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TMI Blog2015 (8) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounting period relevant to the assessment year in which the machinery was purchased. It was held on the facts of that case that the development rebate had to be claimed in the AY in which the machinery was purchased. We are of the view that in the instant case, the AO erred in disallowing the capitalization of the additional customs duty in the manner claimed by the Assessee and adding the entire customs duty paid in the relevant AY to the income of the Assessee. The impugned order of the ITAT affirming the decision of the CIT (A) that the enhanced cost of equipment should be taken into consideration from AY 2005-06 onwards and that the WDV should be reworked for the AY in question does not call for interference. - Decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, the DGHS noted that the Assessee had failed to fulfil the essential condition stipulated in the relevant notification of the Customs Department dated 1st March 1968 for retaining CDECs for import of hospital equipments. Accordingly, the CDEC granted to the Assessee stood withdrawn. 5. Upon such withdrawal, the Customs authorities raised a demand of ₹ 3,78,66,864 as custom duty on the Assessee for the import of equipment in the aforementioned years. Later, by an order dated 28th October 2004, the Commissioner of Customs (CC) reduced the duty to ₹ 1,10,04,795 along with fine of ₹ 10,000 and ₹ 5,000. 6. The appeals filed by the Respondent-Assessee against the order of the CC were dismissed by the Customs, Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer ('AO') rejected the above explanation. The AO held that since the levy of customs duty was penal in nature it was not allowable expenditure in terms of the Explanation to Section 37 of the Act. The entire amount of customs duty was therefore added back to the Assessee's returned income. Alternatively, the AO held that since the Assessee had paid the customs duty in the financial year 2008-09, it had to be capitalized relevant to the AY 2009-10. Depreciation of 15% could be allowed in the current year which would result in an addition of ₹ 93,54,076, i.e., after deducting 15% of the customs duty amount. However, ultimately the AO added back the entire amount of customs duty to the returned income. 9. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uruchi Aggarwal, learned Senior standing counsel appearing for the Revenue, that the liability to pay customs duty crystallized only in the AY 2008-09 after the Assessee had exhausted all legal remedies. It could have been capitalized only in the AY 2009-10 by allowing normal rate of 15% depreciation as against 100% claimed by the Assessee. Further in the block of assets, no individual plant or machinery was identifiable. Consequently, the customs duty paid during the year should have to be added to that block of assets @ 15% and the depreciation claimed allowed accordingly. 13. On the other hand, Dr. Rakesh Gupta, learned counsel for the Respondent-Assessee, referred to the decision of the Madras High Court in the CIT v. Funskool (India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner claimed by the Assessee and adding the entire customs duty paid in the relevant AY to the income of the Assessee. The impugned order of the ITAT affirming the decision of the CIT (A) that the enhanced cost of equipment should be taken into consideration from AY 2005-06 onwards and that the WDV should be reworked for the AY in question does not call for interference. 17. It requires to be noted that the Assessee has not preferred an appeal against the rejection of its cross-objection by the ITAT. Therefore, the question whether the Assessee would be entitled to claim deprecation on the customs duty paid from the year of actual import of equipment is not considered but left open for decision in an appropriate case. 18. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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