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TMI Blog2014 (1) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the ld.DR, the construction made by the assessee would have enduring effect for number of years and it is not used for only one year. Therefore, the assessing officer disallowed the claim of the assessee to the extent of Rs.38,68,518. The ld.DR placed his reliance on the judgment of the Gauhati High Court in CIT vs Sibson Construction & Co (1996) 221 ITR 468 (Gau) and submitted that the Gauhati High Court found that temporary construction is eligible for depreciation only at 7.5%. Therefore, the claim of the assessee for 100% depreciation is not justified. The CIT(A) found that the structure constructed by the assessee would be dismantled on completion of the activity, therefore, it cannot be considered as forming part of the building. The CIT(A) allowed 100% depreciation without considering the judgment of the Gauhati High Court. 4. On the contrary, Shri R Krishna Iyer, the ld.representative for the assessee submitted that as on 31-03-2008, the total expenditure incurred for construction of a temporary structure is Rs.38,68,518. According to the ld.representative, when the assessee undertook massive construction, a temporary structure is required to protect the construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court, the assessee company constructed temporary shed for the purpose of residence and godown to carry out the contract work at the site. The assessee claimed 20% depreciation and not 100% depreciation. The Tribunal found that the assessee was entitled for depreciation @20%. However, the Gauhati High Court found that the assessee has used M.S. rods, G.I. pipes, etc. for construction and the depreciation has to be allowed depending upon the nature of construction such as 1st class, 2nd class and 3rd class. Accordingly, the Gauhati High Court found that the assessee is entitled for depreciation only at 7.5%. In fact, the Gauhati High Court has observed as follows: "... So far question No.4, the Tribunal allowed 20 per cent, depreciation though the facts placed before the Tribunal were that the structures used at construction site were made of cement, M.S. rods, G.I. pipes, etc., over and above wood. It is no doubt, temporary. The temporary constructions come under various categories, viz., 1st class, 2nd class and 3rd class. The rate of depreciation has been mentioned in the rule. Considering all the aspects we come to the conclusion that the Tribunal was not correct in holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business attributable to anyone or more of such activities is eligible for deduction under this section. The legislature employed the words "the whole of the amount of profit and gains of business attributable to anyone or more of such activities". Now the question arises for consideration is when the taxpayer is engaged in the business of banking, whether all kinds of activities would include within the phrase "any such activities"? This Tribunal is of the considered opinion that rule of ejusdem generis or noscitur-a- sociies would come into operation for interpreting the words "any such activities". Therefore, the words "any such activities" employed by the legislature have to be in connection with the business of the taxpayer. An activity which is not connected with banking operation cannot come or fall within the phrase "any such activities". Therefore, any profit or gain of the taxpayer which is attributable to banking business or which has nexus with the banking business is eligible for deduction u/s 80P(2)(a)(i) of the Act. In view of the above, the word "such" shall always refer to the thing which is referred earlier. Therefore, the words "wooden structures" refer to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% of the expenditure as depreciation. Therefore, this Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed. 10. Shri K.K. John, the ld.DR submitted that the next issue arises for consideration is additional depreciation claimed by the assessee. According to the ld.DR, there is no specific provision in the Income-tax Act to claim additional depreciation in the succeeding year. According to the ld.DR, it is not the case of the assessee that sufficient profit was not available to allow the additional depreciation. According to the ld.DR, because of the specific provision in the Act, the assessee was allowed 10% of the additional depreciation in the earlier year, therefore, there is no question of allowing the remaining 10% of depreciation during the year under consideration. 11. Shri R Krishna Iyer, the ld.representative for the assessee submitted that the assessee is entitled for additional depreciation at 20%. Since the asset was used for less than 180 days, the assessee claimed 10% of the additional depreciation in the earlier assessment year and the remaining 10% is claimed in the year under consideration. However, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e depreciation when the assessee has sufficient profit. During the year under consideration, the assessee put to use the machinery for less than 180 days. Therefore, in view of proviso to section 32(1)(ii), the assessee is entitled only for 50% of the depreciation and not the entire rate of depreciation @20%. In view of the proviso, according to the ld.DR, the assessee is not entitled for additional depreciation during the year under consideration. 9. We have considered the rival submissions on either side and also perused the material available on record. Section 32(1)(iia) reads as follows: "32(1)(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided that no deduction shall be allowed in respect of - (A) Any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) Any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery was acquired by the assessing during the previous year and has put to use for the purpose of business less than 180 days, the deduction shall be restricted to 50% of the amount calculated at the prescribed rate. Therefore, if the machinery is put to use in any particular year, the assessee is entitled for 50% of the prescribed rate of additional depreciation. The Income-tax Act is silent about the allowance of the balance 10% additional depreciation in the subsequent year. Taking advantage of this position, the assessee now claims that the year in which the machinery was put to use the assessee is entitled for 50% additional depreciation since the machinery was put to use for less than 180 days and the balance 50% shall be allowed in the next year since the eligibility of the assessee for claiming 20% of the additional depreciation cannot be denied by invoking Second Proviso to section 32(1)(ii) of the Act. 12. This issue was considered by the Delhi Bench of this Tribunal in the case of Cosmo Films Ltd (supra). The revenue has taken a similar ground as taken before this Tribunal that the assessee cannot carry forward the additional depreciation to be allowed in the subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucceeding year. The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of machinery and plant . In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit. We allow ground no.2 of the assessee's appeal. Since we have decided ground no.2 in favour of assessee, there is no need to decide the alternate claim raised in ground no.3. The same is dismissed." 13. This issue was also considered by another bench of this Tribunal at Delhi in SIL Investment Ltd (supra). At page 233 of the TTJ, the Tribunal has observed as follows: "40. There is nothing on record to show that the directions given by the learned CIT(A) are not proper. The eligibility for deduction of additional depreciation stands admitted, since 50 per cent thereof had already been allowed by the AO in the asst.yr.2005-06, i.e. the immediately preceding assessment year. Therefore, obviously ..... X X X X Extracts X X X X X X X X Extracts X X X X
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