THE ACIT- CIRCLE-1(1)(2), BARODA vs. M/S. L.K. INDIA PVT. LTD., BARODA

The revenue has raised following ground of appeal:- “1. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs 46,11,130/- by allowing depreciation on moulds @ 40% as against 15% allowable on the dies and moulds used for manufacturing electric and electronic goods by treating the manufacturing facility of the assessee as rubber and plastic goods factory in terms of Appendix-I to rule 5 of the Income Tax Rules-1962, ignoring the fact that, in common commercial practice, factories producing electric and electronic goods are not known as a rubber and plastic goods factories." 3. The brief fact of the issue in appeal is as under. During the course of assessment proceedings, the assessing officer noticed that assessee has claimed depreciation on mould @ 30%. The assessing officer show caused the assessee why not the depreciation on moulds should not be restricted to 15%. In this connection the assessee company explained that all the switches are plastic products and the company is in the manufacturing of plastic goods having electrical application, therefore, depreciation on moulds should be allowed @ 30%. The assessing officer has not accepted the submission of the assessee by observing that as per Appendix-I rule 5 of the Income Tax Rules-1662, the depreciation on moulds is allowed @ 30% wherein the moulds are used in a rubber and plastic goods factory. Since assessee was engaged in the manufacturing and sale of electrical and electronic item, therefore, it is entitled to depreciation on moulds @ normal rate applicable to plant and machinery i.e. 15%. Consequently, the assessing officer has restricted the claim of depreciation from Rs. 92,22,260/- to Rs. 46,11,130/-

Aggrieved assessee against the impugned decision of the assessing officer preferred appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee by observing as under:- “5.2 The reasons for making disallowance of depreciation as mentioned by the AO in the assessment order as well as above entire submission of AR of the appellant have been considered. The appellant has charged Depreciation on Dies and Moulds @ 30% whereas in the opinion of Assessing officer Depreciation @ 15% is only admissible on such Dies and moulds. In the case of appellant, the said issue was first raised in A.Y. 2001-02. The learned AO made addition to its income on account of alleged differential excess charge of depreciation on the aforesaid assets. Similar additions had been made in the case of appellant in the subsequent assessment years on the same grounds. The Learned CIT (Appeals) decided the aforesaid issue in its favour for A.Y. 2001-02 and subsequent years. Being aggrieved, the department preferred an appeal with the Honourable Income Tax Appellate Tribunal. The Honourable Tribunal vide its order dated October 4, 2007, dismissed the appeal of the department for A.Y. 2001-02. As per the appellant further in A.Y. 2002-03 and 2006-07, CIT(Appeals)-IV and CIT(Appeals)-! have also decided the said issue in its favour. With regard to this submission of the appellant, it is mentioned that the Hon'ble ITAT Ahmedabad, in appellant's case for AY 2001-02 has held that depreciation @ 40% on moulds is to be allowed in view of decision of ITAT Bangalore in the case of BPL Refrigeration Ltd. 272 ITR 47 and in view of decision of ITAT, Pune in the case of Kinetic Honda Motors Ltd. 72 TTJ 72. Respectfully following IT AT, Ahmedabad's decision-in appellant's own case for AY 2001-02, the AO is directed to allow the depreciation on moulds and dies @ 40% and addition of Rs. 46,11,130/- is accordingly hereby deleted. Thus the ground of appeal no. 2 of the appellant is allowed.”

During the course of appellate proceedings before us, learned counsel contended that this issue is covered in favour of the assessee by the decision of Co-Ordinate Bench of the ITAT decided in the case of the assessee itself in the preceding assessment years and the decision of Jurisdictional High Court in the case of the

We have heard both the sides and perused the material on record. We find that the Co-ordinate Bench of the ITAT in the case of the assessee pertaining to assessment year 2001-02 to 2008-09 has decided the issue in favour of the assessee by stating that assessee is entitled for depreciation at higher rate. We have also noticed that hon’ble jurisdictional high court vide Tax Appeal no. 747 of 2015 in the case of the assessee held that assessee is entitled for depreciation on moulds @ 30% as against 15% allowed by the assessing officer. The relevant part of the decision of the hon’ble jurisdictional high court is reproduced as under:-

In the result, the appeal of the revenue is dismissed.