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2015 (8) TMI 665 - DELHI HIGH COURT

2015 (8) TMI 665 - DELHI HIGH COURT - [2015] 378 ITR 65 (Del) - Section of AY to capitalize the customs duty levied on import of hospital equipment and claim depreciation - whether the obligation to pay customs duty related back to the actual date of payment of customs duty or the date of import of the equipment and whether the said customs duty paid in the previous year relevant to the AY in question can be capitalized with reference to an earlier year? - Held that:- Following the decision in F .....

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zation of the additional customs duty in the manner claimed by the Assessee and adding the entire customs duty paid in the relevant AY to the income of the Assessee. The impugned order of the ITAT affirming the decision of the CIT (A) that the enhanced cost of equipment should be taken into consideration from AY 2005-06 onwards and that the WDV should be reworked for the AY in question does not call for interference. - Decided against revenue. - ITA No. 529/2014 - Dated:- 4-8-2015 - S. Muralidha .....

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4894/Del/2012 pertaining to Assessment Year ('AY') 2009-10. 2. The question urged for consideration by the Revenue in this appeal is in which AY can the Assessee capitalize the customs duty levied on import of hospital equipment and claim depreciation? 3. The Respondent-Assessee is a hospital and diagnostic centre. It earns income under the head 'Business and Profession'. The Assessee imported hospital equipments valued at ₹ 2,75,11,988 during the years 1988-89 and 1992-93 .....

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the relevant notification of the Customs Department dated 1st March 1968 for retaining CDECs for import of hospital equipments. Accordingly, the CDEC granted to the Assessee stood withdrawn. 5. Upon such withdrawal, the Customs authorities raised a demand of ₹ 3,78,66,864 as custom duty on the Assessee for the import of equipment in the aforementioned years. Later, by an order dated 28th October 2004, the Commissioner of Customs (CC) reduced the duty to ₹ 1,10,04,795 along with fine .....

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; 9,52,161. 7. The Assessee filed its return of income for the AY 2009-10 on 29th September 2009 inter alia declaring a total income of ₹ 65,16,324. In the fixed schedule in the balance sheet the Assessee included 'new' plant and machinery worth ₹ 1,10,04,795 and claimed 100% depreciation on it. The case was selected for scrutiny and notices were issued under Sections 143 (2) and 142 (1) of the Act. By way of explanation, the Assessee stated that even though the customs duty .....

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ad become negligible, the whole amount of depreciation was written off in the AY 2009-10 on the customs duty paid during the year. 8. The Assessing Officer ('AO') rejected the above explanation. The AO held that since the levy of customs duty was penal in nature it was not allowable expenditure in terms of the Explanation to Section 37 of the Act. The entire amount of customs duty was therefore added back to the Assessee's returned income. Alternatively, the AO held that since the As .....

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nhanced cost of equipment would be taken into consideration from the AY 2005-06 when the CC passed an order dated 29th October 2004 requiring the Assessee to remit the customs duty of ₹ 1,10,04,795. The AO was directed to rework and allow the depreciation on that basis. 10. Aggrieved by an order of the CIT (A), the Revenue preferred an appeal before the ITAT and the Assessee preferred a cross-objection. In the impugned order dated 31st January 2014 the ITAT held that CIT (A) was right in h .....

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ember 2014 the Court required the Revenue to file calculations of the WDV and the depreciation as claimed and allowed. It was also noted that Section 37 (1) of the Act would not apply if the payment of customs duty had to be treated as a capital expenditure. 12. The Revenue has not filed calculations of the WDV and the depreciation as claimed and allowed. It was urged by Ms. Suruchi Aggarwal, learned Senior standing counsel appearing for the Revenue, that the liability to pay customs duty crysta .....

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, learned counsel for the Respondent-Assessee, referred to the decision of the Madras High Court in the CIT v. Funskool (India) Limited (2007) 294 ITR 642 (Mad) which according to him covered the issue in favour of the Assessee. 14. The central question is whether the obligation to pay customs duty related back to the actual date of payment of customs duty or the date of import of the equipment and whether the said customs duty paid in the previous year relevant to the AY in question can be capi .....

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