Jharkhand High Court
The Principal Commissioner Of ... vs Trf Limited on 9 February, 2023
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Tax Appeal No. 08 of 2021
With
Tax Appeal No. 09 of 2021
The Principal Commissioner of Income Tax, Ranchi.
.... Appellant [in both cases]
Versus
TRF Limited, Jamshedpur ..... Respondent [in both cases]
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CORAM: HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE DEEPAK ROSHAN
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For the Appellant : Mr. Ratnesh Nandan Sahay, Adv.
For the Respondent : Mr. Rahul Lamba, Advocate
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9/09.02.2023 Heard learned counsel for the parties.
2. Since common issues are involved in both these appeals; as such
both are heard together and disposed of with this common order.
3. Both these present appeals have been preferred by the Revenue-
Department against the common order dated 05.03.2020, passed by the
Learned Income Tax Appellate Tribunal (hereinafter to be referred as
"ITAT"), Ranchi Bench, Ranchi in relation to respective assessment
orders for AY 2009-10 and AY 2010-11 respectively, passed under
Section 154 of the Income Tax Act, in the case of the Respondent.
4. The brief fact of the case is that the Ld. ITAT in its order has
decided the issue of allowability of additional depreciation on new plant
or machinery, claimed in the subsequent year of first usage of such plant
or machinery, in favour of the Respondent assesse.
The assessment orders for both AY 2009-10 and 2010-11
respectively, passed under Section 154, had been disallowed and added
to the income of the Respondent. The amount of additional depreciation
was claimed by the respondent in the subsequent assessment year to the
assessment year in which such new machinery or plant was put to use.
Such disallowance has been made on the ground that additional
depreciation under Section 32(1)(iia) of Income Tax Act, 1961
(hereinafter to be referred as "the Act") can be claimed only in the first
year of use of the new machinery and the additional depreciation cannot
be taken in the subsequent year.
The assessment orders passed by the Assessing Officer in
connection with AY 2009-10 and 2010-11 was challenged by the
Assessee before the CIT (A) in Appeal No. 44/JSR/2016-17 and Appeal
No. 45/JSR/2016-17, who vide its order dated 15.09.2017 (A.Y. 2009-
10) and 12.09.2017 (A.Y. 2010-11) respectively, confirmed the addition.
Being aggrieved, the Assessee challenged both the orders before
the learned ITAT which was numbered as ITA No. 310/Ran/2017 for the
AY 2009-2010 and ITA No. 312/Ran/2017 for A.Y 2010-11. The Learned
ITAT in its said order has allowed the Respondent's claim of additional
depreciation and has deleted the disallowance of the additional
depreciation for the assessment orders of AY 2009-10 and 2010-11,
respectively after relying on the judgment of the Madras High Court
passed in the case of M/s Brakes India Limited versus DCIT reported in
2017 SCC online Mad 14645.
This Court vide its order dated 15.06.2022 has admitted the
present appeals on following substantial questions of law:
(i) Whether the learned ITAT was justified in deleting the disallowance of
claim of additional depreciation during the relevant assessment years by
relying upon the judgment passed by the Hon'ble Madras High Court in
M/s Brakes India Limited v. DCIT;
(ii) Whether the present appeals fall under the exception clause of
Circular No. 3 of 2018 issued by the CBDT for maintaining this appeal
despite the tax effect being lower than the monetary limit prescribed in
the relevant circulars.
5. The relevant facts in the case of the Respondent-Assessee is as
follows;
(i) TA No. 9 of 2021 which relates to AY 2009 -10, the Respondent-
Assessee had claimed depreciation amount of Rs. 3,63,73,488/-,
including the additional depreciation amount of Rs.1,04,82,825/-, in its
revised return of income. The Assessing Officer, vide its order dated
22.03.2016 passed under Section 154 of the IT Act, has disallowed the
additional depreciation amount of Rs. 57,97,020/-, claimed by the
respondent, on the ground that additional depreciation, in terms of
Section 32 (1)(iia) of the Act is available only in the first year in which
the new plant and machinery is put to use and not in the subsequent year.
(ii) TA No. 8 of 2021 which relates to AY 2010 - 11, the respondent
had claimed depreciation amount of Rs. 5,69,50,098/-, including
additional depreciation, in its revised return of income. The Assessing
Officer, vide its order dated 22.03.2016, had disallowed the additional
depreciation amount of Rs.1,38,57,189/-, claimed by the respondent, on
the ground that additional depreciation is available only in the first year
in which the new plant and machinery is put to use and not in the
subsequent year.
6. Mr. Ratnesh Nandan Sahay, learned counsel for the appellant for
the first question of law contended that the learned ITAT was not
justified in deleting the disallowance of claim of additional depreciation
during the relevant assessment years by relying upon the judgment
passed by the Hon'ble Madras High Court in M/s Brakes India Limited
versus DCIT. As a matter of fact, even the CIT has taken note of these
facts in its order passed under Section 263 of the Act.
He further submits that the disallowance made on the ground that
additional depreciation under Section 32(1)(iia) of the Act can only be
claimed in the first year of use of the new machinery and the additional
depreciation cannot be taken in the subsequent year is correct proposition
of law and both the Tax authorities were justified in making disallowance
of claim of additional depreciation during the relevant assessment years
and the learned Tribunal has made an error in relying the Order passed
by the Hon'ble Madras High Court.
So far as the second question of law is concerned; he contended
that both these appeals are maintainable as it comes under the exception
clause engraved in the same Circular which has fixed the monetary limit
for filing appeal and he placed reliance on an audit objection made for
the relevant assessment years in the case of respondent-Assessee. The
said audit objection states that additional depreciation is available only in
the year in which the new plant and machineries have first been put to
use.
7. At this stage, it is pertinent to mention that the same audit
objection report at its second page states that the department (Income
Tax) has taken a stand that "there is no such provisions in the Income Tax
that additional depreciation can be availed in the first year only and
reiterated that it can be availed in the subsequent year also." Thus, it is
very clear from the audit objection itself that the Income Tax department
was not in agreement with the audit objection and the department was
aware that additional depreciation can be availed also in the subsequent
years.
8. Mr. Rahul Lamba, learned counsel for the Respondent-Assessee
contended that so far as the first question of law is concerned, learned
ITAT has correctly relied on judgment of Hon'ble Madras High Court
passed in the case of M/s Brakes India Limited v. DCIT reported in
2017 SCC online Mad 14645 to hold that the additional depreciation
amount, claimed by Respondent in the subsequent year of first usage of
new machinery, cannot be disallowed by the assessing officer. He further
submits that the said judgment of Hon'ble Madras High Court was
challenged by the revenue before the Hon'ble Apex Court in SLP (C) No.
033755-/2017 (Diary Number 35933/2017), however, the said SLP was
dismissed by the Hon'ble Apex Court.
Learned counsel contended that on the one hand the appeal filed
by the revenue is not maintainable in view of their own circular with
regard to monetary limit and on the other hand even on merit the
appellant is not having a good case in view of the judgment being
referred hereinabove.
9. Heard learned counsel for the parties and perused the impugned
judgment and the question of law as framed by this courts. As far as the
second question of law, which is with regards to maintainability of these
appeals and specifically whether these appeals fall under the exception
clause of Circular No. 3 of 2018 issued by the CBDT is concerned; the
Appellant has placed reliance on an audit objection made for relevant
AYs in the case of the respondent. The said audit objection states that
additional depreciation is available only in the year in which the new
plant and machineries have first been put to use. As pointed hereinabove,
the same report at its second page states that the department (Income
Tax) has taken a stand that "there is no such provisions in the Income
Tax that additional depreciation can be availed in the first year only and
reiterated that it can be availed in the subsequent year also."
Thus, it is very clear from this report itself that the Income Tax
department was not in agreement with the audit objection and the
department was aware that additional depreciation can be availed also in
the subsequent years. From perusal of the entire record, it is crystal clear
that though the revenue-Auditor has made objection, however, nowhere
on record it transpires that the revenue objection was accepted.
At this stage it is also relevant to note that as per the revenue own
circular No. 3/2018 at paragraph 10, the CBDT has engrafted certain
exceptions and at paragraph 10(c) it has been specifically provided that
any appeal even below monetary limit can be entertained provided the
audit objection has been accepted by the revenue. However, even after
opportunities given to the learned standing counsel for revenue, he was
unable to produce a single chit of paper to show that audit objection has
been accepted by the revenue. Thus, since the tax effect in both the cases,
the monetary limit is much below the ceiling as prescribed in the
Circular No. 3/2018; both these appeals are not maintainable and
deserves to be quashed in limine.
10. So far as first question of law is concerned; it appears that the
relevant additional depreciation amount, claimed by the respondent in
the year subsequent to the first year in which such new machine was put
to use, was allowable to respondent in terms of Section 32 (1) (iia) of the
I.T. Act. The relevant extract of Section 32(1)(iia), applicable during the
relevant AY 2009 -10 and AY 2010 -2011, is reproduced herein below for
ready reference :-
"32. (1) In respect of depreciation of --
..................................
(ii a) 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)..."
A bare reading of Section 32(1)(iia) of the Act shows that there is
no condition or restriction that the additional depreciation amount can be
claimed only in the first year of use of the new machinery or plant and
also there is no restriction that it cannot be claimed in the subsequent
year. Further, Section 32(1) (iia) is a beneficial provision for the
purpose of promoting the industries to acquire and install new machinery
and plant. Such provision of law cannot be defeated by the Revenue by
adding an extra condition, which is not specifically provided in the said
provision, that additional depreciation cannot be claimed in the
subsequent year of first usage of the new machinery.
11. The issue of allowability of additional depreciation, in terms of
Section 32 (1) (iia) of the IT Act, has been decided by several High
Courts in their respective judgments. One of the initial judgments on this
issue, was rendered by the High Court of Karnataka in the case of CIT
versus Rittal India Pvt. Ltd. reported in 2015 SCC Online Kar 9272
wherein the High Court held in favour of the assessee that additional
depreciation can be availed even in the subsequent year to the first year
when the machinery was put to use. The relevant extract of the said
judgment of the High Court of Karnataka is reproduced herein below for
ready reference:
"7. Clause (iia) of section 32(1) of the Act, as it now stands, was
substituted by the Finance Act, 2005, applicable with effect from
April 1, 2006. Prior to that, a proviso to the said clause was there,
which provided 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, or that it should be
claimed in one year, have been done away by substituting clause (iia) with effect
from April 1, 2006. The grant of additional depreciation, under the aforesaid
provision, is for the benefit of the Assesse 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 per cent, of the 20 per cent, 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 per cent, would not be allowed
to be claimed by the Assesse in the next assessment year.
9. The language used in clause (iia) of the said section clearly provides
that "a further sum equal to 20 per cent, of the actual cost of such machinery or
plant shall be allowed as deduction under clause (ii)". The word "shall" used in
the said clause is very significant. The benefit which is to be granted is 20 per
cent, additional depreciation. By virtue of the proviso referred to above, only 10
per cent, can be claimed in one year, if plant and machinery is put to use for less
than 180 days in the said financial year. This would necessarily mean that the
balance 10 per cent, additional deduction can be availed of in the subsequent
assessment year, otherwise the very purpose of insertion of clause (iia) would be
defeated because it provides for 20 per cent, deduction which shall be allowed.
10. It has been consistently held by this court, as well as the apex court,
that the beneficial legislation, as in the present case, should be given liberal
interpretation so as to benefit the Assesse. In this case, the intention of the
legislation is absolutely clear, that the Assesse shall be allowed certain additional
benefit, which was restricted by the proviso to only half of the same being granted
in one assessment year, if certain condition was not fulfilled. But, that, in our
considered view, would not restrain the assessee from claiming the balance of the
benefit in the subsequent assessment year. The Tribunal, in our view, has rightly
held, that additional depreciation allowed under section 32(1)(iia) of the Act is a
one-time benefit to encourage industrialization, and the provisions related to it
have to be construed reasonably, liberally and purposively, to make the provision
meaningful while granting the additional allowance. we are in full agreement with
such observations made by the Tribunal"
12. Subsequently, the said issue of additional depreciation was
decided by the Madras High Court in its judgment dated 06.03.2017
rendered in the case of CIT v. Shri T.P. Textiles Private Limited, T.C.A.
No. 157 of 2017 wherein the Hon'ble Madras High Court took the same
view and held that the additional depreciation, in terms of Section 32 (1)
(iia), can be availed in subsequent assessment year to the assessment
year in which the machinery was first put to use. The relevant extract of
the said judgment of the Hon'ble Madras High Court is reproduced
herein below:
"10. According to us, these are provisions included by the
Legislature in the Statute to give a fillip to new industries as
also to existing industries, which seek to expand its sway, by
investing in and making use of new plant and machinery.
10.1. The plain language of Section 32(1)(iia) read along with the
relevant proviso would have us come to the conclusion that, there is no
limitation in the assessee claiming the balance 10% of additional
depreciation in the succeeding assessment year.
.........
11.5. In any event, in so far as the Court is concerned, it has to go by the
plain language of the unamended provision, and then, come to a
conclusion in the matter. As alluded to above, our view, is that, upon a
plain reading of the unamended provision, it could not be said that the
Assessee could not claim balance depreciation in the A.Y., which follows
the A.Y., in which, the machinery had been bought and used, albeit, for
less than 180 days."
Later on, the Madras High Court dealt with the same issue in its
another judgment passed in the case of Brakes India Limited versus
DCIT reported in 2017 SCC online Mad 14645. In the said case, the
Court was adjudicating the appeal filed by the Assessee and the relevant
issue before the Court was whether balance additional depreciation could
be carried forward to the year, following the previous year, in which,
additional depreciation was claimed. After relying on the aforesaid
judgments, the Madras High Court decided the issue in favour of the
Assessee and allowed the appeal thereby approving that additional
depreciation could be carried forward and claimed in the subsequent
year. The relevant extract of the judgment in the case of Brakes India
Limited (supra) is reproduced herein below:
"6. As indicated right at the outset, the issue is covered in
favour of the Assessee, by virtue of our judgment in the matter of
Commissioner of Income Tax, Madurai v. Shri T.P. Textiles
Private Limited. As noticed above, the Karnataka High Court in
CIT v. Rittal India (P.) Ltd., [2016] 66 taxmann.com 4
(Karnataka), has also taken the same view.
7. We are informed that the Revenue has not assailed the
judgment of the Karnataka High Court.
8. In our judgment in the matter of Commissioner of Income
Tax, Madurai v. Shri T.P. Textiles Private Limited, we have
noticed the aforementioned judgment of the Karnataka High
Court.
............
11. The issue, in hand, is as to whether balance additional
depreciation could be carried forward to the year, following the
previous year, in which, additional depreciation was claimed.
....
17. The last submission that Mr. Ravi advanced, was, in fact,
predicated on the reasoning given by the Assessing Officer, which,
according to us, is misconceived, as the manner of calculation of
depreciation, cannot, to our minds, impede the claim of the
Assessee for balance additional depreciation, in the year
following the previous year, in which, the said asset is installed
and put to use.
......
19. The appeal is accordingly, allowed and the impugned
judgment of the Tribunal is set aside. However, there shall be no
order as to costs."
13. Further, the said judgment of the Hon'ble Madras High Court
was challenged by the Revenue department before the Hon'ble Supreme
Court by way of SLP (C) No. 033755-/2017 (Diary Number
35933/2017). However, the said SLP was dismissed by the Hon'ble
Supreme Court.
14. We are in full agreement with the impugned order passed by the
learned ITAT. We hold that the Ld. ITAT in the Impugned Judgment has
correctly allowed the claim of additional depreciation of the respondent
made in the subsequent year by relying on the judgment of the Madras
High Court in the case of M/s. Brakes India Limited (supra).
15. In view of the aforesaid discussions and judicial
pronouncements, both questions of law is decided in favour of Assessee
and both the appeals deserve to be dismissed on both counts. Firstly, on
the question of maintainability; as the tax effect of both the cases are
much below the monetary limit fixed by the CBDT and secondly, even
on merit, in view of the judgment passed by the Madras High Court and
upheld by the Hon'ble Apex Court as discussed hereinabove.
16. Consequently, both these appeals are dismissed.
(Aparesh Kumar Singh, A.C.J.)
(Deepak Roshan, J.)
Amardeep/
