Himalaya Wellness Company Vs Deputy Commissioner of Income-tax (ITAT Bangalore)
There is no condition in section 32 that depreciation on plant and machinery is allowable only if they are used in the factory for manufacturing/production process. Assets like air conditioners, telephones, Samsung tab, office equipments and canteen equipments are in the nature of plant and machinery. Depreciation under section 32 is allowed.
Facts-
The assessee is engaged in the business of manufacture and sale of herbal pharmaceutical products (Ayurvedic medicaments and preparations), consumer / personal care products and animal health care products. AO referred the case to TPO to determine ALP in respect of international transactions entered with AE. TPO vide order u/s 92CA(3) suggested an adjustment.
AO also made the following corporate tax additions with regard depreciation on the ground that air conditioners, telephones, office equipments and canteen equipments are furniture and fixtures and not plant and machinery as claimed by the assessee.
DRP confirmed the AOs finding. Aggrieved, assessee preferred an appeal before the tribunal.
Conclusion-
With regard to TPO adjustment on transactions with AE, it is held that based on assessee own case in different Assessment Years, the said adjustments were deleted.
With regard to depreciation it is held that we find that most of the assets are air conditioners, telephones, Samsung tab, office equipments and canteen equipments. These assets are in the nature of plant and machinery. Depreciation under section 32 is allowed on assets used for the purpose of business of the assessee. It is not in dispute that these assets are used for the purpose of business of the assessee. The only grievance is these assets are not used in the factory for manufacturing/ production process. There is no condition in section 32 that depreciation on plant and machinery is allowable only if they are used in the factory for manufacturing/production process.
FULL TEXT OF THE ORDER OF ITAT BANALORE
This appeal at the instance of the assessee is directed against final assessment order dated 17.02.2022 passed u/s 143(3) r.w.s. 144C(13) of the I.T.Act. The relevant assessment year is 2017-2018.
2. The brief facts of the case are as follows:
The assessee is a partnership firm engaged in the business of manufacture and sale of herbal pharmaceutical products (Ayurvedic medicaments and preparations), consumer / personal care products and animal health care products. The return of income was filed on 30.11.2017 declaring total income of Rs.179,64,23,840. The return was processed u/s 143(1) of the I.T.Act on 03.03.2018.
Subsequently, assessment was selected for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. The Assessing Officer during the course of assessment proceedings referred the case to the Transfer Pricing Officer (TPO) on 03.09.2019 to determine the Arm’s Length Price (ALP) in respect of the international transactions entered by the assessee with its Associated Enterprises (AEs). The TPO vide his order u/s 92CA(3) of the I.T.Act dated 25.01.2021 suggested an adjustment of Rs.231,39,79,272, which is as under:-
