Saturday, June 7, 2014

50% of additional depreciation allowable in 1st year and balance in next year on usage of asset for less than 180 days

In terms of section 32(1)(iia), there is no restriction on assessee to carry forward additional depreciation. Thus, where only 50 per cent of additional depreciation was allowable in year of purchase of machinery, as it was put to use for less than 180 days during said year, balance additional depreciation could be claimed in subsequent assessment year.


a)The assessee claimed additional depreciation in respect of new machinery and plant acquired after 30-9-2005. The Assessing Officer (‘AO’) allowed 10 per cent of the additional depreciation for the assessment year 2006-07. The assessee claimed the remaining 10 per cent of the depreciation during the year under consideration.

b)The Assessing Officer rejected the claim of the assessee on the ground that there was no provision for carry forward of any additional depreciation. The DRP confirmed order of Assessing Officer.

c)The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)Section 32(1)(iia) provides that in case a new machinery or plant is acquired and installed by an assessee, who is engaged in the business of manufacture or production of an article or thing, then a sum equal to 20 per cent of the actual cost of the machinery and plant shall be allowed as a deduction.

2)The assessee had already claimed 10 per cent of additional depreciation in the earlier assessment year since the machinery was used for less than 180 days and the balance 10 per cent was claimed in the year under consideration.

3)Section 32(1)(iia) does not prescribe the year in which the additional depreciation has to be allowed. It simply provides that the assessee is eligible for additional depreciation at 20 % of the cost of the machinery, provided the machinery is acquired and installed after 31-3-2005.

4)As per proviso to section 32(1)(iia) if the machinery is put to use for the purpose of business for less than 180 days, the assessee is entitled to 50 per cent of the prescribed rate of additional depreciation. The Act is silent on the allowance of the balance additional depreciation in the subsequent year;

5)This issue was considered by the Delhi Bench of this Tribunal in the case of Dy. CIT v.Cosmo Films Ltd. [2012] 24 189 (Trib.), wherein it was decided that when there was no restriction in the Act to deny the benefit of balance 50 per cent, the assessee was entitled to balance additional depreciation in the subsequent assessment year.

6)Thus, in view of the decision in case of Cosmo Films (supra), balance 50 per cent of the depreciation had to be allowed in the subsequent year. Therefore, the orders of the lower authorities on this issue were to be set aside. – APOLLO TYRES LTD. V. ACIT [2014] 45 337 (Cochin - Trib.)