2021 (9) TMI 278 - AT - Income Tax

Revision u/s 263 by CIT - entitled to deduction under section 32AC - allowance of depreciation on assets acquired earlier, but were installed during the present assessment year - scope of amendment - as argued installation and capitalization was not evident - HELD THAT - The first proviso to the section inserted Finance Act, 2001 w.e.f. 01/04/2016 mentions that provided that where the installation of the new assets are in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new assets are installed.10. Notes to clauses in the introduction clarifies that it is meant to remove hardships. In our considered opinion, since amendment is meant to remove a hardship, the same needs to be given retrospective effect. This proposition is based upon the Haydens rules or mischief rules. According to this rule, while interpreting statutes, first the problem or mischief that the statute was designed to remedy should be identified and then a construction that suppresses the problem and advances the remedy should be adopted. This proposition is also duly supported by Hon ble Supreme Court decision in the case of Alom Extrusions 2009 (11) TMI 27 - SUPREME COURT and Calcutta Exports Company 2018 (5) TMI 356 - SUPREME COURT that when an amendment is made to clarify or remove the hardship, the same is to be treated as clarificatory amendment and it applies retrospectively. There certainly can be view on this issue that the assessee is eligible for allowance for depreciation on assets which have been acquired earlier, but were installed during the present assessment year. Assessee has provided the details of computation of depreciation including that u.s 32AC to the AO. The grievance of the Ld.CIT, which is echoed by CIT-DR before us is that the AO has not obtained the details of assets acquired earlier, which has been installed during the year. As in the Ld.CIT s view the assets acquired prior to the financial year are not eligible for depreciation u.s 32AC. There certainly can be a legally sustainable view that assessee is eligible for allowance of depreciation on assets, which have been acquired earlier, but were installed during the present assessment year. CIT is not correct in observing that the installation and capitalization is not evident. We find that the installation and capitalization was clearly evident from the financials of the assessee company - AO took the view that the assessee is eligible for the depreciation on all these assets, which have been duly capitalized during the financial ear. It can be said that AO has taken a possible view and if the Ld.CIT is not in agreement there with and takes a contrary view, the same would not give raise to the section 263 jurisdiction with the Ld.CIT. Assessee has filed an additional evidences regarding installation of the machinery. Though, we have already pointed out hereinabove, that once the assets is capitalized in the financials of the company, the same can be said to have taken place only after installation of the company of the assessee. In any case, since assessee s counsel has given the additional evidences before us, we direct the same should be examined by the AO. AO should grant depreciation to the assessee after examination thereof. We set aside the direction of the Ld.CIT that assessee is eligible to claim deduction only where invoice date falls after 01/04/2013.appeal by the assessee stands allowed for statistical purpose.

Summary

Issues Involved:
1. Whether the Assessing Officer's (AO) order was erroneous in relation to the deduction under section 32AC of the Income Tax Act.
2. Whether the deduction under section 32AC should be allowed based on the date of installation of new assets.
3. Whether the Commissioner of Income Tax (CIT) had the jurisdiction to invoke section 263.
4. Whether the CIT's direction to initiate penalty under section 271(l)(c) was justified.

Issue-wise Detailed Analysis:

1. Whether the Assessing Officer's (AO) order was erroneous in relation to the deduction under section 32AC of the Income Tax Act:
The CIT noted that the AO had allowed a deduction under section 32AC without adequate verification of the acquisition and installation of new assets. The CIT found that the assessee had claimed a deduction of ?18,56,46,466 under section 32AC for assets acquired and installed during FY 2013-14. However, the CIT observed that there was no evidence on record to confirm the acquisition and installation of these assets during the specified period. The CIT held that the AO's order was erroneous and prejudicial to the interests of the revenue, leading to an underassessment of income and a short levy of tax.

2. Whether the deduction under section 32AC should be allowed based on the date of installation of new assets:
The assessee argued that section 32AC is a beneficial provision intended to promote substantial investments in plant and machinery. The assessee contended that the significant date for claiming the deduction should be the date of installation, not the date of acquisition. The assessee provided details showing that a portion of the assets was purchased before 1st April 2013 but installed within the specified period. The CIT, however, held that the deduction under section 32AC could only be claimed for assets acquired and installed after 31st March 2013 but before 1st April 2015. The Tribunal, after examining the provisions and amendments to section 32AC, concluded that a view could be taken that assets acquired earlier but installed during the assessment year are eligible for the deduction. This view aligns with the principle that amendments meant to remove hardship should be given retrospective effect.

3. Whether the Commissioner of Income Tax (CIT) had the jurisdiction to invoke section 263:
The Tribunal referred to the Supreme Court's decision in Malabar Industries vs CIT, which states that if the AO has taken a possible view, the CIT cannot invoke section 263 merely because he disagrees with that view. The Tribunal found that the AO had taken a possible view by allowing the deduction under section 32AC based on the installation of assets. The Tribunal held that the CIT's invocation of section 263 was not justified as the AO's order was not unsustainable in law.

4. Whether the CIT's direction to initiate penalty under section 271(l)(c) was justified:
The CIT directed the AO to initiate penalty proceedings under section 271(l)(c) for furnishing inaccurate particulars of income. The Tribunal did not specifically address this issue in detail but set aside the CIT's order, implying that the direction to initiate penalty was also set aside.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, holding that the AO's view was a possible view and the CIT's invocation of section 263 was not justified. The Tribunal directed the AO to re-examine the additional evidence provided by the assessee regarding the installation of machinery and to grant the deduction under section 32AC accordingly. The Tribunal set aside the CIT's direction that the deduction could only be claimed for assets with an invoice date after 1st April 2013.