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I-T - Whether equipments which are used as integral parts of Plant are also entitled to 100% depreciation like primary assets - YES: HC

By TIOL News Service

AHMEDABAD, JULY 14, 2016: THE issue is - Whether the equipments which are used as integral parts of the plant are also entitled for 100% depreciation to which the primary assets are subject to. YES is the answer.

Facts of the case

The assessee company had claimed depreciation as per IT rules to the tune of Rs.11,72,38,528/-. Perusal of depreciation chart revealed that depreciation on Pollution Control Equipments was either claimed excess or was not allowable. Addition to the pollution control equipments was shown in the second half of the year where the assets are used for less than 180 days. Depreciation on these assets was claimed 100%. The items which were treated by the assessee as pollution control equipment, do not fit in the block of 100% depreciation as per IT rules. In the light of depreciation chart given in the IT rules. It was specifically asked to submit report of technical person as to out of Rs.4,73,69,089/-, how much cost of the assets were covered on which depreciation was allowable @ 100%. According to report of General Manager (Technical) assets worth Rs.3,62,16,971/- are covered in the block of 100% depreciation out of total addition of Rs.4,73,69,089/- shown by the assessee as pollution control equipment. It was also mentioned in the report that other equipment and machineries etc. which were thought not strictly covered in 100% block of IT rules but they function with main plant. Though other assets worth Rs.1,11,52,118/- may be working as pollution control equipment but they are not called pollution control equipment as per IT rules on which 100% depreciation was allowable. Thus, excess depreciation claimed on pollution control equipment of Rs.41,82,045/- was disallowable and added to the income. On appeal, CIT(A) also confirmed the view taken by AO.

Held that,

++ it is true that there are certain items referred in Rule 2, (v) of Appendix-A, which are eligible for 100% depreciation. However, the Tribunal has rightly considered the opinion of the expert, which was placed on record and held that the equipments which are used are integral part of the plant. Therefore, the Tribunal has rightly allowed the appeal by reversing the view of both the lower authorities. If the authorities were not agreeable with the opinion of the expert, then appropriate procedure should have been followed, which is not followed in the present case. In view of this, the view taken by the Tribunal is correct and the question posed for our consideration is answered against the department and in favour of the assessee and it is held that the depreciation allowed by the Tribunal is just and proper and no interference is called for in the present appeal. Accordingly, present appeal is dismissed.

(See 2016-TIOL-1371-HC-AHM-IT)


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