2016 (5) TMI 1574 - AT - Income Tax

Rectification of mistake u/s 154 - Disallowing additional depreciation u/s. 32(iia) - assets used for less than 180 days - AO issued a rectification notice u/ s. 154 disallowing additional depreciation claimed - HELD THAT - Section 32(1)(iia) of the Act provides that additional depreciation @ 20% shall be allowed to the assessee on the actual cost of new plant and machinery which has been acquired after 31.03.2005. The second proviso to section 32 restricts depreciation allowance at 50% if the asset is used for less than 180 days in a previous year. There is no mention in section 32(1)(iia) that the 20% additional depreciation is allowable in first year only. Provisions of section 32(1)(iia) and second proviso to section 32 should be read and construed reasonably liberally and purposefully. If the acquired asset is used for less than 180 days in year one than the allowable additional depreciation is restricted to 50% in the first year and balance 50% additional depreciation is allowable in subsequent year. There is no restriction vis-avis the number of assessment years over which the additional depreciation is to be allowed. The issue under consideration is also squarely covered by the order of coordinate bench in the case of SIL Investment Ltd 2012 (6) TMI 83 - ITAT DELHI wherein it was held that additional depreciation which was restricted in the year of purchase to the extent of 50% on the plea of machinery having been put to use for a period of less than 180 days the balance of additional depreciation is required to be allowed in the succeeding year. In view of the above we do not find any merit for disallowing assessee s claim for depreciation. Nature of receipt - TUF subsidy received from Central Government under Technology Upgradation Fund Scheme (TUF) - Revenue or capital receipt - HELD THAT - The assessee himself had offered the taxation for the said subsidy and the AO had assessed the same accordingly. It is not the case that the AO at the time of assessing income of the assessee had proceeded in violation of any statutory provision. If subsequently in a case law the coordinate bench of the Tribunal has given a finding that such receipt is a capital receipt that cannot be form the basis to reopen/readjudicate the issue which has already attained finality. The assessee has neither agitated this issue on merits during the assessment proceedings nor by way of appeal before the CIT(A). Even the same cannot be considered as a mistake apparent on record u/s.154 proceedings as the AO had assessed the income as offered by the assessee and while doing so he had not directly violated any statutory provision of the Act. Hence it cannot be said to be any mistake apparent on record with regard to nature of TUF subsidy. Merely because subsequently a coordinate bench of the Tribunal has taken some view with regard to nature of TUF subsidy in case of some other assessee that itself cannot be said to be sufficient ground to readjudicate or to reconsider the already concluded assessment. If such a course would be allowed to be adopted then it may give rise to a number of claims for readjudication of several already concluded cases and such course will be against the principle of finality of proceedings at one stage and would violate the object and purpose of the Indian Limitation Act 1963. In view of this we do not find that treatment of TUF subsidy offered by assessee and accepted by the AO as revenue receipt under the facts and circumstances of this case was a mistake apparent on record.

Summary

Issues:
1. Disallowance of additional depreciation.
2. Treatment of TUF subsidy as revenue receipt.

Issue 1: Disallowance of additional depreciation
The appellant filed appeals against the CIT(A)-Mumbai's order for the assessment years 2009-10 & 2010-11, primarily challenging the disallowance of additional depreciation. The AO observed that the deduction claimed for additional depreciation was not in order as it was allowable only in the year the asset was put to use. The appellant contended that the additional depreciation was claimed as per the provisions of section 32(1)(iia) and the intent was to stimulate the manufacturing sector. The AO, however, found the claim to be incorrect and withdrew the additional depreciation, resulting in a recomputed loss. The CIT(A) upheld the AO's decision, leading the appellant to appeal further.

The ITAT considered the contentions and found that the appellant had claimed additional depreciation on eligible assets acquired in the financial year 2007-08, used for less than 180 days, as per section 32(1)(iia). The tribunal noted that there was no restriction on the number of assessment years over which the additional depreciation could be claimed. Referring to a similar case, the tribunal held that if the additional depreciation was restricted in the year of purchase due to asset usage, the balance should be allowed in the succeeding year. Therefore, the tribunal concluded that there was no merit in disallowing the appellant's claim for depreciation.

Issue 2: Treatment of TUF subsidy as revenue receipt
In the assessment year 2009-2010, the appellant raised an additional ground regarding the treatment of TUF subsidy received as a revenue receipt. The AO had assessed the subsidy as a revenue receipt based on the appellant's own offer for taxation. The appellant did not challenge this during the appeal before the CIT(A). Subsequently, when the AO disallowed the depreciation claim under section 154, the appellant raised the issue of TUF subsidy treatment, citing a case law. The tribunal found that the appellant's claim was not maintainable at that stage since the issue had not been raised earlier during assessment or appeal proceedings. The tribunal emphasized that the treatment of the subsidy as a revenue receipt had not violated any statutory provision during assessment. Therefore, the claim regarding the nature of TUF subsidy was dismissed as not maintainable at that stage.

In conclusion, the ITAT allowed the appeal for the assessment year 2009-10 in part, while the appeal for the assessment year 2010-11 was fully allowed.