2013 (4) TMI 785 - AT - Income Tax

Summary

Issues Involved:
1. Allowance of depreciation on aircrafts at the rate of 40% versus 15%.

Summary:

Issue: Allowance of Depreciation on Aircrafts at 40% vs. 15%

The Revenue filed appeals against the order of CIT(A)-III, New Delhi, which allowed depreciation on aircrafts at 40% instead of 15% as determined by the Assessing Officer (AO). The AO contended that the higher depreciation rate was applicable only to aeroplanes, not aircrafts. The ITAT found that this issue was covered in favor of the assessee by the decision in the case of SRC Aviation Pvt. Ltd., affirmed by the Hon'ble Jurisdictional High Court.

The CIT invoked powers u/s 263, arguing that the AO had not investigated the issue properly, leading to an erroneous order prejudicial to the revenue. The CIT differentiated between 'aircraft' and 'aeroplane,' suggesting that the former is lighter and less powerful, thus not eligible for higher depreciation. The CIT referred to the old Appendix-I of Income-tax Rules, which prescribed different rates for 'aeroplanes-aeroengines' and 'aeroplane-aircrafts.'

The assessee argued that the AO had inquired into the issue during the original assessment and allowed depreciation at 40%. The assessee also presented evidence that similar aircrafts were granted depreciation at 40% by the department in other cases. The ITAT noted that the definitions of 'aircraft' and 'aeroplane' were not provided in the Income-tax Act or Rules, and general definitions should be considered. The ITAT concluded that the aircraft owned by the assessee, having fixed wings and powered by propellers or jets, qualifies as an 'aeroplane' eligible for 40% depreciation.

The ITAT also observed that the department had consistently allowed 40% depreciation for similar aircrafts in other cases. The ITAT held that the AO's decision to grant 40% depreciation was in accordance with the law, and the CIT's invocation of powers u/s 263 was unjustified. The ITAT set aside the CIT's order and allowed the appeals filed by the assessee.

The Hon'ble Jurisdictional High Court upheld the ITAT's decision, stating that the aircraft owned by the assessee falls within the description of 'aeroplane' and is eligible for 40% depreciation. The High Court noted that the rule-making authority confined the definition to 'aeroplane,' and the Tribunal's judgment was justified.

Respectfully following the decisions of the Hon'ble Jurisdictional High Court and ITAT, the appeals of the Revenue were dismissed, and the order of the CIT(A) was sustained.

Decision pronounced in the open Court on 26th April, 2013.