2020 (9) TMI 313 - AT - Income Tax

Depreciation on vehicles u/s 32 - @30% or 50% - assessee has claimed depreciation @ 50% i.e. on tankers - AO restricted the claim of depreciation @ 30% in respect of addition made to such commercial vehicles - HELD THAT - Commercial vehicles were purchased by the assessee during F.Y. 2008-09 and 2009-10 which were eligible to special rate of depreciation @ 50%. It is noticed that no new vehicle has been purchased by the assessee during the year under consideration. It is observed that no depreciation can be claimed for individual assets under income tax act because of concept of block of assets. Depreciation in the case of the assessee is eligible as per the block of asset otherwise if such expenditure are put in the category of repair/revenue expenditure then the full claim of such expenditure are to be allowed. Since the assessing officer has treated such expenditure as capital expenditure, therefore, we consider that no new asset has been created on renovation of the commercial vehicle. Therefore, the claim of the assessee for depreciation @ 50% applicable to the particular block of assets is justified. Appeal of the assessee is allowed.

Summary

Issues: Appeal against limiting depreciation on vehicles to 30% instead of 50% resulting in disallowance.

The appeal before the Appellate Tribunal ITAT Ahmedabad involved a dispute regarding the depreciation claimed by the assessee on heavy goods vehicles for the assessment year 2013-14. The assessing officer limited the depreciation to 30% instead of 50%, leading to a disallowance of ?13,86,331 under section 32 of the Income Tax Act, 1961. The assessee contended that the higher depreciation was claimed for trucks purchased in the assessment years 2009-10 and 2010-11, which were maintained through renovation expenses. The assessing officer disagreed with this explanation, resulting in the disallowance. The appeal was filed before the CIT(A), who upheld the assessing officer's decision.

Upon hearing both parties and examining the evidence, the Appellate Tribunal noted that the commercial vehicles in question were purchased in the financial years 2008-09 and 2009-10, qualifying for a special rate of depreciation at 50%. Since no new vehicles were acquired during the relevant assessment year, the concept of block of assets applied, and individual assets could not claim depreciation. The Tribunal determined that the renovation expenses did not create a new asset but rather maintained the existing block of assets. Therefore, the claim for depreciation at 50% on the particular block of assets was deemed justified. Consequently, the assessing officer was directed to allow depreciation at the higher rate for the assessee.

The Tribunal dismissed the second ground of appeal as not pressed and upheld the mandatory charging of interest under sections 234A/B/C. Additionally, the ground related to the initiation of penalty under section 271(1)(c) was deemed premature at that stage and also dismissed. Ultimately, the appeal of the assessee was partly allowed by the Appellate Tribunal ITAT Ahmedabad in its order pronounced on 27-05-2020.