Bonafide Error in Claiming 15% Depreciation Instead of 7.5%: ITAT finds Assessee Eligible for Additional Depreciation u/s 32(1)(iia) [Read Order]
Relying on judicial precedents, the counsel argued that depreciation was mandatory and should be allowed even if not claimed in the return, and requested deletion of the disallowance and allowance of the additional depreciation
Bonafide Error
Bonafide Error
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) held that a bonafide error in claiming 15% depreciation instead of the eligible 7.5% on plant and machinery used for less than 180 days did not disqualify the assessee from claiming additional depreciation under Section 32(1)(iia) of Income Tax Act,1961 and accordingly allowed the claim.
Heena Parthiv Thakkar, appellant-assessee,had filed the return of income on 01.02.2021, declaring Rs. 4,67,560/-. The return was processed u/s 143(1) on 02.12.2021, assessing the income at Rs. 14,21,930/- after disallowing excess depreciation of Rs. 9,54,375/- claimed at 15% on plant and machinery used for less than 180 days in the year.
The assessee, aggrieved by the order of the Assessing Officer (AO ), had filed an appeal before the Commissioner of Income Tax(Appeals)[CIT(A)], who dismissed it. The CIT(A) observed that the assessee had admitted to inadvertently claiming depreciation of Rs. 19,08,750 instead of the allowable Rs. 9,54,375, as the plant and machinery were used for less than 180 days.
The CIT(A) upheld the disallowance made by the AO and rejected the assessee’s new claim for additional depreciation under Section 32(1)(iia), noting that it was not made in the original return and could not be entertained without filing a revised return, relying on the Supreme Court’s ruling in Goetze (India) Ltd. vs. CIT. Aggrieved by this order, the assessee filed the present appeal before the Tribunal.
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The assessee counsel stated that the assessee, engaged in manufacturing plastic products, had filed the return declaring Rs. 4,67,560/-. Depreciation was mistakenly claimed at 15% (Rs. 19,08,750) on new plant and machinery used for less than 180 days, instead of the eligible 7.5% (Rs. 9,54,375).
It was further submitted that the assessee was eligible for additional depreciation of Rs. 12,72,500 under Section 32(1)(iia), which was not claimed in the return due to oversight, making the total allowable depreciation Rs. 22,26,875 higher by Rs. 3,18,125 than what was claimed.
Relying on judicial precedents, the counsel argued that depreciation was mandatory and should be allowed even if not claimed in the return, and requested deletion of the disallowance and allowance of the additional depreciation. The departmental representative supported the orders of the lower authorities.
The two member bench comprising Dr.B.R.R. Kumar (Vice-President) and Siddhartha Nautiyal (Judicial Member) examined the submissions and records. It noted that the assessee had wrongly claimed 15% depreciation on new plant and machinery used for less than 180 days, instead of the allowable 7.5%, and had admitted the mistake as bonafide. As there was no ineligibility, the appellate tribunal allowed the additional depreciation.
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