2015 (9) TMI 1544 - HC - Income Tax

High Court remands depreciation issue, upholds Quarry Development Expenditure decision.

PR. CIT-2 Versus CEMENT CORPORATION OF INDIA LTD

The High Court set aside the ITAT's decision on the deletion of additions made by the AO for depreciation claimed by the Assessee, remanding the issue for ... Depreciation claimed by the Assessee on its block of assets - Held that:- There has been no occasion for the ITAT to seriously consider whether, for the AYs in question, there were any working units of the Assessee and if, in fact, the entire block of assets in respect of which depreciation was claimed was actually put to use. The ITAT also did not consider that there is no longer a requirement for the COD to grant permission to the Revenue to file an appeal.The Court accordingly sets aside the impugned order of the ITAT on the issue of depreciation and remands the appeals to this extent to the ITAT for a fresh decision in accordance with law. Quarry Development Expenditure claimed as revenue expenditure - Held that:- It is seen that even before the AO, the Assessee offered an explanation for treating one part of the Quarry Development Expenditure pertaining to the removal of the over burden etc. at the mines which was utilized for capital works like laying of roads, stock yards crushed ramp etc. as capital expenditure whereas the rest of the expenditure was claimed as revenue expenditure.The concurrent order of the CIT (A) as well as the ITAT on this aspect accepting the explanation of the Assessee does not appear to be suffering from any legal infirmity. The Court accordingly declines to frame a question on this issue. Issues:1. Deletion of additions made by the AO pertaining to depreciation claimed by the Assessee on its block of assets.2. Claim by the Assessee of the Quarry Development Expenditure as revenue expenditure.Analysis:1. The High Court addressed the first issue regarding the deletion of additions made by the AO concerning depreciation claimed by the Assessee on its block of assets. The ITAT based its decision on the CIT(A)'s order for previous years where assets were kept 'as a stand by for the whole year.' The COD did not allow the Revenue to appeal against the CIT(A)'s decision for those years. The ITAT declined to interfere with the CIT(A)'s order deleting the addition made by the AO. The Court noted that the ITAT failed to consider whether the Assessee's units were operational for the relevant assessment years and if the assets claimed for depreciation were actually utilized. The Court set aside the ITAT's order on depreciation and remanded the appeals for a fresh decision.2. The second issue involved the claim by the Assessee of the Quarry Development Expenditure as revenue expenditure. The Assessee explained to the AO that part of the expenditure was used for capital works while the rest was claimed as revenue expenditure. Both the CIT(A) and the ITAT accepted the Assessee's explanation. The Court found no legal flaw in their decision and declined to raise any question on this issue. Consequently, the appeals were disposed of by setting aside the ITAT's order on depreciation and remanding the appeals solely for a fresh decision on the depreciation claimed by the Assessee.