Income Tax Appellate Tribunal Hyderabad Mold Tek Plastics Ltd. vs Deputy Commissioner Of Income Tax on 18 October, 2001 Equivalent citations: [2002]81ITD251(HYD) ORDER M.V.R. Prasad, A.M. 1. These are crossappealsone by the assesses and the other by the Departmentfor the asst. yr. 199495. They are directed against the order of the CIT(A)I, Hyderabad, dt, 12th Nov., 1996, and arise from the older under Section 154, dt. 23rd July, 1996, passed by the AO on an application made by the assessee, seeking rectification of intimation under Section 143(1)(a) of the Act, dt. 25th Jan., 1996, in which certain adjustments were made by the AO. 2. The assesseecompany filed a return of income for the asst. yr. 199495, disclosing an income of Rs. 24,36,889. In its return, the assessee claimed depreciation of Rs. 27,90.603 in respect of what it called 'old division' and of Rs. 41,99,618 in respect of what it called 'new division'. In the old division, the assessee claimed depreciation on, what it called, 'temporary structures' together with furniture 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 AO allowed the claim for cent per cent depreciation on the temporary structures, but in terras 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 AO allowed the claim for depreciation on these temporary structures also at 50 per cent, as they were used for less than 180 days, and thus made an addition of Rs. 97,009 in relation to temporary structures of new division. 3. The next item, which is under dispute, is service line charges, shown under electrical installations in the 'New Division' The assessee in the depreciation statement, showed this item at Sl. No. 4, under electrical installations. The amount of service line charges was shown, as held for less than 180 days, and at Rs. 1,75,000. Assessee, however, claimed cent per cent depreciation on this amount of Rs. 1,75,000. The AO restricted the claim for depreciation rate to 25 per cent as applicable to plant and machinery, and further restricted the eligible depreciation by 50 per cent in terms of proviso to Section 32(1), as the item in question was shown as held for less than 180 days. The addition that resulted on this count, was Rs. 1,53,125. 4. Another item of dispute is 'computer software' which is shown against SI. No. 11 of the depreciation statement. The cost of the software is shown at Rs 1,55,000, and is also reflected as held for less than 180 days. In relation to this item also, assessee claimed depreciation at 100 per cent. The AO allowed depreciation on this item also at 25 per cent along with computers, but further restricted the allowable quantum to 50 per cent in terms of proviso to Section 32(1). The resultant addition on this count was Rs. 1,35,625, 5. Pursuant to the intimation of the AO, dt, 25th Jan., 1996, under Section 143(1)(a), making inter alia, adjustments in relation to the above disallowances, assessee filed a letter dt. (sic) 1996, addressed to the AO, which can be seen at pp. 5 to 8 of the assessee's paper book filed before us, in which it is claimed that the adjustments made by the AO were not in the nature or prima facie inadmisibles, and so, were beyond the scope of Section 143(1)(a). It was also contended that the claims made by the assessee were allowable under Section 37 of the Act, as revenue expenditure, The relevant portion of the said letter reads as under : (a) Service line charges The company paid Rs. 1,75,000 as charges to APSEB for providing electrical service lines. The service lines are the property of APSEB but it insists upon every industrial 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 IT 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.