Relief for Maxxis Rubber as ITAT Rejects PCIT’s Interpretation of Depreciation u/S. 263 [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad has granted relief to Maxxis Rubber India Pvt. Ltd. by quashing a revisionary order issued under Section 263of 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, holding that there is no legal requirement to adjust carried forward additional depreciation against the opening written down value of assets.

The Assessee, Maxxis Rubber India Pvt. Ltd., is engaged in manufacturing activities at Sanand Industrial Estate, Ahmedabad, had filed its return for the Assessment Year (AY) 2018-19. In the preceding year, the company acquired plant and machinery becoming eligible for normal depreciation at the rate of 15% and additional depreciation at the rate of 20% under Section 32 of the Income Tax Act, 1961.

Since the assets were put to use for less than one hundred eighty days in that year, the company claimed 50% of the additional depreciation, amounting to ten percent of the cost of the eligible assets, and carried forward the balance 50% percent to the following year.

In the relevant year under dispute, the assessee applied the 15% rate of normal depreciation on the opening written down value of the assets and also claimed the balance additional depreciation from the preceding year.

The Assessing Officer (AO) accepted the depreciation computation while framing the assessment under Section 143(3) of the Act.

Subsequently, the PCIT exercised powers under Section 263, holding that the assessment order was erroneous and prejudicial to the interest of the Revenue, on the ground that the opening written down value of assets should have been reduced by the carried forward additional depreciation.

The appellant, represented by Tushar Hemani, contended that the revisionary order was bad in law as the AO had passed a reasoned assessment order after examining all necessary details. It was argued that depreciation had been computed strictly in accordance with Section 32 and Section 43(6) of the Income Tax Act, 1961, and that there was no provision requiring the carried forward additional depreciation from the preceding year to be reduced from the opening written down value.

The appellant also relied on the decision of the Tribunal in the case of Suzuki Motor Gujarat Pvt. Ltd. vs. PCIT (2025), where identical issues were decided in favour of the assessee.

The Revenue, represented by Sher Singh, supported the order of the PCIT’s order and argued that the assessee had claimed excess depreciation as it did not reduce the carried-forward additional depreciation from the opening written down value.

The Bench comprising Judicial Member, T.R. Senthil Kumar and Accountant Member, Annapurna Gupta, held that there was no error in the assessment order. The Tribunal 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 noted that an identical issue had already been adjudicated by a coordinate bench in the case of Suzuki Motor Gujarat Pvt. Ltd. (supra), where it was categorically held that there is no statutory provision requiring such carried forward additional depreciation to be set off against the opening written down value before applying the prescribed rate of normal depreciation.

Relying on this precedent, the bench ruled that the interpretation advanced by the PCIT was contrary to law.

Thus, the appeal of the assessee was allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates