The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench ruled that the Assessee was entitled to charge depreciation at the rate of 15% under the block of assets “plant and machinery”.
The assessee, Singareni Collieries Company Ltd. is engaged in the business of coal mines and he is extracting coal from open cast mines as well as underground mines. As per details submitted by the AR of the assessee during the course of assessment proceedings and appellate proceedings, it is clear that the expenditure incurred by the assessee is to be treated as ‘plant and machinery. The civil works are related directly to the excavation of coal. Without doing these jobs, it is difficult to extract coal from the mines. From the details submitted, it is clear that the expenditure incurred by the assessee company on construction of retaining wall for sand stowing, Dumper Working Platform, Construction of RCC Bridges, Land leveling, Sand Stowing, Bunker Stowing, construction of Inter Seam Tunnels, Construction of Steel Bunkers, Construction of Water Dams, construction of water tankers for sand stowing, building retention wall for sand stowing, construction bunkers in mines for workers, construction of check dams in mines to prevent water gushing, etc. The entire expenditure was incurred within the mines, which are categorized as plant and machinery for the purpose of depreciation. Functionally the expenditure assumes the nature of plants and machinery in the coal mines.
The assessee raised the issue regarding depreciation on plant and machinery, the AO allowed depreciation at the rate of 10% treating it as ‘building’ as against the assessee’s claim of 15% as plant & machinery. The CIT(A) following the decision in earlier Assessment Years 2011-12 and 2012-13, confirmed the action of AO.
The coram of a Judicial Member, S.S.Godara and Accountant Member, L.P.Sahu held that that the expenditures incurred by the assessee were necessary for excavation of coal from mines and shafts so the assessee is entitled to charge depreciation at the rate of 15% under the block of assets “plant and machinery”, as against 10% made by the AO.”
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