Depreciation – Additional depreciation – Section 32(1)(iia) – A. Ys. 2007-08 and 2008-09 – Plant and machinery set up after 1st October 2006 but before 31st March 2007 – Half of additional depreciation of 20% is allowable in A. Y. 2007-08 and the balance half allowable in A. Y. 2008-09

The assessee acquired and installed new plant and machinery in the F. Y. 2006-07 after 1st October 2006. The assessee therefore claimed additional depreciation of 10%, in the A. Y. 2007-08, being half of the 20% allowable u/s. 32(2)(iia) and the same was allowed. The balance half was claimed in the A. Y. 2008-09 which was disallowed by the Assessing Officer. The Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

“i) The beneficial legislation should be given liberal interpretation so as to benefit the assessee. The intention of the legislature is absolutely clear that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to half being granted in one assessment year, if certain condition was not fulfilled. But that would not restrain the assesee from claiming the balance of the benefit in the subsequent assessment year.
ii) The Tribunal had rightly held that the additional depreciation allowed u/s. 32(1)(iia) is a onetime benefit to encourage industrialisation and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting the additional allowance. Appeal is accordingly dismissed.”