2021 (7) TMI 531 - HC - Income Tax

Additional depreciation allowed in the next year, in case, the same cannot be allowed in the earlier year - provisions in the statute to carry forward the balance additional depreciation to the following years - HELD THAT - Issue decided against revenue as decided in M/S. COMSTAR AUTOMATIVE TECHNOLOGIES PRIVATE LTD. 2020 (3) TMI 814 - MADRAS HIGH COURT

Summary

Issues:
Challenging the order passed by the Income Tax Appellate Tribunal, the Revenue has filed appeals regarding additional depreciation claimed by the assessee on the opening Written Down Value (WDV) of plant and machinery purchased in earlier years. The substantial questions of law involve the allowance of additional depreciation in subsequent years, ignoring jurisdictional High Court decisions, and the provisions of Section 32(1) regarding carrying forward balance additional depreciation.

Analysis:
The assessee, a limited company in the business of Foundries, claimed additional depreciation under section 32(1)(iia) of the Income Tax Act for Assessment Years 2007-2008, 2009-2010, and 2010-2011 on the opening WDV of plant and machinery. The Assessing Officer disallowed the claim, stating that additional depreciation is only allowable in the year of purchasing new plant and machinery. The Commissioner of Income Tax(Appeals) upheld this decision, leading the assessee to appeal before the Income Tax Appellate Tribunal, which allowed the appeals.

The appeals were admitted based on substantial questions of law, including the allowance of additional depreciation in subsequent years, ignoring previous court decisions, and the absence of provisions for carrying forward balance additional depreciation. The Senior Standing Counsel for the appellant referenced a previous judgment where the Hon'ble Division Bench held that deductions under Section 10A or 10B should be made while computing the gross total income of the eligible undertaking, not at the stage of computing total income under Chapter VI of the Act.

Following this precedent, the Division Bench decided against the Revenue in a subsequent judgment, affirming that the questions of law were already settled in previous cases. The counsel for the respondent also supported this view, leading to the dismissal of the Tax Case Appeals. The court held that the questions of law were decided against the revenue and in favor of the assessee, in line with previous judgments. Consequently, the appeals were dismissed with no costs.

In conclusion, the judgment upheld the decision of the Income Tax Appellate Tribunal to allow the assessee's claim for additional depreciation on the opening WDV of plant and machinery purchased in earlier years, based on the interpretation of relevant provisions and previous court decisions.