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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: SHRI N.K. BILLAIYA & SHRI MAHAVIR PRASAD
PER N.K. BILLAIYA, ACCOUNTANT MEMBER
With this appeal the Revenue has challenged the order of the CIT(A)-VIII, Ahmedabad dated 12.08.2014 pertaining to assessment year 2008-09
The only grievance of the Revenue is that the CIT(A) erred in deleting the addition of Rs.2,77,92,657/- made by the Assessing Officer on account of excess claim of depreciation and additional depreciation on the spare parts in respect of pre-existing machinery.
Briefly stated, the facts of the case are that the assessee is in the business of mining and generation of power. Return was filed on 27.09.2008 showing income at Rs.246.04 crores. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
ITA No.3010/Ahd/2014 A.Y. 2008-09 Page 2 of 3 4. Following the directions given by the Commissioner vide an order dated 14.01.2013 framed under section 263 of the Income Tax Act, 1961 (“the Act” hereinafter) the Assessing Officer proceeded by examining the claim of depreciation. The Assessing Officer noticed that the assessee has claimed additional depreciation of Rs.4.27 crores including additional depreciation of Rs.1.49 crores.
On scrutinizing the details, the Assessing Officer observed that these spare parts of the machines cannot be classified as machine and, therefore, additional depreciation cannot be allowed. The Assessing Officer was of the opinion that the additional depreciation on machinery spares of plant and machinery which was already acquired and installed earlier cannot be allowed. The Assessing Officer accordingly disallowed the excess depreciation of Rs.2,77,92,657/-.
The assessee assailed the assessment before the CIT(A) and pointed out that if the machine spare parts are treated as capital expenditure, then the assessee is very much entitled for depreciation and simultaneously also entitled for additional depreciation. After considering the facts and the submissions, the CIT(A) observed that the assessee is entitled to depreciation as well as the additional depreciation on the new spare parts and machinery which have been purchased by it during the year and fitted to the existing machines being utilized for production of article or thing. Being convinced with the claim of the assessee, the CIT(A) directed the Assessing Officer to allow the claim of depreciation and additional depreciation on the spare parts and machineries which were used in the mining project. The CIT(A) also directed to allow the claim of depreciation in respect of machinery and spare parts which have been capitalized and is used for the purpose of power generation units.
Aggrieved by this, Revenue is before us. Learned Departmental Representative strongly supported the findings of the Assessing Officer. Per contra, learned counsel for the assessee reiterated what has been stated before the lower authorities.
ITA No.3010/Ahd/2014 A.Y. 2008-09 Page 3 of 3 8. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the assessee has purchased certain spare parts in respect of the machinery which is used for the purpose of power generation units. We further find that the purchase of spare parts for the machinery was treated as capital expenditure and, therefore, makes the assessee eligible for claim of depreciation and also the claim of additional depreciation on the same. We, therefore, do not find any error or infirmity in the findings of the CIT(A).
In the result, appeal filed by the Revenue is accordingly dismissed. (Order pronounced in the open Court on this 13th day of December, 2017)
Sd/- Sd/- Mahavir Prasad N.K. Billaiya (Judicial Member) (Accountant Member) Ahmedabad, the 13th day of December, 2017 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad