2018 (10) TMI 1428 - AT - Income Tax

Addition on account of incorrect depreciation claimed - depreciation includes depreciation claimed on the Written Down Value of machinery and claimed on the WDV on the factory building - Held that - As far as the contention of the assessee that the claim of depreciation is eligible in the income tax return even if the same has not been claimed in the books of accounts certainly has merits as the issue is squarely covered by the decision of Co-ordinate Bench in the case of Sudha Devi Oswal Vs JCIT Ratlam 2015 (11) TMI 1760 - ITAT INDORE wherein similar facts held that depreciation on the building and Warehouse was not claimed in the balance sheet but the claim for depreciation was lodged by the assessee before the A.O during the assessment proceedings. Tribunal after examining the facts concluded that the warehouse building was in existence and was also used for business activities, therefore the assessee is entitled to depreciation. In the instant appeal the facts are quite similar as the depreciation on machinery and factory building have not been claimed in the balance sheet i.e. not debited to the Profit & Loss Account but while preparing the computation of income the depreciation of ₹ 26,82,229/- has been claimed. In the Tax Audit Report u/s 44AB of the Act, at the relevant column of Form 3CD. Auditor has given the details of depreciation calculated on the written down value of the machinery as well as factory building. There is no dispute at the end of Revenue about the WDV of Machinery and Factory Building. We are also satisfied that the impugned assets are being regularly used for business purposes. The assessee has rightly claimed the depreciation and Ld.CIT(A) made no error in allowing the claim of the assessee. - Decided against revenue.

Summary

Issues Involved:
- Whether Ld.CIT(A) was justified in deleting the addition of ?27,88,184/- made on account of incorrect depreciation claimed by the assessee.

Analysis:
1. The appeal pertained to the assessment year 2012-13 and was directed against the order of the Ld. Commissioner of Income Tax(Appeals) arising from the order framed under section 154 of the Income Tax Act 1961 by ITO-2, Ratlam. The Revenue challenged the deletion of the addition of ?27,88,184/- on account of incorrect depreciation claimed by the assessee.

2. The assessee, an individual conducting business under sole proprietorship, initially declared income of ?4,22,050/-, later revised to ?4,90,390/-. The assessment under section 143(3) of the Act was completed assessing income at ?6,80,390/-. Subsequently, a rectification order was passed under section 154 observing incorrect depreciation claim of ?27,88,184/- on machinery and building, not reflected in the audited balance sheet.

3. The Ld.CIT(A) allowed the assessee's appeal, citing that the depreciation claim was legitimate as the assets were used for business purposes. The Revenue, aggrieved by this decision, appealed to the Tribunal solely on the issue of deletion of the depreciation addition.

4. During the Tribunal hearing, the Revenue argued in support of the Assessing Officer's order, while the assessee's counsel contended that depreciation can be claimed in the income tax return even if not reflected in the books of accounts. The Tribunal reviewed the submissions and found the depreciation claim of ?26,80,229/- valid, including depreciation on machinery and factory building.

5. The Tribunal noted that the claim for depreciation was eligible even if not shown in the balance sheet, citing a similar precedent where depreciation on assets not reflected in the balance sheet was allowed. The Tribunal confirmed the Ld.CIT(A)'s decision, stating that the assets were used for business purposes, and the depreciation claim was legitimate.

6. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of ?27,88,184/- on account of incorrect depreciation claimed by the assessee.