Suzuki Motor Case Cited in Maxxis Rubber ITAT Win on Depreciation Treatment
Income Tax Tribunal Rules in Favor of Assessee in Section 32 Depreciation Case
The Ahmedabad Bench of the Income Tax Appellate Tribunal has granted significant relief to Maxxis Rubber India Pvt. Ltd., setting aside a revisionary order passed under Section 263 of the Income Tax Act, 1961. The Tribunal ruled that the Principal Commissioner of Income Tax had erred in interpreting the depreciation provisions, particularly concerning the treatment of carried forward additional depreciation.
Background of the Case
Maxxis Rubber India Pvt. Ltd., engaged in manufacturing operations at the Sanand Industrial Estate in Ahmedabad, had filed its return for the Assessment Year 2018–19. During the preceding financial year, the company had acquired eligible plant and machinery, entitling it to:
- Normal depreciation at 15%, and
- Additional depreciation at 20%, as per Section 32 of the Act.
However, since the assets were put to use for less than 180 days during that year, only 50% of the additional depreciation (i.e., 10% of the asset cost) was claimed. The balance 50% was validly carried forward to the following year, a practice consistent with the statutory provisions.
PCIT’s Contention and Revisionary Action
In the assessment proceedings for AY 2018–19, the Assessing Officer (AO) accepted the company’s depreciation computation under Section 143(3) of the Act. This included:
- Applying 15% depreciation on the opening Written Down Value (WDV), and
- Claiming the balance 10% additional depreciation carried forward from the previous year.
Subsequently, invoking Section 263, the PCIT revised the assessment order, asserting that it was:
- Erroneous, and
- Prejudicial to the interests of the Revenue.
The PCIT argued that the opening WDV of the assets should have been reduced by the unclaimed additional depreciation brought forward from the previous year. This interpretation, if accepted, would effectively lower the depreciation base and, consequently, reduce the overall depreciation allowable to the assessee.
Assessee’s Arguments
Represented by Tushar Hemani, counsel for the appellant, Maxxis Rubber challenged the PCIT’s revision order on both legal and factual grounds. Key submissions included:
- The AO had duly examined all relevant facts and applied his mind before completing the assessment.
- Depreciation had been computed in strict conformity with Section 32 and Section 43(6) of the Income Tax Act.
- No statutory provision mandates the adjustment of carried forward additional depreciation from the WDV before applying normal depreciation rates.
To reinforce the argument, reliance was placed on the decision in Suzuki Motor Gujarat Pvt. Ltd. vs. PCIT (2025), wherein the Tribunal had conclusively held in favour of the assessee on an identical issue.
Revenue’s Position
The Department, represented by Sher Singh, defended the PCIT’s interpretation, maintaining that failure to reduce the carried-forward additional depreciation from the opening WDV had resulted in an excess claim of depreciation. The Revenue contended that the assessment order lacked due diligence and thus warranted revision under Section 263.
ITAT’s Findings and Observations
The Tribunal Bench comprising Judicial Member T.R. Senthil Kumar and Accountant Member Annapurna Gupta decisively rejected the PCIT’s interpretation.
Key findings included:
- There was no error in the AO’s assessment order that would justify invocation of revisionary powers under Section 263.
- Section 32(1)(ii) and Section 43(6)(c) do not provide for any adjustment of the unclaimed portion of additional depreciation against the opening WDV of assets.
- The decision in Suzuki Motor Gujarat Pvt. Ltd. was directly applicable and binding in this context.
The Tribunal concluded that the PCIT had overstepped in assuming an interpretation not supported by the statute and precedent. Accordingly, the revision order was found to be unsustainable in law.
Implications
The ruling by the Ahmedabad ITAT not only provides relief to Maxxis Rubber India Pvt. Ltd. but also reinforces the judicial view that carried forward additional depreciation cannot be forcibly adjusted against the opening WDV for subsequent years. This decision:
- Clarifies a recurring issue in corporate tax assessments concerning depreciation computation,
- Limits the scope of PCIT’s revisionary powers under Section 263, and
- Upholds consistency in interpretation by aligning with previous Tribunal decisions.
In light of this ruling, businesses claiming additional depreciation under Section 32 can draw significant assurance regarding the treatment of such deductions, particularly when assets are used for less than 180 days in the year of acquisition.