High Court Of Calcutta
CIT, Kolkata-I vs. Ankit Metal and Power Ltd.
Section : 32
Assessment Year : 2008-09
Soumitra Pal And Arindam Sinha, JJ.
I.T.A.T. No.78 Of 2014
G.A. No. 1936 Of 2014
November 20, 2014
JUDGMENT
The Court – This appeal was heard extensively on November 11, 2014, as well as today.
2. The appeal preferred by the Revenue under section 260A of the Income-tax Act, 1961, against the consolidated order dated January 8, 2014, passed by the Income-tax Appellate Tribunal “A” Bench in I.T.A. No. 517/Kolkata/2012 filed by the Revenue and CO No. 46/Kolkata/2012 filed by the assessee both for the assessment year 2008-09 seeks to raise the questions set out in paragraph 8 of the stay application for adjudication. We admit question No. 1 for adjudication as we find the other questions raised are not substantial questions of law to be adjudicated in the appeal.
3. By consent of the parties the question formulated is taken up for hearing in appeal. The question is as under:
“(i) Whether, on the facts and in the circumstances of the case, the learned Tribunal erred in law and was not justified in allowing the appeal filed by the assessee as well as on law in upholding the decision of the Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 4,17,27,868 made by the Assessing Officer on the ground of additional depreciation without appreciating the fact that the case of the assessee falls under clause (i) of sub-section (1) of section 32 for which there is no additional depreciation available in clause (iia) of sub-section (1) of section 32 of the Income-tax Act, 1961 ;”
4. It appears the assessee had claimed further depreciation in respect of its plant and machinery used for the purpose of generation of power necessary for its business of manufacture and production of sponge iron, ingot/billets, etc., upon having claimed depreciation in respect of its assets under section 32(1) clause (i), i.e., under the rates directed by rule 5(1A) of the Income-tax Rules, 1962, as have been provided for in Appendix I thereof. The assessee’s claim for deduction of further depreciation is in terms of clause (iia) of section 32(1). The said clause, as it stood in the relevant assessment year, is set out as under :
“(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).”
5. The Assessing Officer in disallowing such claim held, inter alia, as follows :
“1.2 Further, examination of the depreciation schedule of the power plant reveals that the assessee has claimed additional depreciation of Rs. 4,17,28,868 in addition to the normal depreciation of Rs. 1,96,36,450. As per page 7 of the annual report, the company had commissioned the captive power plant of 8.5 MW in January, 2008. Therefore, the additions in the depreciation schedule for the power plant in the tax audit report has been shown after September and the total additions aggregate to Rs. 49.85 crores. The rates of depreciation for the power plant claimed by the assessee are as per the rates prescribed in Appendix IA of the Income-tax Rules read with rule 5(1A). Rule 5(1A) provides that the depreciation under clause (i) of sub-section (1) of section 32 of the Income-tax Act on assets acquired on or after 1st April, 1997, shall be calculated at the percentage specified in Appendix 1A on the actual cost.
1.3 Analysis of the aforesaid facts undisputedly reveal that the assessee is claiming depreciation on the power plants under clause (i) of sub-section (1) of section 32. Now, the issue for consideration arises as to whether additional depreciation is to be allowed on the power plant on which depreciation under clause (i) of sub-section (1) of section 32 has been claimed.
1.9 On a perusal of clause (iia) of sub-section (1) of section 32 quoted above, it is crystal clear that clause (iia) mandates that the additional depreciation shall be allowed as deduction under clause (ii). There is no universal independent deduction available under sub-clause (iia) for every type of case. There has been specific mention of clause (ii) in sub-clause (iia) saying that additional depreciation shall be allowed as deduction under clause (ii). There is no mention of clause (i) in clause (iia). Therefore, undoubtedly additional depreciation under clause (iia) is not to be allowed in the cases falling under clause (i). It is also pertinent to note that clause (iia) of sub-section (1) of section 32 is the only provision in the Act allowing additional depreciation. In view of the above, the power plant would not be eligible for the benefit of additional depreciation, as separate clause (i) governs its depreciation claim which is not mentioned in clause (iia) for allowing the additional depreciation.”
6. Ms. Gutgutia, learned advocate appearing on behalf of the appellant-Revenue, submitted the reasoning given by the Assessing Officer is correct. She drew our attention to the definition of block of assets as given in section 2(11) of the Act that indicates the assets in respect of which the same percentage of depreciation is prescribed. She relied on the judgment of the Madras High Court in M. M. Forgings Ltd. v. Addl. CIT [2012] 349 ITR 673/[2011] 11 taxmann.com 367/200 Taxman 36 (Mag.) where the question raised by the assessee against the Appellate Tribunal holding it was not entitled to additional depreciation was not admitted for adjudication in appeal. We, however, find from that decision the same was regarding applicability of the second proviso under section 32(1) of the said Act. She submitted further the provisions laid down in section 32(1) clause (iia) were unambiguous in providing for further sum to be allowed as deduction under clause (ii) thereof to mean a sum further to depreciation claimed under clause (ii). According to her, such further sum would not be allowed as depreciation under clause (ii) if the assessee had claimed its depreciation under clause (i) of the said section.
7. Mr. Khaitan, learned senior advocate appearing on behalf of the respondent-assessee, and has relied on the judgment of the Gujarat High Court in CIT v. Diamines & Chemicals Ltd. [2014] 222 Taxman 218/42 taxmann.com 193, where the Tribunal held as under :
“7. We have considered the rival submissions. A perusal of the order of the learned Commissioner of Income-tax (Appeals) more specifically in paragraphs 4.3 to 4.5 of his order clearly shows that the learned Commissioner of Income-tax (Appeals) has relied upon the decisions of the hon’ble Madras High Court in the cases of CIT v. Hi-Tech Arai Ltd. [2010] 321 ITR 477 (Mad), CIT v. VTM Ltd. [2009] 319 ITR 336 (Mad)Texmo Precision Castings (refer to supra) for the purpose of holding that the assessee is eligible for additional depreciation as per the provisions of section 32(1)(iia) of the Act. In the absence of any decision to the contrary much less any decision of the hon’ble jurisdictional High Court on the issue to the contrary, we are of the view that the order of the learned Commissioner of Income-tax (Appeals) on this issue is on a right footing and does not call for any interference, in so far as he has followed the judicial discipline in following the decisions of the hon’ble Madras High Court (refer to supra) and granted the relief to the assessee. In the circumstances, we find no reason to interfere with the order of the learned Commissioner of Income-tax (Appeals) in doing so . . .”
8. We have considered the judgments of the Madras High Court as well as that of the Gujarat High Court. We find clause (iia) of section 32(1) provides for further depreciation on any new machinery or plant 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 at the rate provided to be allowed as a deduction under clause (ii) of the said section. There is no dispute on facts regarding the assessee having acquired and installed the plant and machinery for the purpose of generation of power necessary for the production of the items it manufactures. The assessee having satisfied those conditions is entitled to claim the additional depreciation as provided by the said clause (iia) irrespective of its original claim for depreciation having been made under clause (i) of the said section. We do not find any relation of clause (iia) of the said section with the head of deduction claimed by the assessee in the matter of determining whether it is entitled to a claim for additional depreciation.
9. For the reasons above, we answer the question formulated in the negative and in favour of the assessee.
10. The appeal and the application are dismissed.
[Citation : 372 ITR 660]
