2015 (7) TMI 939 - AT - Income Tax

Disallowance of depreciation on electrical installation - The assessee had claimed depreciation @ 15% on the electrical installations and further additional depreciation of 10% - Assessing Officer held that the electrical equipment was eligible for depreciation only at 15% as the same fell within the electrical fittings which were required for the power distribution to the plant and machinery - Held that - A perusal of the items as mentioned in page 2 of the assessment order for the assessment year 2006-07, which are substantially the electrical items in respect of the claim of depreciation, shows that these are items which form part of the plant and machinery. These items are not simple electrical fittings, for example industrial cables, power distribution board, control cabin, converter panel, etc. do not have standard alone function. They are part of the plant and machinery. The electrical fittings as mentioned by the Income Tax Rules on which depreciation is specified at 10% are such items which can function on a standard alone basis such as fan, light and the attachments thereto representing wires, switches, etc. The items which have been mentioned in page 2 of the assessment order clearly are not simple electrical fittings. These go to form part of the plant and machinery. Consequently the same would have to be held to be eligible for depreciation at the rate provided for plant and machinery. - electrical installation was to be treated as part of plant and machinery for depreciation at the specified rate provided for plant and machinery. Revenue has not been able to dislodge this specific finding of the ld. CIT(Appeals), consequently the finding of the ld. CIT(Appeals) on this issue stands confirmed. - Decided against Revenue.

Summary

Issues:
1. Appeal by Revenue against the order of Commissioner of Income Tax (Appeals) for assessment year 2006-07.
2. Appeal by Revenue against the order of Commissioner of Income Tax (Appeals) for assessment year 2008-09.
3. Cross Objection filed by the assessee in Revenue's appeal for assessment year 2006-07.

Analysis:
1. The main issue in the Revenue's appeals was regarding the eligibility of depreciation on electrical installations claimed by the assessee. The Assessing Officer had allowed depreciation at 15% on the electrical equipment, considering them as "electrical fittings" necessary for power distribution to the plant and machinery. However, the assessee contended that the electrical equipment constituted part of the plant and machinery and should be eligible for depreciation at 15%.

2. The Appellate Tribunal examined the items listed in the assessment order for the relevant year, noting that they were integral to the plant and machinery, such as industrial cables, power distribution board, control cabin, and converter panel. These items were not standalone electrical fittings like fans and lights. The Tribunal referenced decisions from the Hon'ble Punjab & Haryana High Court and the Jurisdictional High Court to support the view that the electrical installation should be treated as part of the plant and machinery for depreciation purposes.

3. Consequently, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) that the electrical installation constituted part of the plant and machinery, affirming the eligibility for depreciation at the specified rate for plant and machinery. The Revenue's appeals were dismissed as they failed to challenge this specific finding. The Cross Objection filed by the assessee was also dismissed as the Revenue's appeals were rejected on merits, rendering the issue of reopening assessment irrelevant.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's reasoning leading to the dismissal of the Revenue's appeals and the Cross Objection filed by the assessee.