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TMI Blog2014 (2) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... es - Such restrictions cannot divest the statutory right - Law does not prohibit that balance 50% will not be allowed in succeeding 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 plant and machinery - thus, the order is set aside and the authority directed to extend the benefit - Decided in favour of Assessee. Disallowance made u/s 14A of the Act - Held that:- The assessee had not claimed any exempt income - provisions of section 14A were applicable in that year and AO was entitle to make disallowance - But, he should not have invoked the provisions of Rule 8D - thus, the matter remitted back to the AO for fresh adjudication - Decided partly in favour of Assessee. - ITA No. 7495/Mum/2010, ITA No. 7126/Mum/2011 - - - Dated:- 19-2-2014 - Sh. Rajendra And Vivek Varma, JJ. For the Petitioner : Shri Vijay Mehta For the Respondent : Shri M. L. Perumal ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing of chemical Dyes and intermediates.Details of dates of filing of returns, incomes returned, dates of assessment, assessed incomes, dates of orders of the CIT(A)can be summarised as under : Dt.of filing of Return Returned Income (Rs.) Date of assessment Assessed Income Dt. of orders of CIT(A) AY-2007-08 24.10.2007 16, 37, 06, 558/- 24.12.2009 16, 89, 35, 800/- 03.08.2010 AY-2008-09 19.09.2008 16, 08, 10, 347/- 16.12.2010 16, 32, 89, 290/- 04.08.2011 ITA No. 7495/MUM/2010 AY-2007-08 3.During the course of assessment proceedings, AO found that assessee had claimed additional depreciation of Rs. 45, 45, 937/- on the machinery purchased during the AY 2006-07 @ 10%. He directed the assessee to explain as to why the additional depreciation amounting to Rs. 45.45 lacs should not be disallowed on the machinery purchased. Vide its letter dated 16.09.2009 assessee submitted that claim on depreciation was made as per the tax report. Referring to sub-section 32(1)(iia), AO held that intention of the legislature was to grant additional depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the case of Cosmo Films Ltd.(supra).We would like to reproduce the relevant portion of the orders. "13.In Ground Nos. 2 3, the issue involved is against the disallowance of arrears of additional depreciation of Rs. 3, 34, 78, 825/- and negating an alternate claim for deduction of additional depreciation of Rs. 11, 29, 06, 214/-. 14.The assessee has claimed additional depreciation during the year which was not pertaining to the addition to the fixed asset during the year.The claim of the assessee was that the additions made during the second half of the financial year 2002-03 relevant to Assessment Year 2003-04, the additional depreciation was claimed only on 50% on all the additions made after 30th September, 2002. The balance 50% could not be claimed in that Assessment Year on account of second proviso to section 32(1)(ii), hence the same is being claimed during this year as it was balance of the additional depreciation. 17. We have heard both the sides on this issue. Section 32(1)(iia) inserted by Finance (No. 2) Act, 2002 with effect from 1.4.2003. In speech of Finance Minister, this clause was inserted to provide incentives for fresh investment in industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of additional allowance u/s 32(1)(iia) is one time benefit to encourage the industrialization and in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. (supra), the provisions related to it have to be constructed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days. One time benefit extended to assessee has been earned in the year of acquisition of new plant and machinery. It has been calculated @ 15% but restricted to 50% only on account of usage of these plant machinery in the year of acquisition. In section 32(1)(iia), the expression used is "shall be allowed". Thus, the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D was not applicable in the AY-2007-08, that assessee had not claimed any expenditure with relation to exempt income. He referred to page no. 2 of the paper book. He relied upon the cases of Gujarat State Fertilizers and Chemicals Ltd.(358 ITR 323), Shopper's Stop Ltd. (ITA No. 1448 4475/Mum/2010- AY 2006- 07 2007-08 dated 30.08.2011, Strides Arcolab Ltd.(138 ITD 323), Weizman Ltd. (ITA No. 4751/ Mum/ 2010-AY 2006-07 dated 21.08.2011. Departmental Representative (DR) supported the order of the FAA.We have heard the rival submissions and perused the material before us. It is a fact that assessee had not claimed any exempt income in the year under consideration. In our opinion provisions of section 14A were applicable in that year and AO was entitle to make disallowance. But, he should not have invoked the provisions of Rule 8D. We are of the opinion that in the interest of justice, matter should be remitted back to the file of the AO for fresh adjudication. Appeal filed by the assessee is allowed.in part. ITA No.7126/Mum/2011 AY-2008-09 11.Ground No.1 is about disallowance of the additional depreciation u/s. 32(1)(iia) of the Act. Following our order of the earlier ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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