2017 (5) TMI 246 - AT - Income Tax

Depreciation on electrical fittings - Held that - As decided in assessee s own case for AY 2006-07 the electrical installations formed an integral part of the assessee s plant, therefore, depreciation was allowable at the rate applicable to plant and machinery. We are also of the considered view that electrical installation is integral to the plant and machinery used for manufacturing steel and as the Assessing Officer has not controverted the contentions of the assessee company hence, Ld. CIT(A) has rightly directed the AO to allow depreciation on electrical installations @ 15% i.e. the rate applicable to plant & machinery . MAT computation - calculation of Book Profit u/s 115JB on account of the additions representing the disallowance on excess depreciation on UPS/electrical installation - Held that - CIT(A) after considering the submissions of the assessee and the ratio laid down by the Hon ble Apex Court in the case of M/s Apollo Tyres Ltd. Vs CIT (2002 (5) TMI 5 - SUPREME Court) decided the issue in assessee s favour. In our opinion, the impugned order does not require any interference on our part when the issue has been decided by the ld. CIT(A) by following the ratio laid down by the Hon ble Supreme Court

Summary

Issues:
1. Rate of depreciation on electrical fittings.
2. Calculation of Book Profit u/s 115JB of the Income-tax Act, 1961.

Issue 1: Rate of Depreciation on Electrical Fittings:
The department contested the rate of depreciation on electrical installations, arguing for a lower rate applicable to furniture and fittings. However, the assessee maintained that the electrical installations were an integral part of the plant and machinery used in manufacturing operations. The dispute centered on whether these installations should be considered as part of the plant and machinery block or as separate furniture and fittings. The Tribunal, referencing previous judgments and the nature of the installations' role in the manufacturing process, upheld the assessee's claim. It was concluded that the electrical installations formed an integral part of the plant, warranting depreciation at the rate applicable to plant and machinery. The additional depreciation claimed was also deemed allowable. The department's appeal on this issue was dismissed based on the precedent and the lack of merit in their argument.

Issue 2: Calculation of Book Profit u/s 115JB:
The second issue revolved around the calculation of Book Profit under section 115JB of the Income-tax Act, 1961, concerning the disallowance on excess depreciation on UPS/electrical installations. The Assessing Officer had made additions to the Book Profit, which the assessee challenged citing a previous order in their favor and the limited powers of the AO to make adjustments. The ld. CIT(A) agreed with the assessee, directing the AO to delete the additions as they exceeded the authorized adjustments under the Act. The Tribunal upheld the ld. CIT(A)'s decision, emphasizing the restricted jurisdiction of the AO in making such additions to the profit and loss account. The department's appeal was dismissed as the ld. CIT(A)'s order aligned with the legal provisions and previous judicial interpretations, thereby not warranting any interference.

In conclusion, the Tribunal upheld the decisions of the ld. CIT(A) on both issues, emphasizing the legal precedents and the correct application of relevant provisions in determining the rate of depreciation and calculating Book Profit under section 115JB. The department's appeals were dismissed, and the orders in favor of the assessee were upheld.