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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 ..... 94/Del/2012 pertaining to Assessment Year ('AY') 2009-10. 2. The question urged for consideration by the Revenue in this appeal is in which AY can the Assessee capitalize the customs duty levied on import of hospital equipment and claim depreciation? 3. The Respondent-Assessee is a hospital and diagnostic centre. It earns income under the head 'Business and Profession'. The Assessee imported hospital equipments valued at Rs. 2,75,11,988 during the years 1988-89 and 1992-93, without payment of custom duty, on the basis of a customs duty exemption certificate ('CDEC') issued by the Director General of Health Services ('DGHS'). The equipment thus imported was capitalized by the Assessee on the actual value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed 100% depreciation on it. The case was selected for scrutiny and notices were issued under Sections 143 (2) and 142 (1) of the Act. By way of explanation, the Assessee stated that even though the customs duty was paid during the previous year relevant to the AY 2009-10, the liability to pay the customs duty related back to the accounting period 1989-90 and 1992-93 when the equipment was actually imported. Thus there was an increase in the cost of the imported machinery to the extent of customs duty paid during the year. The Assessee accordingly claimed depreciation on the enhanced cost of machinery from year to year basis since the date of actual import. Since the written down value ('WDV') had become negligible, the whole a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms duty and interest arose for the first time on 28th October 2004, relevant to the AY 2005-06 and therefore, the enhanced cost of the equipment should be taken into consideration from AY 2005-06 onwards. The depreciation had to be allowed accordingly. The WDV had to be reworked for the relevant AY 2009-10. The Revenue's appeal as well as cross-objections of the Assessee on this aspect were rejected. 11. In the present appeal, by an order dated 11th November 2014 the Court required the Revenue to file calculations of the WDV and the depreciation as claimed and allowed. It was also noted that Section 37 (1) of the Act would not apply if the payment of customs duty had to be treated as a capital expenditure. 12. The Revenue has not fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at was imported and installed in an earlier year. That question was answered in the affirmative by the Madras High Court by following the judgment of the Gujarat High Court in Atlas Radio and Electronics P. Limited v. Commissioner of Income Tax (1994) 207 ITR 329 (Guj) in which it was held that even though the sales tax was paid in a subsequent year, the liability to pay sales tax arose in 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. 16. Following the above decision of the Madras High Court in Funskool (India) Limited (supra), we are of the view that in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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