RASHTRIYA CHEMICALS & FERTILIZERS LTD, MUMBAI V. CIT LTU, MUMBAI

ITA 5160/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2992 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A G BHATKAR
• Keywords: Depreciation; Additional depreciation; Question of law
• Section: 143(3); 32; 263; 2

Judgement Text

1 I.T.A. NO.5160 /MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI JOGINDER SINGH(JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACOUNTANT MEMBER) I.T.A. NO.5160 /MUM/2014 (ASSESSMENT YEAR : 2010-11) RASHTRIYA CHEMICALS & FEWRTILIZERS LTD PRIYADARSHINI, EASTEN EXPRESS HIGHWAY, SION, MUMBAI-22 VS COMMISSIONER OF INCOME-TAX, LTU, MUMBAI PAN :AAACR2831H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NIRAJ SHETH RESPONDENT BY SHRI A.G. BHATKAR DATE OF HEARING : 15-06-2016 DATE OF PRONOUNCEMENT : 29 -06-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED AGAINST THE ORDER PASSED U/S 263 BY THE COMMISSIONER OF INCOME-TAX (LTU), MUMBAI (HEREINAFT ER CALLED CIT) DT 10-06- 2014 FOR A.Y. 2010-11 REVISING THE ORIGINAL ASSESSM ENT ORDER PASSED U/S 143(3) DT 23-01-2013. 2. WE HAVE HEARD BOTH THE PARTIES ON THE GROUNDS RAIS ED BEFORE US WITH REGARD TO THE VALIDITY OF ORDER PASSED U/S 263. 2 I.T.A. NO.5160 /MUM/2014 3. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WHETHE R THE ASSESSEE WAS ENTITLED OR BENEFIT OF ADDITIONAL DEPRECIATION IN T HE IMPUGNED ORDER @30% U/S 32(1)(IIA). THE ASSESSING OFFICER HAD ALLOWED THE DEPRECIATION VIDE ORDER U/S 143(3) DT 23-01-2013. IN THE ORDER PASSED U/S 263, THE LD.CIT OBSERVED THAT THE ADDITIONAL DEPRECIATION WAS CLAIMED AND ALLOWED ON NEW PLANT & MACHINERY WHICH WERE ACQUIRED AND PUT TO USE IN THE YEAR RELEVANT TO ASSESSMENT YEAR 21009-10. THEREFORE, NO DEPRECIATI ON CAN BE ALLOWED IN THE SUBSEQUENT YEAR I.E. IMPUGNED ASSESSMENT YEAR, I.E. A.Y. 2010-11 SINCE NO NEW PLANT & MACHINERY HAS BEEN ACQUIRED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE SUBMITTED THAT THE NEW PLANT & MACHINE RY ACQUIRED IN A.Y. 2009- 10 WAS PUT TO USE FOR LESS THAN 180 DAYS, THEREFOR E, THE ASSESSEE CLAIMED ONE- HALF OF THE ADDITIONAL DEPRECIATION THAT WAS ALLOWA BLE TO THE ASSESSEE. THEREFORE, THE BALANCE AMOUNT OF ADDITIONAL DEPRECI ATION WOULD BE ALLOWABLE TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AS PER PROVISIONS CONTAINED IN CLAUSE (II) OF SUB SECTION (1) OF SECTION 32. BUT THE LD.CIT WAS NOT SATISFIED WITH THE REASONING GIVEN BY THE ASSESSEE AND HE FOUND TH AT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND, THEREFORE, ORDER PASSED BY ASSE SSING OFFICER WAS SET ASIDE WITH THE DIRECTION TO THE ASSESSING OFFICER TO DISA LLOW THE CLAIM OF ADDITIONAL DEPRECIATION MADE DURING THE YEAR UNDER CONSIDERATI ON. DURING THE COURSE OF HEARING BEFORE US, THE LD.COUNSEL BROUGHT TO OUR NO TICE THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS RITTAL INDIA PVT LTD 3 80 ITR 4243 (KAR) AND VARIOUS OTHER JUDGEMENTS OF THE TRIBUNAL ON THIS ISSUE, AS PER DETAILS GIVEN BELOW: 1. DY.CIT, CIR 3(1) VS COSMO FILMS LTD (2012) 24 TA XMANN.COM 189 (DEL) 3 I.T.A. NO.5160 /MUM/2014 2. M/ DIVIS LABORATORIES LTD VS THE DY.CIT ITA O. 11/HYD/2012 ORDER DT 12-07-2013 3. ITO VS M/S ASWANI INDUSTRIES ITA O.210/AHD/201 3 ORDER DT 31- 05-2013 4. APOLLO TYRES LTD VS ACIT ITA NO. 616/COCH/2011 ORDER DT 2012- 2013 5. M/A MITC ROLLING MILLS P. LTD VS ACIT 10(2), MUM BAI ORDER DT 13- 05-2013 4. PER CONTRA, THE LD.DR RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF CRI PUMPS PVT LTD VS ACIT 58 SOT 154 (CHEN). 5. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIE S AND CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES. IN OUR VIE W, THIS ISSUE HAS BEEN DECIDED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS RITTAL INDIA PVT LTD (SUPRA) WITH THE FOLLOWING OBSERVATIONS: 4. WE HAVE HEARD SRI K.V ARAVIND, LEARNED COUNSEL F OR THE APPELLANTS AS WELL AS SRI T. SURYANARAYANA, LEARNED COUNSEL AP PEARING FOR THE RESPONDENT-ASSESSEE AND PERUSED THE RECORD. 5. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWING TWO SUBSTANTIAL QUESTION OF LAW: 'I. WHETHER THE TRIBUNAL IS CORRECT IN EXTENDING TH E BENEFIT OF SECTION 32(1 )(IIA) OF THE ACT TO THE NEXT ASSESSMENT YEAR WHEN THE INCOME TAX ACT DOES NOT PROVIDE FOR SUCH CARRYOVER, THEREBY VI OLATING THE LEGAL PRINCIPLES OF 'CASSUS OMISSUS' WHICH STATES THAT TH E COURTS CANNOT COMPENSATE FOR WHAT THE LEGISLATURE HAS OMITTED TO ENACT? II. WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THA T ADDITIONAL DEPRECIATION ALLOWED U/S.32(L)(IIA) IS A ONE TIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION AND THE RELEVANT PROVISIONS HAS B EEN CONSTRUED 4 I.T.A. NO.5160 /MUM/2014 REASONABLY AND PURPOSIVE WITHOUT APPRECIATING THAT THE ADDITIONAL DEPRECIATION IS ALLOWED IN THE YEAR OF PURCHASE AND IF IN THE YEAR OF PURCHASE THE ASSESSEE IS ELIGIBLE ONLY FOR 50% DEPR ECIATION, THE BALANCE 50% CANNOT BE CARRIED FORWARD FOR THE SUBSE QUENT YEAR ON THE CLAIM CANNOT BE ALLOWED IN ANY OTHER YEAR?' 6. THE RELEVANT PROVISIONS OF SECTION 32 ARE REPROD UCED BELOW: 'SECTION 32. (1) IN RESPECT OF DEPRECIATION OF- (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LI CENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMIL AR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1 ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTION S SHALL BE ALLOWED- (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTA GE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED; (II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCE NTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED: PROVIDED . .......... (A) . ............ (B) ............. PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIR ED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UNDER THIS SUB-SE CTION IN RESPECT OF 5 I.T.A. NO.5160 /MUM/2014 SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSE T UNDER CLAUSE (I) OR CLAUSE (II) I OR CLAUSE (IIA), AS THE CASE MAY B E: PROVIDED ALSO .............. PROVIDED ALSO .............. PROVIDED ALSO .............. PROVIDED ALSO .............. EXPLANATION I. .............. EXPLANATION 2 . .......... EXPLANATION 3 ............ EXPLANATION 4 ............ EXPLANATION 5 ............ (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AF TER THE 31 ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR GENERATION OR GENERATION AND DISTRIBUTION OF POWER, A FURTHER SUM EQUAL TO TWENT Y PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALL OWED AS DEDUCTION UNDER CLAUSE (II). PROVIDED................. ' 7. CLAUSE (IIA) OF SECTION 32(1) OF THE ACT, AS IT NOW STANDS, WAS SUBSTITUTED BY THE FINANCE ACT, 2005, APPLICABLE WI TH EFFECT FROM 01.04.2006. PRIOR TO THAT, A PROVISO TO THE SAID CL AUSE WAS THERE, WHICH PROVIDED FOR THE BENEFIT TO BE' GIVEN ONLY TO A NEW INDUSTRIAL UNDERTAKING, OR ONLY WHERE A NEW INDUSTRIAL UNDERTA KING BEGINS TO MANUFACTURE OR PRODUCE DURING ANY YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 6 I.T.A. NO.5160 /MUM/2014 8. THE AFORESAID TWO CONDITIONS, I.E., THE UNDERTAK ING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDE RTAKING, OR THAT IT SHOULD BE CLAIMED IN ONE YEAR, HAVE BEEN DONE AW AY BY SUBSTITUTING CLAUSE (IIA) WITH EFFECT FROM 01.04.2006. THE GRANT OF ADDITIONAL EPRECIATION, UNDER THE AFORESAID PROVISION, IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENCOURAGING INDUST RIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPAN DING THE EXISTING UNIT BY PURCHASE OF NEW PLANT AND MACHINERY, AND PU TTING 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% WOULD BE AL LOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIRED IS PUT TO USE F OR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTR ICTS THAT THE BALANCE 10% WOULD NOT BE ALLOWED TO BE CLAIMED BY T HE ASSESSEE IN THE NEXT ASSESSMENT 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 DEDUCTION UN DER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLAUSE IS VERY SI GNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20% ADDITIONAL DEPRECIATI ON. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 10% 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 TH E BALANCE 10% ADDITIONAL DEDUCTION CAN BE AVAILED IN THE SUBSEQUE NT ASSESSMENT YEAR, OTHERWISE THE VERY PURPOSE OF INSERTION OF CL AUSE (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 PRESE NT CASE, SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT THE A SSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISLATION IS ABSOLUTELY CLEA R, THAT THE ASSESSEE SHALL BE ALLOWED CEL1AIN 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 DEPRECIATIO N ALLOWED UNDER SECTION 32(1)(IIA) OF THE ACT IS A ONE TIME BENEFIT TO ENCOURAGE 7 I.T.A. NO.5160 /MUM/2014 INDUSTRIALIZATION, AND THE PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVELY, TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUN AL. 11. IN VIEW OF THE AFORESAID, WE DO NOT FIND THAT A NY INTERFERENCE IS CALLED FOR WITH THE ORDER OF THE TRIBUNAL, OR THAT ANY QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COU RT. 6. THE AFORESAID JUDGEMENT OF THE HONBLE KARNATAKA HI GH COURT HAS APTLY DISCUSSED THE PROVISIONS OF SECTION 32. THE JUDGEM ENT HAS BEEN FOLLOWED BY VARIOUS BENCHES OF THIS TRIBUNAL, WHOSE NAMES HAVE BEEN MENTIONED ABOVE AS WERE RELIED UPON BY THE LD.COUNSEL. IN OUR CONSIDE RED OPINION, THE VIEW ADOPTED BY THE LD.CIT IS CONTRARY TO LAW AND FACTS. THE ASSESSING OFFICER HAD RIGHTLY ALLOWED THE BENEFIT OF ADDITIONAL DEPRECIAT ION IN THE YEAR UNDER CONSIDERATION. UNDER THESE CIRCUMSTANCES, THE ORDE R PASSED BY THE LD.CIT IS HEREBY QUASHED. 7. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON THIS29TH DAY OF JU NE, 21016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH JUNE, 2016 PK/- 8 I.T.A. NO.5160 /MUM/2014 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , D-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES