Everest Industries Limited Vs JCIT (ITAT Mumbai)
The perusal of the Package Scheme of Incentive, 1993 reflect that the scheme was formulated to give incentive for setting up the industries in certain belts of Maharashtra and for the purpose of working out the amount of subsidy, though the cost of eligible investment was taken as the base, but the said subsidy was not specifically intended to meet the cost of assets. In view thereof, it could not be held that the incentive received by the assessee under the Package Scheme of 1993 in the form of subsidy was covered under provisions of Explanation 10 to section 43(1) of the Act and consequently, the subsidy amount was not to be reduced from the cost of the assets.
FULL TEXT OF THE ITAT JUDGMENT
These cross appeals are directed against the order dated 31.3.2015 passed by the learned CIT(A)-1, Thane and it relates to A.Y. 2009-10.
2. The assessee company is engaged in the business of manufacture and sale of Asbestos Cement Sheets & Accessories and pre-engineered buildings products. The Assessing Officer completed the assessment of the year under consideration by making various additions. The assessee had returned a loss of Rs 39.39 crores and it was converted into a total income of Rs 91.73 crores by the assessing officer by making various additions. The appeal filed by the assessee before the learned CIT(A) challenging the assessment order was allowed in part. Hence, both the parties are in appeal before us.
3. We shall first take up the appeal filed by the Revenue. The solitary issue urged therein relates to assessment of sales tax incentive of ` 583.36 lakhs earned by the assessee during the year under consideration.
4. The assessee availed sales tax incentive of ` 583.36 lakhs under “New Package Scheme of Incentive 1992”. The assessee treated the same as capital The Assessing officer, however, took the view that the sales tax incentive is “revenue receipt” and accordingly assessed the same as income of the assessee. The learned CIT(A) allowed the claim of the assessee by following the decision rendered by the ITAT in assessee’s own case for A.Y. 2003-04 and also by following his own orders passed for A.Ys. 2007-08 & 2008-09. The revenue is aggrieved.
5. Learned Departmental Representative submitted that the order passed by the learned CIT(A) in A.Ys. 2007-08 & 2008-09 was challenged by the Revenue before the Tribunal and Tribunal, vide its order dated 15.9.2017 passed in ITA No. 1885 & 1886/Mum/2013, has restored the matter to the file of the Assessing Officer with certain directions. Accordingly, learned Departmental Representative submitted that this issue may be restored to the file of the Assessing Officer for examining it afresh as held by the Coordinate Bench in A.Ys. 2007-08 & 2008-09.
6. On the contrary, learned AR submitted that the Tribunal, while passing the order for A.Ys. 2007-08 & 2008-09, did not consider the order passed by it for A.Y. 2003-04. He submitted that the Tribunal has held in AY 2003-04 that the sales tax incentive received by it is a capital receipt. Further the Tribunal has restored the matter to the file of the Assessing Officer in AY 2007-08 & 2008-09 for comparing the terms and conditions of the scheme under which the assessee had availed sales tax incentive with the scheme considered by Hon’ble Bombay High Court in the case of Reliance Industries Ltd. He submitted that the Tribunal had earlier examined the sales tax incentive scheme while disposing of the appeal for A.Y. 2 003-04 and hence there is no necessity to restore the matter to the file of the Assessing Officer.
7. We have heard the rival contentions and perused the record. We noticed that the Coordinate Bench of the Tribunal has restored the issue relating to sales tax incentive to the file of the Assessing Officer in AY 2007-08 & 2008-09 with the following observations:-
“2.3. We have heard the rival submissions and perused the material before us. We find that the assessee had claimed that sales tax incentives received by it had to be treated as capital receipt in the revised return filed by it. The AO and the FAA had rejected its claim. The matter of RIL, relied upon by the assessee, has been sent back to the Hon’ble Bombay High Court by the Hon’ble Apex Court with a direction to consider the provisions of the scheme. There is no doubt about the principles governing the subsidies-if the subsidy is in the field of setting up of a business or for capital goods it has to be considered a capital receipt or same has to be taxed as revenue receipt. The said broad categorisation is applicable to all kind of subsidies. As the various schemes announced by the state government from time to time lay down different conditions for availing the incentive schemes, so, without analysing the scheme, as a whole, no final conclusion can be drawn. Considering the peculiar facts and circumstances of the case, we are of the opinion, that in the interest of justice matter should be restored back to the file of the AO for fresh adjudication. He is directed to compare the scheme deliberated upon by the Tribunal in the case of RIL and the scheme of 1993 applicable for the year under appeal. He would afford a reasonable opportunity of hearing to the assessee. First Ground of appeal is decided in favour of the assessee, in part.”
Since the order passed by the Tribunal for A.Ys. 2007-08 & 2008-09 is later one, consistent with the view taken therein, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with identical directions. The AO should also take into account the decision rendered by the Tribunal in the assessee’s own case in AY 2003-04, wherein, according to Ld A.R, it has already been decided in favour of the assessee.
8. We shall now take up the appeal filed by the assessee.
9. First issue contested by the assessee is whether the learned CIT(A) was justified in directing the Assessing Officer to reduce the amount of sales tax incentive from the Cost of asset as per Explanation 10 to section 43(1) of the T. Act for the purpose of computing depreciation.
10. We have noticed earlier that the learned CIT(A), by following the order passed by the ITAT for A.Y. 2003-04, has held that the Sales Tax incentive availed by the assessee is capital in nature. However, he held that the same has to be reduced from the cost of asset for the purpose of computing The assessee is challenging the said decision of the learned CIT(A).
11. The assessee relied upon various decisions to contend that the sales tax incentive is given for setting up industries in certain areas of Maharashtra and not to meet the “Cost of asset” as contemplated in Explanation 10 to section 43(1) of the Act. We noticed that an identical issue was considered by the Pune Bench of the Tribunal in the case of Rohit Exhaust Systems Pvt. Ltd. (ITA No. 1880/Pn/2003 dated 3 1.3.2015). For the sake of convenience, we extract below operative portion of the order passed by the Pune Bench of the Tribunal in the above said case:-
“9. We have heard the rival contentions and perused the record. The assessee during the year under consideration had received Capital Incentive Subsidy under the Package Incentive Scheme, 1993 of Government of Maharashtra for establishing industries in the backward area of Aurangabad. The assessee had claimed the said receipt to be capital in nature as the object of the subsidy was to set up units in backward areas. The said plea of the assessee has been accepted by the CIT(A), in turn, relying on the ratio laid down by Hon’ble Bombay High Court in CIT Vs. Reliance Industries Ltd. (supra), against which the Revenue is not in appeal, hence, the said proposition is accepted in the hands of the assessee. The second proposition raised by the Assessing Officer that the said subsidy is to be added as income under section 41(1) of the Act, in view of the ratio laid down by Hon’ble Bombay High Court in Nector Beverages (P) Ltd. Vs. DCIT (2004) 267 ITR 385 (Bom) has been reversed by the CIT(A) since the Hon’ble Supreme Court has reversed the decision of Hon’ble Bombay High Court in Nector Beverages (P) Ltd. Vs. DCIT (supra). The Revenue is also not in appeal against the said proposition and the same stands accepted. The third proposition proposed by the Assessing Officer was that in the alternate Explanation 10 to section 43(1) of the Act is applicable and the value of capital incentive is to be reduced from the cost of assets in respect of which the said subsidy had been received and the CIT(A) has applied the same.
10. The perusal of the Package Scheme of Incentive, 1993 placed at pages 21 to 44 reflect that the purpose of the scheme was to establish industries in the underdeveloped areas of the Maharashtra State under which the Government appointed SICOM Ltd. to act as an agent of the Government for the implementation of the scheme. Under the 1993 scheme, the procedures were framed and the entrepreneur was entitled to special capital incentive of varying percentage of the gross fixed capital investment, subject to ceiling in respect of eligible unit, provided where the entrepreneur does not opt for availing sales tax incentive under Part-III of 1993 scheme. Under the said scheme a grant of Rs. 15 lakhs was disbursed to the assessee.
11. We find that similar issue of taxability of the capital incentive received under the Package Scheme Incentive, 1993 arose before the Tribunal in ACIT Vs. M/s. Endress + Hauser Flowtec (India) Pvt. Ltd., in ITA No. 1206/PN/201 1, M/s. End ress + Hauser Flowtec (India) Pvt. Ltd., ACIT in ITA No.121 5/PN/201 1 and Cross Objection, relating to assessment year 200 7-08 and M/s. Endress + Hauser Flowtec (India) Pvt. Ltd., Vs. ACIT in ITA No.295/PN/2013, relating to assessment year 2008-09, order dated 25.02.2015 and in lead order i.e. ITA No. 1206/PN/201 1, the Tribunal considered the ratio laid down by the Mumbai Bench of the Tribunal in the case of Everest Industries Ltd. Vs. ACIT vide ITA No.814/Mum/2007 relating to assessment year 2003-04 order dated 04.12.2009, wherein it was held as under:-
“10.4 Coming to the merits of the case, the “G” bench of the Tribunal in the case of M/s Zenith Fibres Ltd (supra) had considered the incentive scheme of the Maharashtra Government of 1993 and came to a conclusion that this scheme is identical to the incentive scheme of 1979 considered by the Special Bench of the tribunal in the case of CIT vs Reliance Industries Ltd 88 ITD 273 (Mu m) (SB) and concluded that the receipt in question is capital receipt.”
12. The Tribunal after considering the Scheme of 1993 observed as under:-
“33. The contention of the learned Authorised Representative for the assessee was that 1993 scheme formulated by the Government of Maharashtra has been considered by the Mumbai Bench of the Tribunal in Everest Industries Vs. ACIT (Supra), wherein it has been held that the incentive received under the scheme was capital receipt. It has also been held by the Mumbai Bench of the Tribunal that the scheme referred to in the case of Reliance Industries Ltd., i.e. 1979 scheme was identical to the 1993 scheme. The Hon’ble Bombay High Court in the case of CIT Vs. Reliance Industries Ltd., (Supra) in the appeal filed by Revenue against the order of Special Bench of Mumbai Tribunal reported in (2004) 88 ITD 273 (SB) (Mum) have held that the subsidy received under the 1979 scheme for setting up new units in backward areas was a capital receipt. Applying the same ratio to the facts of the ITA No.1880/PN/2013 Rohit Exhaust Systems Pvt. Ltd present case, we are in conformity with the order of the CIT(A) in holding that the grant of Rs.30 lakhs received by the assessee during the year under consideration was a capital receipt and not taxable in the hands of the assessee. Further, there is no merit in invoking of the provisions of either section 41(1) or section 43(1)(b) of the Act. Thus, ground of appeal No.3 raised by the Revenue is dismissed.”
13. The issue before us is restricted to the invoking of Explanation 10 to section 43(1) of the Act, under which it is provided that where portion of cost of asset acquired by the assessee has been met directly or indirectly by the Central Government or the State Government or any Authority established under any law or by any other person, in the form of subsidy or grant or reimbursement, then so much of the cost as is relatable to such subsidy or grant or reimbursement, shall not be included in the actual cost of the asset to the assessee. It is further provided there under that where such subsidy or grant or reimbursement of such nature cannot be directly relatable to the asset acquired, so much of the amount which bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. In other words, in order to invoke the provisions of Explanation 10 to section 43(1)of the Act, it is necessary to establish that the subsidy was directly or indirectly utilized for meeting the cost or portion of cost of asset acquired. Where it is found that the cost for acquiring the asset was directly or indirectly met out of the subsidy, then the value of subsidy is to be reduced from the cost of the asset to re-work the depreciation on the said asset. Under the proviso, it is also provided that it is necessary to show that the subsidy had been directly or indirectly used for the acquisition of an asset. The facts of each case in this regard have to be seen to determine whether the subsidy has been granted to meet the cost of asset directly or indirectly. Similar proposition has been laid down by the Kolkata Bench of the Tribunal in DCIT Vs. Rasoi Ltd. (supra) and also by Visakhapatnam Bench of the Tribunal in Sasisri Extractions Ltd. Vs. ACIT (supra). It has been further laid down by the Tribunal in Sasisri ITA No.1880/PN/2013 Rohit Exhaust Systems Pvt. Ltd Extractions Ltd. Vs. ACIT (supra) that even after insertion of Explanation 10 to section 43(1) of the Act, the basic principle underlying the decision of Apex Court in CIT Vs. P.J. Chemicals Ltd. (1994) 210 ITR 830 (SC) still holds the field. The Tribunal has held as under:-
“10. We have carefully considered the rival submissions and perused the record. In our considered opinion, even after insertion of Expln. 10 to s. 43(1) of the Act, the basic principle underlying in the decision of the apex Court in the case of PJ. Chemicals Ltd. (supra) still holds the field. Their Lordships analysed the expression “met directly or indirectly” to come to the conclusion that only in a case where a subsidy or other grant was given to offset the cost of an asset, such payment/grant would fall within the expression ‘met’, whereas the subsidy received merely to accelerate the industrial development of the State cannot be considered as payments made specifically to meet a portion of the cost of the assets.
11. A careful perusal of ‘Target 2000’ scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh and for the purpose of determining the amount of subsidy to be given, cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, we are of the view that the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Expln. 10 to s. 43(1) of the Act. In the light of the above discussion, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. The AO is directed accordingly.”
14. The perusal of the Package Scheme of Incentive, 1993 reflect that the scheme was formulated to give incentive for setting up the industries in certain belts of Maharashtra and for the purpose of working out the amount of subsidy, though the cost of eligible investment was taken as the base, but the said subsidy was not specifically intended to meet the cost of assets. In view thereof, it could not be held that the incentive received by the assessee under the Package Scheme of 1993 in the form of subsidy was covered under provisions of Explanation 10 to section 43(1) of the Act and consequently, the subsidy amount was not to be reduced from the cost of the assets. Accordingly, the Assessing Officer is directed not to reduce the value of the ITA No. 1880/PN/2013 Rohit Exhaust Systems Pvt. Ltd subsidy from the cost of assets while allowing depreciation on the said assets of the assessee.”
12. Consistent with the view taken in the above said case, we hold that the sales tax incentive is not required to be deducted from the cost of asset, if the same is considered as capital receipt by the AO in the set aside proceedings.
13. The second issue contested by the assessee relates to deduction respect of “Provision of leave encashment”. The assessee created a provision of ` 60 lakhs towards leave encashment and claimed the same as deduction. When the AO sought to disallow the same u/s 43B of the Act, the assessee contended that the Provision for leave encashment is not a statutory liability and hence it is not liable to be disallowed u/s. 43B of the Act. In this regard, the assessee placed its reliance on the decision rendered by Hon’ble Calcutta High Court in the case of Exide Industries Ltd (292 ITR 470). The Assessing Officer, however, disallowed the claim of the assessee on the reasoning that the decision rendered by Hon’ble Calcutta High Court in the case of Exide Industries Ltd. (292 ITR 470) holding that the provisions of section 43B(f) is unconstitutional, has since been stayed by Hon’ble Supreme Court. The learned CIT(A) also confirmed the same.
14. The Learned AR submitted that Hon’ble Cochin Bench of the ITAT has considered an identical issue in the case of Muthoot Vehicles and Asset Finance Ltd. (ITA No. 623/Coch/2013 dated 6.12.20 13), and the Tribunal has restored the matter to the file of the Assessing Officer with the direction to consider the issue afresh as per the decision that may be rendered by Hon’ble Apex Court in the case of Exide Industries Ltd.
15. We have heard learned Departmental Representative and perused the We noticed that the Cochin Bench of the Tribunal has considered an identical issue and restored the matter to the file of the Assessing Officer with following observations :-
3. We have heard the rival contentions on this issue. We notice that this bench of Tribunal has considered an identical issue in the case of M/s Kerala Feeds Ltd (ITA No.179 & 1 80/Coch/2013) and the Tribunal, vide its order dated 27-09-2013, has set aside this issue to the file of the AO with the following observations:-
7. We have heard the rival contentions and perused the record. With regard to the claim of Provision for leave encashment, the Ld Counsel placed reliance on the decision of Honble Kerala High Court in the case of Hindustan Latex Ltd (supra) and also on the decision rendered by Honble Rajasthan High Court in the case of CIT Vs. Raj. State Bride and Construction Corporation Ltd (2012)(346 ITR 53). We notice that the Rajasthan High Court, in the above cited case, has considered the claim of deduction of Provision for leave encashment for assessment year 2000-01. However, the provisions of sec. 43B(f) was inserted into the Act by Finance Act,2001 w.e.f. 1.4.2002, which could not have been considered by Honble Rajasthan High Court. Hence, reliance placed by the assessee on the said decision may not be useful for the year under consideration.
8. We have also carefully gone through the decision rendered by the jurisdictional Kerala High Court in the case of Hindustan Latex Ltd (supra) and notice that the High Court has allowed the claim of the assessee on two grounds viz.,
(a) The Honble Kerala High Court, in para 5 of its order, has concurred with the view expressed by the Honble Calcutta High Court in the case of Exide Industries Ltd (supra) that Clause (f) of Section 43B is unconstitutional.
(b) The decision rendered by the Honble Calcutta High Court has not been challenged before the Supreme Court. (Para 5 and 8). Accordingly, the Honble Kerala High Court, by following the decision rendered by the Honble Supreme Court in the case of Berger Paints Ltd Vs. CIT (266 ITR 99), has further held that the Revenue having not challenged the correctness of the law laid down by the Calcutta High Court, it is not open to the Revenue to challenge its correctness in the case of another assessee.
9. However, we notice that the department has challenged the decision rendered by the Honble Calcutta High Court in the case of Exide Industries Ltd, by filing appeal before Honble Supreme Court and the Honble Apex Court has stayed the judgment of the Honble Calcutta High Court. In fact, the Honble Apex Court has passed two interim orders in this regard, which are detailed below:-
(a) The first order was passed on 08-09-2008 in the petition for Special Leave to Appeal (Civil) CC 12060/2008 in the case of CIT Exide Industries Ltd (from the judgment and order dated 2 7-6-2007 in APO No.301/2005 of The High Court of Calcutta). The order reads as under:-
“Upon hearing counsel the Court made the following ORDER Issue notice.
In the meantime, there shall be stay of the impugned judgment, until further orders.”
(b) The second order was passed on 08-05-2009 in the petition for Special Leave to Appeal (Civil) No(s) 2288 9/2008 (from the very same judgment of the High Court of Calcutta). The order reads as under:-
Pending hearing and final disposal of the Civil Appeal, Department is restrained from recovering penalty and interest which has accrued till date. It is made clear that as far as the outstanding interest demand as of date is concerned, it would be open to the Department to recover that amount in case Civil Appeal of the Department is allowed.
We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book but at the same time it would be entitled to make a claim in its returns.
Thus, it is noticed that the Honble Apex Court has not only stayed the operation of the Honble Calcutta High Court in the case of Exide Industries Ltd (supra), but also observed that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the Statute Book. Though the interim orders were passed by the Honble Apex Court in the years 2008/2009, it was not brought to the notice of Honble jurisdictional High Court. We further notice that the Honble Supreme Court has modified the decision rendered in the case of Berger Paints (supra) in its subsequent decision in the case of Gangad ha ran (304 ITR 61). The operative part of the said decision reads as under:-
“In answering the reference, we hold that merely because in some cases the Revenue has not preferred appeal that does not operate as a bar for the Revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the Tribunals or the High Courts.
10. We also notice that the Calcutta Bench of Tribunal has considered an identical issue in the case of S.R Batliboy & Co. in ITA No.1 598/Kol/201 1 and the Tribunal, vide its decision dated 13-03-2012, has set aside the matter to the file of the AO with the direction to consider the issue afresh as per the decision of Hon’ble Apex Court in the case of Exide Industries Ltd (supra). Accordingly, we set aside the orders of Ld CIT(A) on this issue in both the years under consideration and restore them to the file of the AO with the direction to examine the issue afresh in the light of discussions made supra.
4. Consistent with the view taken in the case of Kerala Feeds Ltd (supra), we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh in accordance with the decision rendered by Hon’ble Supreme Court in the case of M/s Exide Industries Ltd (supra).”
16. It can be noticed that the Hon’ble Supreme Court has held that the assessee shall pay tax on the disallowance of “Provision for leave encashment” as if sec. 43B(f) is on Statute book. Hence the addition made by the AO is required to be sustained. If the decision of Hon’ble Supreme Court comes in favour of the assessee in future, then the assessee is free to seek amendment of assessment order.
17. Next ground of appeal urged by the assessee relates to additional depreciation claimed u/s. 32(1)(iia) of the Act. The Assessing Officer noticed that the assessee, during the year under consideration, has claimed additional depreciation u/s 32(1)(iia) @ 20% of the original cost of plant and machineries that were acquired and installed during the financial years 2005-06 to 2007- 08 relevant to assessment years 2006-07 to 2008-09. The Assessing Officer, however, took the view that the additional depreciation prescribed u/s. 32(1)(iia) of the Act is an one time allowance which is allowed on the cost of new Plant and Machinery acquired and installed during the year of acquisition and installation. Accordingly he took the view that the Plant & Machineries acquired and installed in the earlier years no longer remain “New assets”, since they have already been put to use and depreciation has been allowed. Accordingly he held that the additional depreciation claimed u/s 32(1)(iia) of the Act on the Plant and machineries acquired and installed in the earlier years cannot be allowed.
18. The assessee, however, contended that provisions of section 32(1)(iia) does not provide that the additional depreciation shall be allowed only in the year in which the new plant and machinery has been acquired and installed, e., the assessee took the view that the plant and machinery purchased after 31.3.2005 shall be eligible for additional depreciation @ 20% of the actual cost every year. However, the said contention of the assessee was rejected by the Assessing Officer for the reasons discussed above and accordingly the additional depreciation of 1621.45 lakhs claimed by the assessee in respect of assets purchased and installed during the Financial Year 2005-06 to 2007-08 relevant to A.Ys. 2006-07 to 2008-09 was disallowed by the AO. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before us.
19. The Learned AR submitted that an identical issue was considered by the Coordinate Bench in assessee’s own case in ITA No. 1971/Mum/2013 and the Tribunal has decided the issue in favour of the assessee by following the decision rendered by Hon’ble Kolkata Bench of the Tribunal in the case of Gloster Jute Mills Ltd. (ITA No. 95/Kol/20 11 dated 1.3.2017). The Learned AR submitted that provisions of section 32(1)(iia) of the Act was substituted by the Finance Act, 2005 w.e.f. 1.4.2006. In the substituted section, there is no restriction that the additional depreciation prescribed in that section is allowable only in the year of acquisition and installation.
20. He submitted that the provisions of section 32(1)(iia) of the Act was originally introduced w.e.f. 1.4.198 1 and the same omitted from 1.4.1988. The provision so introduced in 1981 specifically provided that additional depreciation shall be allowed in the year in which the Plant and machinery was installed and if it is put to use in the succeeding year, then it shall be allowed in the year in which it was first put to use. He submitted that the provisions of section 32(1)(iia) was reintroduced w.e.f. 1.4.2005 and it contained a specific provision that the additional depreciation shall be allowed to a new industrial undertaking during the previous year in which it begins to manufacture or produce any articles or things or achieved substantial expansion by way of increase in installed capacity by not less than 10%. This provision was substituted by the present provision which reads 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 percent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii).”
The Ld A.R submitted that the provisions of sec. 32(1)(iia), before its amendment, contained specific provision that the additional depreciation shall be allowed only in the year in which the assets were acquired or put to use. However, no such restriction was placed in the new provision substituted by Finance Act, 2005 w.e.f. 1.4.2006.
21. He submitted that Hon’ble Kolkata Bench of the Tribunal, in the case of Gloster Jute Mills Ltd. (supra) has analyzed the history of the provisions of section 32(1)(iia) of the Act and has come to a conclusion that present provisions of section 32(2)(iia) of the Act, as amended by the Finance Act, 2005, does not provide any restriction that additional depreciation will be allowed only in one year. Accordingly Kolkata Bench of the Tribunal held that additional depreciation is allowable on the cost of the assets every year. He further submitted that the above said decision of Hon’ble Kolkata Bench has been followed by the Coordinate Bench in assessee’s own case. Accordingly, he submitted that, under the principles of consistency, decision of the Coordinate Bench in A.Y. 2007-08 should be followed.
22. On the contrary, the learned Departmental Representative submitted that the legislative intention was to allow additional depreciation u/s. 32(1)(iia) of the Act only in the year in which new plant and machinery is acquired and installed. He submitted that the legislative intention can be understood by considering the decisions rendered in the context of the second proviso to section 32(1) of the Act. He submitted that the second proviso to sec. 32(1) restricts the amount of depreciation allowable during the year to 50%, if the asset was put to use for a period of less than one hundred and eighty days. The assessees contended that the additional depreciation allowed u/s.32(1)(iia) of the Act, if got restricted by the second proviso, then the balance amount should be allowed in the succeeding year. The additional depreciation is allowed at 20% u/s 32(1)(iia). The second proviso to sec. 32(1) states that the depreciation shall be restricted to 50%, if the asset was put to use for less than 180 days. Accordingly, the additional shall be restricted to 10% (50% of 20%), if the asset was put to use for less than 180 days. In that kind of situation, the assessees contended that the balance amount of depreciation calculated at remaining 10% of the cost should be allowed in the succeeding year. The above said contention of the assessee has been upheld by the High Court/ Tribunal in following cases:-
