2010 (6) TMI 626 - AT - Income Tax

Depreciation - CIT allowed 100 per cent depreciation on wooden partitions and work stations treating the same as temporary structures as against furniture and fixtures treated by AO eligible for depreciation at 10 per cent - Held that - The nature of alterations/changes/ maintenance made by the assessee was in the nature of wooden partition and work stations and is made in the premises which were not owned by the assessee. These modifications are stated to be made for the optimum utilisation of the space and for better and more efficient working of the office staff. No material had been brought on record to suggest that such statement of the assessee is incorrect. If it is so, the work done by the assessee will fall under item 4 which describes the rate of depreciation of 100 per cent in respect of purely temporary erection such as wooden structure . No infirmity in the order of the CIT(A) vide which the necessary relief has been given to the assessee, appeals filed by the Revenue are dismissed.

Summary

Issues:
- Depreciation on wooden partitions and work stations
- Nature of assets: temporary structures or furniture and fixtures

Analysis:
- Depreciation on wooden partitions and work stations:
The appeals were filed by the Revenue against two separate orders of the Commissioner of Income-tax (Appeals) concerning the allowance of 100% depreciation on wooden partitions and work stations. The assessee, engaged in the manufacturing and sale of pharmaceutical products, had incurred expenditure on alterations in its office structure. The Assessing Officer treated the assets as "furniture and fixtures" and allowed depreciation at 5%, while the assessee claimed 50% depreciation. The Commissioner of Income-tax (Appeals) held that the assets were temporary erections eligible for 100% depreciation based on changing needs and the decision in a case by the Madras High Court. The Revenue contended that the assets were permanent in nature and should be treated as furniture and fixtures, not temporary structures. After considering the submissions, the Tribunal upheld the Commissioner's decision, stating that the modifications were temporary structures like wooden partitions, qualifying for 100% depreciation.

- Nature of assets: temporary structures or furniture and fixtures:
The nature of the alterations made by the assessee, namely wooden partitions and work stations, was crucial in determining the depreciation rate applicable. The Revenue argued that the assets were permanent and should not be considered temporary structures eligible for 100% depreciation. In contrast, the assessee maintained that the assets were temporary in nature, as per the Income-tax Rules, and supported their case with relevant case law. The Tribunal found that the modifications were made for better office space utilization and efficient working, falling under the category of "purely temporary erections such as wooden structure" as per the rules. Therefore, the Tribunal dismissed the appeals filed by the Revenue, upholding the decision of the Commissioner of Income-tax (Appeals) regarding the nature of the assets and the depreciation rate applicable.