MAXXIS RUBBER INDIA PVT. LTD.,AHMEDABAD V. THE PR. CIT, AHMEDABAD-1, AHMEDABAD

ITA 1129/AHD/2025

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Maxxis Rubber India Pvt. Ltd. appealed against the order of the Principal Commissioner of Income Tax, Ahmedabad-1, which was passed under Section 263 of the Income Tax Act, 1961, for the Assessment Year 2018-19. The PCIT had found the assessment order erroneous as it allowed an excess claim of depreciation. The Tribunal examined the method of depreciation calculation and found it consistent with the provisions of Section 32 and 43(6) of the Act, rejecting the PCIT's view that the additional depreciation from the preceding year should have been set off against the opening written down value for calculating depreciation in the current year. The Tribunal's decision was influenced by a similar case involving Suzuki Motor Gujarat Pvt. Ltd., where it was established that the assessee's method of depreciation calculation was correct.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773666 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 20-05-2025
• Other Referred Cases: Suzuki Motor Gujarat Pvt. Ltd. vs. PCIT (2025) 172 taxmann.com 469 (Ahmedabad-Trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHER SINGH
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Depreciation; Additional depreciation; Capital Gains
• Section: 143(3); 263; 32; 2

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER I.T.A. No. 1129/Ahd/2025 (Assessment Year: 2018-19) Maxxis Rubber India Pvt. Ltd., Plot No. SM-12, SM 51/2, Sanand Industrial Estate, Kundal, Srinagar, Ahmedabad-382110 Vs. Principal Commissioner of Income Tax, Ahmedabad-1 [PAN No.AAJCM7177Q] (Appellant) .. (Respondent) Appellant by : Shri Tushar Hemani, Sr. Advocate Respondent by : Shri Sher Singh, CIT-DR Date of Hearing 14.08.2025 Date of Pronouncement 08.09.2025 O R D E R PER: ANNAPURNA GUPTA - AM: The present appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (hereinafter referred to as “PCIT”), PCIT, Ahmedabad-1 dated 18.03.2025 passed under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2018-19. 2. Grounds raised by the assessee are as under: “1. The Ld. PCIT has grossly erred in law and on facts in assuming jurisdiction u/s.263 of the Act on the erroneous ground that the impugned assessment order is erroneous in so far as it is prejudicial to the interest of the revenue. 2. The Ld. PCIT has grossly erred in not appreciating that in order to invoke s.263, two conditions must be fulfilled viz. the impugned assessment order must be erroneous and that error must be prejudicial to the interest of the revenue. In the present case, ld. AO has passed the reasoned assessment order after analyzing all details and therefore there was no error in the impugned assessment order so as to justify action u/s.263 of the Act. Under the circumstances, the very assumption of Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 2 - power u/s.263 of the Act is unjustified and bad in law and therefore, order u/s.263 of the Act deserved to be -quashed. 3. The subject order u/s. 263 passed by the Ld. PCIT is illegal and bad in law in absence of any finding of Ld. PCIT as to how the alleged error of AO has resulted in loss of revenue particularly when the depreciation has been correctly computed in accordance with Section 32 of the Act. 4. The Ld. PCIT has further erred in law and on facts in not appreciating that the view taken by the AO is a possible view and hence the proceedings are illegal and bad in law. 5. The ld. PCIT has further erred in law in not coming to any concrete conclusion and without conducting any inquiry or investigating the issue, merely directed the AO to frame the assessment order afresh. Without there being any positive finding about order being erroneous and prejudicial to the interest of the revenue, the action of Id. PCIT is without jurisdiction and illegal and hence deserves to be deleted. 6. Ld. PCIT has erred in not considering various facts, submissions, explanations and clarifications as given by the appellant and further erred in not appreciating the facts and law in their proper perspective. 7. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. The order of the Ld. PCIT reveals that the assessment order passed in the case of the assessee under Section 143(3) of the Act was found to be erroneous causing prejudice to the Revenue on account of having allowed excess claim of depreciation to the assessee as per Section 32(1) of the Act. The order reveals that in the preceding assessment year the assessee had acquired Plant & Machinery on which alongwith normal depreciation @ 15%, it was eligible to claim additional depreciation also@ 20% of the cost of the asset in terms of section 32 of the Act. However, since those assets were put to use for less than 180 days the assessee had claimed 50% of the eligible additional depreciation, i.e 10% of the cost of eligible assets in the preceding year as per law and the balance 50% was claimed in the impugned year. The Ld. PCIT noted that while computing the normal Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 3 - depreciation allowable for impugned year the assessee had applied the applicable rate of depreciation, i.e 15% to the opening written down value (WDV) of the assets. As per the Ld. PCIT, however, the opening written down value of such assets ought to have been reduced by the balance additional depreciation of the preceding year claimed in the impugned year and on the remaining WDV of the assets the assessee ought to have claimed depreciation as per rate applicable. The assessee’s entitlement to claim of additional depreciation was 20% of the cost of the new assets purchased i.e. Plant & Machinery, while its entitlement to normal depreciation on Plant & Machinery was 15% of WDV of the assets. As per the Ld. PCIT, the assesee had claimed excess depreciation pertaining to 15% of the remaining 50% additional depreciation, which as per his calculation amounted to Rs. 3,03,22,137/-. The entire facts relating to the calculation of the excess depreciation are mentioned in Para 5.1 to 5.1.2 of his order. 4. Ld. Counsel for the assessee pointed out that the issue raised in the present appeal stands squarely covered in favour of the assessee by the decision of the ITAT in the case of Suzuki Motor Gujarat Pvt. Ltd. vs. PCIT (2025) 172 taxmann.com 469 (Ahmedabad-Trib.). Copy of the order was placed before us. Referring to the same Ld. Counsel for the assessee pointed out that the facts of the said case was identical, in which revisionary power was exercised by the Ld. PCIT noting that the fact that the assessee had been allowed excess depreciation on account of the carry forward of additional depreciation to the impugned year to the extent of 50% which was not set off from its opening written down value of assets Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 4 - for the purpose of calculating depreciation for the impugned year. Ld. Counsel of the assessee pointed out that the ITAT categorically held that the proposition advanced by the Ld. PCIT was not in accordance with law. He pointed out that the ITAT referred to all relevant provisions of law pertaining to depreciation and written down value of assets under Section 32 and 43(6) of the Act and pointed out that the said calculation nowhere prescribed set off of the carried forward additional depreciation from the preceding year, to be set off from the opening written down value of assets ,for calculating depreciation for the impugned year. Our attention was drawn to the findings of the ITAT at Para 7.1 to 7.4 of the order as under: “7.1 The assessee is engaged in the business of manufacture of passenger cars. During the preceding assessment year 2017-18, the assessee had claimed additional depreciation @10% (50% of the prescribed rate) aggregating to Rs. 156,00,22,181/- on 'plant and machinery' put to use for a period of less than 180 days. Closing Written Down Value ('WDV') of the block 'Plant and Machinery' as on 31.03.2017 amounted to Rs.1419,66,02,772/-. The balance additional depreciation of Rs.156,00,22,181/- was carried forward to be claimed in assessment year 2018-19 as per the third proviso to section 32(1)(ii) of the Act. A working of the total depreciation charged during the year under consideration is tabulated as under:- S.No. Block of assets Plant and Machinery Rate (%) 15 30 40 (i) (ii) (iii) 3a Written down value on the first day of previous year 14,19,66,02,772 - 3b Written down value on the first day of previous year, of those block of assets which were eligible for depreciation @ 50%, 60% or 80% as per the old Table - - 23,10,31,519 4 Additions for a period of 180 days or more in the previous year 1,33,91,27,790 - 3,08,38,247 5 Consideration or other realization during the previous year out of 3 or 4 - - - Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 5 - 6 Amount on which depreciation at full rate to be allowed (3a+3b + 4 -5) 15,53,57,30,562 - 26,18,69,766 7 Additions for a period of less than 180 days in the previous year 6,65,82,83,901 - 3,02,59,885 8 Consideration or other realizations during the year out of 7 - - - 9 Amount on which depreciation at half rate to be allowed (7 - 8) 6,65,82,83,901 - 3,02,59,885 10 Depreciation on 6 at full rate 2,33,03,59,584 - 10,47,47,906 11 Depreciation on 9 at half rate 49,93,71,293 - 60,51,977 12 Additional depreciation, if any, on 4 25,60,45,955 - - 13 Additional depreciation, if any, on 7 64,83,02,170 - - 14 Additional depreciation relating to immediately preceding year' on asset put to use for less than 180 days 1,56,00,22,181 - - 15 Total depreciation (10+11+12+13+14) 5,29,41,01,183 - 11,07,99,883 16 Depreciation disallowed under section 38(2) of the I.T. Act (out of column 15) - - 17 Net aggregate depreciation (15- 16) 5,29,41,01,183 - 11,07,99,883 18 Proportionate aggregate depreciation allowable in the event of succession, amalgamation, demerger etc. (out of column 17) - - 19 Expenditure incurred in connection with transfer of asset/ assets - 20 Capital gains/ loss under section 50(5+ 8-3a-3b -4 -7-19) - - 21 Written down value on the last day of previous year (6+ 9-15) 16,89,99,13,280 - 18,13,29,768 7.2 For the year under consideration, the assessee claimed aggregate depreciation of Rs.529,41,01,183/- which included additional depreciation of Rs.156,00,22,181 pertaining to assets put to use for less than 180 days in the preceding assessment year 2017-18. The aforesaid depreciation, it is submitted, was computed in accordance with income tax return utility prescribed by CBDT. The Ld. PCIT, in the impugned order, however held that the assessee should, at first, have reduced the additional depreciation pertaining to AY 2017-18 from the WDV as on 01.04.2017 and then computed the normal depreciation @ 15% for the year under consideration. As a Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 6 - consequence thereof, the Ld. PCIT has alleged that the assessee has claimed excess normal depreciation for the year under consideration. In this regard, we hold that the aforesaid method of computation provided by the Pr. CIT is not correct as Section 32(1)(ii) of the Act provides that depreciation has to be charged on the written down value of any block of assets as per the rates prescribed. Further section 43(6)(c) of the Act provides that the written down value of a block of asset shall be computed by taking the WDV as on the opening date, which shall be increased by the actual cost of the assets acquired during the year and be reduced by the moneys payable in respect of assets sold during the year and no further adjustment is allowed to be made to the WDV computed as per the provisions of the said section. It is on such WDV so computed that the depreciation has to be computed. The format of income tax return utility notified by the CBDT, the amount of depreciation chargeable on plant and machinery is auto computed in Schedule DPM. An assessee is meant to submit the figure of opening WDV of the block, details of additions made during the year classified by the period for which such asset is put to use (more than or less than 180 days) and the details of assets sold during the year. Basis the aforesaid details submitted, the utility as conceived by the Income-tax Department, calculates the amount of normal and additional depreciation allowable on the block of asset. 7.3 For the sake of ready reference, the Schedule of DPM and the sequence of computation is mentioned below:- 1. Block of assets 2. Rate % 3. Written^down value on the first day of previous year 4. Additions for a period of 180 days or more in the previous year 5. Consideration or other realization during the previous year out of 3 or 4 6. Amount on which depreciation at full rate to be allowed 3+4-5 (enter 0, if result is negative 7. Addition for a period of less than 180 days in the previous year 8. Consideration or other realizations during the year out of 7 9. Amount on which deprecation at half rate to be allowed (7-8) 10. Depreciation on 6 at full rate 11. Depreciation on 9 at half rate 12. Additional deprecaition, if any, on 4 13. Additional depreciation, if any, on 7 14. Additional deprecaition relating to immediately preceidng year on asset put to use for less than 180 days 15. Total depreciation (10+11+12+13+14) 16. Depreciation disallowed under section 38(2) of the I.T. Act (out of column 15) 7.4 Even on going through the above, it can be found that no mechanism for the assessee to first compute and reduce the additional depreciation for the preceding year from the opening WDV and then compute the normal depreciation for the relevant Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 7 - year, as directed by the Ld. PCIT. The said computation of depreciation, as provided in the income tax return utility, has also been found to be in consonance with the Clause 18 of the Tax Audit Report. If the method suggested by the Ld. PCIT in the impugned order were to be followed, in that case, the total depreciation allowable to the assessee, would be higher in subsequent years since the closing WDV would be higher. Being so, the assessee would be allowed higher depreciation is subsequent years. In view these facts, we hold that that there is no error in the depreciation claimed by the assessee, hence no case of order being erroneous inasmuch as it is prejudicial to the interest of revenue could be made out.” 3.1 Ld. Counsel for the assessee, therefore, contended that the order of the Ld. PCIT, passed in the present case was not sustainable, being covered in favour of the assessee by the decision of the ITAT as above. 4. Ld. DR though vehemently supported the order of the Ld. PCIT, however, he was unable to drawn our attention to any contrary decision of either the ITAT or any higher judicial authority in this regard. 5. We have heard both the parties and gone through the order of the Ld. PCIT. The error found by the Ld. PCIT is with regards to claim of depreciation during the year, which he found was excess claimed by the assessee since the assessee had claimed depreciation on the opening WDV of assets without reducing the same with the additional depreciation of preceding year carried forward for claiming in the impugned year. The coordinate Bench of the ITAT has dealt with an identical issue in the case of Suzuki Motor Gujarat (P) Ltd.(supra), categorically holding this contention of the Ld. PCIT to be against law. We have gone through the order of the ITAT and we have noted that it has categorically held that there is no provision in law requiring brought forward additional depreciation from preceding year to be set off against opening WDV of the Printed from counselvise.com ITA No.1129/Ahd/2025 Maxxis Rubber India Pvt. Ltd. vs. PCIT Asst.Year –2018-19 - 8 - assets and depreciation thereafter for the year being calculated by applying prescribed rate to the balance WDV of the assets. Therefore, we have no hesitation in holding that the Ld. PCIT was wrong in holding the assessment order passed in the case of the assessee to be erroneous for having allowed depreciation on the opening WDV without setting off brought forward additional depreciation of preceding year. The finding of error in the order of the AO by the Ld. PCIT, is therefore, we hold, incorrect. 6. In view of the above, the order passed by the Ld. PCIT in the present case under Section 263 of the Act is held not sustainable. 7. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 08/09/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) (JUDICIAL MEMBER) ACCOUNTANT MEMBER Ahmedabad; Dated 08/09/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "