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2017 (9) TMI 34 - AT - Income TaxRevision u/s 263 - declining the claim and set off of additional depreciation in next year - machinery was installed and worked for less than 180 days - assessee has claimed 50% of additional depreciation in A.Y.2011-12 and carry forward balance 50% in next year - Held that - The eligibility to carry forward and set off 50% of the additional depreciation to the subsequent year on the plea of machinery having been worked for less than six months has been decided by Madras High Court in case of T.P.Textiles Pvt. Ltd. 2017 (3) TMI 739 - MADRAS HIGH COURT stating upon a plain reading of the unamended provision, it could not be said that the Assessee could not claim balance depreciation in the A.Y., which follows the A.Y., in which, the machinery had been bought and used for less than 180 days. we do not find any merit in the action of CIT for declining the claim of additional depreciation to be carried forward. - Decided in favour of assessee.
Issues Involved:
1. Invoking provisions of Section 263 of the Income-Tax Act, 1961. 2. Disallowance of additional depreciation amounting to ?12,29,935. Detailed Analysis: Issue 1: Invoking Provisions of Section 263 of the Income-Tax Act, 1961 The primary issue is whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking the provisions of Section 263 of the Income-Tax Act, 1961, to revise the order passed by the Deputy Commissioner of Income Tax (AO) under Section 143(3) of the Act. The Pr. CIT contended that the order passed by the AO was erroneous and prejudicial to the interest of the revenue because the AO had not made the required inquiries or investigations while allowing the claim of additional depreciation. According to the Pr. CIT, the AO's failure to disallow the additional depreciation claimed by the assessee for the second half of the financial year 2010-11, relevant to A.Y. 2011-12, rendered the assessment order erroneous and prejudicial to the interests of the revenue. The Pr. CIT relied on Explanation 2 to Section 263, which states that an order passed without making necessary inquiries or verifications shall be deemed to be erroneous and prejudicial to the interests of the revenue. The assessee argued that merely because an issue was not discussed in detail in the assessment order does not indicate a lack of inquiry or prejudice caused to the revenue. The assessee cited several judicial pronouncements to support this contention, including CIT v. Gabriel India Ltd., CIT v. T.P. Textiles (P.) Ltd., and CIT v. Krishna Capbox (P.) Ltd. Issue 2: Disallowance of Additional Depreciation Amounting to ?12,29,935The second issue pertains to the disallowance of additional depreciation amounting to ?12,29,935. The Pr. CIT set aside the AO's order on the grounds that adequate inquiry and investigation were not conducted while allowing the claim of additional depreciation under Section 32(1)(iia) of the Act. The Pr. CIT argued that the benefit of additional depreciation should be construed liberally and that there is no restriction on the assessee to carry forward additional depreciation. The Pr. CIT also noted that the third proviso to Clause (ii) of Sub Section (1) of Section 32, inserted by the Finance Act 2015, effective from 01/04/2016, allows the balance 50% of additional depreciation to be claimed in the succeeding previous year. The assessee contended that there is no restriction on carrying forward additional depreciation and cited several judicial pronouncements to support this view, including CIT v. T.P. Textile (P.) Ltd., CIT v. Rittal India (P.) Ltd., and DCIT v. M/s. Godrej Industries Ltd. Upon reviewing the facts and judicial pronouncements, the tribunal noted that the eligibility to carry forward and set off 50% of the additional depreciation to the subsequent year has been decided by the Madras High Court in the case of T.P. Textiles Pvt. Ltd. The court held that there is no limitation on the assessee claiming the balance 50% of additional depreciation in the succeeding assessment year. The Karnataka High Court in the case of Rittal India (P) Ltd. also held that the balance 50% of additional depreciation can be claimed in the subsequent assessment year. Respectfully following the decisions of the Hon'ble High Courts and other judicial pronouncements cited by the learned AR, the tribunal concluded that there is no merit in the action of the Pr. CIT for declining the claim of additional depreciation to be carried forward. The appeals were allowed in favor of the assessee. Order pronounced in the open court on 23/08/2017.
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