Relief for Philips India: ITAT Upholds 30% Depreciation on Moulds Used by Exclusive Vendors [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) upheld 30% depreciation on moulds used by third-party vendors exclusively manufacturing for Philips India.

The Revenue-appellant appealed against the order passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the Assessment Year 2012-13.In this case, Philips India Limited,respondent-assessee,filed its original return for AY 2012-13 declaring income of ₹142.34 crore, which was later revised to ₹141.76 crore. The assessment was completed under Section 143(3) r.w.s. 144C on 27.02.2017. On appeal, the ITAT Kolkata set aside the order on 07.02.2018 for fresh adjudication.

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The Assessing Officer (AO) then passed a revised order on 16.11.2018 under Section 143(3) r.w.s. 254, assessing income at ₹145.61 crore after disallowing ₹3.14 crore towards depreciation on moulds. The CIT(A) partly allowed the assessee’s appeal against this order.

Aggrieved by the CIT(A) decision the Revenue appealed before the tribunal.

The Authorised Representative (AR) submitted that the only issue was the AO’s restriction of depreciation on moulds from 30% to 15%. The CIT(A) had noted that the moulds were owned by the appellant and used by third-party vendors who worked exclusively for it.

The AO held that 30% depreciation applied only to factories producing rubber and plastic goods, which the appellant did not own, and therefore allowed only 15% depreciation.

The AR pointed out that a similar issue for AY 2009–10 had been decided in favour of the assessee by the ITAT, which held that ownership and use of moulds for business purposes, even in vendors’ premises, was sufficient to claim 30% depreciation.

The two member bench comprising George Mathan ( Judicial Member) and Rakesh Mishra( Accountant Member) noted that the CIT(A) had followed its earlier decision in the assessee’s case for AY 2009-10. Since the facts were the same, the tribunal held that the assessee was eligible for 30% depreciation and found no reason to interfere with the CIT(A)’s order. The Revenue’s appeal for AY 2012-13 was dismissed.

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