Commissioner of Income-tax v. Ankit Metal and Power Ltd
[Citation -2014-LL-1120]

Citation 2014-LL-1120
Appellant Name Commissioner of Income-tax
Respondent Name Ankit Metal and Power Ltd.
Court HIGH COURT OF CALCUTTA
Relevant Act Income-tax
Date of Order 20/11/2014
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags manufacture or production • additional depreciation • plant and machinery • judicial discipline • power plant
Bot Summary: 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. Now, the issue for consideration arises as to whether additional depreciation is to be allowed on the power plant on which depreciation under clause of sub-section of section 32 has been claimed. 1.9 On a perusal of clause of sub-section of section 32 quoted above, it is crystal clear that clause mandates that the additional depreciation shall be allowed as deduction under clause. Undoubtedly additional depreciation under clause is not to be allowed in the cases falling under clause. In view of the above, the power plant would not be eligible for the benefit of additional depreciation, as separate clause governs its depreciation claim which is not mentioned in clause for allowing the additional depreciation. According to her, such further sum would not be allowed as depreciation under clause if the assessee had claimed its depreciation under clause of the said section. The assessee having satisfied those conditions is entitled to claim the additional depreciation as provided by the said clause irrespective of its original claim for depreciation having been made under clause of the said section.


JUDGMENT This appeal was heard extensively on November 11, 2014, as well as today. appeal preferred by Revenue under section 260A of Incometax Act, 1961, against consolidated order dated January 8, 2014, passed by Income-tax Appellate Tribunal "A" Bench in I.T.A. No. 517/Kolkata/ 2012 filed by Revenue and CO No. 46/Kolkata/2012 filed by assessee both for assessment year 2008-09 seeks to raise questions set out in paragraph 8 of stay application for adjudication. We admit question No. 1 for adjudication as we find other questions raised are not substantial questions of law to be adjudicated in appeal. By consent of parties question formulated is taken up for hearing in appeal. question is as under: "(i) Whether, on facts and in circumstances of case, learned Tribunal erred in law and was not justified in allowing appeal filed by assessee as well as on law in upholding decision of Commissioner of Income-tax (Appeals) in deleting addition of Rs. 4,17,27,868 made by Assessing Officer on ground of additional depreciation without appreciating fact that case of 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 Income-tax Act, 1961?" It appears assessee had claimed further depreciation in respect of its plant and machinery used for 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 rates directed by rule 5(1A) of Income-tax Rules, 1962, as have been provided for in Appendix I thereof. assessee's claim for deduction of further depreciation is in terms of clause (iia) of section 32(1). said clause, as it stood in relevant assessment year, is set out as under: "(iia) in case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after 31st day of March, 2005, by assessee engaged in business of manufacture or production of any article or thing, further sum equal to twenty per cent. of actual cost of such machinery or plant shall be allowed as deduction under clause (ii)." Assessing Officer in disallowing such claim held, inter alia, as follows: "1.2 Further, examination of depreciation schedule of power plant reveals that assessee has claimed additional depreciation of Rs. 4,17,28,868 in addition to normal depreciation of Rs. 1,96,36,450. As per page 7 of annual report, company had commissioned captive power plant of 8.5 MW in January, 2008. Therefore, additions in depreciation schedule for power plant in tax audit report has been shown after September and total additions aggregate to Rs. 49.85 crores. rates of depreciation for power plant claimed by assessee are as per rates prescribed in Appendix IA of Income-tax Rules read with rule 5(1A). Rule 5(1A) provides that depreciation under clause (i) of sub-section (1) of section 32 of Income-tax Act on assets acquired on or after 1st April, 1997, shall be calculated at percentage specified in Appendix 1A on actual cost. 1.3 Analysis of aforesaid facts undisputedly reveal that assessee is claiming depreciation on power plants under clause (i) of sub-section (1) of section 32. Now, issue for consideration arises as to whether additional depreciation is to be allowed on power plant on which depreciation under clause (i) of sub-section (1) of section 32 has been claimed. 1.9 On perusal of clause (iia) of sub-section (1) of section 32 quoted above, it is crystal clear that clause (iia) mandates that additional depreciation shall be allowed as deduction under clause (ii). There is no universal independent deduction available under subclause (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 cases falling under clause (i). It is also pertinent to note that clause (iia) of sub-section (1) of section 32 is only provision in Act allowing additional depreciation. In view of above, power plant would not be eligible for benefit of additional depreciation, as separate clause (i) governs its depreciation claim which is not mentioned in clause (iia) for allowing additional depreciation." Ms. Gutgutia, learned advocate appearing on behalf of appellantRevenue, submitted reasoning given by Assessing Officer is correct. She drew our attention to definition of block of assets as given in section 2(11) of Act that indicates assets in respect of which same percentage of depreciation is prescribed. She relied on judgment of Madras High Court in M. M. Forgings Ltd. v. Addl. CIT [2012] 349 ITR 673 (Mad) where question raised by assessee against Appellate Tribunal holding it was not entitled to additional depreciation was not admitted for adjudication in appeal. We, however, find from that decision same was regarding applicability of second proviso under section 32(1) of said Act. She submitted further 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 sum further to depreciation claimed under clause (ii). According to her, such further sum would not be allowed as depreciation under clause (ii) if assessee had claimed its depreciation under clause (i) of said section. Mr. Khaitan, learned senior advocate appearing on behalf of respondent-assessee, has relied on judgment of Gujarat High Court in CIT v. Diamines and Chemicals Ltd. [2014] 222 Taxman 218 (Guj), where Tribunal held as under: "7. We have considered rival submissions. perusal of order of learned Commissioner of Income-tax (Appeals) more specifically in paragraphs 4.3 to 4.5 of his order clearly shows that learned Commissioner of Income- tax (Appeals) has relied upon decisions of hon'ble Madras High Court in cases of CIT v. HiTech Arai Ltd. [2010] 321 ITR 477 (Mad), CIT v. VTM Ltd. [2009] 319 ITR 336 (Mad) Texmo Precision Castings (refer to supra) for purpose of holding that assessee is eligible for additional depreciation as per provisions of section 32(1)(iia) of Act. In absence of any decision to contrary much less any decision of hon'ble jurisdictional High Court on issue to contrary, we are of view that order of learned Commissioner of Income-tax (Appeals) on this issue is on right footing and does not call for any interference, in so far as he has followed judicial discipline in following decisions of hon'ble Madras High Court (refer to supra) and granted relief to assessee. In circumstances, we find no reason to interfere with order of learned Commissioner of Income-tax (Appeals) in doing so..." We have considered judgments of Madras High Court as well as that of 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 31st day of March, 2005, by assessee engaged in business of manufacture or production of any article or thing at rate provided to be allowed as deduction under clause (ii) of said section. There is no dispute on facts regarding assessee having acquired and installed plant and machinery for purpose of generation of power necessary for production of items it manufactures. assessee having satisfied those conditions is entitled to claim additional depreciation as provided by said clause (iia) irrespective of its original claim for depreciation having been made under clause (i) of said section. We do not find any relation of clause (iia) of said section with head of deduction claimed by assessee in matter of determining whether it is entitled to claim for additional depreciation. For reasons above, we answer question formulated in negative and in favour of assessee. appeal and application are dismissed. *** Commissioner of Income-tax v. Ankit Metal and Power Ltd
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