ITAT DELHI BENCH ‘C’
International Cars & Motors Ltd.
IT APPEAL NO. 860 (DELHI) OF 2012
[ASSESSMENT YEAR 2006-07]
DECEMBER 21, 2012
I.C. Sudhir, Judicial Member
The assessee has impunged first appellate order on the ground that Ld. CIT(A) has erred in confirming the disallowance of depreciation on plant and machinery u/s 32(1)(iia) of the Income Tax Act, 1961 as made by the AO.
2. The relevant facts are that the assessee had claimed additional depreciation amounting to Rs. 1,82,76,190/- on plant and machinery aggregating to Rs. 18,27,61,898/- which were acquired in assessment year 2005-06, whereas the installation of the said plant and machinery was completed on 31.1.2006 i.e. in the year under consideration. The AO denied the claim on the basis that the plant and machinery were acquired in the assessment year 2005-06 i.e. before 31.3.2005. Hence the assessee is not entitled to claim additional depreciation because as per section 32(1)(iia) of the Income Tax Act 1961, additional depreciation is allowed in respect of “new plant and machinery installed after 31.3.2005”. This disallowance was questioned before the Ld. CIT(A) but the assessee could not succeed in the first appeal. The aggrieved assessee now has raised the issue before the Tribunal.
3. In support of the ground Ld. AR submitted that the assessee is engaged in the business of manufacturing on production. Hence it was entitled to the claimed depreciation. He submitted that before arriving at any conclusion, all the provision of section 32 must be read with together in its true spirit. The provisions of section 32(i)(iia) have been applied by the AO in isolation and without considering all the provisions laid down u/s 32(1) of the Act. He submitted that provisions under section 32(1) provides for allowance for additional depreciation under clauses (iia) only when the condition pertaining to the ownership of the eligible assets and its use for the purpose of business or profession of the assessee. In another words the assessee will be eligible to claim depreciation under sub section (1) of section 32 only on fulfillment of the above conditions. Once the assessee qualify then there is no question of disallowance of depreciation. In accordance with the second proviso of section 32(1), the claim of depreciation shall be restricted to 50% of the normal depreciation only in case where the assets are used for the purpose of business or profession for a period of less than 180 days during the year. In this proviso also both the words “acquired” and “put to use” are used but the depreciation will be allowed only in the year in which the assets are used or put to use irrespective of the date of its acquisition. Ownership of the prescribed assets will not automatically entitled the assessee to make a valid claim of deprecation until and unless the asset is installed and put to use or used by the assessee for the purpose of business or profession. He submitted that the basic intent in bringing the additional depreciation into the ambit of the Act is to rationalize the rates of depreciation and enhancement of additional depreciation on New Machinery and Plant. The Ld. AR submitted that the date of installation is relevant and not the acquisition. He submitted further that liberal interpretation is required to be made while applying the incentive provisions of the Act. The purpose of these incentives provision of the Act is to encourage the industries. He placed reliance on the following decisions :-
1. CIT v. Surama Tubes (P) Ltd.  201 ITR 124 (Cal.)
2. Bajaj Tempo Ltd. v. CIT  196 ITR 188
3. CIT v. U.P. Co-operative Federation Ltd.  176 ITR 435
4. CIT v. Straw Board Mfg. Co. Ltd.  177 ITR 431
5. K.P. Varghese v. ITO  131 ITR 597
4. The Ld. DR on the other hand tried to justify the orders of the authorities below. He submitted that plain reading of the provisions laid down u/s 32(1) of the Act makes it obvious that for claiming depreciation the plant and machinery must be acquired and installed during the prescribed period. Both these requirements of acquisition and installation should be read together for the application of the provision laid down u/s 32(1) of the Act.
5. Considering the above submissions we find that the only dispute is regarding application of the words “acquired” and “installed” provided u/s 32(1) (iia) of the Act to decide the eligibility of the claimed depreciation. The view of the authorities below is that both the words i.e. acquired and installed should be read together, whereas the contention of the assessee remained that both the words are meant for different purpose and hence installation date is relevant and not the date of acquisition. The contention of the assessee remained that the plants were purchased on different dates but they were installed to set in notion during the year relevant for the assessment year under consideration. We thus find that there is no dispute on this relevant fact that new plants were acquired before 31st March, 2005 but have been installed after 31st March, 2005. For a ready reference we reproduce relevant provision laid down u/s 32(1)(iia) of the Act, which reads as ” …………..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 ……………….”. On the plain reading of these provisions it is obvious and apparent that both the words “acquired” and “installed” are linked with “and” thus requirement of both these words cannot be seen fulfilled even if either of the two is only fulfilled. In other words both the “acquisition” and “installation” of the new machinery or plant are required to be made after 31st day of April, 2005 by an assessee engaged in the business of manufacture or production of an article or thing. To claim the additional depreciation available therein there is no doubt on the submission of the Ld. AR that incentive provisions of the Act should be read liberally but it does not mean that liberal approach should be applied at the cost of literal and obvious meaning of the statute, fulfillment of which is the primary requirement to qualify for the benefit of claimed depreciation. Liberal approach is required to be given while interpreting a provision, where possibility of more than one interpretations is there and one of them appears favourable to the assessee. In the present case when the requirement of fulfillment of the conditions of acquisition and installation to grant the benefit of the claimed additional depreciation is so obvious and apparent that there is no scope of different interpretation that acquisition and installation should not be read together and simultaneously. The purpose of the word “acquisition” and “installation” may be different but both are required to be fulfilled only after 31st March, 2005 to make the assessee eligible for the benefit of the claimed additional depreciation u/s 32(1)(iia) of the Act. Of course an identical issue was raised under almost similar facts before the Hon’ble Calcutta High Court in the case of Surama Tubes (P) Ltd. (supra) relied upon by the Ld. AR but during the assessment year 1982-83 involved in that case the provisions laid down u/s 32(1)(iia) of the Act in operation were different as tehrein acquisition of new machinery or plant was not given importance and the only requirement was that new machinery or plant has been installed after the 31st day of March 1980 and before 1.4.1965. Since there was no dispute on this fact hence Hon’ble Calcutta High Court was pleased to hold that acquisition of plant or machinery is not material, what is material is the installation of such plant or machinery for claiming additional depreciation allowance. For a ready reference provisions laid down u/s 32(1)(iia) in operation at that time reproduced in the decision of Hon’ble High Court is reproduced hereunder :-
“32 (1)(iia) In the case of any new machinery or plant (other than ships and aircraft) which has been installed after the 31st day of March, 1980, but before the 1st day of April, 1985, a further sum equal to one-half of the amount admissible under clause (ii) (exclusive or extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year.”
6. During the assessment year 2006-07 in question in the provisions laid down u/s 32(i)(iia) there was specific condition alongwith installation of new plant or machinery after 31st March, 2005 that the new plant or machinery must also be acquired after 31st March, 2005. We have also reproduced herein above the relevant provisions laid down u/s 32(i)(iia) of the Act in operation during the assessment year under consideration. Under these circumstances we hold that the decision of Hon’ble Calcutta High Court in the case of Surama Tubes (P) Ltd.(supra) relied upon by the Ld. AR is not helpful to the assessee. During the year for claiming additional depreciation u/s 32(i)(iia) of the Act, as discussed above, both the conditions that new machinery or plant has been acquired and installed after 31.3.2005 were required to be fulfilled . Since undisputedly the new machinery or plant in question were not acquired after 31st day of March, 2005, the authorities below were justified in denying the claimed additional depreciation under the said provisions on that basis. We also agree with the view of the Ld. CIT(A) which has got the support of the decision of Hon’ble Supreme Court relied upon by him that the court interprets a law and cannot legislate. The action of the authorities below in this regard is thus upheld. The ground is accordingly rejected.
7. Consequently appeal is dismissed.