Oil Wells Eligible for Depreciation as Plant and Machinery: ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the oil wells are eligible for depreciation as plant and machinery.

The assessee company, Joshi Technologies International Inc was engaged in exploration of crude oil from Dholka and Weevil oil fields. The crude was exported to ONGC Central Storage for further refining process. For the  impugned assessment year, the assessee filed return of income declaring “Nil” total income.

The assessee submitted before the Assessing Officer that in terms of entry III 8(xii) of Appendix 1, Depreciation table of Income Tax Rules 1962, oil wells were eligible for depreciation as plant and machinery @ 60%. However, the Assessing Officer granted depreciation on oil wells @ 10% by treating oil wells as building.

S.N. Soparkar,on behalf of the assessee submitted that the entry in appendix-1 had not mandated any such requirement asset should be used for “distribution” to be eligible for claim for deduction.

He further, relied upon the decision of Gujarat High Court in the case of Niko Resources Ltd.  that minerals oil wells would form part of “plant and machinery” and not “building”

Sudhendu Das, appeared on behalf of the revenue.

The Division Bench of Annapurna Gupta, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) allowed the appeal filed by the assessee following the decision of assessee's own case in which oil wells were eligible for depreciation as “plant and machinery”. The Bench directed AO to re-compute the depreciation on “oil wells” on opening WDV.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates