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2015 (6) TMI 314 - AT - Income TaxAdditional depreciation u/s 32(1)(iia) on plant and machinery - disallowance of claim as it had not been claimed as per explanation 5 to section 32(1) - Held that - As relying on ase of Goetze (India) Ltd. vs. CIT 2006 (3) TMI 75 - SUPREME Court wherein held as regards the explanation 5 to section 32(1) which speaks of allowing depreciation u/s 32 whether or not the assessee has claimed deduction in respect of depreciation in computing total income. In the said explanation which was inserted by the Finance Act, 2001 w.e.f. 1.4.2002, has in fact, been inserted after the sub-section (ii) of section 32(1). But at the same time, in our view, the same is applicable for section 32(1)(iia), since normal depreciation and additional depreciation are part of depreciation u/s 32(1) especially of section 32(1)(i), which includes the machinery for allowing depreciation. Therefore, on this account, a legal claim of additional depreciation has to be allowed by the Income Tax Authorities and accordingly, we direct the AO to allow the additional depreciation as per law, so claimed by the assessee. Decided in favour of assessee.
Issues Involved:
1. Rejection of the claim for additional depreciation under Section 32(1)(iia) of the Income Tax Act, 1961. 2. Applicability of Explanation 5 to Section 32(1) concerning the allowance of depreciation. Detailed Analysis: Issue 1: Rejection of the Claim for Additional Depreciation The primary issue in this case revolves around the rejection of the assessee's claim for additional depreciation on plant and machinery amounting to Rs. 6,29,28,039/-. The Assessing Officer (AO) disallowed the claim on the grounds that the assessee failed to file a revised return by the deadline of 31.03.2011. The CIT(A) upheld this decision, relying heavily on the Supreme Court's ruling in Goetze (India) Ltd. vs. CIT, which stated that claims for deductions must be made through a revised return and not by a letter during assessment proceedings. The assessee argued that the situation was similar to a previous case involving its sister concern, where the ITAT Amritsar Bench had ruled in favor of the assessee. The assessee also contended that the omission to claim additional depreciation was inadvertent and not deliberate or malafide. The ITAT examined the facts and found that the omission was indeed inadvertent, referencing the Bombay High Court ruling in Commissioner of Income Tax. Central-I Versus M/s. Pruthvi Brokers & Shareholders Pvt. Ltd., which supported the notion that appellate authorities have the jurisdiction to consider additional claims even if not initially filed. Issue 2: Applicability of Explanation 5 to Section 32(1) The second issue pertains to whether Explanation 5 to Section 32(1) of the Income Tax Act, which allows for depreciation whether or not claimed by the assessee, applies to additional depreciation under Section 32(1)(iia). The CIT(A) held that Explanation 5 applies only to normal depreciation and not to additional depreciation. However, the ITAT disagreed, stating that both normal and additional depreciation are part of Section 32(1) and thus, Explanation 5 should apply to both. Consequently, the ITAT directed the AO to allow the additional depreciation as per law. Conclusion: The ITAT concluded that the assessee's claim for additional depreciation was valid and should be allowed. The tribunal noted that the omission to claim the depreciation was inadvertent and not deliberate. It also clarified that Explanation 5 to Section 32(1) applies to additional depreciation under Section 32(1)(iia). Therefore, the ITAT reversed the order of the CIT(A) and directed the AO to allow the additional depreciation. The appeal of the assessee was allowed. Order: The appeal filed by the assessee was allowed, and the AO was directed to allow the additional depreciation as per law. The order was pronounced in the open court on 17.3.2015.
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