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TMI Blog2016 (4) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. 2. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee claimed additional depreciation under Section 32(1)(iia) of the Income-tax Act, 1961 (in short 'the Act') in respect of machinery installed, to the extent of ₹ 5,88,856/- in respect of addition made to the plant and machinery, during the year under consideration. The Ld.counsel further clarified that the plant and machinery were installed in the second half of the year under consideration, therefore, the assessee claimed 50% of additional depreciation during the previous year. In other words, according to the Ld. counsel, since the machinery was used for less than 180 days in the earlier assessment year, the assessee claimed 50% depreciation. The remaining additional depreciation was claimed during the year consideration. The Assessing Officer found that since the plant and machinery was used for less than 180 days during the assessment year 2007-08, the additional depreciation has to be allowed only at 50%. The Assessing Officer, according to the Ld. counsel, further found that there is no provision in the Income-tax Act for allowing 50% in the succeeding assessment year. Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry purchased during the year under consideration. The Assessing Officer found that the additions to fixed assets were made in the second half of the financial year, therefore, 50% of additional depreciation has been claimed. The balance 50% was carried forward in the next year. The Assessing Officer found that the additional depreciation is allowable only during the year in which the machinery was installed and used for business of the assessee. There is no provision in the Income-tax Act for carry forward of the additional depreciation to the subsequent assessment year. This issue was examined by the Cochin Bench of this Tribunal in Apollo Tyres Ltd. v. ACIT (supra). The Cochin Bench found that if additional depreciation could not be allowed at the rate of 20% during the year in which the machinery was installed, the balance 50% has to be allowed in the subsequent year. In fact, the Cochin Bench of this Tribunal has observed as follows:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed 10% of the depreciation in the earlier assessment year since the machinery was used for less than 180 days and claiming the balance 10% in the year under consideration. Section 32(1)(iia) does not say that the year in which the additional depreciation has to be allowed. It simply says that the assessee is eligible for additional depreciation equal to 20% of the cost of the machinery provided the machinery or plant is acquired and installed after 31-03- 2005. Proviso to section 32(1)(iia) says that if the machinery 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of acquisition of new machinery and plant . 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 I shall be allowed . Thus, the assessee had earned the benefit as soon as he had purchased the new machinery and plant in full but it is restricted to 50% in that particular year on account of period usages. 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 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 raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the benefit to be given only to a new industrial undertaking, or only where a new industrial undertaking begins to manufacture or produce during any year previous to the relevant assessment year. 8. The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, OF that it should be claimed in one year, have been done away by substituting clause (iia) with effect from 01.0.2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialization, by either setting up a new industrial unit or by expanding the existing unit by purchase of new plant and machinery, and putting it to use for the purpose of business. The proviso to Clause [ii] of the said Section makes it clear that only 50% of the 20% would be allowable, if the new plant and machinery so acquired is put to use for less than 180 days in a financial year. However, it nowhere restricts that the balance 10% would not be allowed to be claimed by the assessee in the next assessement year. 9. The language used in Clause (iia) of the said Section clearly provides ..... 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