2019 (4) TMI 1432 - AT - Income Tax

Disallowance of Additional Depreciation u/s 32(1)(iia) - use less tan 180 days - addition to the tune of 50% of stipulated rate of 20% i.e. 10% with respect to new plant and machinery which was acquired and put to use for less than 180 days - entitlement for balance 50% in the subsequent assessment year - HELD THAT - Assessee has acquired and installed new plant and machineries during the year under consideration which undisputedly are entitled for additional depreciation under Sec.32(1)(iia) of 20% , but since the Plant and Machinery were put to use for less than 180 days in AY 2012-13, the authorities below rightly allowed additional depreciation @ 50% of the stipulated rate of additional depreciation of 20% i.e. 10% keeping in view second proviso to Section 32(1) during the impugned assessment year, as against stipulated rate of additional depreciation on new plant and machinery of 20% provided under Section 32(1)(iia) of the 1961 Act , hence consequently balance additional depreciation @ 10% on such new plant and machinery will be allowed in immediately succeeding year i.e A.Y. 2013-14, subject to verification by the AO. On the same analogy what remained to be allowed in immediately preceding assessment year i.e. AY 2011-12 i.e. additional depreciation @10% ( being 50% of stipulated rate of 20%) on the ground that new plant and machinery acquired during AY 2011-12 was put to use for less than 180 days , the remaining claim of depreciation @10% shall be allowed in the year under consideration , subject to verification by the AO. Amendment brought in statute in Section 32 of the 1961 Act by insertion of third proviso to Section 32(1) by Finance Act, 2015 w.e.f. 01.04.2016, wherein it is provided that the assessee will be entitled for claiming rest of the additional depreciation in immediately succeeding year which could not be allowed in the year of acquisition on the ground that the said new plant and machinery was put to use for less than 180 days. The Hon ble Madras High Court in the case of CIT v. T.P.Textiles Private Limited 2017 (3) TMI 739 - MADRAS HIGH COURT has held the said proviso to be clarificatory in nature Respectfully following decision of the tribunal in assessee s own case 2018 (2) TMI 1879 - ITAT MUMBAI , we allow ground raised by the assessee in its appeal for AY. 2012-13, subject to limited verification by the AO as to correctness of the amounts so claimed in two successive years. On the same analogy, the claim of additional depreciation u/s 32(1)(iia) of the 1961 Act which stood disallowed in AY 2011-12 on the ground of user of new plant and machinery for a period of less than 180 days keeping in view second proviso to Section 32(1) of the 1961 Act , shall be allowed in the impugned assessment year subject to limited verification by the AO as to correctness of the amounts so claimed in two successive years.. The appeal of the assessee is partly allowed as indicated above

Issues Involved:
1. Disallowance of Additional Depreciation under Section 32(1)(iia) of the Income Tax Act, 1961.
2. Restriction of Additional Depreciation to 50% for assets used for less than 180 days.
3. Non-adjudication of fresh claim for balance 50% additional depreciation for assets acquired in the previous year but used for less than 180 days.

Detailed Analysis:

1. Disallowance of Additional Depreciation under Section 32(1)(iia):
The appellant, engaged in the manufacturing of printed packaging materials, claimed additional depreciation of ?6,48,97,045 under Section 32(1)(iia) of the Income Tax Act, 1961. Out of this, ?6,08,48,418 was undisputed as it pertained to new plant and machinery used for more than 180 days. The dispute arose over the additional depreciation of ?40,48,626 for new plant and machinery used for less than 180 days, which the AO restricted to 50% (i.e., 10% of the stipulated 20%) as per the second proviso to Section 32(1)(iia). The AO disallowed the remaining 50%, adding ?20,24,313 back to the assessee's income.

2. Restriction of Additional Depreciation to 50% for Assets Used for Less than 180 Days:
The CIT(A) upheld the AO's decision, stating that there is no provision in the statute to allow additional depreciation beyond the first year of use. The CIT(A) maintained that only 50% of the stipulated rate of 20% (i.e., 10%) is allowable for assets used for less than 180 days, as per the second proviso to Section 32(1). The CIT(A) dismissed the assessee's contention for the remaining 50% additional depreciation.

3. Non-adjudication of Fresh Claim for Balance 50% Additional Depreciation:
The assessee also claimed additional depreciation of ?29,92,833 for the preceding assessment year (AY 2011-12) for assets used for less than 180 days, which was not allowed by the CIT(A). The CIT(A) dismissed this claim, stating it did not arise from the assessment order. The assessee argued that the balance additional depreciation should be allowed in the subsequent year (AY 2012-13) as per the CIT(A)'s own decision for AY 2011-12.

Tribunal's Decision:
The tribunal dismissed grounds 1 to 3 as not pressed by the assessee. For ground 4, the tribunal referred to the assessee's own case in ITA Nos. 5403 & 5404/Mum/2016 and the decision of the Hon'ble Madras High Court in CIT v. T.P. Textiles Private Limited (2017) 394 ITR 483 (Mad.), which held that the balance 50% of additional depreciation can be claimed in the succeeding year. The tribunal observed that the amendment to Section 32 by the Finance Act, 2015, effective from 01.04.2016, clarified that the balance 50% of additional depreciation is allowable in the immediately succeeding year.

The tribunal allowed the assessee's claim for the balance additional depreciation for AY 2011-12 and AY 2012-13, subject to verification by the AO. The tribunal followed the precedent set by the Hon'ble Madras High Court and the tribunal's own earlier decision, concluding that the balance additional depreciation should be allowed in the subsequent year if the asset was used for less than 180 days in the year of acquisition.

Conclusion:
The appeal was partly allowed, with the tribunal directing the AO to verify the correctness of the amounts claimed for additional depreciation in the successive years and allow the balance 50% additional depreciation accordingly. The decision emphasized the beneficial nature of the provision and the legislative intent to encourage investment in new plant and machinery.

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