Carborundum Universal Limited, CHENNAI V. DCIT, CHENNAI

ITA 803/CHNY/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4350 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Additional depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , '.. % , * BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.803/MDS/2014 + + /ASSESSMENT YEAR: 2006-07 M/S.CARBORUNDUM UNIVERSAL LTD., PARRY HOUSE, 43, MOORE STREET, CHENNAI-600 001. VS. THE DY. COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CHENNAI. [PAN: AAACC 2474 P ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.R.VIJAYARAGHAVAN, /0. 1 /RESPONDENT BY : MR.SASIKUMAR, JCIT 1 /DATE OF HEARING : 17.04.2017 1 /DATE OF PRONOUNCEMENT : 08.06.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 26.12.2013 OF COMMISSIONER OF INCOME TAX (APPEALS), LTU, CHENNAI, IN ITA NO.99/11-12/LTU(A) FOR THE AY 2006-07. ITA NO.803/MDS/2014 :- 2 -: 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE D ISALLOWANCE OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.1,19,82,000 /- U/S.32(1)(II) OF IT ACT. THE ASSESSEE MADE THE ADDITIONS TO THE ASSETS DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2005-06 AND USED THE PLANT AND MACHINERY FOR LESS THAN 180 DAYS. ACCORDINGLY, THE ASSESSEE CLAI MED 50% OF DEPRECIATION AND ADDITIONAL DEPRECIATION DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2005-06 AND THE REMAINING 50% OF THE ADDI TIONAL DEPRECIATION WAS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSI DERATION. THE AO WAS OF THE OPINION THAT RESIDUAL DEPRECIATION ADDITIONA LLY CANNOT BE ALLOWED DURING THE SUBSEQUENT YEAR SINCE THE PLANT AND MACH INERY WAS NOT NEW MACHINERY. THE AO FURTHER STATED THAT FROM THE INTR ODUCTION OF THE CONCEPT OF THE BLOCK OF ASSETS AFTER ALLOWING THE D EPRECIATION, THE COST OF ASSETS ARE INCLUDED IN THE BLOCK OF ASSETS AND AS A PPLICABLE FOR THE YEAR UNDER CONSIDERATION, THE DEPRECIATION REQUIRED TO B E ALLOWED FROM THE BLOCK OF ASSETS AND THERE IS NO PROVISION WHICH ALL OWS ADDITIONAL DEPRECIATION IN THE BLOCK OF ASSETS. FURTHER, THE AO ALSO WAS OF THE VIEW THAT THE ADDITIONAL DEPRECIATION IS ONE TIME MEASUR E WHICH IS ALLOWED ONLY IN THE YEAR OF PURCHASE OF NEW MACHINERY AND ACCORD INGLY, DISALLOWED THE AMOUNT OF RS.1,19,82,000/-. 3.0 THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DISMISSED THE ASSESSEES APPEAL FOLLOWING ON THE DE CISION OF THE HONBLE ITAT CHENNAI DECISION IN THE CASE OF M/S.BRAKES IND IA LTD., THE RELEVANT PART OF THE CIT(A) IS EXTRACTED AS UNDER: ITA NO.803/MDS/2014 :- 3 -: 4.2.1 FURTHER, HONBLE ITAT IN THE CASE OF BRAKES I NDIA LTD IN ITA NO.1069/MDS/2010 FOR A.Y. 2006-07 DATED 06.01.2012 DECIDED THE ISSUE AGA INST THE ASSESSEE. THE HONBLE ITAT, D BENCH, CHENNAI IN THE CASE OF ABI SHOWATECH INDIA LTD IN ITA NOS.39 TO 42 /MDS/12 DATED 2.1.2013 FOR THE AYS. 2004-05 TO 2007-08 ALSO CONFIRMED THE ORDER OF THE CIT(A) FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF MM FORGINGS LTD V. ADDL. CIT (349 ITR 673) HOLDING THAT THE ASSESSEE IS NOT E NTITLED FOR 50% ADDITIONAL DEPRECIATION IN THE SUBSEQUENT YEAR. RESPECTFULLY FOLLOWING THE SAME, THE GROUND IS DISMISSED. 4.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED ON RECORD. THE ADDITIONAL DEPRECIATION IS ALLOWED U/S.32(1)(I IA) OF IT ACT FOR THE NEW ASSETS ADDED DURING THE YEAR. THE ADDITIONAL D EPRECIATION IS A BENEFICIAL PROVISION WHICH IS MEANT FOR MODERNIZING THE INDUSTRIES TO IMPROVE THE PRODUCTION IN THE INDUSTRY AND TO BE IN TERPRETED LIBERALLY. THE ASSESSEE HAS PURCHASED THE NEW MACHINERY DURING THE FINANCIAL YEAR RELEVANT TO THE AY 2005-06 AND INSTALLED AND USED F OR THE PURPOSE OF BUSINESS. THEREFORE, THE ASSESSEE HAS PUT TO USE T HE MACHINERY FOR LESS THAN 180 DAYS AND THE AO HAS ALLOWED THE DEPRECIATI ON @50 % AS PER THE APPLICABLE RATES. IN RESPECT OF ADDITIONAL DEPRECI ATION, THE ASSESSEE HAS CLAIMED 50% OF THE ELIGIBLE RATE OF 20% AND THE BAL ANCE 10% WAS CLAIMED IN THE SUBSEQUENT YEAR. THE ASSESSEE IS ENTITLED F OR 20% DEPRECIATION IN THE YEAR IN WHICH IT WAS ACQUIRED AND INSTALLED. S INCE THE ASSESSEE COULD NOT USE THE MACHINERY FOR MORE THAN 180 DAYS, THE B ALANCE UNUTILIZED DEPRECIATION WAS CLAIMED IN THE SUBSEQUENT YEAR. S INCE THE ASSESSEE IS ENTITLED FOR THE ADDITIONAL DEPRECIATION IN THE YEA R OF PURCHASE AND COULD NOT ALLOW THE DEPRECIATION IN FULL FOR NON-UTILIZAT ION, AS A NATURAL COROLLARY, THE REMAINING 50% OF ELIGIBLE DEPRECIATION REQUIRED TO BE ALLOWED IN THE ITA NO.803/MDS/2014 :- 4 -: SUBSEQUENT YEAR. FOR READY REFERENCE, WE EXTRACT T HE RELEVANT PROVISIONS OF SEC.32(1)(IIA) OF IT AS UNDER: ( IIA ) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF M ARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHI NERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE ( II ) : PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATI ON BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATUR E OF A GUEST-HOUSE; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; O R ( D ) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERW ISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION OF ANY ONE PREVIOUS YEAR; ] THOUGH, THE ACT IS SILENT ON THIS ISSUE SINCE THE PROVISION IS A BENEFICIAL PROVISION, THE ADDITIONAL DEPRECIATION C ANNOT BE DISALLOWED IN THE SUBSEQUENT YEAR. THEREFORE, WE HOLD THAT THE A SSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION. THIS VIEW IS UPHELD BY TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.BRAKES INDIA LTD., AN D ALSO THIS TRIBUNAL IN ITA NO.1789/MDS/2014 IN THE CASE OF M/S.AUTOMOTIVE COACHES & COMPONENTS LTD. VS. DCIT DATED 12.02.2016 AND M/S.B RAKES INDIA LTD. V. DCIT IN TCA NO.551/2013 (MADRAS HC) DATED 14.03.201 7 5.0 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT WE SET-ASIDE THE ORDERS OF THE LOWER AUTHORIT IES AND DIRECT THE AO TO ITA NO.803/MDS/2014 :- 5 -: ALLOW THE BALANCE ADDITIONAL DEPRECIATION IN THE AY UNDER CONSIDERATION. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6.0 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 08, 201 7, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' . . % ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: JUNE 08, 2017. TLN 1 /%7 8 7 /COPY TO: 1. . /APPELLANT 4. 9 /CIT 2. /0. /RESPONDENT 5. 7 / /DR 3. 9 ( ) /CIT(A) 6. + /GF