Income Tax Appellate Tribunal - Mumbai
Custom Capsules P.Ltd, Mumbai vs Pr Cit Cen 4, Mumbai on 21 August, 2017
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ "सी" मुंबई
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
BEFORE HON'BLE S/SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR,(AM)
आमकय अऩीर सं./I.T.A. No.3564/Mum/2017
(ननधधायण वषा / Assessment Year :2012-13)
Custom Capsules Pvt.Ltd, बनाम/ Principal Commissioner of
1001, Dalamal House, Vs. Income Tax -Central-4,
10th Floor, Nariman Point, Room No.663,
Mumbai-400021 6th Floor, Ayakar Bhavan,
M.K.Road,
Mumbai-400020
(अऩीरधथी /Appellant) .. (प्रत्मथी / Respondent)
स्थधमी रेखध सं ./जीआइआय सं ./PAN/GIR No. :AAACC6203G
अऩीरधथी ओय से / Appellant by: Shri Ronak G Doshi
प्रत्मथी की ओय से/Respondent by Shri Pratap Singh
सुनवधई की तधयीख / Date of Hearing : 6.7.2017
घोषणध की तधयीख /Date of Pronouncement : 21.08.2017
आदे श / O R D E R
Per RAJESH KUMAR, Accountant Member:
This is an appeal filed by the assessee and is directed against the order of the Ld. CIT, Central-4, Mumbai dated 15.3.2017 passed u/s 263 of the Income Tax Act, 1961 and it is pertaining to A.Y.2009-10.
2. Only issue raised in the grounds of appeal is against the exercising the jurisdiction as per the provisions of section 263 of the Act by ld.CIT setting ITA No.3564/M/17 2 aside the order of the AO to make assessment denovo vide order dated 15.3.2017.
3. The facts of the case are that the assessment was completed under section 144 r.w.section 144C of the Act by the AO vide order dated 29.2.2016 assessing the total income at Rs.7,10,57,884/- against the returned income of Rs.6,90,42,520/-. The Principal Commissioner of Income Tax (PCIT) by exercising the jurisdiction u/s 263 Explanation -2 of the Act by issuing set aside the assessment on the basis that AO has framed the assessment without inquiry resulting the assessment being erroneous and prejudicial to the interest of the revenue after issuing notice dated 11.2.2016 u/s 263 of the Act which is reproduced below:
To, Custom Capsules Pvt. Ltd., 1011, Dalamal House, Jamnalal Bajaj Road, Nariman Point Mumbai 400 021.
Sir, Sub: Proceedings u/s. 263 of the LT. Act, 1961 - A.Y. 2012-13 - Show Cause Notice - reg. (PA : AAACP4134F) Kindly refer to the above subject.
2. On examination of the records for A.Y. 2012-13, it is noticed that the assessment proceedings were completed uls 143(3) r.w.s.144C(13) of the IT Act, vide order dated 29.02.2016, determining total income ofRs.7,01,76,650/-
3. The Statement showing the working of depreciation as per Income tax Act [as per annexure to clause 14 to the Form 3CD enclosed with the return] reveals that the assessee has claimed balance 50% of the additional depreciation u/s 32(1)(iia) amounting to RS.2,16,941/- on ITA No.3564/M/17 3 the additions made in assets during the second half of the financial year 2010- 1 relevant to A.Y. 2011-12.
4. The quantum of permissible allowance of depreciation under clause
(i) and [iia] to section 32(1) is limited to 50% if the asset has been put to use for the purposes of business for a period less thazn one hundred and eighty days in the previous year. Further as per the third proviso to clause (ii) of the sub-section (1) of section 32, the balance 50% of the additional depreciation admissible under clause (iia) is allowable in the succeeding previous year, but then this proviso is inserted by the Finance Act, 2015 and is effective prospectively from 01.04.2016 only. Therefore, the balance 50% of the depreciation relating to assets added in second half of the financial year 2010-11, is not allowable in A.Y. 2012-13.
5. A perusal of the records and the assessment order shows that the AO has not made the disallowance of depreciation to the extent of Rs.2,16,941/- being the additional depreciation claimed in respect of additions in assets made during the second half of the financial year 2010-11 relevant to A. Y. 2011-12.
6. In view of the above, it is clear that there is a failure on the part of the assessing officer to examine the issue of claim of additional depreciation in terms of provisions of section 32(1), which has rendered the impugned assessment order passed vi] s.143(3) of the I.T. Act erroneous, in so far as it is prejudicial to the interests of revenue, in terms of explanation 2 to section 263 of the IT. Act.
6. In view of the above, you are requested to show cause as to why the said assessment order should 'not be revised u/s.263 of the l.T. Act, 1961. Your objections, if any, to the proposed revision of the assessment order may be filed before the undersigned on or before 24.02.2017.
7. The date of hearing is fixed for this purpose on 24.02.2017. You are requested to appear personally or through an authorized representative on the said date at 12.20 pm in my chamber (Room No.663, Aayakar Bhavan) Yours faithfully, Sd (K K SINGH) Pr. Commissioner of Income-tax, (Central) - 4, Mumbai.
ITA No.3564/M/174 The said notice was replied by the assessee vide letter dated 22.4.2017 which is also produced below:
1) The original assessment in this regard was completed after due consideration of all the details and explanation submitted to the Ld AO.
Therefore your honour's contention to revise the order is unwarranted. In this regard we further submit as under:
1.1) As regards your contention that the additional deprecation u/ s.32(1)(iia) on additions made in assets during the second half of the financial year 2010-11 relevant to A. Y. 2011-12 amounting to Rs.2, 16,941/ - in view of the third proviso to section 32(1)(iia), allowing such a claim is effective prospectively from 01.04.2016 only and therefore, the aforesaid amount of Rs.2, 16,941/ - relating to assets added in the second half of the financial year 2010-11 is not allowable in A. Y. 2012-13, we submit as under:
"the assessee has claimed Rs.1,82,948/ - as additional depreciation pertaining to depreciation at 10% u/s. 32(1)(iia) in respect of additions made to eligible assets during the year ended March 2011 and used in that year for less than 180 days on which such additional depreciation was claimed at 10% only. During the course of assessment proceedings the assessee' had filed the tax audit report issued to it as per the provisions of section 44AB of the Act which has disclosed the basis on which depreciation has been claimed u/s 32 of the Act."
1.2) Section 32(1)(iia} was introduced into the Act by Finance Act, 2002 w.e.f.01-04-2003. It was introduced as an incentive for fresh investments in the industrial sector. Section 32(1)(iia} and second proviso to section 32(1)(ii) needs to be interpreted in a manner which fulfills this objective. The object of section 32(1)(iia} could be achieved only when half of the additional depreciation remaining unavailable [in view of second proviso to section 32(1)(ii)] to the assessee in the year of acquisition and installation is allowed in the succeeding year. This interpretation also gets support from the fact that there is no specific bar against such a claim under second proviso to section 32(1)(ii}. The second proviso to section. 32(1)(ii} only creates a restriction with respect to the time over which additional deprecation could be claimed. 1.3) The second proviso to section 32(1)(ii} does not affect the vested right of the assessee towards additional depreciation which it gets by making investment in the new machinery or plant. One may state that ITA No.3564/M/17 5 the assessee earns his entitlement towards additional depreciation as soon as he incurs a cost on acquisition of plant or machinery. The entitlement towards additional depreciation crystallizes with the event of incurrence of cost on plant or machinery and has no relation with the WDV of the block of asset. In other words, a right to claim full additional depreciation vests with an assessee as soon as he incurs cost on acquisition and installation of a new machinery or plant during the relevant previous year.
1.4) Therefore the assessee, in view of several judicial pronouncements, has claimed additional depreciation u/ s.32(1)(iia) This view is neither erroneous nor prejudicial to the Revenue and therefore provisions of section 263 cannot be invoked." After having considered the various contentions and explanation of the assessee, the PCIT invoked provisions of section 263-explantion -2 of the Act which provides that the order passed without making inquiries or verification by the AO, which should have been made or the order is passed allowing any relief without inquiring into the claim, the order shall be deemed to be erroneous and prejudicial to the interest of revenue on account of addition claim of depreciation to the extent of Rs.1,82,948/-. The assessee made the addition in the second half of the preceding previous year relevant to assessment year 2011-12 and accordingly claimed depreciation at the rate of 10% which is 50% of the normal rate of depreciation as per the I.T. Rules as the assets was put to use is less than 182 days and remaining 50% of the depreciation of Rs.1,82,948/- was claimed in the assessment year 2012-13 as per the provisions of section 32(1)(iia) of the Act, which was introduced by the Finance Act, 2002 w.e.f 1.4.2003.
4. The ld. AR vehemently submitted before us that the assessee has rightly claimed depreciation. Even on merits, the assessee was entitled to ITA No.3564/M/17 6 this additional depreciation as it has only claimed 50% depreciation in the assessment year 2011-12 as the assets was put to use for less than 182 days and claim of remaining 50% depreciation made in the next assessment year i.e.2012-13 as per the provisions of the Act.
5. The ld. AR while drawing our attention to the written submission dated 4.1.2016 filed before the DCIT submitted that in response to query from the AO, the details of its assets along with the copy of bills qua fixed assets were furnished along with the various necessary annexure to form No.3CD which deals with calculation of depreciation as per the Income Tax Act. Therefore, the allegation of the PCIT that the AO has not made any inquiry to the issue of claim of additional depreciation resulting into assessment being erroneous and prejudicial to the interest of revenue was totally wrong and unfounded. The ld.AR also contended that merely because the issue has not been discussed by the AO in the assessment order could not be taken as that there was lack of inquiry rendering the assessment erroneous as well as prejudicial to the interest of revenue. In support of his submissions the ld.AR also relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT V/s Gabriel India Ltd. (1993) 203 ITR 108 Bom; and the decision of co-ordinate bench of the Tribunal in the case of Small Wonder Industries V/s CIT in ITA No.2464/Mum/2013 (AY-2009-10) dated 24.2.2017. Even on merits, the ld. AR submitted that there is no bar on the assessee to carry forward the additional depreciation u/s 32(1) (iia) of the Act to claim the same in the subsequent year in view of the fact that in the year of addition to ITA No.3564/M/17 7 fixed assets, the depreciation was claimed at 50% of the normal depreciation as the assessee was put to use in the second half of the year. In support of this contentions, the ld.AR also relied on the decision of Karnataka High Court in the case of CIT V/s Rittal India(P) Ltd reported in 380 ITR 423) (Kar). Finally, the ld.AR, in view of the facts and circumstances of the case and the ratio laid down by the various authorities submitted that the case of the assessee stands covered in favour of the assessee and exercising the jurisdiction u/s 263 of the Act was wrong and against the provisions of the Act and should be quashed.
6. On the other hand the ld. DR heavily relied upon the order of PCIT by submitting that the setting aside the order of AO that the same was erroneous and prejudicial to the interest of revenue. Ld Dr further submitted that the PCIT has given only direction to look into the matter and decide the issue as per facts and law, so no prejudice was caused to the assessee. The ld. DR requested the bench to uphold the order of the PCIT.
7. We have carefully considered the rival submissions and perused the material placed before us including the impugned order and case law as relied upon by the assessee. We find that the addition to the fixed assets in this case was made in the second half of the preceding previous year relevant to assessment year 2011-12 and the depreciation was claimed at 50% of the normal rate of depreciation as the assets was put to use for less than 182 days. The second aspect is that the assessee claimed depreciation at the rate of 50% of the normal depreciation and carried forward the ITA No.3564/M/17 8 remaining 50% to the subsequent year 2012-13 and claimed the same in that year which is current year assessment year 2012-13 under the clause (iia) of the section 32 of the Act. We also find that even during the course of assessment proceedings, the assessee specifically submitted all the details and schedule of depreciation along with the bills and vouchers in support of the said claim before the AO and the AO thereafter framed the assessment u/s 143(3) of the Act. In our opinion, the twin conditions are to be satisfied before exercising the revisionary jurisdiction u/s 263 of the Act that the order passed by the AO is erroneous as well as prejudicial to the interest of revenue. But in the present, the AO has necessary details qua the additional claim of depreciation of Rs. 1,82,948/- and allowed the claim of the assessee as per the provisions of section 32(1)(iia) of the Act. Accordingly, we are fully agreed with the arguments of ld.AR that it cannot be presumed that due to lack of inquiry the prejudicel is caused to the revenue when the issue was not discussed in the order of AO. The assessee finds supports from the decision of the jurisdictional High Court in the case of Gabriel India Ltd(supra), wherein it has been held that simply because in his order he did not make an elaborate discussion in that regard. Even otherwise, the claim of the assessee, which is as per law under the provisions of section 32(1)(iia) of the Act , cannot be said to be have caused prejudice to the revenue and therefore, the order is not erroneous as no prejudice was caused to the revenue as the assessee has claimed the additional depreciation as per the provisions of Act which is also supported by number ITA No.3564/M/17 9 of decisions. We, therefore, respectfully following the ratio laid down in the above mentioned decisions are inclined to set aside the order of PCIT and quash the proceedings u/s 263 of the Act and the consequent order passed u/s 263 of the Act as being without any jurisdiction.
8. In the result the appeal of the assessee stands dismissed.
The above order was pronounced in the open court on 21st Aug, 2017.
घोषणध खर
ु े न्मधमधरम भें ददनधंकः Aug, 2017 को की गई ।
Sd sd
(JOGINDER SINGH) ( RAJESH KUMAR)
Judicial Member Accountant Member
भुंफई Mumbai: 21st Aug, 2017.
व.नन.स./ SRL , Sr. PS
आदे श की प्रतिलऱपप अग्रेपिि/Copy of the Order forwarded to :
1. अऩीरधथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमक् ु त(अऩीर) / The CIT(A)- concerned
4. आमकय आमक् ु त / CIT concerned
5. ववबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भंफ ु ई/ DR, ITAT, Mumbai concerned
6.
गधर्ा पधईर / Guard file.
आदे शधनुसधय/ BY ORDER, True copy सहधमक ऩंजीकधय (Asstt. Registrar) आमकय अऩीरीम अधधकयण, भंफ ु ई /ITAT, Mumbai