2015 (10) TMI 1424 - AT - Income Tax

Depreciation of school building, labour huts, store building etc. - Held that - The assessee constructed/completed a big project of Rajasthan Housing Board. As per the agreement the assessee was to construct certain assets/buildings like school, labour huts at the site to stay for labour and store building to keep the material at site, site office building etc. The same were handed over to the Rajasthan Government. The assessee written of the assets by claiming 100% of depreciation. There is no dispute that the assessee incurred expenses on such construction like site office building, labour huts and store building which were lateron handed over to the Rajasthan Housing Board. These were part and partial of the project, thus, the construction expenses has to be allowed as revenue expenditure. The assessee preferred to do in two installment by claiming 50% depreciation in two different assessment year when the project was in existence. In view of these facts, we affirm the stand of the ld. Commissioner of Income Tax (Appeals) on this issue in granting relief with respect to claim of depreciation, thus, the appeal of the Revenue is having no merit. Addition made on accrued interest on fixed deposit - AO disallowed a sum on the ground that the accrued interest on F.Ds was not accounted for in the books of accounts by the assessee - Held that - If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we find that the assessee is a partnership firm carrying on the business of civil construction broadly with the Government and Semi Government Organisations. We find that the bank directly credited the interest on F.Ds and due to non-communication to the assessee at the relevant time, could not be shown, however, the F.Ds matured in the assessment year 2010-11 and the Bank along with interest credited the income for which the assessee declared the same in his profit & loss account on maturity and offered the income on such interest in the assessment year 2010-11. There is no loss to the Revenue since the interest was offered as income. Thus, this appeal of the assessee is allowed and the addition so made is deleted. - Decided in favour of assessee.

Summary

Issues:
1. Cross appeal by Revenue and Assessee challenging the order for Assessment Year 2008-09.
2. Depreciation allowance on school building, labour huts, and store building.
3. Addition of accrued interest on fixed deposit not accounted for in books of account.

Analysis:
1. The Revenue appealed against the allowance of depreciation on school building, labour huts, and store building claimed by the assessee for Assessment Year 2008-09. The Assessing Officer disallowed a sum of &8377;16,07,503 claiming that 100% depreciation was not available to the assessee as these assets were not owned by them. However, it was established that the assessee, a civil construction firm, had constructed assets like school buildings, labour huts, and store buildings as part of a project for the Rajasthan Housing Board. These assets were later handed over to the government. The Tribunal noted that the construction expenses were revenue expenditure and allowed the claim of depreciation. The appeal of the Revenue was dismissed based on the affirming stand of the Commissioner of Income Tax (Appeals) regarding the depreciation claim.

2. The appeal by the assessee challenged the addition of &8377;11,62,358 for accrued interest on fixed deposits not accounted for in the books of account. The Assessing Officer disallowed this amount, but it was revealed that the bank had directly credited the interest on fixed deposits without informing the assessee. The fixed deposits matured in the subsequent assessment year, and the bank credited the interest income, which was then declared by the assessee in the profit & loss account for that year. As the interest income was offered and there was no loss to the Revenue, the Tribunal allowed the appeal of the assessee and deleted the addition. Consequently, the appeal of the Revenue was dismissed, and that of the assessee was allowed.

In conclusion, the Tribunal upheld the depreciation claim by the assessee for construction assets and allowed the appeal regarding the accrued interest on fixed deposits. The judgment was pronounced in the presence of representatives from both sides on 26.5.2015.