2016 (1) TMI 746 - AT - Income Tax

Rectification u/s 154 - depreciation @100% or 15% on interiors which are purely wooden structures - Held that - Rectification under Section 154 can only be made when a glaring mistake of fact or law committed by the Officer passing the order as apparent from the record. Rectification is not possible when question is debatable. Moreover, a point which was not examined on the facts or in law cannot be dealt with as a mistake apparent from the record. Therefore, we hold that the issue whether the deprecation @100% or 15% on interiors which are purely wooden structures is a debatable point as it requires examination of details and cannot be rectified by exercising the power vested under Section 154 of the Act. Therefore, we quash the order of the Assessing Officer passed under section 154 of the Act and allow this ground of appeal. - Decided in favour of assessee

Summary

Issues:
1. Rectification order passed by AO under section 154
2. Claim of depreciation on temporary wooden structures at 100%
3. Denial of claim of depreciation by CIT(A)
4. Classification of assets and depreciation rate
5. Business losses of Erstwhile Global Trust Bank
6. Jurisdiction of AO under section 154

Issue 1: Rectification order passed by AO under section 154

The appeal was against the order of the CIT(A) upholding the rectification order passed by the AO under section 154. The appellant contended that there was no mistake apparent from the record justifying the rectification. The AO sought to rectify the assessment order concerning the claim of depreciation at 100% on furniture and fixtures and the business loss of Erstwhile Global Trust Bank. The appellant objected to the rectification proceedings, citing the debatable nature of the depreciation claim. The CIT(A) upheld the AO's order, leading to the appeal before ITAT Delhi.

Issue 2: Claim of depreciation on temporary wooden structures at 100%

The appellant claimed depreciation at 100% on temporary wooden structures, disputing the AO's decision to allow only 15% depreciation. The AO's rectification order withdrew the excess depreciation claimed by the appellant. The CIT(A) rejected the claim, stating that the assets were reclassified as temporary wooden structures post-amalgamation and lacked justification for the 100% depreciation claim. The ITAT Delhi held that the issue of depreciation rate was debatable, requiring examination of details, and could not be rectified under section 154. They quashed the AO's order and allowed this ground of appeal.

Issue 3: Denial of claim of depreciation by CIT(A)

The CIT(A) denied the claim of depreciation at 100% on the grounds that the assets were previously classified differently and lacked sufficient justification for reclassification. The appellant argued that the depreciation rate was in accordance with law and had been allowed during the original assessment. The ITAT Delhi found the issue to be debatable, requiring detailed examination, and ruled in favor of the appellant, quashing the AO's order and allowing the appeal on this ground.

Issue 4: Classification of assets and depreciation rate

The classification of assets as temporary wooden structures for claiming 100% depreciation was contested by the AO, who withdrew the excess depreciation. The CIT(A) upheld the AO's decision based on lack of justification and prior classification by the Erstwhile Global Trust Bank. The ITAT Delhi deemed the issue debatable, requiring detailed examination, and ruled that the AO's rectification could not be based on a change of opinion. They referred to legal precedents emphasizing that rectification under section 154 is not applicable to debatable issues, ultimately allowing the appeal on this ground.

Issue 5: Business losses of Erstwhile Global Trust Bank

The appellant sought to include the business losses of Erstwhile Global Trust Bank in their returns post-amalgamation with Oriental Bank of Commerce. The CIT(A) did not allow the claim, leading to an appeal before ITAT Delhi. However, the decision did not provide specific details on the resolution of this issue.

Issue 6: Jurisdiction of AO under section 154

The appellant contested the AO's jurisdiction under section 154 to rectify the depreciation claim, arguing that the issue was debatable and required detailed examination. The ITAT Delhi agreed, citing legal precedents that rectification cannot be based on debatable issues and allowed the appeal on this ground, quashing the AO's order.

---