ITAT allows 100% depreciation for individual construction materials

The ITAT Delhi-C allowed the appeal, directing the Assessing Officer to grant 100% depreciation under the first proviso to s. 32(1)(ii) of the IT Act for individual construction materials. The Tribunal held that each item of construction material should be considered a separate plant for depreciation purposes, as they could be used individually based on construction needs. The decision was based on the individual usability of each item and the cost criteria specified in the Act, distinguishing cases where bulk items were considered a single plant.

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Issues:
- Depreciation rate under first proviso to s. 32(1)(ii) of the IT Act.
- Claim of investment allowance under s. 32A(4).

Analysis:
1. Depreciation Rate Dispute:
The appeal concerned the depreciation rate for the assessment year 1989-90. The assessee claimed 100% depreciation under the first proviso to s. 32(1)(ii) of the IT Act for construction materials like wooden shuttering sheets plants and supporting material. However, the Assessing Officer allowed depreciation at a rate of 33.33%, contending that the materials could not be used individually and were functionally part of a group. The AO relied on a previous decision of the Madras High Court. The CIT(A) upheld the AO's decision. The assessee challenged this, arguing that each item could be used individually in construction work. The assessee distinguished the Madras High Court decision and relied on a Delhi Tribunal decision supporting individual depreciation for such items.

2. Judgment and Reasoning:
After hearing both parties, the ITAT Delhi-C analyzed the functional use of the construction materials. The Tribunal referred to a previous decision by the Delhi Tribunal, which held that each item of construction material should be considered a separate plant for depreciation purposes. The Tribunal agreed with this reasoning, stating that each shuttering and plank could be used individually, and the number used depended on the construction size. As the cost of each item was below the specified limit, the assessee was entitled to 100% depreciation under the first proviso to s. 32(1)(ii) of the IT Act. The Tribunal distinguished a case cited by the Revenue where bulk items were leased out as a single plant, stating that in this case, individual use was possible.

3. Investment Allowance Claim:
Although the assessee raised a ground regarding investment allowance under s. 32A(4), the Tribunal did not consider it as it was not argued during the appeal hearing. The Tribunal focused solely on the depreciation rate issue under the first proviso to s. 32(1)(ii) of the IT Act.

4. Final Decision:
The ITAT Delhi-C allowed the assessee's appeal, directing the Assessing Officer to grant depreciation at 100% under the first proviso to s. 32(1)(ii) of the IT Act for the individual construction materials in question. The Tribunal's decision was based on the individual usability of each item and the cost criteria specified in the Act.

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