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TMI Blog2022 (8) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... rded two contracts by ISPRL viz. Mangalore Project and Padur Project for the construction of underground crude oil, reservoir which was signed and executive a preliminary joint venture agreement on 07.01.2009 and 22.01.2010 the initial JV agreement respectively setting out the rights, duties, obligations and liabilities as among themselves with respect to various stages involved in the project at Mangalore and Padur which, inter-alia, included the pre-qualifying bid, final bid and execution of work in case of Mangalore Project and Padur Project awarded to parties. 3. The assessee filed its return of income for AY 2011-12 on 30.09.2011 declaring income of Rs.6,97,55,810/- which was revised later on 30.11.2012 declaring income of Rs.8,11,83,020/- which was processed u/s 143(1) of the Act. The assessment was completed u/s 143(3) read with section 144C of the Act determining the income of the assessee at Rs.8,70,63,553/- while completing the assessment the Assessing Officer noticed that assessee claimed depreciation amounting to Rs.58,80,533/- being 10% in respect of addition to buildings amounting to Rs.5,88,05,330/- made during the assessment year. The assessee was required to file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation claimed. The assessee relied on the following decisions in support of its contention that depreciation is allowable at 100% on purely temporary structures: 1. Shalivahana Constructions Ltd. Vs. DCIT (2007) 12 SOT 406 (Hyd.) 2. DCIT Vs. Win Medicare Ltd. (2011) 11 ITR (Trib.) 66 (Del.) 3. CIT Vs. Print Systems & Products 203 CTR 247 (Mad.). 5. The Ld. CIT(A) following the order of his predecessor in assessee's own case for the AY 2012-13 and 2013-14 held that the assessee is not entitled for 100% deduction but however, depreciation was allowed at 10% on such temporary structures. 6. The Ld. Counsel for the assessee submits before us that the erections made by the assessee in the project sites at Mangalore and Padur are purely temporary structures to enable the assessee to carry on the projects awarded by ISPRL for the construction of underground crude oil, reservoir. The Ld. Counsel for the assessee referring to page 1 of the Paper Book submits that assessee had obtained certificate from S. Maitra & Company who is the Government approved valuer who also certified that the assessee had erected the site offices, store, workshop and canteen at the project sites ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsence of any evidence furnished by the assessee in support of its claim for depreciation. 8. In reply the Ld. Counsel for the assessee submits that even though similar disallowance was made while completing the assessment for AY 2010-11 which is the first year of operations as the project commenced in the year 2009, in view of the smallness of the disallowance the assessee did not contest the issue in appeal. 9. We have heard the rival contentions, perused the orders of the authorities below and the decisions relied on. On perusal of the assessment order for the AY 2011-12, we noticed that the claim for depreciation on temporary structures at 100% was denied by the AO for the reason that except the certificate issued by S. Maitra & Company the assessee did not furnish the details of temporary structures erected by the assessee. We also observed from the assessment order for AY 2011- 12 that it is the observation of the Assessing Officer that similar claim was denied to the assessee while completing the assessment for the AY 2010-11 as the assessee could not produce any evidence in support of its depreciation claimed. We have also perused the assessment order for the AY 2010-11 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions and facilities were later on demolished and removed from the sites after completion of the projects. 11. In the case of Shalivahana Constructions Ltd. Vs. DCIT (supra) the Hyderabad Bench of the Tribunal had considered the identical situation and held as under: "7. In the case of contractors, certain structures are put up at project site on land given temporarily by the contractee. These structures are meant for the use by the contractor as his project office and also for housing labour as well as employees of the contractor. The land is neither owned by the contractor nor is it held by the contractor as leasehold. In this view of the matter, the structures put up on such land, of whatever nature, are purely temporary structures. The assessee might have used material which gives longer life to the structures in question, but the fact remains that the assessee is neither the owner of the land nor has it any claim over the structures after completion/termination of the contract. In fact, when such structures are put up on land not belonging to the person, the expenditure is of revenue nature in view of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 ITR 1 (All.). 3.3 (ii) The CIT(A) held that the bridge over river Yamuna was constructed by the assessee-company for the transportation of over-dimensional consignment of the work site without which the project could not have been completed. It is also clear from the certificate of the Uttar Pradesh Public Works Department that the bridge over river Yamuna and the bye-pass roads constructed for the said transportation were of temporary nature and were to be demolished after the necessary use. The CIT(A) considered the judgments of the Hon'ble Supreme Court in the case of Bombay Steam Navigation Co. (P) Ld. vs. CIT 91965) 56 ITR 52 (SC) : judgment in the case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 (1980) 124 ITR 1 (SC) and judgment in the case of Bikaner Gypsum Ltd. vs. CIT (1990) 89 CTR (SC) 176 : (1991) 187 ITR 39 (SC). He further observed that the assessee had to incur expenditure on the construction of bye-pass road and temporary bridge on river Yamuna for the purposes of carrying on its business because without incurring this expenditure it could not have transported the relevant machinery to the work site for the execution of the project. The assessee had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to uphold this view more or less on the strength of the same reasoning, i.e., use of marble glaze tiles and false ceiling. This court is of the opinion that the materials on record show that the construction was not authorized and appears to have been put up only for the convenience of workers who were engaged by the assessee. The record also indicates that the constructions were subsequently demolished although after the Commissioner's order. In these circumstances, the depreciation claimed to the tune of 100% cannot be termed as unreasonable as to warrant reversal of the Commissioner of Income-tax (Appeals)'s view." 14. The Delhi Bench of the Tribunal in the case of DCIT Vs. Win Medicare Ltd. (supra) held as under: 4. "After narrating the facts, the Ld. Departmental Representative relying upon the grounds of appeal submitted that the wooden partition and work stations could not be treated as temporary structures and these were in the nature of furniture and fixtures. Thus, it was contended by the Ld. Departmental Representative that the Assessing Officer was right in allowing depreciation at 10%. It was submitted that wooden partitions and work stations erected by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have to be treated as revenue expenditure. The Revenue is not in a position to point out any rule or section to substantiate its claim that the assessee is not entitled to 100%, depreciation on temporary erection. The ownership or taking the property on lease is of no consequence, so far as the construction of a temporary partition is concerned. So, the Tribunal, considering the relevant materials and evidence came to the conclusion that the assessee was entitled to 100%, depreciation in respect of the addition on temporary erection. This view has also been taken by the Tribunal in respect of the earlier assessment orders. In view of the foregoing conclusion, we do not find any error or infirmity in the order of the Tribunal and hence the same does not warrant any interference and no substantial questions of law arise for consideration of this court. Hence, we dismiss the above tax case." 16. The ratio in all the above decisions is that when the assessee constructed temporary structures such temporary structures are entitled for 100% depreciation. On reading of all the assessment orders and CIT(Appeals) orders and the submissions made by the assessee in all these assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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