2016 (1) TMI 81 - HC - Income Tax

Additional Depreciation u/s 32 - claim of 10% (50% of 20%) in the first year and balance 10% in the second year - Whether the Tribunal is correct in extending the 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 violating the legal principles of cassus omissus which states that the courts cannot compensate for what the legislature has omitted to enact? - Held that - The language used in Clause (iia) of the said Section clearly provides that a further sum equal to 20% of the actual cost of such machinery or plant shall be allowed as deduction under Clause (ii) . The word shall used in the said Clause is very significant. The benefit which is to be granted is 20% additional depreciation. 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 the balance 10% additional deduction can be availed in the subsequent assessment year, otherwise the very purpose of insertion of Clause (iia) would be defeated because it provides for 20% deduction which shall be allowed. Beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain 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 depreciation allowed under Section 32(i)(iia) of the Act is a one time benefit to encourage 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 Tribunal. - Decided in favour of assessee

Summary

Issues:
- Interpretation of Section 32(1)(iia) of the Income Tax Act, 1961 regarding allowance of additional depreciation in subsequent assessment years.
- Application of legal principles in extending benefits under Section 32(1)(iia) to the next assessment year.

Analysis:
1. Issue 1: Interpretation of Section 32(1)(iia)
The case involved a dispute over the allowance of the balance 10% depreciation under Section 32(1)(iia) of the Income Tax Act, 1961 in the next assessment year. The assessee had claimed 50% of additional 20% depreciation under this provision for the financial year 2006-07. The Assessing Officer and the Appellate Commissioner disallowed the claim, but the Tribunal allowed it. The central question was whether the balance 10% depreciation could be claimed in the subsequent year to avail the total 20% allowable depreciation.

2. Analysis of Section 32(1)(iia) Provision
The court analyzed the relevant provisions of Section 32, specifically focusing on Clause (iia) which allows a further sum equal to 20% of the actual cost of new machinery or plant as deduction under Clause (ii). The court emphasized the significance of the word "shall" in the provision, indicating that the benefit of 20% additional depreciation must be allowed. The proviso restricted claiming only 10% in one year if the machinery was used for less than 180 days, implying that the balance 10% could be claimed in the subsequent assessment year.

3. Legal Interpretation and Purpose of Legislation
The court highlighted that beneficial legislation like Section 32(1)(iia) should be liberally interpreted to benefit the assessee. The purpose of the provision was to encourage industrialization by providing additional benefits for setting up new industrial units or expanding existing ones. The court emphasized that the intention of the legislation was clear in granting additional benefits, and restricting the balance 10% in the subsequent year would defeat the purpose of the provision.

4. Judgment and Conclusion
The court dismissed the appeal, upholding the Tribunal's decision to allow the balance 10% depreciation in the next assessment year under Section 32(1)(iia). It was concluded that the provision should be construed reasonably, liberally, and purposively to grant additional allowances for encouraging industrialization. The court agreed with the Tribunal's interpretation that the additional depreciation under Section 32(1)(iia) is a one-time benefit, and the balance of the benefit can be claimed in the subsequent assessment year.

Therefore, the court held that no interference was necessary with the Tribunal's decision, and no question of law arose for determination. The appeal was dismissed with no order as to costs.