2017 (2) TMI 914 - AT - Income Tax

Disallowance of depreciation claim made in course of assessment proceedings - Plant & machinery merge with motor vehicle so as to form a single block of assets - seeking to include the alleged short term capital gains arising from sale of motor vehicles with the other block of assets of plant and machinery thereby assessing its short term capital gains u/s.50 Held that - Section 2(11) of the Act means a group of assets falling within the respective categories/clauses (a) & ( b) and the former one pertaining to tangible assets including building , machinery, plant etc. The relevant appendix of rate of depreciation prescribing the same rate of depreciation of 15% for plant and machinery and motor vehicles forms a single category of block of assets. We accordingly observe that the assessee was very well justified in seeking to merge its plant & machinery with motor vehicle so as to form a single block of assets as per provisions of the Act. We thus direct the Assessing Officer to frame necessary consequential computation as per the assessee s revised depreciation schedule filed in the course of assessment proceedings as per law. See M/s. Filmcraft Productions India Ltd. vs. Addl.CIT 2015 (7) TMI 1193 - ITAT MUMBAI and Ansal Property & Infrastructure Ltd. 2012 (4) TMI 469 - DELHI HIGH COURT - Decided in favour of assessee

Summary

Issues:
Assessment of short term capital gains arising from the sale of motor vehicles with other block of assets for depreciation claim.

Analysis:
The appeal for the assessment year 2009-10 involved the challenge of the Assessing Officer's action disallowing depreciation claim and assessing short term capital gains under Section 50 of the Income Tax Act. The appellant sought to merge the short term capital gains arising from the sale of motor vehicles with the block of assets of plant and machinery. The Assessing Officer rejected this claim, stating that the assets could not form one block under the Income Tax Rules. The CIT(A) upheld the Assessing Officer's decision, emphasizing that assets must fall under the same class to be considered a block of assets. The appellant's claim was dismissed based on this interpretation.

The appellate tribunal, after hearing both parties, considered whether the appellant could merge the block of assets of plant and machinery with motor vehicles. Referring to a co-ordinate bench decision and a high court ruling, it was concluded that the relevant appendix prescribing the same rate of depreciation for both plant and machinery and motor vehicles formed a single category of block of assets. The tribunal found the appellant's justification for merging the assets to be valid under the provisions of the Act. Consequently, the Assessing Officer was directed to compute the necessary consequential adjustments based on the revised depreciation schedule filed by the appellant during the assessment proceedings. As a result, the appellant's appeal was allowed, and the decision was pronounced on February 13, 2017.