The Income Tax Appellate Tribunal ( ITAT ) of Delhi, allowed depreciation claim under Section 80IC of Income Tax Act, 1961, for building, furniture, and plant machinery blocks.
The assessee is a resident corporate entity. As stated by the Assessing Officer, the main objects of the assessee are manufacture and distribution of flexible laminates.
The Assessing Officer has further stated that the assessee came into existence as a result of demerger of the rubber thread unit of M/s Dharmpal Satyapal Ltd. in a scheme of demerger approved by the Delhi High Court vide order dated 11.09.2007.
In course of assessment proceedings, the Assessing Officer, while verifying the return of income filed by the assessee as well as the audited financial statements, noticed that the assessee has claimed depreciation amounting to Rs.3,96,19,664/-. From the audit report, the Assessing Officer noticed that depreciation has been claimed in respect of various blocks of assets comprising of building, factory, furniture & fixture and plant and machinery.
Mr. Kanav Bali representing the revenue submitted that in terms of explanation 10 to section 43(1) of the Income Tax Act, the actual cost of such assets has to be determined after reducing the cost mat by the Central Government through Central Excise Exemption.
Per Contra, the counsels for the assessee, R.S. Singhvi, and Satyajeet Goel, submitted that the assessee has claimed depreciation on the written down value of assets as standing in the books of the erstwhile company M/s Dharampal Satyapal Ltd. on the date of demerger and acquisition by the assessee. Thus, he submitted, there is no scope left with the Department to reduce the Central Government Excise Duty Exemption from the written down value to arrive at determining the actual cost of the assets at nil.
Undisputedly, the assessee came into existence as a result of demerger of M/s Dharmpal Satyapal Ltd. in a scheme of demerger approved by the Delhi High Court vide order dated 11.09.2007, effective from 01st April, 2006. As per the scheme of demerger, the building, plant and machinery and other assets of the flexible packaging unit came to the assessee company. The issue which was arising for consideration was whether the Central Excise Duty Exemption granted to M/s Dharampal Satypal Ltd. can be reduced from the cost of assets to determine the actual cost for the purpose of depreciation.
Therefore, the bench of Pradip Kumar Kediya (Accountant member) and Saktijit Dey (Vice president) opined that the assessee’s claim of depreciation was allowable. Even, otherwise also, the disallowance of depreciation would only enhance the profit of the assessee, which was otherwise eligible for claim of deduction under Section 80IC of the Income Tax Act.
ITAT upholds the decision of the First Appellate Authority in all these assessment years. Grounds raised by the Revenue are dismissed.
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