2018 (12) TMI 64 - HC - Income Tax

Entitlement to 50% of the additional depreciation under Section 32(1) (iia) - whether when 50% of the additional depreciation is claimed by the Assessee in a particular Assessment Year, since the acquisition and putting in to use of the assets in the previous Year was for less than 180 days, the Assessee can claim the remaining depreciation in the subsequent Assessment Year? - Tribunal allowed claim - Held that - The third proviso, now recognizes the right of an Assessee to claim the remaining 50% depreciation in subsequent year in a case where machinery and plant being acquired and put to use for less than 180 days in the previous year, the depreciation was restricted to 50%. Such a situation as in the present case, was considered by the Division Bench of the Madras High Court in Commissioner of Income Tax v/s. Shri T. P. Textiles Pvt. Ltd. 2017 (3) TMI 739 - MADRAS HIGH COURT the Court referred to the judgment of the Karnataka High Court in Rittal India Pvt. Ltd., 2016 (1) TMI 81 - KARNATAKA HIGH COURT as well as the addition of third proviso to clause (ii) of sub-section 1 of Section 32 Karnataka High Court in Rittal India Pvt., Ltd.,(supra) even without the aid of the statutory amendment held that remaining 50% unclaimed depreciation would be available to the Assessee in the succeeding Assessment Year. Now the legislation has amended the provision by adding a proviso which, specifically recognizes the said right. The Madras High Court in Shri T. P. Textiles Pvt. Ltd., (supra) ruled that such proviso being clarificatory in nature, would apply to pending cases, covering past period also. No reason to take view different from two High Courts, examining the situation at considerable length. In the result, no question of law arises. - Decided against revenue

Summary

Issues:
Challenge to Judgment of Income Tax Appellate Tribunal regarding additional depreciation under Section 32(1)(iia) of the IT Act, 1961 for Assessment Year 2007-08.

Analysis:
The case involved a challenge by the Revenue against the Judgment of the Income Tax Appellate Tribunal regarding the Assessee's entitlement to 50% of the additional depreciation under Section 32(1)(iia) of the IT Act, 1961 for Assessment Year 2007-08. The facts revealed that the Assessee had claimed additional depreciation under Section 32(1)(iia) for acquiring and installing new machinery. The dispute arose when the Assessing Officer restricted the claim for additional depreciation, leading to an appeal by the Assessee before the CIT(A) and subsequently before the Tribunal. The Tribunal dismissed the Revenue's appeal, prompting the Revenue to challenge the decision before the High Court.

The High Court analyzed the statutory provisions related to additional depreciation under Section 32(1)(iia) of the Act. It noted that the second proviso to clause (ii) of Section 32 restricts the Assessee's claim to 50% of the additional depreciation if the assets are put to use for less than 180 days in the previous year. The Court referred to a judgment of the Karnataka High Court and emphasized the liberal interpretation of beneficial legislation to benefit the Assessee. The Court highlighted that the purpose of additional depreciation was to encourage industrialization and held that the Assessee could claim the balance of the benefit in the subsequent assessment year.

The High Court discussed the subsequent amendment to the statutory provisions adding a third proviso to clause (ii) of Section 32, explicitly recognizing the Assessee's right to claim the remaining 50% depreciation in the subsequent year. It referred to a judgment of the Madras High Court, which clarified that the amendment was clarificatory in nature and applied to pending cases, including past periods. The High Court concurred with the interpretations of both High Courts and dismissed the Revenue's appeal, stating that no question of law arose in the case.

In conclusion, the High Court upheld the Tribunal's decision, affirming the Assessee's right to claim the remaining 50% of additional depreciation in the subsequent assessment year. The Court emphasized the importance of a liberal interpretation of beneficial legislation and the statutory provisions to encourage industrialization. The judgment provided clarity on the Assessee's entitlement to additional depreciation under Section 32(1)(iia) of the IT Act, 1961, settling the dispute for the Assessment Year 2007-08.