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2012 (11) TMI 852 - HC - Income TaxCapitalization of Depreciation amount and setting off and carry forward against interest income - highway construction - A.O. held that the basic element for claim of depreciation is absent in the case of the assessee. The depreciation on equipment or assets used to construct the highway is itself a capital expenditure till the completion of the same and commencement of the commercial operation. - held that:- In Commissioner of Income Tax v. Sakthi Soyas Ltd. [2006 (2) TMI 87 - MADRAS HIGH COURT] it was held that - “Capitalisation of those expenditure in the books of account alone was not the decisive factor in examining an expenditure for the purpose of income-tax. The name given to an expenditure or a nomenclature given to an expenditure in the books of account of the assessee is not the litmus test to decide the exact nature of expenditure for the purpose of income-tax. The purpose of the Companies Act is different from the purpose of the Income-tax Act. Therefore, the classification of those expenses as capital in nature for the purpose of the Companies Act, does not ipso facto make that expenditure a capital expenditure for the purpose of the Income-tax Act.” Application of section 143(3) - held that:- sub-section (3) in this case has no manner of application as it is not a case here that the appellant has frequently shifting its accounting process and method. In this case the accounting system is uniform however, while filing returns the depreciation of those assets have been claimed under the provisions of the law in its return. It is not a case that the said assets and properties do not belong to the appellant, therefore depreciation in any assets and properties is a regular phenomenon and deduction on this account is allowable under Section 32 automatically. Tribunal while reading Section 32 of the Act has accepted the legal principle but unfortunately while granting relief as rightly pointed out by Mr. Khaitan has not allowed the setting off of the interest income as regard the aforesaid amount of depreciation. - A.O.is directed to work out again allowing the deduction and setting off of the amount of interest income and to allow carry forward - Decided in favor of assessee.
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