2018 (12) TMI 1634 - AT - Income Tax

Depreciation at 60% on oil rigs - higher rate of depreciation on the hired out oil rigs - validity of section 147 proceedings - HELD THAT - CIT(A) upheld the validity of the proceedings under section 147 but in respect of the merits, observed that the plant and machinery of the assessee i.e. oil rigs owned by them and are leased out to various mineral oil concerns like Reliance Industries Limited, Orles Ltd and ONGC Ltd and claimed 60% deposition on such rigs. CIT(A) observed that the AO did not discuss the issue of the specific plant and machinery but ultimately held that the assessee is not a mineral oil concern and did not fulfill one of the basic conditions to entitle themselves to claim the depreciation at 60%. CIT(A), as a matter of fact, found that the assets of the oil rigs are wholly owned by the assessee and are used for the purpose of business of the assessee which is to give on lease these assets. Following the decision of the Hon ble jurisdictional High Court in the case of HLS India 2011 (5) TMI 322 - DELHI HIGH COURT learned Ld. CIT(A) granted relief to the assessee and deleted the addition. It is not the case of the revenue that the ratio laid down by the Hon ble jurisdictional High Court in the case of the HLS India Ltd (supra) has no application to the facts of the case but the only ground on which the AO did not follow the same is that the Department has preferred an SLP against such order to the Hon ble Supreme Court 2012 (2) TMI 669 - SUPREME COURT OF INDIA . Now the things are clear and SLP preferred against the orders of the jurisdictional High Court was dismissed. No illegality or irregularity in the finding of the Ld. CIT(A). We consequently uphold the said finding and dismiss the ground of appeal of the revenue

Summary

Issues Involved:
Challenging order dated 14/07/2014 in Appeal No. 389/11-12 - Revenue filed ITA 5709/del/2014, assessee filed cross objection No. 201/del/2017. Validity of proceedings under section 147 of the Income-tax Act, 1961. Claiming excessive depreciation on plant and machinery for Assessment Year 2007-08. Disallowance of excessive depreciation by Assessing Officer. Application of higher rate of depreciation. Dismissal of SLP preferred against the order of the Hon'ble jurisdictional High Court. Upholding deletion of excess depreciation claimed by the assessee.

Analysis:
The case involved a challenge to an order dated 14/07/2014 in Appeal No. 389/11-12, where the revenue filed ITA 5709/del/2014 and the assessee filed cross objection No. 201/del/2017. The primary issue was the validity of proceedings under section 147 of the Income-tax Act, 1961, concerning the claim of excessive depreciation on plant and machinery for the Assessment Year 2007-08. The Assessing Officer disallowed the excessive depreciation claimed by the assessee, citing that the assessee was not eligible for a higher rate of depreciation as they were not a mineral oil concern. This led to the initiation of proceedings under section 147 of the Act.

During the appeal, the CIT(A) upheld the validity of the section 147 proceedings but found that the assessee, engaged in providing plant and machinery on hire, owned oil rigs leased out to mineral oil concerns. The CIT(A) observed that the assessee did not fulfill the conditions to claim depreciation at 60% as they were not a mineral oil concern. However, relying on a decision of the jurisdictional High Court, the CIT(A) granted relief to the assessee and deleted the addition of excessive depreciation.

The Tribunal noted that the SLP preferred against the jurisdictional High Court's decision was dismissed by the Supreme Court. As there was no legal impediment to follow the High Court's decision, the Tribunal upheld the deletion of excess depreciation claimed by the assessee. Consequently, the Tribunal dismissed the appeal of the revenue and the cross objection raised by the assessee, as the relief had already been granted on the merits of the case. The order was pronounced in open court on 18th December 2018.