ITO, WARD-2(3)(6), SURAT vs. DHAVAL KIRTIBHAI SHAH, SURAT

Grounds of appeal raised by the Revenue are as follows: “(i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of excess claim of depreciation on embroidery machinery of Rs.11,11,350/- whereas the AO has rightly calculated the allowable depreciation at Rs.1,96,243/- on closing WDV of block of asset of embroidery at the applicable rate. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed the order of the Ld. CIT(A)-4, Surat may be set-aside and that of the Assessing Officer’s order may be restored.

The facts necessary for disposal of the appeal are stated in brief. During the assessment proceedings, the assessing officer observed that assessee had claimed depreciation to the tune of Rs.13,07,593/-on embroidery machinery. The assessing officer noted the relevant facts that embroidery machine showed opening balance of Rs.82,40,499/-, purchase of machinery of Rs.4,76,789/- and sale and transfer of machinery of Rs.74,09,000/-, therefore resulting into loss of Rs. 695/-, after claim of depreciation of Rs.13,07,593/-. The assessing officer was of the view that depreciation allowance would be at the rate of 15% on the Rs.13,08,228/- (after deducting sale proceeds of Rs.74,09,000/-) which comes to Rs.1,96,243/- ( 15% of Rs.13,08,228). However, the assessee first claimed depreciation of Rs.13,07,593/- being 15% of Rs.87,17,288/- (Opening Rs.82,40,499/- + Purchase Rs.4,76,789/-) as the machine was used during the year and sale was made at the end of the year as evident from the ledger account. Therefore, assessing officer made disallowance of difference to the tune of Rs.11,11,350/- (Rs.13,07,593 minus Rs.1,96,243). 4. The assessing officer also noticed that assessee had claimed depreciation of Rs.1,19,196/- on electrification at the rate of 60% whereas according to assessing officer, it should be at the rate of 15% on the Rs.1,98,660/- which comes to Rs.29,799/- and hence assessing officer made further disallowance of depreciation at Rs.89,397/- (Rs.1,98,660- Rs.29,799). In view of the matter, the excess depreciation claimed amounting to Rs.12,00,747/- (11,11,350 + 89,397) was disallowed and added to the total income of the assessee. 5. On appeal, ld CIT(A) deleted the addition. Aggrieved, by the order of ld CIT(A), the Revenue is in appeal before us.

On the other hand, Learned Counsel for the assessee defended the order passed by the ld CIT(A).

We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that Revenue has challenged the deletion of additions by ld CIT(A) of Rs.12,00,747/- (Rs.11,11,350 + Rs.89,397) on account of excess claim of depreciation. The Learned CIT(A) observed that block of embroidery machine is exhausted which is "evident from the fact that assessing officer (AO) has accepted the figure of loss of Rs. 695/- claimed by the assessee on embroidery machinery. During appellate proceedings, the assessee has contended that even if depreciation claimed by him (assessee) on opening balance and purchase is ignored, it would result into further loss on sale of machinery of Rs.11,11,350/- and the same should be treated as loss u/s 32(i)(iii) and not short term capital loss u/s 50 of the Act. The difference in the treatment is relevant because if the

Now we shall take Cross Objection No.16/SRT/2020 for AY.2012-13, raised by the assessee. The assessee in its cross objection has challenged the reopening of assessment by assessing officer under section 147/148 of the Act. Since we have dismissed the appeal of the Revenue, therefore Cross Objection filed by assessee rendered academic and does not require adjudication.

In the result, appeals in ITA No.147/SRT/2017 filed by the Revenue is dismissed and in CO No. 16/SRT/2020 filed by assessee is also dismissed.