ITAT upholds depreciation on plastic crates & partial bad debts claim, dismissing revenue's appeals. Order pronounced on 31st May 2016.

The ITAT upheld the CIT(A)'s decisions to allow 50% depreciation on plastic crates and a partial claim of bad debts. The revenue's appeals were dismissed, and the order was pronounced on 31st May 2016.

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Issues Involved:
1. Depreciation on plastic crates.
2. Disallowance of bad debts.

Issue-wise Detailed Analysis:

1. Depreciation on Plastic Crates:

The primary issue under consideration was whether plastic crates used by the assessee in its business qualify for 50% depreciation as containers made of glass or plastic used as refills. The assessee claimed 50% depreciation on plastic crates as per the rates prescribed under the Income Tax Act. The Assessing Officer (A.O.) restricted the depreciation to 25%, arguing that plastic crates fall under the normal block of plant and machinery.

The CIT(A) and ITAT had previously allowed 50% depreciation on plastic crates in earlier assessment years (2001-02 and 2002-03). The CIT(A) followed this precedent and directed the A.O. to allow 50% depreciation. The revenue appealed, citing the Supreme Court's decision in Goetz India Ltd. vs. CIT, which mandates that claims for deductions should be made through a revised return.

However, the ITAT upheld the CIT(A)'s decision, stating that the CIT(A), being an appellate authority, can entertain new claims based on facts available at the time of assessment. The ITAT concluded that plastic crates used by the assessee fall under the separate block of containers made of glass or plastic used as refills, eligible for 50% depreciation.

2. Disallowance of Bad Debts:

The second issue was the disallowance of bad debts claimed by the assessee. The A.O. disallowed the claim, stating that the assessee failed to prove that the debts were taken into account in computing income in earlier periods, as required under section 36(1)(vii) of the Income Tax Act.

The assessee argued that the bad debts were written off in the books of accounts as irrecoverable, which suffices under section 36(1)(vii). The CIT(A) considered the additional evidence and the A.O.'s remand report, allowing a partial claim of Rs. 6,87,061/- out of the total Rs. 30,05,782/- claimed as bad debts.

The ITAT found merit in the assessee's argument that once debts are written off in the books, there is no need to prove that they have become bad. The ITAT upheld the CIT(A)'s decision to allow the partial claim of bad debts, finding no error or infirmity in the order.

Conclusion:

The ITAT dismissed the revenue's appeals, affirming the CIT(A)'s decisions to allow 50% depreciation on plastic crates and a partial claim of bad debts. The order was pronounced in the open court on 31st May 2016.

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