2017 (4) TMI 411 - HC - Income Tax

Additional depreciation - assessee not permitted to carry forward, the balance additional depreciation, to the following year, in which, the said asset had been installed and first put to use - Held that - The provision incorporates within itself certain attributes qua the asset in issue based on which the Assessee can claim additional depreciation. The word new which precedes machinery or plant is indicative of the type of asset, on which, additional depreciation can be claimed. In our opinion, it does not, in any way, limit or restrict the claim for additional depreciation, to the previous year, in which, the said asset is installed and used. Accordingly, in our view, the Assessee cannot be prevented from claiming balance additional depreciation in the following year. - Decided in favour of assessee

Summary

Issues:
1. Appeal against the judgment of the Income Tax Appellate Tribunal regarding carrying forward balance additional depreciation.
2. Interpretation of Section 32(1)(iia) of the Income Tax Act, 1961 regarding claiming balance additional depreciation.

Analysis:
1. The appeal was filed by the Assessee against the Tribunal's decision not permitting the carry forward of balance additional depreciation to the following year when the asset was first put to use. The Assessee had acquired and utilized plant and machinery worth a specific amount during the relevant assessment year. The Assessee claimed the balance additional depreciation in the subsequent year, which was rejected by the Assessing Officer, leading to an appeal to the CIT(A) and then to the Tribunal, which upheld the assessment order.

2. The key issue revolved around the interpretation of Section 32(1)(iia) of the Income Tax Act, 1961. The Assessee argued that the term "new machinery or plant" in the provision did not restrict the claim for additional depreciation to the year of installation and use. The Court agreed with the Assessee, emphasizing that the term "new" merely indicated the type of asset eligible for additional depreciation and did not limit the claim to the installation year. The Court highlighted that the provision contained attributes allowing the Assessee to claim additional depreciation on the asset in question, irrespective of the year of installation and use.

3. The Court referred to previous judgments, including Commissioner of Income Tax, Madurai Vs. M/s.Shri T.P.Textiles Private Limited and M/s.Brakes India Limited Vs. The Deputy Commissioner of Income Tax, to support its interpretation. It rejected the Revenue's contention that balance depreciation could not be carried forward based on the expression used in the Act. Ultimately, the Court allowed the Assessee's appeal, setting aside the Tribunal's judgment without any order as to costs.