Tribunal upholds depreciation claim for construction assets, dismisses Revenue's appeal

The Tribunal upheld the assessee's depreciation claim for construction assets like school buildings, labour huts, and store buildings, dismissing the Revenue's appeal. Additionally, the Tribunal allowed the assessee's appeal regarding accrued interest on fixed deposits, deleting the addition made by the Assessing Officer. The judgment was delivered on 26.5.2015, with both parties' representatives present.

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Issues:
1. Cross appeal by Revenue and Assessee challenging the order for Assessment Year 2008-09.
2. Depreciation allowance on school building, labour huts, and store building.
3. Addition of accrued interest on fixed deposit not accounted for in books of account.

Analysis:
1. The Revenue appealed against the allowance of depreciation on school building, labour huts, and store building claimed by the assessee for Assessment Year 2008-09. The Assessing Officer disallowed a sum of &8377;16,07,503 claiming that 100% depreciation was not available to the assessee as these assets were not owned by them. However, it was established that the assessee, a civil construction firm, had constructed assets like school buildings, labour huts, and store buildings as part of a project for the Rajasthan Housing Board. These assets were later handed over to the government. The Tribunal noted that the construction expenses were revenue expenditure and allowed the claim of depreciation. The appeal of the Revenue was dismissed based on the affirming stand of the Commissioner of Income Tax (Appeals) regarding the depreciation claim.

2. The appeal by the assessee challenged the addition of &8377;11,62,358 for accrued interest on fixed deposits not accounted for in the books of account. The Assessing Officer disallowed this amount, but it was revealed that the bank had directly credited the interest on fixed deposits without informing the assessee. The fixed deposits matured in the subsequent assessment year, and the bank credited the interest income, which was then declared by the assessee in the profit & loss account for that year. As the interest income was offered and there was no loss to the Revenue, the Tribunal allowed the appeal of the assessee and deleted the addition. Consequently, the appeal of the Revenue was dismissed, and that of the assessee was allowed.

In conclusion, the Tribunal upheld the depreciation claim by the assessee for construction assets and allowed the appeal regarding the accrued interest on fixed deposits. The judgment was pronounced in the presence of representatives from both sides on 26.5.2015.

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