2021 (10) TMI 1269 - HC - Income Tax

Revision u/s 263 - Dis-allowance of additional depreciation u/s 32(1)(iia) - Claim of assessee was rejected in the year under consideration by order under Section 263 of the Act, since no new plant and machinery was put to use in that Assessment Year - ITAT allowed the appeal relying upon the judgment of Rittal India (P) Ltd. 2016 (1) TMI 81 - KARNATAKA HIGH COURT HELD THAT - The judgment of Rittal India 2016 (1) TMI 81 - KARNATAKA HIGH COURT has been considered by this Court in an unreported order in M/s. Godrej Industries Ltd. 2018 (12) TMI 64 - BOMBAY HIGH COURT - This Court in Godrej Industries Ltd. 2018 (12) TMI 64 - BOMBAY HIGH COURT has also relied upon the judgment of T. P. Textiles Pvt. Limited 2017 (3) TMI 739 - MADRAS HIGH COURT wherein Madras High Court has considered the additional proviso which was inserted to Section 32(1) (iia) of the Act and has also concurred with the view of the Madras High Court that said newly added third proviso to clause (ii) of subsection 1 of Section 32 of the Act being clarificatory in nature would apply to case covering past period also. In our view, ITAT has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raised any substantial question of law.

Summary

Issues:
1. Jurisdiction of the order passed under Section 263 of the Income Tax Act.
2. Disallowance of additional depreciation under Section 32(1)(iia) of the Act.

Analysis:
1. The Respondent appealed against the order passed under Section 263 of the Income Tax Act, challenging jurisdiction and the disallowance of additional depreciation under Section 32(1)(iia) of the Act. The Assessing Officer had granted additional depreciation on new plant and machinery for the Assessment Year 2009-2010, with a claim for the balance in the Assessment Year 2010-2011. However, the order under Section 263 of the Act rejected this claim. The ITAT allowed the appeal, citing the judgment of the Karnataka High Court in a similar case. The Appellant argued against the carryover of depreciation, stating that machinery ceases to be new once used. The High Court, following the Karnataka High Court and Madras High Court judgments, upheld the ITAT decision, emphasizing the liberal interpretation of beneficial legislation to encourage industrialization.

2. The Karnataka High Court judgment clarified that the balance of unclaimed depreciation could be availed in the succeeding Assessment Year, even before the statutory amendment. The subsequent legislative amendment explicitly recognized this right. The Madras High Court considered the amendment clarificatory and applicable to pending cases, including past periods. The High Court concurred with these interpretations, emphasizing the need for a liberal and purposive construction of provisions to grant additional allowances for industrial development. The Court dismissed the appeal, finding no substantial question of law and upholding the ITAT decision.