ITAT rules on the claim of depreciation
The assessee was erroneously allowed a higher reduction, which he considered had become a rule
The Allahabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that the decision taken by the authorities in the previous year would not estop or operate as res judicata for the subsequent year.
The assessee, S.P. Chips Potato Pvt. Ltd. filed its Income Tax Return (ITR) for the Assessment Year 2014-15, declaring a total income of Rs.25,31,420.
Under the Income Tax Act, 1961, the assessment was finalized in December 2016 by the Deputy Commissioner of Income Tax (DCIT), accepting the returned income and book profit as per the return of income at Rs.3,54,138.
The assessees’ case was selected for scrutiny. The assessee claimed a depreciation @30 percent on opening WDV of Rs.22.95 lakhs under the head ‘plant and machinery.’ However, the Principal Commissioner of Income Tax (PCIT) did not find it. He also noticed that the depreciation allowable to the assessee should have been @15 percent. Therefore, excess depreciation was allowed incorrectly.
In December 2018, the PCIT issued a notice to the assessee under the IT Act.
On behalf of the assessee, the counsel Sanjay R Shah submitted that the assessee was trading in potatoes and had two cold storages. The trucks on which depreciation was claimed @30 percent were used for delivery of potatoes and a sum of Rs.5,79,960 were earned as freight income, which was shown as trading receipts, but not done separately in the accounts. Therefore, the assessment order was not erroneous and prejudicial to the interest of the revenue.
But the contentions of the assessee were rejected by PCIT.
The bench comprising PM Jagtap (vice president) and Siddhartha Nautiyal (judicial member) held, “We do not agree with the contention of the counsel for the assessee that if an incorrect/higher claim of depreciation was allowed in a previous year, the same would be allowed in the following years as well. It cannot be done simply because the asset was a part of the block on which higher depreciation was allowed (albeit incorrectly) earlier.