Case Law Details
First requirement to claim of additional depreciation is that there should a new machinery or plant. A machinery is new till it is first put to use. Once it is used, it is no longer a new machinery. Admittedly, the machinery, on which additional depreciation has been claimed, was already used in various preceding previous years. Therefore, for the year under consideration, It was no more a new machinery or plant. There is nothing in the statute which allows such claim of additional depreciation every year on machinery acquired and put to use in earlier year. Accordingly, dis allowance of excess claim was justified.
IN THE ITAT, CHENNAI BENCH
CHANDRA POOJARI, A.M. & DUVVURU RL REDDY, J.M.
CRI Pumps (P) Ltd. v. Asstt. CIT, & Vice-Versa
I.T.A. Nos. 1017, 1246/Mds/2012, 2014, 1872/Mds/2013, 2318/Mds/2014, 830/Mds/2015
16 November, 2016
Appellant by: Anita Sumanth, Advocate
Respondent by: Durai Pandian, J Commissioner
ORDER
Duvvuru RL Reddy, J.M.
These two cross appeals filed by the assessee as well as Revenue pertain to same assessee are directed against different orders of the learned Commissioner (Appeals) I, Coimbatore dated 8-3-2012 and 20-8-2013 for the assessment years 2008-09 and 2009-10 respectively. The assessee also filed appeal against the order of the learned Commissioner (Appeals) I, Coimbatore dated 6-8-2014 for the assessment year 2005-06 and the Department also filed appeal against the order of the learned Commissioner (Appeals) I, Coimbatore dated 5-1-2015 for the assessment year 2007-08.
2. First, we shall take up cross appeals relevant to the assessment year 2008-09 and in the assessee’s appeal, following grounds have been raised :–
“(a) The order of the Commissioner (Appeals) dated 8-3-2012 is erroneous to the extent it rejects the appellant’s contention concerning the grant of additional depreciation on plant and machinery acquired in the period 2002- 2005.
(b) The Commissioner (Appeals) ought to have reversed the order of the assessing officer rejecting the claim of additional depreciation of an amount Rs. 1,98,26,411. The claim is allowable and the Commissioner (Appeals) erred in concluding that additional depreciation is allowable under section 32(1)(iia) of the Income Tax Act only in respect of assessment year in which the new machinery was acquired and installed and not thereafter.
(c) The Commissioner (Appeals) ought to have accepted the claim in so far as clause (iia) to section 32 introduced vide Finance Act 2005 supports the stand of the Appellant herein.
(d) The claim in relation to additional depreciation in relation to assets acquired in the period 2002-2005 is allowable under section 32(1)(iia) in law and on facts and the Commissioner (Appeals) erred in rejecting the claim.
(e) The Commissioner (Appeals) erred in concluding that the expenses relating to software concerning import/export (Rs. 6,75,418), payroll (Rs. 1,21,680) and billing (Rs. 3,80,000) are not allowable being capital in nature.
(f) The Commissioner (Appeals) ought to have rioted that the expenses are revenue in nature and allowable in so far as they are inextricably connected with the business carried on by the appellant.
(g) Any other ground that may be taken at the time of personal hearing.”
2.1 For the assessment year 2008-09, the Revenue has raised the following effective grounds :–
(i) The learned Commissioner (Appeals) has erred in deleting the royalty payment of Rs. 1,60,97,339 made to M/s. C.R.I. Amalgamations (P) Ltd. on the ground that the assessee is the owner of the trade mark “CRI”.
(ii) The learned Commissioner (Appeals) has erred in deleting the addition made towards implementation of Oracle additional report development.
(iii) The learned Commissioner (Appeals) has erred in deleting the addition made under section 14A of the Act.
2.2 Brief facts of the case are that the assessee is engaged in the business of manufacture and sale of pumps and motors with brand name “CRI”. The assessee has filed its return of income admitting the total income of Rs. 33,69,88,630 on 26-9-2008. Subsequently a revised return was filed on 25-9-2009 admitting the same total income. The return of income filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 (“Act” in short). Subsequently, the case was selected for scrutiny and notice under section 143(2) of the Act was issued on 7-9-2009. In response thereto, the assessee furnished all details and after verification of details, the assessment was completed under section 143(3) of the Act by assessing total income of the assessee at Rs. 37,52,87,545 by making various additions.
2.3 The first ground raised by the assessee before the Tribunal is with regard to confirmation of dis allowance of additional depreciation claimed by the assessee of Rs. 1,98,26,411. In the assessment order, the assessing officer has observed that as against the eligible amount of additional depreciation of Rs. 1,84,90,560, the assessee has claimed depreciation of Rs. 3,83,16,971 in excess by grouping the plant and machinery into different categories. The Authorized Representative of the assessee has stated before the assessing officer that the excess claim of Rs. 3,83,16,971 is the additional depreciation on plant and machinery acquired and installed by the assessee in the previous year as well as in the preceding year. After considering the submissions of the assessee and verification of details furnished by the assessee, the assessing officer has observed that no deduction under section 32(1)(iia) of the Act is allowable to any machinery or plant, the whole or the actual cost of which is allowed as deduction, whether by way of depreciation or otherwise, in computing the income chargeable under the head “profit and gains of business or profession” of anyone previous year since the assessee has claimed an amount of Rs. 1,98,26,411 as additional depreciation on machineries acquired and installed during the period 2002-03 to 2004-05 and 2005-06. The machineries were installed and claimed depreciation and additional depreciation during the previous year itself and duly allowed in the computation of total income for the respective assessment years. Since the assessee has claimed depreciation and additional depreciation of such machineries of preceding assessment years, the assessing officer has held that the claim of additional depreciation for the year under consideration is not allowable and hence, the claim of additional depreciation in the guise of depreciation on machinery acquired and installed in the preceding years amounting to Rs. 1,98,26,411 was disallowed and added to the income declared by the assessee.
2.4 The assessee carried the matter in appeal before the learned Commissioner (Appeals). After considering the submissions of the assessee, the learned Commissioner (Appeals) has observed and held as under :–
“8. I have gone through the submissions made by the appellant and also the order of the assessing officer. Taking into consideration the provisions as existed in 1981, 2002 and 2005, the learned Authorized Representative stated that since the restriction to the previous year is as per the provisions introduced by the Finance Act 2005 with effect from 1-4-2006, additional depreciation is allowable till the value of assetbeco.mes NIL. On going through the provision of Clause (ii) of sub section (1) of section 32 with effect from 1-4-1981 and also the provisions with effect from 1-4-2003 and the provisions with effect from 1-4-2005, the intention of the legislature is very clear that the deduction under additional depreciation is allowable in the previous year in which the new machinery or plant was installed by the assessee engaged in the business of manufacturing or production of any article or thing. The provisions of Clause (ii) (a) clearly states that the a further sum equal to ……………… percentage of the actual cost of such machinery or plant shall be allowed as deduction under clause II. The definition of actual cost is discussed in the provision of section 43(1) of the Income Tax Act. Actual cost means the actual cost of the assets to the assessee reduced by that portion of cost thereof, if any as has been made directly or indirectly by any other person or authority. In reference to this the provisions of the act are very clear that the actual cost to the appellant is the cost at which he has purchased the new plant and machinery and installed after the 31-3-2002 (as per the provisions of Finance Act 2002) and also any new machinery or plant acquired and installed after 31st day of march 2005 (according to the Finance Act 2005) additional depreciation is allowable on the actual cost of such machinery. Hence the arguments of the learned Authorized Representative have no merit and the assessing officer in his assessment order has also discussed elaborately regarding the provisions of section 32.
In view of this I confirm the dis allowance made by the assessing officer with regard to depreciation.”
2.5 At the time of hearing, the learned Departmental Representative has submitted that the issue involved in this appeal is squarely covered against the assessee by the decision of the Coordinate Bench of the Tribunal in assessee’s own case for the assessment year 2010-11 in I.T.A. No. 578/Mds/2015 vide Order, dt. 28-8-2015 and filed copy of the order of the Tribunal.
2.6 On the other hand, the learned Counsel for the assessee fairly conceded the submissions of the learned Departmental Representative.
2.7 We have heard both sides, perused the materials on record and gone through the orders of authorities below. We have also perused the order of the Tribunal in assessee’s own case for the assessment year 2010-11 dated 28-8-2015 with regard to the claim of additional depreciation, wherein the Tribunal has observed and held as under :–
“2. The only issue involved in this appeal is relating to claim of additional depreciation. In the assessment order, the assessing officer has observed as under :–
“4(ii). The assessee company has claimed additional depreciation on plant and machinery acquired and installed in the preceding years other than the new machinery acquired and installed during the previous year. As per the provisions of section 32 (1)(ii)(a), ‘no deduction is allowable to any plant and machinery, the whole or the actual cost of which is allowed as deduction whether by way of depreciation or otherwise, in computing the income chargeable under the head “profit and gains of business or profession’ of any one previous year”. The additional depreciation under section 32 is eligible only to any new machinery or plant acquired and installed by an assessee engaged in the business of manufacture and production of any article or thing in the previous year relevant to the respective assessment year. Once a new machinery or plant acquired and installed in a year and claimed depreciation and additional depreciation for the year of installation, the assessee is not eligible for additional depreciation in the subsequent year since the plant and machinery lost its character of new plant and machinery. The assessee is eligible for additional depreciation only to the new plant and machinery acquired and installed during the previous year. The additional depreciation is only eligible to the new plant and machinery acquired and installed during a given year and cannot be extended to subsequent years as such plant and machinery will not qualify for additional depreciation since it was no longer new machinery in the subsequent years. The additional depreciation is introduced by the legislature in order to promote industries’ as one time measure in the year of installation by providing over and above the normal entitled depreciation on plant and machinery. The Finance Act 2002 provided additional depreciation at the rate of 15% and the Finance (No. 2) Act 2004 provided 20% additional depreciation to the new plant and machinery acquired and installed. The very same way the Finance Act 2005 also provided 20% additional depreciation to the new plant and machinery. All the above referred amendments insisted and highlighted the acquisition and installation of new machinery or plant an specifically pointed out that no deduction is eligible to any plant or machinery, whole of the actual cost to which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year. It is pertinent to point out that the additional depreciation is eligible only to new machinery, or plant acquired or installed and not availed any deduction by way of depreciation or otherwise in the year of such machinery or plant put into use by an assessee.
This issue was present in the assessment year 2008-09 & 2009-10 also in the case of assessee Company and dis allowance was made. Further, Commissioner (Appeals) as well as ITAT, Chennai bench has upheld this dis allowance and assessee company has preferred appeal before the High Court of Madras. Therefore, for the current year also dis allowance of claim of additional depreciation is made.”
3. On appeal, the learned Commissioner (Appeals), by following his own decisions for the earlier assessment years 2008-09 and 2009-10 in assessee’s own case, dismissed the ground raised by the assessee.
4. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The learned Commissioner (Appeals), by following his own decisions for the earlier assessment years, has observed as under :–
“9. I have gone through the submissions made by the appellant and also the order of the assessing officer. For the assessment year 2008-09 the same issue was dealt elaborate by me in my appellate order in ITA No. 213/10-11, date 8-3-2012 and decided in favour of the Revenue. Subsequently for the assessment year 2009-10, on the same issue in ITA No. 105/12-13, date 20-8-2013, the ground of appeal was decided against the assessee. Following my earlier orders for the assessment years 2008-09 and 2009-10, I confirm the dis allowance made by the assessing officer with regard to additional depreciation. This ground of appeal is dismissed.”
5. Similar issue has been raised before the Tribunal in assessee’s own case for the assessment year 2007-08 in I.T.A. No. 1824 & 1825/Mds/2010 vide order dated 4-4-2013, wherein the Tribunal has observed as under :–
“8. We have perused the orders and heard the rival submissions. There is no dispute that the additional depreciation claimed by the assessees, for impugned assessment year, were on machinery already acquired during the years 2002-03 to 2004-05 and 2005-06. Thus, in the previous year relevant to impugned assessment year, the machinery were no more new. Claim of the assessees is that under section 32(1)(iia) of the Act, additional depreciation for new plant and machinery acquired was available in every year after its installation if such installation happened after 31-3-2005. Said clause (iia) of section 32(1) is reproduced here-under :–
“32 (1) In respect of depreciation of —
…. …. …. …. …. …. …. …. …. …. …. …. …. …. …. ….
…. … …. ….. ….. ….. ….. …. …. …. …. …. …. …. …. …
…. ….. ….. …. …. …. …. …. …. …. …. …. …. …. …. ….
(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31-3-2005, by an assessee engaged in the business of manufacture and 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) :–
Provided that no deduction shall be allowed in respect of —
(A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or
(B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or
(C) any office appliances or road transport vehicles; or any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;”
9. First requirement for being eligible for the claim of additional depreciation is that it should be on a new machinery or plant. A machinery is new only when it is first put to use. Once it is used, it is no longer a new machinery. Admittedly, the machinery, on which additional depreciation has been claimed, was already used in various preceding previous years. Therefore, for the impugned assessment year, it is no more a new machinery or plant. Once it is not a new machinery or plant, allowance under section 32(1)(iia) cannot be allowed. Additional depreciation itself is only for a new machinery or plant. A claim of additional depreciation as made by the assessee, if allowed, will not be an allowance for a new machinery or plant. Intention of the Legislature was to give such additional depreciation in the year in which assets were put to use and not for any succeeding year. There is nothing in the statute which allows such claim of additional depreciation every year on machinery acquired in earlier year. There cannot be any presumption that unless a claim is specifically denied, it has to be allowed. In the case of Brakes India Ltd. (supra) where assessee claimed carry forward of additional depreciation, this Tribunal had held as under at para 15 of its order :–
“15. We have considered the rival submissions.–A perusal of the provisions of section 32 as applicable for the relevant assessment year clearly shows that additional depreciation is allowable on the plant and machinery only for the year in which the capacity expansion has taken place which has resulted in the substantial increase in the installed capacity. In the assessee’s case this took place in the assessment year 2005-06 and the assessee has also claimed the additional depreciation during that year and the same has also been allowed. Each assessment year is separate and independent assessment year. The provisions of section 32 of the Act do not provide for carry forward of the residual additional depreciation, if any. In the circumstances, the finding of the learned Commissioner (Appeals) on this issue is on a right footing and does not call for any interference. Consequently, ground No. 1 of the assessee’s appeal stands dismissed.”
10. When an allowance which is ordinarily not available under normal commercial principles of accounting, is made specifically allowable, through enactment of certain specific provisions of the Act, it is also a requirement that there should be similar specific provision which shows its applicability every year, unless the context strongly calls for such an interpretation. We are thus of the opinion that Commissioner (Appeals) was justified in confirming the dis allowance of additional depreciation. No interference is warranted.”
6. Respectfully following the above decision of the Tribunal in assessee’s own case for the assessment year 2007-08 on similar issue raised, for the assessment year 2010-11 also, the ground raised by the assessee stands dismissed.”
2.8 Respectfully following the above decision of the Tribunal in assessee’s own case for the assessment year 2010-11, the similar ground raised by the assessee in the assessment year 2008-09 is dismissed.
