My machine went into use after 30 September, so I got only half the additional depreciation. The assessment year is before AY 2016-17. Can I claim the balance half in the following year?
Yes. On the unamended section the Madras High Court held there is nothing that confines additional depreciation under s.32(1)(iia) to the year of acquisition, so the balance fifty per cent of the additional depreciation is allowable in the immediately succeeding year; and it treated the Finance Act 2015 amendment as clarificatory of that position rather than as changing it. From AY 2016-17 the point is no longer arguable: the third proviso to s.32(1) inserted by s.10 of the Finance Act 2015, with effect from 1 April 2016, expressly allows the balance in the immediately succeeding previous year.
Decided by the High Court (Rajiv Shakdher J and R. Suresh Kumar J) on 2017-03-14, reported as T.C.A. No. 551 of 2013 (Madras High Court); assessment year 2006-07. It bears on section 32(1)(iia), section 32(1), section 32 of the Income Tax Act 1961, in Deductions & Disallowances and How Tax Law Is Read matters.
The Assessing Officer's standard objection is that s.32(1)(iia) is a one-time benefit tied to the year of installation, and that the second proviso restricting the deduction to fifty per cent where the asset is used for less than 180 days extinguishes the other half. That objection was heavily litigated for years up to AY 2015-16 and it is the pre-amendment years that still come up in reassessment and s.263 proceedings. Know which side of AY 2016-17 your year falls on: for AY 2016-17 and later the third proviso answers it on the statute and no case law is needed; for earlier years you are arguing construction of the unamended provision, and this judgment (and the line of Tribunal decisions with it) is the answer. Note that the Finance Act 2015 amendment also inserted the first proviso to clause (iia) giving thirty-five per cent instead of twenty per cent for an undertaking set up in a notified backward area of Andhra Pradesh, Bihar, Telangana or West Bengal, for plant acquired and installed between 1 April 2015 and 31 March 2020.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a manufacturer, acquired and installed new plant and machinery in the previous year relevant to AY 2005-06 and put it to use for less than 180 days in that year. Because of the 180-day restriction it was allowed only fifty per cent of the additional depreciation under s.32(1)(iia) — 7.5 per cent, being half of the then prescribed rate of 15 per cent — on a claim of Rs. 1,89,67,159. In AY 2006-07 it claimed the balance 7.5 per cent. The Assessing Officer rejected the claim, the CIT(A) sustained his order and the Tribunal did likewise, and the assessee appealed to the High Court under s.260A against the Tribunal's order dated 6 January 2012 (paras 5.1 to 5.6). The year in question is before the third proviso to s.32(1) inserted by the Finance Act 2015 with effect from 1 April 2016.
The appeal was allowed and the impugned judgment of the Tribunal set aside, with no order as to costs (para 11). The issue was held to be covered in the assessee's favour by the same Bench's judgment of 6 March 2017 in CIT, Madurai v. M/s. Shri T.P. Textiles Private Limited, the observations in which are reproduced at para 3 and adopted: on a plain reading of the unamended provision it could not be said that the assessee could not claim the balance additional depreciation in the assessment year following the year in which the machinery was bought and used for less than 180 days.
The Court held the issue covered by its own judgment of 6 March 2017 in CIT, Madurai v. Shri T.P. Textiles Pvt Ltd, whose observations it reproduced at para 3 and adopted, and by the Karnataka High Court in CIT v. Rittal India (P) Ltd., with which it expressed respectful agreement, noting that the Revenue had not assailed that judgment (paras 6, 6.1 and 6.2). It then rejected each of the Revenue's three further submissions. M.M. Forgings Limited v. Addl. CIT did not deal with the question of carrying the balance forward and was distinguishable (paras 7 to 7.3). CBDT Circular No. 281 of 29 November 1979 pre-dates the insertion of clause (iia) by the Finance (No. 2) Act 2002 with effect from 1 April 2003, Circular No. 8 of 2002 does not touch the point, and in any case circulars bind the Revenue and not the Court (paras 8 to 8.3). The block of assets submission — that once depreciation is provided in the year of installation the written down value goes into the block and cannot be computed asset-wise — was misconceived, because the manner of calculating depreciation cannot impede the claim to the balance additional depreciation in the following year (para 9). In the extract adopted at para 3 the Court had held that the plain language of s.32(1)(iia) with its proviso imposes no limitation on claiming the balance in the succeeding year, and that the third proviso inserted with effect from 1 April 2016 is clarificatory and not prospective, the Memorandum to the Finance Bill 2015 only clarifying how the unamended provision had to be read all along.
As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the Assessee could not claim balance depreciation in the A.Y., which follows the A.Y., in which, the machinery had been bought and used, albeit, for less than 180 days.
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Handle my notice → Ask a CA on WhatsAppYes. On the unamended section the Madras High Court held there is nothing that confines additional depreciation under s.32(1)(iia) to the year of acquisition, so the balance fifty per cent of the additional depreciation is allowable in the immediately succeeding year; and it treated the Finance Act 2015 amendment as clarificatory of that position rather than as changing it. From AY 2016-17 the point is no longer arguable: the third proviso to s.32(1) inserted by s.10 of the Finance Act 2015, with effect from 1 April 2016, expressly allows the balance in the immediately succeeding previous year. This was decided by the High Court (Rajiv Shakdher J and R. Suresh Kumar J) and bears on section 32(1)(iia), section 32(1), section 32 of the Income Tax Act 1961. It is reported as T.C.A. No. 551 of 2013 (Madras High Court); assessment year 2006-07. The Assessing Officer's standard objection is that s.32(1)(iia) is a one-time benefit tied to the year of installation, and that the second proviso restricting the deduction to fifty per cent where the asset is used for less than 180 days extinguishes the other half. That objection was heavily litigated for years up to AY 2015-16 and it is the pre-amendment years that still come up in reassessment and s.263 proceedings. Know which side of AY 2016-17 your year falls on: for AY 2016-17 and later the third proviso answers it on the statute and no case law is needed; for earlier years you are arguing construction of the unamended provision, and this judgment (and the line of Tribunal decisions with it) is the answer. Note that the Finance Act 2015 amendment also inserted the first proviso to clause (iia) giving thirty-five per cent instead of twenty per cent for an undertaking set up in a notified backward area of Andhra Pradesh, Bihar, Telangana or West Bengal, for plant acquired and installed between 1 April 2015 and 31 March 2020. If it applies to you, the first step is this: Identify the assessment year first. For AY 2016-17 onwards cite the third proviso to s.32(1) inserted by s.10 of the Finance Act 2015 w.e.f. 1 April 2016 — it is a statutory entitlement, not a matter of case law.
The assessee, a manufacturer, acquired and installed new plant and machinery in the previous year relevant to AY 2005-06 and put it to use for less than 180 days in that year. Because of the 180-day restriction it was allowed only fifty per cent of the additional depreciation under s.32(1)(iia) — 7.5 per cent, being half of the then prescribed rate of 15 per cent — on a claim of Rs. 1,89,67,159. In AY 2006-07 it claimed the balance 7.5 per cent. The Assessing Officer rejected the claim, the CIT(A) sustained his order and the Tribunal did likewise, and the assessee appealed to the High Court under s.260A against the Tribunal's order dated 6 January 2012 (paras 5.1 to 5.6). The year in question is before the third proviso to s.32(1) inserted by the Finance Act 2015 with effect from 1 April 2016. The matter was decided on 2017-03-14 by the High Court (Rajiv Shakdher J and R. Suresh Kumar J). On those facts the High Court held as follows. The appeal was allowed and the impugned judgment of the Tribunal set aside, with no order as to costs (para 11). The issue was held to be covered in the assessee's favour by the same Bench's judgment of 6 March 2017 in CIT, Madurai v. M/s. Shri T.P. Textiles Private Limited, the observations in which are reproduced at para 3 and adopted: on a plain reading of the unamended provision it could not be said that the assessee could not claim the balance additional depreciation in the assessment year following the year in which the machinery was bought and used for less than 180 days.
The Court held the issue covered by its own judgment of 6 March 2017 in CIT, Madurai v. Shri T.P. Textiles Pvt Ltd, whose observations it reproduced at para 3 and adopted, and by the Karnataka High Court in CIT v. Rittal India (P) Ltd., with which it expressed respectful agreement, noting that the Revenue had not assailed that judgment (paras 6, 6.1 and 6.2). It then rejected each of the Revenue's three further submissions. M.M. Forgings Limited v. Addl. CIT did not deal with the question of carrying the balance forward and was distinguishable (paras 7 to 7.3). CBDT Circular No. 281 of 29 November 1979 pre-dates the insertion of clause (iia) by the Finance (No. 2) Act 2002 with effect from 1 April 2003, Circular No. 8 of 2002 does not touch the point, and in any case circulars bind the Revenue and not the Court (paras 8 to 8.3). The block of assets submission — that once depreciation is provided in the year of installation the written down value goes into the block and cannot be computed asset-wise — was misconceived, because the manner of calculating depreciation cannot impede the claim to the balance additional depreciation in the following year (para 9). In the extract adopted at para 3 the Court had held that the plain language of s.32(1)(iia) with its proviso imposes no limitation on claiming the balance in the succeeding year, and that the third proviso inserted with effect from 1 April 2016 is clarificatory and not prospective, the Memorandum to the Finance Bill 2015 only clarifying how the unamended provision had to be read all along. In the words reproduced by the source cited on this page: "As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the Assessee could not claim balance depreciation in the A.Y., which follows the A.Y., in which, the machinery had been bought and used, albeit, for less than 180 days." The decision followed or applied CIT, Madurai v. M/s. Shri T.P. Textiles Private Limited, T.C.A. No. 157 of 2017 (Madras High Court, 6 March 2017) — the same Bench's earlier judgment, reproduced at para 3 and followed; CIT v. Rittal India (P) Ltd. [2016] 66 taxmann.com 4 (Karnataka) — respectfully agreed with (para 9 of the extract); the Revenue had not assailed it (para 6.1); M.M. Forgings Limited v. Addl. CIT (2012) 349 ITR 673 (Madras) — distinguished as not dealing with the question (paras 7.1 to 7.3); Fresh & Honest Cafe Ltd. v. DCIT, I.T.A. No. 1373/Mds/2016 (ITAT Chennai, 10 August 2016) — the Tribunal decision relied on in T.P. Textiles, referred to inside the extract at para 3; Automotive Coaches & Components Ltd. v. ACIT, ITA No. 1789/Mds/2014 (ITAT Chennai, 12 February 2016), para 6 — balance additional depreciation allowed in the succeeding year for AY 2008-09, to the same effect.
It was decided by the High Court on 2017-03-14 and is reported as T.C.A. No. 551 of 2013 (Madras High Court); assessment year 2006-07. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 32(1)(iia), section 32(1), section 32, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the impugned judgment of the Tribunal set aside, with no order as to costs (para 11). The issue was held to be covered in the assessee's favour by the same Bench's judgment of 6 March 2017 in CIT, Madurai v. M/s. Shri T.P. Textiles Private Limited, the observations in which are reproduced at para 3 and adopted: on a plain reading of the unamended provision it could not be said that the assessee could not claim the balance additional depreciation in the assessment year following the year in which the machinery was bought and used for less than 180 days. It arises in Deductions & Disallowances and How Tax Law Is Read matters, on section 32(1)(iia), section 32(1), section 32 of the Income Tax Act 1961, and was decided by Rajiv Shakdher J and R. Suresh Kumar J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For an earlier year, put the claim on the plain language of the unamended s.32(1)(iia) and rely on this decision; do not concede that the benefit is confined to the year of installation. Prove the base facts the clause needs: that you are engaged in manufacture or production of an article or thing, that the plant is new, and that it was acquired AND installed in the earlier year — the AO often attacks these rather than the timing point. Reconcile the tax depreciation schedule so the balance claimed this year is traced to the specific assets on which only half the additional depreciation was allowed last year; an unreconciled lump claim invites a disallowance on facts. If the AO says the amendment is prospective and therefore the earlier position must have been the opposite, meet it with the reasoning here that the amendment was clarificatory of what the unamended words already permitted.
Validity check could not be completed. Later treatment of this judgment was not checked. The Court held that the third proviso to s.32(1), inserted by s.10 of the Finance Act 2015 with effect from 1 April 2016, is clarificatory of the unamended provision and not prospective (paras 11.3 and 11.4 of the extract adopted at para 3), so the entry is not marked superseded; for AY 2016-17 and later the proviso answers the question on the statute in any event and no case law is needed. The commencement date was verified from the amending section itself (s.10 of the Finance Act 2015) and is corroborated by the Memorandum extract reproduced in the judgment, which states that the amendment "will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years". The decision matters for assessment years up to AY 2015-16. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Verified against the judgment's own paragraph structure. The document is built round an extract: its paragraph 3 reproduces the same Bench's judgment of 6 March 2017 in CIT, Madurai v. M/s. Shri T.P. Textiles Private Limited (T.C.A. No. 157 of 2017) and that extract carries its own numbering, 6.1 to 11.5; the host judgment then resumes at its own paragraph 4 and ends at paragraph 11, which is the two-sentence disposal. The sentence quoted here is para 11.5 OF THE EXTRACT and not of this judgment; it is the same two judges speaking eight days earlier and is expressly adopted, so it is used, but with that locator. For the same reason the figure Rs. 8,03,233 and the assessment year 2011-12, which appear at para 6.1 of the extract, are T.P. Textiles' facts and not this assessee's: this appeal is for AY 2006-07, the additional depreciation claimed in AY 2005-06 was Rs. 1,89,67,159 at 7.5 per cent, being half of the then prescribed 15 per cent, and the balance 7.5 per cent was claimed in AY 2006-07 (paras 5.1 to 5.6). The reference to Fresh & Honest Cafe Ltd. is also inside the extract; this judgment's own para 7.2 is about M.M. Forgings. The third proviso to s.32(1) and its 1 April 2016 commencement were read from s.10 of the Finance Act 2015 itself. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the impugned judgment of the Tribunal set aside, with no order as to costs (para 11). The issue was held to be covered in the assessee's favour by the same Bench's judgment of 6 March 2017 in CIT, Madurai v. M/s. Shri T.P. Textiles Private Limited, the observations in which are reproduced at para 3 and adopted: on a plain reading of the unamended provision it could not be said that the assessee could not claim the balance additional depreciation in the assessment year following the year in which the machinery was bought and used for less than 180 days.
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