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2017 (5) TMI 1312 - AT - Income TaxAddition of excess depreciation on aircraft - reopening of assessment - Held that - We note that as per Entry no. III(3)(i) of Part-A of the Depreciation Table in Appendix-I, of the Income Tax Rules, 1962 the depreciation available on aircraft is @40%, hence, it was rightly held by the Ld. CIT(A) that the Assessee s claim was correct and AO should also understand that depreciation on aircraft cannot be equated with depreciation on motor vehicle. The depreciation is given on plant and machinery depending on its life and maintenance cost involved in such machinery. The depreciation is allowed by the government to give part of the profit to the businessman and he can make another plant and machinery at the end of the old machinery life to continue his business. Therefore, Ld. CIT(A) has rightly observed that the AO should understand the basic requirement of law and discuss the matter with his supervise officers before reopening the case. Hence, the addition of depreciation disallowance was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute - Decided against revenue
Issues:
1. Excess depreciation on aircraft - deletion of addition by CIT(A) 2. Correctness of CIT(A) order 3. Grounds of appeal alteration Issue 1: Excess Depreciation on Aircraft - Deletion of Addition by CIT(A): The case involved a dispute over the claim of depreciation on aircraft by the assessee at 40% against the AO's allowance of 15%. The AO disallowed excess depreciation of &8377; 2,20,40,609/-, resulting in under-assessment of income. The AO reopened the assessment under section 147/148 of the Income Tax Act, 1961. The CIT(A) held that the assessee's claim was correct as per the Depreciation Table in the Income Tax Rules, which allowed depreciation on aircraft at 40%. The CIT(A) emphasized that aircraft depreciation differs from motor vehicle depreciation, considering factors like life and maintenance costs. The CIT(A) concluded that the AO misunderstood the law and deleted the addition of excess depreciation. The ITAT upheld the CIT(A)'s decision, stating that the AO erred in equating aircraft with ordinary plant and machinery and confirmed the correctness of the CIT(A)'s order. Issue 2: Correctness of CIT(A) Order: The Revenue challenged the CIT(A)'s order, arguing that it was erroneous and untenable. However, the ITAT found that the CIT(A) had thoroughly examined the issue of depreciation on aircraft, correctly applying the provisions of the Income Tax Rules. The ITAT concurred with the CIT(A)'s reasoning that the AO's disallowance of excess depreciation was unwarranted and upheld the deletion of the addition. The ITAT emphasized the importance of understanding the specific provisions related to depreciation on different assets and rejected the Revenue's appeal, affirming the correctness of the CIT(A)'s order. Issue 3: Grounds of Appeal Alteration: The appellant sought leave to add, alter, amend, or forgo any grounds of appeal during the hearing. However, the ITAT, after considering the facts and circumstances of the case, proceeded with an ex-parte decision as the assessee did not appear or submit any response. The ITAT examined the contentions raised by the Revenue but ultimately dismissed the appeal, maintaining the CIT(A)'s decision to delete the addition of excess depreciation on aircraft. The ITAT's decision was based on the correct interpretation of the Income Tax Rules regarding depreciation rates for aircraft and the AO's misunderstanding of the applicable law. This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the rationale behind the decisions made by the CIT(A) and the ITAT.
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