TMI Blog2001 (10) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... niture and fixtures. Some of the temporary structures were shown as held for more than 180 days whereas others were shown as held for less than 180 days. Depreciation was claimed on the said temporary structures at 100 per cent, even though on other furniture and fixtures, along with which depreciation on temporary structures was claimed, depreciation claimed was only at 10 per cent. The Assessing Officer allowed the claim for cent-per-cent depreciation on the temporary structures, but in terms of proviso to section 32(1) restricted the said claim of the assessee to 50 per cent in relation to temporary structures held for less than 180 days. On this basis, he computed the allowable depreciation on temporary structures held for less than 180 days at Rs.5,417 as against the claim of the assessee for Rs.10,834 in relation to old division. There were other temporary structures shown in the new division, and their cost was shown at Rs.1,94,017, and they were shown by the assessee itself to have been used for less than 180 days, but did not restrict the depreciation thereof, in terms of the proviso to section 32(1). In terms of the said proviso, the Assessing Officer allowed the claim fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumer to reimburse it, the cost thereof, prior to giving electrical connection. You have allowed 10 per cent depreciation as against 100 per cent deduction as revenue expenditure under section 37(1) of the Income-tax Act. For the sake of convenience the company included the service charges under depreciation schedule but the provisions of section 32 are not applicable, since this is not a fixed asset. Numerous High Courts have held that this amount is revenue expenditure and it should be deducted from the profits of the business. The relevant case laws are mentioned below: Birla Jute Manufacturing Co. Ltd. 182 ITR 497 (Cal.) Mafatlal Fine Spg. Wvg. Co. Ltd. 206 ITR 578 (Bom.) The disallowance made by you is not 'prima facie' and kindly therefore delete the disallowance. (b) Temporary structures The company incurred Rs.1,94,017 and Rs.1,11,435 towards temporary structures in its office premises. The details of these are given under additions to fixed assets. These comprise of false ceilings and partitions and installed in office premises leased by the assessee-company. Consequently the entire expenditure is revenue and 100 per cent thereof is allowable under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endix-I of I.T. Rules, 1962. Therefore, there is no mistake apparent from record to be rectified under section 154, inasmuch as the excess depreciation was worked out and prima facie adjustment thereof was made, based on the material available at the time of processing of the return. Therefore, the assessee's contention in this regard is rejected." 7. When the matter was carried in appeal, the CIT(Appeals) upheld the order of the Assessing Officer passed under section 154, on the above aspect, with the following remarks-- "7. ...In the present case the appellant in its Depreciation Statement enclosed with the return of income included temporary structures under the group 'Furniture Fixtures'. Similarly, Service Line Charges have also been incorporated in the Depreciation Statement as an asset under the head 'Electrical Installations' and depreciation charged thereon (Item No. 4). Likewise, Computer Software has also been capitalised and included as an asset in the Depreciation Statement by the appellant itself. The Assessing Officer, therefore, proceeded on the information available in the Depreciation Statement and allowed depreciation on the aforesaid items at appropriate r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distinction between capital expenditure and revenue expenditure. In the light of these decisions, it is claimed that the issue whether the assessee is entitled for the deduction of the claims made by it in respect of the three items, viz., temporary structures, service line charges and computer software, in terms of section 37 of the Act is at least debatable, and so, the Assessing Officer was not justified in making the impugned adjustments, while processing the return under section 143(1)(a). 9. The learned Departmental Representative, on the other hand, relied on the orders of the Revenue authorities, and submitted that the impugned adjustments made by the Assessing Officer were just and proper. 10. We are of the view that the impugned orders of the Revenue authorities on the point at issue deserve to be upheld. The assessee clearly capitalised the three items, i.e., temporary structures, service line charges and computer software, and showed them as depreciable assets in the depreciation chart filed by it and claimed cent-per-cent depreciation thereon. So, the only question open for consideration before the Assessing Officer while processing the return under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee tried to argue that this decision is distinguishable inasmuch as in that case the assessee did not make any claim at all, but in the present case the assessee did make a claim though under a wrong section, i.e., under section 32. We are of the view that in the present case it is not simply a question of citing wrong section, since the assessee has clearly capitalised the expenditure relating to the three items in question in support of a claim. The result of a claim for cent-per-cent depreciation and cent-per-cent write off as revenue expenditure may have the same tax consequence. But, they are two different claims, arising out of two different situations. It is not as if the Assessing Officer, while processing the return under section 143(1)(a), confused between the two situations and made any adjustments either in favour or to the prejudice of the assessee. We are of the view that the cases cited by the learned counsel for the assessee are not of any assistance. We have no quarrel with the proposition that no adjustment on a debatable issue can be made while processing the return under section 143(1)(a), which is the principle laid down by a number of High Courts, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assets in question are depreciable assets, as claimed by the assessee. He only disturbed the rates of depreciation applicable to the said assets, about which there is not much scope for any debate. At any rate, no possible debate on the applicable rates has been brought to our notice, in the course of hearing. 13. We may also mention that it has been brought to our notice by both the parties that subsequent to the intimation in question under section 143(1)(a), the Assessing Officer has also made a regular assessment under section 143(3). In the course of the regular assessment, the assessee is free to take the alternative plea that in case the assessee is held to be not entitled for cent-per-cent depreciation on the three items, viz., temporary structures, service line charges and computer software, they are entitled to be treated as revenue expenditure. If the final result on such a plea goes in favour of the assessee, assessee would be entitled for consequential reliefs in terms of clause (b) of section 143(1). We can only mention that this question does not arise in the present appeal. So far as this appeal is concerned, the only issue is whether the Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequent to a ground taken before him in this behalf and gave the following direction. "8. However, with regard to the ground taken by the appellant (Ground No. 5) that the Assessing Officer ought to have revised the relief under sections 80HH, 80-I and 80-IA of the Act, consequent to the enhancement of the total income by denying deductions for certain expenses claimed, I direct the Assessing Officer to look into the matter and pass an appropriate order as per the provisions of law." Aggrieved by the above directions of the CIT(Appeals), Revenue preferred the present appeal. 17. Before us, the learned Departmental Representative pleaded that the assessee did not file separate P L Accounts for the old division and the new division, though separate depreciation statements have been filed, and so, it is not possible to work out the relief under sections 80HH, 80-I and 80-IA, consequent to enhancement of income as a result of adjustments made. The learned counsel for the assessee, on the other hand, pleaded that the relief sought for in this regard is only consequential to the adjustments made in the intimation under section 143(1)(a), and so, the direction given by the CIT(Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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