V. M/s. G.M. Pens International Ltd., CHENNAI

ITA 2836/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8093 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 30-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Keywords: Depreciation; Additional depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 32(1)(iia); 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2836/MDS./2016 / ASSESSMENT YEAR : 2013-14 THE DCIT, CORPORATE CIRCLE 2(1), CHENNAI 34. VS. M/S.G.M.PENS INTERNATIONAL LTD ., JANAKPURI, NO.2M VELACHERY BYPADD ROAD,VELACHERRY,CHENNAI -42. [PAN AAACG 1150 E ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI SUPRIYO PAL, JCIT D.R /RESPONDENT BY : SHRI N.QUADIR HOSEYN,ADVOCATE SHRI S M KHAJA MUYEENUDDEEN, C.A / DATE OF HEARING : 28 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNA I DATED 26.07.2016 PERTAINING TO ASSESSMENT YEAR 2013-14. ITA NO.2836/16 :- 2 -: 2. THE ONLY GROUND IN THIS APPEAL IS WITH REGARD T O GRANT OF ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY U/S. 32(1)(IIA) OF THE ACT CARRIED FORWARD FROM THE EARLIER ASSESSMENT YEAR. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 ON 28.11.2013 AD MITTING A LOSS OF 37,84,388/-. HOWEVER, THE TAX WAS PAID U/S.115JB OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAD DENIED THE CLAIM OF ADDITIONAL DEPRECIATION U/S.32(1)(IIA) OF THE ACT T O THE EXTENT OF ` 2,19,52,559/-, WHICH IS A PART OF THE ADDITIONAL D EPRECIATION NOT CLAIMED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEA R AS THE ASSET IN QUESTION WAS PUT TO USE FOR LESS THAN 180 DAYS. HEN CE, THE ASSESSEE HAD CLAIMED ONLY 50% OF ALL DEPRECIATION U/S.32(1)( IIA) OF THE ACT IN ASSESSMENT YEAR 2012-13. AGGRIEVED WITH THE ACTION OF THE AO, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). O N APPEAL, THE LD.CIT(A) PLACING RELIANCE ON THE JUDGMENT OF CHENN AI TRIBUNAL IN THE CASE OF ADDISON AND COMPANY LTD VS. DCIT IN ITA NO. 2198/MDS./2016 AND ALSO THE JUDGEMENT OF KARNATAKA HIGH COURT IN T HE CASE OF CIT VS. RITTAL INDIA PVT. LTD IN ITA NO.268/2014 DATED 24.1 1.2015, ALLOWED THE APPEAL OF ASSESSEE. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, IF THE ASSESSEE ACQUIRED TH E ASSETS IN THE ITA NO.2836/16 :- 3 -: SECOND HALF OF EARLIER PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2012- 13 ( I.E. AFTER 30.09.2011) AND CLAIMED THE ADDITIO NAL DEPRECIATION AT 50% OF THE SAME, THE BALANCE ADDITIONAL DEPRECIATIO N TO BE GRANTED TO THE ASSESSEE IN THE NEXT ASSESSMENT YEAR I.E. 2013- 2014. BEING SO, IN OUR OPINION, THE ISSUE TO BE DECIDED BY VERIFYING T HE DATE OF ACQUISITION OF THE ASSETS AND ALSO GRANTING ADDITIONAL DEPRECIA TION IN EARLIER PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2012-13. FURTHER, THIS ISSUE CAME FOR CONSIDERATION BEFORE KARNATAKA HIGH COURT IN THE CASE 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 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 ITA NO.2836/16 :- 4 -: 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 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 ITA NO.2836/16 :- 5 -: ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. 4.1 HOWEVER, THE LD.D.R RELIED ON JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF M M FORGINGS LTD. IN 349 ITR 673(MAD.) IS WITH REGARD TO WHETHER THE ASSESSEE IS ENTITLED FOR WHOL E OR ONLY 50% OF ADDITIONAL DEPRECIATION, WHICH WAS ACQUIRED IN THE SECOND HALF OF PREVIOUS RELEVANT TO ASSESSMENT YEAR AND AS SUCH I T CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE. 5. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND REMIT THE ISSUE IN DISPUTE TO THE F ILE OF AO TO DECIDE THE ISSUE IN FRESH. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. 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