2016 (8) TMI 1401 - AT - Income Tax

Reopening of assessment u/s 147 2, 04, 84, 781/- for the relevant assessment year 2008-09 in the case of the assessee. It is ordered accordingly. Since we have decided the issue on merits we do not find it necessary to adjudicate the issue with respect to reopening of assessment since it would be only academic. - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of assessment under section 147 & 148 of the Income Tax Act.
2. Disallowance of additional depreciation under section 32(1)(ii) of the Income Tax Act.

Detailed Analysis:

1. Reopening of Assessment under Section 147 & 148:
The assessee challenged the reopening of the assessment under sections 147 and 148 of the Income Tax Act. However, since the primary issue was decided on merits, the Tribunal did not find it necessary to adjudicate the reopening of the assessment, considering it academic.

2. Disallowance of Additional Depreciation under Section 32(1)(ii):
The core issue revolved around the disallowance of additional depreciation amounting to ?2,04,88,781/- by the Assessing Officer (AO), which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee claimed additional depreciation for assets used for less than 180 days in the preceding year, which was disallowed by the AO based on the proviso to section 32(1)(ii), stating that there was no provision for carrying forward the balance depreciation to subsequent years.

The CIT(A) confirmed the AO's order, emphasizing the absence of a provision in the Act to carry forward unabsorbed additional depreciation to subsequent years before the amendment introduced by the Finance Act, 2015, effective from 1.4.2016. The CIT(A) held that the assessee was not entitled to claim additional depreciation for the prior year in the succeeding assessment year, as per the law applicable to the assessment year 2008-09.

Tribunal's Findings:
The Tribunal found merit in the Authorized Representative's (AR) contentions, who cited the case of Automotive Coaches & Components Ltd. Vs. DCIT, where it was held that the assessee is entitled to claim the remaining 10% of the depreciation in the subsequent year. The Tribunal noted that section 32(1)(iia) provides for additional depreciation at 20%, and if the asset is used for less than 180 days, only 50% of the depreciation is allowed in that year, with the balance 50% to be claimed in the subsequent year.

The Tribunal referred to several precedents, including the Cochin Bench's decision in Apollo Tyres Ltd. v. ACIT and the Karnataka High Court's judgment in Rittal India Pvt. Ltd., which supported the view that the balance additional depreciation can be claimed in the subsequent year. These decisions emphasized that the beneficial provisions of the Income Tax Act should be interpreted liberally to allow the assessee the full benefit of additional depreciation, even if it means carrying forward the balance to the next year.

Conclusion:
The Tribunal concluded that the assessee is entitled to claim the remaining 10% of the additional depreciation of ?2,04,84,781/- for the assessment year 2008-09. Consequently, the orders of the lower authorities were set aside, and the AO was directed to allow the balance 50% of depreciation during the relevant assessment year. The appeal of the assessee was allowed, and the issue of reopening the assessment was not adjudicated as it became academic.

Order Pronounced:
The order was pronounced in the open court on 24th August 2016, allowing the appeal of the assessee.