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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI
Before: SH. BHAVNESH SAINI & SH. L.P.SAHU
PER L.P.SAHU, ACCOUNTANT MEMBER : This is an appeal filed by the revenue against order dated 14.07.2014 passed by the ld. CIT(A)-X, New Delhi for assessment year 2008-09 on the following grounds of appeal :-
“1) The Ld. CIT(A) has erred on facts and in law in allowing depreciation @ 30% as against 15% allowed by the AO on “injection Molding Machine” by wrongly categorizing if as “Moulds”.
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2) The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.” 2. We observe that the assessee is engaged in the manufacturing and printing of laminated pouches and bags The brief facts of the case are that the the assessee has filed originally return of income on 29th September, 2018 delcaring loss of Rs. 1,32,97,313/- and the case was completed assessment u/s 143(3) on 23.11.2010. Later, the case was reopen by issuing notice u/s 148/147 on dated 30.3.2012 after recording following reasons as under :- “Perusal of records revealed that the assessee had claimed and allowed depreciation of Rs. 1,39,55,650/- @ 30% on Plant and Machinery, Lab equipment, office equipment Electrical & fitting and office vehicles and the same was allowed at a higher rate of depreciation than the allowable rate of depreciation @ 15% on Plant & Machinery, Lab equipment, office equipment, office vehicles and 10% on electrical & fitting only. Hence, difference of claimed and allowable normal depreciation of Rs. 71,16,929/- (being 13955650- 6838720) should have been disallowed and added back in the income of the assessee. The mistake resulted in over assessment of loss of Rs. 71,16,929/-. I have therefore, reason to believe that an amount of Rs. 71,16,929/- represents income of the assessee for the A.Y. 2008-09 which has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961.” 3. The Ld. Assessing officer observed that the assessee company has claimed depreciation of Rs. 1,39,55,650/- and which has been allowed @ 30% on Plant and Machinery, Lab equipment, Office equipment Electrical & fitting and office vehicles and the same was allowed at a higher rate of depreciation than the allowable rate of depreciation @ 15% on Plan & Machinery, Lab equipment, office equipment, office vehicles and 10% on electrical & fitting only.
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During the course of re assessment proceedings, the assessee submitted reply he also relied the CBDT Circular no. 109 [F.No. 202/21/71-IT(A-II)] which were not accepted by the assessing officer and the ld. Assessing officer excess depreciation as per chart mentioned below :-
Particular w.d.v. as on Amount/rate Depreciation Excess claim 31/03/2008 claimed allowable Plant & 43136340 12940902@30% 6470451@15% 6470451 machinery Lab equipment 180240 54072@30% 27036@15% 27036 Electrical & 2782089 834627@30% 278209@10% 556418 Fittings Office 372686 111806@30% 55903@15% 55903 equipments Office vehicle 35608 14243@40% 5341@15% 8902 Total depreciation in excess claimed by assessee 7118710
The ld. AO make addition of Rs. 71,18,710/- as excess depreciation claimed on the above basis and aggrieved by the addition, he is in appeal before the CIT(A). The ld. CIT(A) after considering the submissions of the assessee and he allowed the appeal of the assessee on merit.
Aggrieved by the deletion of Rs. 71,18,710/- the revenue came before the Tribunal.
Ld. DR relied on the order of the assessing officer and he submitted that the Ld. AO has rightly calculated the depreciation no any extra depreciation can be allowed to the assessee @ 30% because the assessee has not submitted any proof for operating in the multiple shifts of the factories.
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On the other hand, the Ld. AR reiterated the submissions made before the CIT(A) and he submitted that the plant is operating 24 hours. On the original assessments made u/s 143(3), the ld. Assessing Officer had examined in details.
After hearing both the sides, perusing the material available on records and gone through the order of the authorities below, the finding of the CIT(A) is as under :-
“(ii) Ground No.2 of appeal is against the disallowance of Rs.71,18,710/- as excess depreciation made by the A.O. In the reassessment proceedings, the A.O. had applied rate of depreciation @15% on plant & machinery, lab equipment, office equipment and office vehicles and depreciation on electrical and fittings was applied @10% instead 30% applied by the appellant. On the other hand, it was argued by the appellant that appellant is engaged in manufacture and printing of laminated pouches and bags. It comes under the category of "rubber & plastic goods industries". It was argued that the main machinery used by the appellant company is "injection moulding machine" through which plastic film of the required size is made after granules are put into it. The appellant further claimed that machinery is squarely covered under "moulds used in rubber & plastic goods factories" as Sub Item (3)(vii) of Item III (Plant & Machinery) of Part A to Schedule of Depreciation having depreciation @30%. On considering the facts of the case it is observed that the appellant has changed its stand what it had argued on the issue before the A.O. in the re-assessment proceedings. Before the A.O., the higher claim of depreciation was made justifiable on the ground that the appellant company was operating on triple shift basis and its machinery and other assets were being utilized accordingly. However, during the appellate proceedings, it has been claimed that the entire plant & machinery including the office equipments, office vehicles
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etc. are categorized as moulds used to rubber and goods factories and, therefore, @30% is justified. On perusal of new Appendix I (table of rates at which depreciation is admissible) it is observed that in respect of plant & machinery the rate of depreciation is applicable at 30% (instead of 15%) on moulds used in rubber and plastic goods factories only. The item is very specific and to come under the category of "moulds" only the plant and machinery which is used in such activity can qualify for higher rate of depreciation. Whether the "injection moulding machines" used by the appellant in converting the granules into plastic films is really a mould or not is the deciding factor under which the plant & machinery shall qualify for the rate of depreciation applicable to it. Other machinery and assets do not come at all under such category. Since the appellant is engaged in the manufacture and printing of laminated pouches and plastic bags, the 'injection moulding machine' used in such manufacturing can only be termed as moulding machine and, therefore, the same shall qualify for higher rate of depreciation (@30%) instead of 15% as allowed by the A.O. The remaining equipment e.g. office equipments, electrical fittings, lab equipments etc. shall not come under this block and no higher rate of depreciation shall be applicable on these assets. The appellant's argument that since ‘main machinery' used by it is 'injection moulding machine', all the items should qualify for depreciation @30% is devoid of merits since lab equipments, electrical fittings, vehicles etc. form separate block of assets on which different rates of depreciation are applicable. Thus, the A.O. is directed to allow 30% depreciation only on ‘injection moulding machine’ used in manufacturing activity. The appellant gets a consequential relief to this extent only. This ground of appeal is partly allowed.”
From the perusal of above orders of the ld. CIT(A) and submission of the assessee. The CIT(A) has considered all the facts for applying depreciation at the
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higher rate. Therefore, the ld. CIT(A) has done good reasoned order and it does not require any interference. Therefore, we uphold the order of the CIT(A). 11. In the result, appeal of the revenue is dismissed. Order pronounced in the Open Court on 27/02/2018.
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(BHAVNESH SAINI) (L.P.SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Date: 27.02.2018 Binita copy of order to: - 1) The Appellant; 2) The Respondent; 3) The CIT; 4) The CIT(A)-, New Delhi; 5) The DR, I.T.A.T., New Delhi; True Copy By Order ITAT, New Delhi
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S.No. Details Date 1 Draft dictated on 26.02.2018 2 Draft placed before author 26.02.2018 Draft proposed & placed before 3 the Second Member Draft discussed/approved by 4 Second Member Approved Draft comes to the Sr. 5 PS/PS 6 Kept for pronouncement on 7 File sent to Bench Clerk Date on which the file goes to 8 the Head Clerk Date on which file goes to the 9 A.R. 10 Date of Dispatch of order
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