The Income Tax Appellate Tribunal (ITAT), Bangalore Bench comprising Beena Pillai, Judicial Member and Laxmi Prasad Sahu, Accountant Member, in a major set back to M/s. Toyota Kirloskar Motor (P) Ltd, rejected the depreciation claim on provisional basis.
The assessee had capitalized some capital assets on provisions basis, the assets were acquired. Subsequently, in the next financial year it was reversed. Before the AO the assessee submitted that it was only because of the price negotiations with the vendors was not finalized, therefore the assessee claimed depreciation on the basis of liability, which has neither been quantified nor crystallized.
The assessee also admitted that there was excess claim of depreciation of Rs.60,26,382/- has been claimed on provisions created and it was reversed subsequently. The explanations were not accepted by the AO and he added it into the total income of the assessee. On objections raised before the DRP, the assessee submitted detailed submissions.
The DRP observed that the assessee has not adopted any scientific approach for claiming depreciation on provisions and the provisions has been reversed in the financial year 2012-13 and 2013-14 and they confirmed the order of the AO.
The fixed assets are to be capitalized if it is ready for use, the cost components include all relevant costs which are directly attributable cost of bringing the assets to its working conditions for its intended use. The assessee submitted that the assets were put to use during the assessment year to which the revenue authorities have not disputed merely the DRP did not accept the claim of the assessee that the assessee has not adopted any scientific approach.
Now as per Section 32 for claiming depreciation on the following two conditions must be satisfied. (i) It should be owned, wholly or partially by the assessee and (ii) it should be used for the purpose of business or profession.
During the impugned assessment year, the assessee has submitted that the assets were put to use by the assessee but from the documents available it is not clear whether the ownership of the assets were transferred to the assessee because there was no price fixed by the suppliers. The assessee has not satisfied both the conditions, therefore, the assessee is not eligible for claiming depreciation on provisional basis.
The Bench observed that “Accordingly, we uphold the order of the lower authorities. The assessee admitted that there was excess claim of depreciation on the provisions created, which has been reversed subsequently. Considering the totality of the facts and circumstances of the case, we uphold the order of the revenue authorities.”
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