2017 (12) TMI 1850 - AT - Income Tax

Depreciation on hoardings - whether the hoardings were temporary or permanent structure - Depreciation @ 100% treated as temporary structures as against the treatment given by the AO as plant and machinery allowing depreciation @ 15% - depreciation on hoardings claimed by the Assessee and disallowed by the AO depreciation on Hoarding Structures (Bus Shelters) on additions for more than 180 days - HELD THAT - As in the Assessment Order for the AY. 2009-10, AO disallowed Rs. 57,73,114 out of total depreciation claimed of Rs. 1,94,65,631 @ 100% on the additions of more than 180 days to the Hoarding Structures ( Bus Shelters). He further disallowed 50% depreciation amounting to Rs.7,74,495/- on additions of Rs.15,48,990/- Hoarding structures (Bus Shelters) for less than 180 days in Paragraph 3 on page 2 of the order. He allowed the balance 50% of the claim for depreciation of Rs.18,77,500/- on Hoarding Structures that was disallowed in A.Y. 2008-09 in paragraph 3 on page 3 of the order. It is thus clear from the order of CIT(A) that the depreciation disallowed by the AO of Rs.57,73,114 was depreciation on hoardings and structures which were used for more than 180 days. Therefore there is no merit in ground No.2 raised by the revenue before us.

Summary

Issues:
1. Depreciation rate on hoardings - 100% vs. 15%
2. Duration of use for claiming depreciation
3. Interpretation of "purely temporary erections"
4. Applicability of policy guidelines on hoardings

Analysis:

Issue 1: Depreciation rate on hoardings - 100% vs. 15%
The appellant, a company engaged in outdoor advertisement, claimed depreciation at 100% on hoarding structures. The AO disallowed this claim, considering hoardings as plant and machinery eligible for 15% depreciation only. The CIT(A) allowed 100% depreciation based on a previous Tribunal decision in a similar case involving a sister concern of the appellant. The Tribunal upheld the CIT(A)'s decision, emphasizing the principle of consistency and lack of evidence supporting the revenue's argument.

Issue 2: Duration of use for claiming depreciation
The AO disallowed depreciation on hoardings used for more than 180 days. The Tribunal clarified that the disallowed depreciation of Rs. 57,73,114 was for hoardings used for over 180 days, rendering the revenue's argument groundless.

Issue 3: Interpretation of "purely temporary erections"
The AO argued that hoardings, with cement bases and iron structures, were not "purely temporary erections." The revenue relied on policy guidelines for hoarding display within the Kolkata Municipal Corporation Area to support this claim. However, the Tribunal found no merit in this argument, considering the previous Tribunal decision and the nature of the structures.

Issue 4: Applicability of policy guidelines on hoardings
The revenue presented policy guidelines on hoarding display to argue against considering hoardings as purely temporary structures. The Tribunal, after careful consideration, dismissed this argument, emphasizing the importance of consistency with past decisions and lack of factual support for the revenue's stance.

In conclusion, the Tribunal upheld the CIT(A)'s decision to allow 100% depreciation on hoardings, dismissing the revenue's appeal. The order was pronounced on 01.12.2017.