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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 11.05.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The only common issue raised in all the grounds of appeal is against the confirmation of addition of Rs.5,97,602/- by Ld. CIT(A) as made by the AO towards excess depreciation
3. The assessment was framed in this case under section 143(3) of the Act vide order dated 25.11.11 assessing the income at Rs.4,43,35,802/- as against the returned income of Rs.4,42,42,224/-. Thereafter, the AO issued notice under section 154 of the Act on 04.03.13 proposing to disallow depreciation on various equipments to the tune of 5%. As according to the AO the depreciation on these assets should have been 10% whereas the assessee has claimed 15% and accordingly the sum of Rs.5,97,602/- was added to the income of the assessee towards excess depreciation by framing order under section 154 of the Act dated 29.10.13.
4. In the appellate proceedings, the appeal of the assessee was dismissed by the Ld. CIT(A) after considering the submissions and contentions of the assessee by holding that electrical installation is a separate category on which only 10% depreciation is allowable and thus dismissed the appeal.
The Ld. A.R. vehemently submitted before us that the Ld. CIT(A) has grossly erred on facts and in law in upholding the order of AO passed under section 154 of the Act upholding the disallowance of Rs.5,97,602/-. The Ld. A.R. submitted before us by referring to the appendix 1 of Income Tax Rules which prescribes the rate of depreciation. As per the said appendix, the furniture and fixture includes electric fitting on which the rate of deprecation is 10% whereas in the 3 M/s. S. Kant Pharma Pvt. Ltd. assessee’s case the assets on which deprecation has been claimed at 15% comprised of electric fitting, office equipment and others. The electric fitting comprised of electric panel, transformers, MCC panel board, electric motors of various horse power sizes, worm reduction gear boxes and switch gears used for laboratory and production purposes in pharmaceutical industries whereas the office equipments consisted of heating ventilation & air conditioning system, steel racks for keeping the raw and packing materials, copier machine and air conditioners. The Ld. A.R. also submitted that these details were filed before the AO but they were not looked into by the AO. The Ld. A.R. vehemently submitted that the rate of depreciation on these items is only 15% as mentioned under the head plant & machinery as these are not the furniture and fixture or electrical fitting as has been observed by the authorities below. The Ld. A.R. relied on the following decision in support of her arguments: 1. CIT vs. Express Resorts & Hotels Ltd. (2015) 56 taxmann.com 171 (Gujarat) 2. Cera Sanitaryware Ltd. vs. DCIT (2016) 68 taxmann.com 433 (Ahmedabad – Trib.)
The Ld. D.R., on the other hand, relied on the order of authorities below.
We have heard the rival submissions of both the parties and perused the relevant records placed before us. We find that in this case the assets on which the depreciation was withdrawn by the AO to the extent of 5% as also affirmed by the first appellate authority included the items like electric
4 M/s. S. Kant Pharma Pvt. Ltd. panel, transformers, MCC panel board, electric motors of various horse power sizes, worm reduction gear boxes and switch gears used for laboratory and production purposes in pharmaceutical industries and thus these are ostensibly not the furniture and fixture and electric fitting on which the rate of deprecation is 10% as specified in appendix 1 in the Income Tax Rules. After hearing both the parties and perusing the details of plant & machinery, we find that the above items clearly fall under the head plant & machinery and is eligible for depreciation @ 15%. In our opinion, the assessee has rightly claimed the depreciation at the rate of 15%. Therefore, the order of Ld. CIT(A) upholding the withdrawal of depreciation by the AO cannot be sustained. The decision of Hon’ble Gujarat High Court in the case of CIT vs. Express Resorts & Hotels Ltd. (supra) it has been held that electric installation and sanitary fittings should be regarded as ‘Plant’ for the purpose of depreciation under section 32 and in the case of Cera Sanitaryware Ltd. vs. DCIT (supra) it has been held that electric fittings, fans etc. are integral part of plant & machinery and depreciation has to be allowed at the same rate as is applicable in the case of plant & machinery. However, in the present case before us the items on which the depreciation has been claimed at the rate of 15% are clearly in the nature of plant & machinery and not electric fittings. In view of the discussion hereinabove and the ratio laid down by the above decisions, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to allow the depreciation @ 15%.
Order pronounced in the open court on 27.04.2018.