2019 (3) TMI 1821 - AT - Income Tax

Carry forward the balance additional depreciation to the following years - Whether additional depreciation can be allowed in the next year in case the same cannot be allowed in the earlier year? - HELD THAT - As decided in own case 2016 (8) TMI 1167 - ITAT CHENNAI 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. As rightly held, that additional depreciation allowed under Section 32(1)(iia) of the Act is a one time benefit to encourage industrialization, and 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. Respectfully following the above decision of the Tribunal, we direct the Assessing Officer to allow the balance 50% of depreciation i.e., 10% additional depreciation as claimed by the assessee in the following assessment year - Ground raised by the assessee is allowed.

Summary

Issues Involved:
1. Legality of allowing additional depreciation in the subsequent year.
2. Ignoring jurisdictional High Court’s decision.
3. Provisions for carrying forward additional depreciation.

Detailed Analysis:

1. Legality of Allowing Additional Depreciation in the Subsequent Year:
The primary issue raised by the Revenue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in holding that additional depreciation can be allowed in the next year if it cannot be allowed in the earlier year. The Tribunal referenced its own previous decision in the assessee’s case for the AY 2012-13, where it was held that if machinery was installed and used for less than 180 days, the assessee could claim the remaining 10% additional depreciation in the subsequent year under Section 32(1)(iia) of the Income Tax Act. The Tribunal emphasized that there is no provision in the Income Tax Act that explicitly prohibits carrying forward the balance additional depreciation to the following year. This interpretation was consistent with decisions from other benches, such as the Cochin Bench in Apollo Tyres Ltd. and the Delhi Bench in Cosmo Films Ltd., which supported the allowance of the balance 50% additional depreciation in the subsequent year.

2. Ignoring Jurisdictional High Court’s Decision:
The Revenue argued that the CIT(A) ignored the jurisdictional High Court’s decision in the case of MM Forgings Ltd. The Tribunal, however, relied on the judgment of the Karnataka High Court in Rittal India Pvt. Ltd., which interpreted Section 32(1)(iia) liberally, allowing the balance of the benefit of additional depreciation in the subsequent assessment year. The Karnataka High Court held that beneficial legislation should be interpreted to benefit the assessee and that the proviso to Section 32(1)(iia) does not restrict the assessee from claiming the balance of the benefit in the subsequent year.

3. Provisions for Carrying Forward Additional Depreciation:
The Revenue contended that there are no provisions in the statute to carry forward the balance additional depreciation to the following years. The Tribunal, however, noted that the law does not explicitly prohibit this carry forward. The Tribunal cited various precedents, including the Delhi Bench’s decision in Cosmo Films Ltd., which stated that when there is no restriction in the statute to deny the benefit of the balance 50%, the assessee is entitled to the balance additional depreciation in the subsequent year. The Tribunal also referred to the Mumbai Bench’s decision in MITC Rolling Mills (P.) Ltd., which supported the allowance of the balance 50% additional depreciation in the subsequent year.

Conclusion:
The Tribunal concluded that the assessee is entitled to the remaining 10% additional depreciation during the year under consideration, affirming the CIT(A)’s decision. The Tribunal directed the Assessing Officer to allow the balance 50% of depreciation, i.e., 10% additional depreciation, during the year under consideration. The appeal filed by the Revenue was dismissed, and the decision was pronounced in the open court on March 19, 2019, in Chennai.