2015 (9) TMI 746 - AT - Income Tax

Tribunal Upholds Disallowance of Excess Depreciation & Other Claims for A.Y. 2008-09 & 2009-10

The tribunal dismissed all three appeals by the assessee for A.Y. 2008-09 and 2009-10. The disallowance of depreciation claimed in excess was upheld as ... Rectification of mistake - assessee had claimed depreciation on Tools, Moulds with Shoe plates, Shoe Lasts @ 30% while depreciation should be allowed @ 15% - Held that:- When the A.O. issued show cause notice to the assessee in this regard, it was submitted by the assessee that the assessee wrongly claimed depreciation on this item but in fact, it is revenue expenditure. The A.O. did not find any merit in this contention and he made disallowance of ₹ 475,063/- being depreciation excess claimed and allowed. Learned CIT (A) upheld the assessment order and the assessee is in further appeal before us. Before us, this is not the claim of the assessee that depreciation on Tools, Moulds with Shoe plates & Shoe Lasts is allowable @ 30%. The claim is this that this expense is revenue expenditure. In our considered opinion, whether expenditure is capital expenditure or revenue expenditure is not an issue of apparent mistake, which can be decided u/s 154. This is admitted position that the assessee has itself treated this expenditure as capital expenditure and claimed depreciation thereon @ 30%. The correct rate of depreciation can be an issue of apparent mistake and it can be decided in the proceedings u/s 154 but whether the expenditure is capital or revenue is a highly debatable issue and such claim cannot be entertained and decided in 154 proceedings. Therefore, we find no merit in the contentions of the assessee. - Decided against assessee. Deduction u/s 80IB in respect of Duty Draw Back income - Held that:- Issue is covered against the assessee by the judgment of Liberty India, [2009 (8) TMI 63 - SUPREME COURT] - Decided against assessee. Treatment to subsidy - whether subsidy is capital subsidy for setting up plant in backward area and not part of actual cost as held by CIT(A) - Held that:- CIT(A) has followed two judgments of Hon’ble Apex Court rendered in the case of Sahney Steel [1997 (9) TMI 3 - SUPREME Court] and Raja ram Maize Products [2001 (8) TMI 13 - SUPREME Court] and assessee could not show as to what is the infirmity in the order of CIT (A) in following these two judgments or how these judgments are not supporting the case of the revenue. Now, we examine the Clause (v) of the Subsidy Sanction letter stating that if the unit of the assessee becomes non operational within two years, the assessee has to refund the subsidy. Now we are in the year 2015 and this is not the case of the assessee that the assessee has refunded the subsidy as per this clause and hence, in our opinion, this clause has no relevance in the facts of the present case. Hence, on this issue also, we do not find any reason to interfere in the order of CIT (A).- Decided against assessee. Issues involved:- Appeal arising out of proceedings u/s 154 for A.Y. 2008-09- Appeal arising out of assessment proceedings u/s 143 (3) for A.Y. 2008-09- Appeal arising out of assessment proceedings u/s 143 (3) for A.Y. 2009-10Analysis:Appeal u/s 154 for A.Y. 2008-09:The issue revolved around the disallowance of depreciation claimed in excess by the assessee. The Assessing Officer (A.O.) disallowed depreciation on Tools, Moulds with Shoe plates, and Shoe Lasts, claiming it was excessive. The assessee argued that the expenditure was revenue in nature, not capital. However, the tribunal held that the distinction between capital and revenue expenditure is not a matter of apparent mistake under section 154. The tribunal dismissed the appeal, stating that the claim was debatable and not suitable for resolution under section 154.Appeal u/s 143 (3) for A.Y. 2008-09:The first grievance was the disallowance of deduction u/s 80IB for Duty Draw Back income. Citing a judgment by the Hon'ble Apex Court, the tribunal upheld the decision against the assessee. The second grievance was regarding the treatment of subsidy as part of the actual cost of Plant & Machinery. The tribunal found no grounds to interfere with the CIT (A)'s decision based on relevant judgments. The third grievance was the classification of the cost of moulds as capital expenditure instead of revenue expenditure. The tribunal dismissed the appeal, following the decisions made in the A.Y. 2008-09 case.Appeal u/s 143 (3) for A.Y. 2009-10:The issues raised were similar to those in the A.Y. 2008-09 cases. The tribunal found that the decisions made in the previous year's appeals were applicable to the current year as well. Consequently, all three issues raised by the assessee were decided against them, leading to the dismissal of the appeal.In conclusion, all three appeals of the assessee were dismissed based on the findings and judgments presented in the respective cases for the assessment years 2008-09 and 2009-10.