2014 (7) TMI 163 - AT - Income Tax

Depreciation on aircrafts @ 40% - revenue granted depreciation considering the same as plant and machinery - Held that - The decision in SRC Aviation (P) Ltd. Versus Deputy Commissioner of Income-tax, Circle 9(1) 2011 (8) TMI 749 - ITAT DELHI followed - no justification in observations of CIT that the aircraft of the assessee should not be described as aeroplane simply for the reason that aeroplane is a machine much bigger, heavier and powerful than an aircraft which travels in the air more than an aircraft - the aircraft owned by the assessee cannot be thrown out of the category of aeroplane and the aircraft owned by the assessee cannot be considered only as Plant and Machinery which is a term distinct to such type of aircraft - aircraft as aeroplane and granting depreciation to the respective assessees @ 40% - revenue has not been able to bring on record any of the cases wherein such aircraft has been considered by them eligible for depreciation under the head Machinery and Plant - the AO had granted the depreciation to the assessee @ 40% in accordance with the provisions of the Rule - grant of depreciation cannot be considered to be a claim not supported by law, as the department cannot straightaway show that such claim of depreciation was not in accordance with the law and, in such, circumstances, the powers u/s 263 could not be invoked Decided against Revenue.

Summary

Issues Involved:
Appeal against the order of CIT(A) allowing depreciation on aircraft at 40% instead of 15% as allowed by the Assessing Officer for the assessment years 2009-10 and 2010-11.

Analysis:

Issue 1: Depreciation Rate on Aircraft
- The Department appealed against the order of CIT(A) allowing depreciation on aircraft at 40% instead of 15% as per the Assessing Officer's decision.
- CIT(A) directed the A.O to allow the claim based on the judgment of the Jurisdictional High Court in a specific case.
- The High Court decision highlighted that the legislature had revised the classification of assets, leading to a single category of aircraft with a depreciation rate of 40%.
- The High Court emphasized that the term "aircraft" is broader and includes "aeroplane," and concluded that the specific aircraft in question fell within the description of an aeroplane, warranting a 40% depreciation rate.
- The Tribunal upheld the CIT(A)'s decision based on the earlier order in a similar case and the affirmation by the High Court, stating that the issue was already decided in favor of the assessee in previous assessment years.
- The Tribunal dismissed the Department's appeal, citing identical facts and previous judgments supporting the allowance of depreciation at 40% for the aircraft.

This detailed analysis outlines the legal proceedings and key arguments leading to the decision to allow depreciation on aircraft at a rate of 40% instead of 15%, as per the Assessing Officer's initial determination. The judgment is based on legislative changes, High Court interpretations, and consistency with previous decisions in similar cases, ultimately resulting in the dismissal of the Department's appeal.