2016 (9) TMI 761 - AT - Income Tax

Depreciation on electrical installation - rate of depreciation applicable - Held that - The electrical installations formed an integral part of the assessee s plant, therefore, depreciation was allowable at the rate applicable to plant and machinery. We are also of the considered view that electrical installation is integral to the plant and machinery used for manufacturing steel and as the Assessing Officer has not controverted the contentions of the assessee company hence, Ld. CIT(A) has rightly directed the AO to allow depreciation on electrical installations @ 15% i.e. the rate applicable to plant & machinery . We further note that Ld. CIT(A) was justified in holding that as a natural corollary, additional depreciation amounting to ₹ 1,02,12,533/- is also required to be allowed as the Assessing Officer disallowed the same considering electrical installations as part of furniture and fixture, which does not need any interference. - Decided against revenue

Summary

Issues:
Depreciation on electrical installations, additional depreciation claim, classification of electrical installations, applicability of depreciation rates, interpretation of relevant case laws, block of assets for electrical items.

Detailed Analysis:
1. Depreciation on Electrical Installations:
The Revenue appealed against the order of the Ld. CIT(A) directing the AO to allow depreciation on electrical installations at the rate applicable to 'Plant & Machinery'. The Ld. CIT(A) considered the submissions of the assessee, highlighting that electrical installations were an integral part of the plant and machinery used in manufacturing operations. The Ld. CIT(A) referred to relevant case laws, including the judgment of the Gujarat High Court in CIT vs. Starlight Silk Mills P. Ltd., to support the claim that electrical installations form an inseparable part of the manufacturing process. The Ld. CIT(A) concluded that depreciation on electrical installations should be allowed at 15%, the rate applicable to 'plant & machinery'.

2. Additional Depreciation Claim:
The Ld. CIT(A) also addressed the issue of additional depreciation claimed by the assessee on electrical installations. The AO had disallowed this claim, considering electrical installations as part of furniture and fixtures. However, the Ld. CIT(A) disagreed with this classification and directed the AO to allow the additional depreciation amounting to a specific sum. The Ld. CIT(A) justified this decision by emphasizing that electrical installations were integral to the manufacturing process and should be treated as part of 'plant and machinery'.

3. Interpretation of Case Laws:
In the judgment, the Ld. CIT(A) relied on various case laws, including CIT vs. Oswal Woollen Mills Ltd., Berger Paints India Ltd. vs. CIT, and others, to support the contention that electrical installations are an integral part of the plant and machinery. These precedents established that depreciation on electrical installations should be allowed at the rate applicable to plant and machinery, rather than considering them as separate assets under furniture and fixtures.

4. Conclusion and Dismissal of Appeal:
After considering the arguments of both parties and reviewing the impugned order, the Tribunal upheld the decision of the Ld. CIT(A). The Tribunal concurred with the Ld. CIT(A)'s reasoning, citing the precedents and case laws mentioned in the judgment. Consequently, the appeal of the Revenue was dismissed, affirming the allowance of depreciation on electrical installations at the rate applicable to 'plant and machinery' and the additional depreciation claim.

This detailed analysis of the judgment highlights the key issues addressed, the arguments presented by both parties, the interpretation of relevant legal provisions and case laws, and the ultimate decision of the Tribunal in dismissing the Revenue's appeal.