B.A. RESEARCH INDIA LTD.( NOW KNOWN AS CLIANTHA RESEARCH LTD. ),AHMEDABAD vs. THE PRINCIPAL CIT- I,, AHMEDABAD

In this case return of income declaring income of Rs.53,33,240/- was filed on 14.09.2010. Subsequently the case

The office equipment including furniture and fitting are eligible for depreciation @ 10% only. Therefore allowance of depreciation @ 15% by the A.O. in the assessment order was not as per law. Accordingly it was held that the assessment order passed u/s. 143(3) dated 21.03.2013 was erroneous and prejudicial to the interest of Revenue and the A.O. was directed to make afresh assessment of total income of the assessee for the assessment year under consideration. During the course of appellate proceedings the Ld. A.R. has submitted paper book containing copy of notice issued by the CIT. Copy of reply filed by the assessee and copy of assessment order etc. The Learned counsel has contended before us that total income in the case of the assessee as per the provision of Income tax Act worked out to the amount of Rs. 53,33,240/- on which the tax payable was Rs. 16,47,971/-. Since the provision of MAT u/s. 115JB are attracted

On the other hand the Ld. D.R. stated that by not making correction in the amount of depreciation according to the provision of Income Tax Rule it will affect the claim of depreciation of the assessee in the future assessment year. Therefore he vehemently contended that it is required to rectify the error committed by the A.O.

We have heard both the sides and pursued the material on record carefully. In terms of Rule 5(1) of the Income-tax Rules 1962 depreciation is allowable to an assessee as per the rates specified in Appendix-1 of the Rules. The office and electric equipment are eligible for depreciation @ 10% as against the rate of 15 % claimed by the assessee for the year under consideration. The claim of the assessee of charging depreciation of 15% is not as per law. Therefore the Ld. CIT has correctly initiated the proceedings u/s. 263 of the Act with the direction to the A.O. to make afresh assessment for the year under consideration. We have taken into consideration the contention of the Ld. counsel that the amount of depreciation would not result in any difference in tax

In view of the above facts and circumstances we have noticed that under the diminishing balance method of calculating depreciation, the amount of depreciation is calculated as a fixed percentage of the reducing or diminishing value of asset standing in the books at the beginning of the year, so as to bring down the book value of the asset to its residual value. The amount of depreciation charged in each period is not fixed but is gradually decreasing sum. After considering the aforesaid facts and circumstances we are of the opinion that it would not be appropriate to allow higher rate of depreciation on assumption basis that assessee has paid the tax liability on the basis of MAT for the year under consideration, because it may affect the determination of unpredicted tax liability of the assessee in the consequent assessment years.

Therefore, we consider that the allowance of depreciation at the rate of 15% by the A.O. as against eligible depreciation rate of 10% provided by the A.O. was erroneous and prejudicial to the interest of Revenue.

Considering the above facts and circumstances we justify the decision and finding of the Ld. Pr. CIT. Therefore the appeal of the assessee is dismissed.

In the result appeal of the assessee is dismissed.