International Cars & Motors Ltd., Delhi V. ITO, New Delhi

ITA 860/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66076 (ITAT-DELHI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Depreciation; Additional depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C: NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTAN T MEMBER ITA NO. 860/DEL/2012 ASSESSMENT YEAR 2006-07 INTERNATIONAL CARS & MOTORS LTD. VS. ITO SANALIKA HOUSE, WA RD-11(4) 283, AGCR ENCLAVE, KARKARDOOMA NEW DELHI. DELHI 110 092. AABC12403D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SAMPATH, ADVOCATE RESPONDENT BY : SHRI SATPAL SINGH, SR. DR DATE OF HEARING : 01/11/2012 DATE OF PRONOUNCEMENT : ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESSEE HAS IMPUNGED FIRST APPELLATE O RDER ON THE GROUND THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY U/S 32(1)(IIA) OF THE INCOME TAX ACT, 196 1 AS MADE BY THE AO. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION AMOUNTING TO RS. 1,82,76,190/- ON PLANT AND MACHINE RY AGGREGATING TO RS. 18,27,61,898/- WHICH WERE ACQUIRED IN ASSESSMENT YE AR 2005-06, WHEREAS THE INSTALLATION OF THE SAID PLANT AND MACHINERY WAS CO MPLETED ON 31.1.2006 I.E. IN THE YEAR UNDER CONSIDERATION. THE AO DENIED THE CLA IM ON THE BASIS THAT THE PLANT AND MACHINERY WERE ACQUIRED IN THE ASSESSMENT YEAR 2005-06 I.E. BEFORE ITA NO. 860/DEL/12 2 31.3.2005. HENCE THE ASSESSEE IS NOT ENTITLED TO CL AIM ADDITIONAL DEPRECIATION BECAUSE AS PER SECTION 32 (1) (IIA) OF THE INCOME T AX ACT 1961, ADDITIONAL DEPRECIATION IS ALLOWED IN RESPECT OF NEW PLANT AN D MACHINERY INSTALLED AFTER 31.3.2005. THIS DISALLOWANCE WAS QUESTIONED BEFORE THE LD. CIT(A) BUT THE ASSESSEE COULD NOT SUCCEED IN THE FIRST APPEAL. THE AGGRIEVED ASSESSEE NOW HAS RAISED THE ISSUE BEFORE THE TRIBUNAL. 3. IN SUPPORT OF THE GROUND LD. AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING ON PRODUCTION. HENCE IT WAS ENTITLED TO THE CLAIMED DEPRECIATION. HE SUBMITTED THAT BEFORE ARRI VING AT ANY CONCLUSION, ALL THE PROVISION OF SECTION 32 MUST BE READ WITH TOGETHER IN ITS TRUE SPIRIT. THE PROVISIONS OF SECTION 32(I)(IIA) HAVE BEEN APPLIED BY THE AO IN ISOLATION AND WITHOUT CONSIDERING ALL THE PROVISIONS LAID DOWN U/ S 32(1) OF THE ACT. HE SUBMITTED THAT PROVISIONS UNDER SECTION 32(1) PROVI DES FOR ALLOWANCE FOR ADDITIONAL DEPRECIATION UNDER CLAUSES (IIA) ONLY WH EN THE CONDITION PERTAINING TO THE OWNERSHIP OF THE ELIGIBLE ASSETS AND ITS USE FO R THE PURPOSE OF BUSINESS OR PROFESSION OF THE ASSESSEE. IN ANOTHER WORDS THE AS SESSEE WILL BE ELIGIBLE TO CLAIM DEPRECIATION UNDER SUB SECTION (1) OF SECTION 32 ONLY ON FULFILLMENT OF THE ABOVE CONDITIONS. ONCE THE ASSESSEE QUALIFY THEN T HERE IS NO QUESTION OF DISALLOWANCE OF DEPRECIATION. IN ACCORDANCE WITH T HE SECOND PROVISO OF SECTION 32(1), THE CLAIM OF DEPRECIATION SHALL BE RESTRICTE D TO 50% OF THE NORMAL DEPRECIATION ONLY IN CASE WHERE THE ASSETS ARE USED FOR THE PURPOSE OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN 180 DAYS D URING THE YEAR. IN THIS PROVISO ITA NO. 860/DEL/12 3 ALSO BOTH THE WORDS ACQUIRED AND PUT TO USE AR E USED BUT THE DEPRECIATION WILL BE ALLOWED ONLY IN THE YEAR IN WHICH THE ASSET S ARE USED OR PUT TO USE IRRESPECTIVE OF THE DATE OF ITS ACQUISITION. OWNERS HIP OF THE PRESCRIBED ASSETS WILL NOT AUTOMATICALLY ENTITLED THE ASSESSEE TO MAKE A V ALID CLAIM OF DEPRECATION UNTIL AND UNLESS THE ASSET IS INSTALLED AND PUT TO USE OR USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OR PROFESSION. HE SUBMITTED THA T THE BASIC INTENT IN BRINGING THE ADDITIONAL DEPRECIATION INTO THE AMBIT OF THE A CT IS TO RATIONALIZE THE RATES OF DEPRECIATION AND ENHANCEMENT OF ADDITIONAL DEPRECIA TION ON NEW MACHINERY AND PLANT. THE LD. AR SUBMITTED THAT THE DATE OF INSTAL LATION IS RELEVANT AND NOT THE ACQUISITION. HE SUBMITTED FURTHER THAT LIBERAL INTE RPRETATION IS REQUIRED TO BE MADE WHILE APPLYING THE INCENTIVE PROVISIONS OF THE ACT. THE PURPOSE OF THESE INCENTIVES PROVISION OF THE ACT IS TO ENCOURAGE THE INDUSTRIES. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- 1. CIT VS. SURAMA TUBES (P) LTD. 201 ITR 124 (C ALCUTTA) 2. BAJAJ TEMPO LTD. VS. CIT 196 ITR 188 (SC) 3. CIT VS. U.P. COOPERATIVE FEDN. LTD. 176 ITR 435 (SC.) 4. CIT VS. STRAWBOARD MANUFACTURING CO. LTD. 17 7 ITR 431 (SC) 5. K.P. VARGHESE VS. ITO 131 ITR 597 (SC) 4. THE LD. DR ON THE OTHER HAND TRIED TO JUSTI FY THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT PLAIN READING OF THE PROV ISIONS LAID DOWN U/S 32(1) OF THE ACT MAKES IT OBVIOUS THAT FOR CLAIMING DEPRECIA TION THE PLANT AND MACHINERY MUST BE ACQUIRED AND INSTALLED DURING THE PRESCRIBE D PERIOD. BOTH THESE ITA NO. 860/DEL/12 4 REQUIREMENTS OF ACQUISITION AND INSTALLATION SHOULD BE READ TOGETHER FOR THE APPLICATION OF THE PROVISION LAID DOWN U/S 32(1) OF THE ACT. 5. CONSIDERING THE ABOVE SUBMISSIONS WE FIND TH AT THE ONLY DISPUTE IS REGARDING APPLICATION OF THE WORDS ACQUIRED AND INSTALLED PROVIDED U/S 32(1) (IIA) OF THE ACT TO DECIDE THE ELIGIBILITY OF THE C LAIMED DEPRECIATION. THE VIEW OF THE AUTHORITIES BELOW IS THAT BOTH THE WORDS I.E AC QUIRED AND INSTALLED SHOULD BE READ TOGETHER, WHEREAS THE CONTENTION OF THE ASSESS EE REMAINED THAT BOTH THE WORDS ARE MEANT FOR DIFFERENT PURPOSE AND HENCE INS TALLATION DATE IS RELEVANT AND NOT THE DATE OF ACQUISITION. THE CONTENTION OF THE ASSESSEE REMAINED THAT THE PLANTS WERE PURCHASED ON DIFFERENT DATES BUT THEY W ERE INSTALLED TO SET IN NOTION DURING THE YEAR RELEVANT FOR THE ASSESSMENT YEAR UN DER CONSIDERATION. WE THUS FIND THAT THERE IS NO DISPUTE ON THIS RELEVANT FAC T THAT NEW PLANTS WERE ACQUIRED BEFORE 31 ST MARCH, 2005 BUT HAVE BEEN INSTALLED AFTER 31 ST MARCH, 2005. FOR A READY REFERENCE WE REPRODUCE RELEVANT PROVISION LIA ID DOWN U/S 32(1)(IIA) OF THE ACT, WHICH READS AS ..IN THE CASE OF ANY NEW MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED AN D INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005 BY AN ASSESSEE ENGAGED IN THE BUSINE SS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING .. ON THE PLAIN READING OF THESE PROVISIONS IT IS OBVIOUS AND APPARENT THAT BOTH THE WORDS ACQUIRED AND INSTALLED ARE LINKED WITH AND THUS REQUIREMENT OF BOTH THESE WORDS CANNOT BE SEEN FULFILLED EVEN IF EITHER OF THE TWO IS ONLY FU LFILLED. IN OTHER WORDS BOTH THE ACQUISITION AND INSTALLATION OF THE NEW MACHINE RY OR PLANT ARE REQUIRED TO BE ITA NO. 860/DEL/12 5 MADE AFTER 31 ST DAY OF APRIL, 2005 BY AN ASSESSEE ENGAGED IN THE B USINESS OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. T O CLAIM THE ADDITIONAL DEPRECIATION AVAILABLE THEREIN THERE IS NO DOUBT ON THE SUBMISSION OF THE LD. AR THAT INCENTIVE PROVISIONS OF THE ACT SHOULD BE READ LIBERALLY BUT IT DOES NOT MEAN THAT LIBERAL APPROACH SHOULD BE APPLIED AT THE COST OF LITERAL AND OBVIOUS MEANING OF THE STATUTE, FULFILLMENT OF WHICH IS THE PRIMARY REQUIREMENT TO QUALIFY FOR THE BENEFIT OF CLAIMED DEPRECIATION. LIBERAL APPROACH I S REQUIRED TO BE GIVEN WHILE INTERPRETING A PROVISION, WHERE POSSIBILITY OF MORE THAN ONE INTERPRETATIONS IS THERE AND ONE OF THEM APPEARS FAVOURABLE TO THE ASS ESSEE. IN THE PRESENT CASE WHEN THE REQUIREMENT OF FULFILLMENT OF THE CONDITIO NS OF ACQUISITION AND INSTALLATION TO GRANT THE BENEFIT OF THE CLAIMED AD DITIONAL DEPRECIATION IS SO OBVIOUS AND APPARENT THAT THERE IS NO SCOPE OF DIFF ERENT INTERPRETATION THAT ACQUISITION AND INSTALLATION SHOULD NOT BE READ TOG ETHER AND SIMULTANEOUSLY. THE PURPOSE OF THE WORD ACQUISITION AND INSTALLATION MAY BE DIFFERENT BUT BOTH ARE REQUIRED TO BE FULFILLED ONLY AFTER 31 ST MARCH, 2005 TO MAKE THE ASSESSEE ELIGIBLE FOR THE BENEFIT OF THE CLAIMED ADDITIONAL DEPRECIAT ION U/S 32 (1)(IIA) OF THE ACT. OF COURSE AN IDENTICAL ISSUE WAS RAISED UNDER ALMOS T SIMILAR FACTS BEFORE THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SURAMA TUBES (P) LTD. RELIED UPON BY THE LD. AR BUT DURING THE ASSESSMENT YEAR 1 982-83 INVOLVED IN THAT CASE THE PROVISIONS LAID DOWN U/S 32 (1)(IIA) OF TH E ACT IN OPERATION WERE DIFFERENT AS TEHREIN ACQUISITION OF NEW MACHINERY O R PLANT WAS NOT GIVEN IMPORTANCE AND THE ONLY REQUIREMENT WAS THAT NEW MA CHINERY OR PLANT HAS BEEN ITA NO. 860/DEL/12 6 INSTALLED AFTER THE 31 ST DAY OF MARCH 1980 AND BEFORE 1.4.1965. SINCE THERE WAS NO DISPUTE ON THIS FACT HENCE HONBLE CALCUTTA HIGH COURT WAS PLEASED TO HOLD THAT ACQUISITION OF PLANT OR MACHINERY IS NOT MATER IAL, WHAT IS MATERIAL IS THE INSTALLATION OF SUCH PLANT OR MACHINERY FOR CLAIMIN G ADDITIONAL DEPRECIATION ALLOWANCE. FOR A READY REFERENCE PROVISIONS LAID DO WN U/S 32(1)(IIA) IN OPERATION AT THAT TIME REPRODUCED IN THE DECISION OF HONBLE HIGH COURT IS REPRODUCED HEREUNDER :- 32 (1)(IIA) IN THE CASE OF ANY NEW MACHINERY OR PL ANT (OTHER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN INSTALLED AFTER THE 31 ST DAY OF MARCH, 1980, BUT BEFORE THE 1 ST DAY OF APRIL, 1985, A FURTHER SUM EQUAL TO ONE-HALF OF THE AMOUNT ADMISSIBLE UNDER CL AUSE (II) (EXCLUSIVE OR EXTRA ALLOWANCE FOR DOUBLE OR MULTIPL E SHIFT WORKING OF THE MACHINERY OR PLANT AND THE EXTRA ALLOWANCE IN R ESPECT OF MACHINERY OR PLANT INSTALLED IN ANY PREMISES USED A S A HOTEL) IN RESPECT OF THE PREVIOUS YEAR IN WHICH SUCH MACHINER Y OR PLANT IS INSTALLED OR, IF THE MACHINERY OR PLANT IS FIRST PU T TO USE IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR, THEN, IN RESP ECT OF THAT PREVIOUS YEAR. . 6. DURING THE ASSESSMENT YEAR 2006-07 IN QUESTIO N IN THE PROVISIONS LAID DOWN U/S 32 (I)(IIA) THERE WAS SPECIFIC CONDITION ALONGW ITH INSTALLATION OF NEW PLANT OR MACHINERY AFTER 31 ST MARCH, 2005 THAT THE NEW PLANT OR MACHINERY MUST A LSO BE ACQUIRED AFTER 31 ST MARCH, 2005. WE HAVE ALSO REPRODUCED HEREIN ABOVE THE RELEVANT PROVISIONS LAID DOWN U/S 32(I)(IIA) OF THE ACT IN OPERATION DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. UNDER THESE CI RCUMSTANCES WE HOLD THAT THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SURAMA TUBES (P) LTD. (SUPRA) RELIED UPON BY THE LD. AR IS NOT H ELPFUL TO THE ASSESSEE. DURING ITA NO. 860/DEL/12 7 THE YEAR FOR CLAIMING ADDITIONAL DEPRECIATION U/S 3 2(I)(IIA) OF THE ACT, AS DISCUSSED ABOVE, BOTH THE CONDITIONS THAT NEW MACHINERY OR PL ANT HAS BEEN ACQUIRED AND INSTALLED AFTER 31.3.2005 WERE REQUIRED TO BE FULFI LLED . SINCE UNDISPUTEDLY THE NEW MACHINERY OR PLANT IN QUESTION WERE NOT ACQUIRE D AFTER 31 ST DAY OF MARCH, 2005, THE AUTHORITIES BELOW WERE JUSTIFIED IN DENYI NG THE CLAIMED ADDITIONAL DEPRECIATION UNDER THE SAID PROVISIONS ON THAT BASI S. WE ALSO AGREE WITH THE VIEW OF THE LD. CIT(A) WHICH HAS GOT THE SUPPORT OF THE DECISION OF HONBLE SUPREME COURT RELIED UPON BY HIM THAT THE COURT INTERPRETS A LAW AND CANNOT LEGISLATE. THE ACTION OF THE AUTHORITIES BELOW IN THIS REGARD IS T HUS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. 7. CONSEQUENTLY APPEAL IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21.12.2012. SD/- SD/- (B.C. MEENA) ( I .C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 21.12.2012 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ITA NO. 860/DEL/12 8 DEPUTY REGISTRAR, ITAT