No Adjustment of Carried Forward Additional Depreciation Against Opening WDV: ITAT
No Adjustment of Carried Forward Additional Depreciation Against Opening WDV: ITAT
Introduction
The Income Tax Appellate Tribunal (ITAT), Ahmedabad has granted relief to Maxxis Rubber India Pvt. Ltd. by quashing a revisionary order issued under Section 263 of the Income Tax Act, 1961. The Tribunal observed that the Principal Commissioner of Income Tax (PCIT) erred in treating the company's depreciation claim as excessive.
Factual Background
Maxxis Rubber India Pvt. Ltd., a company engaged in manufacturing activities, had filed its return for the Assessment Year (AY) 2018-19. The company had claimed normal depreciation and additional depreciation on plant and machinery acquired in the preceding year. The Assessing Officer (AO) accepted the depreciation computation while framing the assessment under Section 143(3) of the Act.
Procedural Background
The PCIT exercised powers under Section 263, holding that the assessment order was erroneous and prejudicial to the interest of the Revenue. The PCIT held that the opening written down value of assets should have been reduced by the carried forward additional depreciation.
Issues
Depreciation Claim: The dispute centered around the company's claim for depreciation on plant and machinery, specifically whether the carried forward additional depreciation should be adjusted against the opening written down value of assets.
Revisionary Order: The validity of the revisionary order issued by the PCIT under Section 263 of the Income Tax Act, 1961.
Contentions of the Parties
Assessee's Contention: The company argued that the revisionary order was bad in law, and that the AO had passed a reasoned assessment order after examining all necessary details. The company relied on the decision of the Tribunal in the case of Suzuki Motor Gujarat Pvt. Ltd. vs. PCIT, where identical issues were decided in favour of the assessee.
Revenue's Contention: The Revenue supported the order of the PCIT, arguing that the assessee had claimed excess depreciation by not reducing the carried-forward additional depreciation from the opening written down value.
Reasoning and Analysis
The Bench comprising Judicial Member, T.R. Senthil Kumar and Accountant Member, Annapurna Gupta observed that Section 32(1)(ii) and Section 43(6)(c) of the Income Tax Act, 1961 do not provide for any adjustment of carried forward additional depreciation against the opening written down value. The Tribunal relied on the precedent set by a coordinate bench in the case of Suzuki Motor Gujarat Pvt. Ltd., where it was held that there is no statutory provision requiring such carried forward additional depreciation to be set off against the opening written down value.
Implications
The judgment highlights the importance of understanding the statutory provisions governing depreciation claims under the Income Tax Act, 1961. The Tribunal's decision provides clarity on the treatment of carried forward additional depreciation and its impact on the opening written down value of assets.
