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DCIT (OSD) , Circle-8, Ahmedabad Versus M/s. Tubestar Oil and Gas Services Pvt. Limited and Vica-Versa

2016 (7) TMI 265 - ITAT AHMEDABAD

Depreciation on Plant & machinery - @60% OR 15% - Assessee was engaged in the business of providing services like testing, analysis and inspection services relating to oil and gas to various companies like ONGC, Reliance, British Gas, etc. - For providing above services, the assessee company purchased specialized plant & machinery used specifically for oil & gas industry - AO observed that assessee is not eligible for claiming depredation @ 60%, as the assessee was engaged into providing service .....

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ay by the observations made by AO in the light of the provisions of section 36(2) of the Act. There is no dispute that the claim of the assessee could not be allowed as a bad debt in the light of the provisions of section 36(2) of the Act but nevertheless the claim is justified as a business loss. Since both these amounts are directly related to the business of the assessee, therefore, the claim of business loss cannot be brushed aside lightly. We accordingly set aside the findings of the ld. CI .....

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, Ahmedabad dated 20.03.2013 pertaining to A.Y. 2009-10. 2. The appeal and the cross objection were heard together and are being disposed of by this common order for the sake of convenience. ITA No. 1590/Ahd/2013 Revenue s Appeal 3. The substantive grievance of the revenue read as under:- 1. (a) The Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in allowing the depreciation of ₹ 50,64,819/- on Plant & machinery @60% instead of 15% allowed by the A .....

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eration and on going through the details submitted by the assessee, the A.O noticed that the assessee has claimed depreciation @ 60% on plant & machinery. The assessee was asked to justify its claim of 60% and was also asked to show cause why the depreciation so claimed should not be restricted to 15%. Assessee filed a detailed reply which read as under:- 4.2. In response to the same, the assessee filed its submission vide letter dated: 23/11/11, which is reproduced as under: "During th .....

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spection, thickness gauging inspection etc. and other related services. For providing above services, the assessee company purchased specialized plant & machinery used specifically for oil & gas industry. The copy of bills is enclosed herewith as Annexure-1. On the above-assets, the assessee claimed depredation @ 60% during the year under reference. However, the Ld. A.O. observed that the assessee is not eligible for claiming depredation @ 60%, as the assessee was engaged into providing .....

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sively for the above purpose. Accordingly, we submit that the machineries used by the assessee are in relation to oil& gas exploration and eligible for claiming depreciation @ 60%. At this juncture, we draw your good selves attention to the recent judgment of Delhi High Court in case, of CIT - IV, Delhi vs. M/s. HLS India Ltd, (copy enclosed herewith as Annexure - 2), wherein the court held as under: "49. Having decided the issue in the aforesaid terms, we may take liberty to look into .....

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g an assistance or leasing these equipments to a. mineral oil concern then definitely this 'other concern' will charge more for these services and consequently the mineral oil concerns will be commercially forced not to outsource wireline logging activities to other companies but to do it themselves. However, practically this is not a viable option because oil companies are facing immense pressure to increase the output to meet the energy needs of our growing economy and this has resulte .....

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company, however for the year under reference, the auditor was of the opinion that since the assessee in also engaged into the business of proving services to oil & gas related company, the assessee is also, eligible to claim the depreciation acclaimed by those companies. In addition to above, we submit that the purpose of providing higher depredation by the legislature was for the development of oil sector in India. The companies, which provide services to those companies, who explore oil & .....

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hould not be made to the total income of the assessee for the year under reference. 5. The aforementioned submission of the assessee did not find any favour with the A.O. who was of the firm belief that the assessee is not entitled for higher rate of depreciation and accordingly restricted the claim of depreciation to 15%. 6. Assessee carried the matter before the ld. CIT(A) and reiterated its claim. 7. During the course of the appellate proceedings, the assessee submitted photographs of the act .....

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igh Court given in the case of HLS India Limited 335 ITR 292 squarely apply on the facts of the present case and following the same. The ld. CIT(A) directed the A.O. to allow depreciation @ 60% thereby deleted the disallowance of ₹ 50,64,819/-. 8. Aggrieved by this, the revenue is before us. The ld. D.R. strongly relied upon the findings of the A.O. but could not bring any decision in favour of the revenue. The ld. counsel for the assessee reiterated what has been stated before the lower a .....

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e said to be an industrial undertaking engaged in the business of manufacture or production of an article or a thing for the purpose of section 32A and section 80-IA /80-IB. (ii) That OIL had informed the Assessing Officer that the equipment in question, known as logging tools, was provided, maintained and operated by the assessee in its field operation below the ground and the equipment operated inside the well in hostile environment of extreme pressure and temperature and that these services w .....

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r asset and the character of its user including the types of business and the environmental conditions in which it is used. OIL had certified in this regard, that the wireline logging and per-foration equipment/tools which were used by the assessee were similar to the equipment/tools owned and used by mineral oil concerns. The assessee's wireline logging and perforation equipment was eligible for higher depreciation at 100 per cent, under clause (ii) of section 32(1) of the Act, read with it .....

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g Site Advances and Rent Deposits written off and claimed as business loss. 12. The facts of these disallowances are that while scrutinizing the return of income, the A.O. found that the assessee has debited bad debts written off amounting to ₹ 7,94,689/- . The A.O found that out of this, an amount of ₹ 1,30,911/- pertains to Site Advances and ₹ 1,26,500/- pertains to Rent Deposits. The assessee was asked to show cause why these amounts should not be disallowed. The assessee ju .....

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mit that the same cannot be treated as income of the assessee company, as the same is amount paid for the purpose of business & profession of the assessee and should be allowed as expense and shall not be treated as income. As regards to Rent Deposit, we submit that the assessee company takes various properties across its project sites for the purpose of stay of its employees and other crew members. For getting the premises on rented basis, the assessee has to make certain amount of deposit .....

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