1988 (9) TMI 75 - AT - Income Tax

Summary

Issues:
- Additional depreciation u/s 32(1)(iia) of the IT Act, 1961

Analysis:
In this appeal, the department contested the allowance of additional depreciation u/s 32(1)(iia) of the IT Act, 1961 for an Industrial Company that installed new machineries during the accounting period. The dispute arose when the ITO restricted the additional depreciation to a period of 12 months, disallowing a portion of the claim. However, the CIT(A) ruled in favor of the company, stating that once normal depreciation was allowed for more than 12 months, additional depreciation should not be restricted to a 12-month period. The Revenue argued that the legislative intent behind sec. 32(1)(iia) was to allow additional depreciation for one year only. Conversely, the company's counsel contended that the quantification of additional depreciation is linked to the normal depreciation amount, not the duration of the previous year.

Upon analysis, the Tribunal found merit in the company's argument, emphasizing a harmonious construction of the relevant provisions. The Tribunal noted that the calculation of additional depreciation under sec. 32(1)(iia) is inherently tied to the amount of normal depreciation determined under sec. 32(1)(ii) and Rule 5(1) with the proviso. The Tribunal highlighted that the expressions "previous year" and "immediately succeeding previous year" in sec. 32(1)(iia) must align with the meanings derived from the proviso to Rule 5(1) for coherence in the statutory framework. By considering the legislative intent and departmental circular emphasizing beneficial treatment for the assessee, the Tribunal upheld the CIT(A)'s decision to allow the company's claim for additional depreciation in full.

The Tribunal concluded that the ITO erred in adopting a different figure for normal depreciation while calculating additional depreciation, despite complying with the applicable provisions. Therefore, the Tribunal upheld the CIT(A)'s order, confirming the allowance of additional depreciation and dismissing the department's grounds of appeal on this issue.