Central Warehousing Corporation Vs ACIT (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT) Delhi was filed by Central Warehousing Corporation against the order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), dated 10 February 2024, concerning Assessment Year 2016–17. The dispute related to the treatment of ₹1,11,93,565 spent on dunnage as capital expenditure instead of revenue expenditure. The assessee, engaged in warehousing and related activities, had filed its return declaring income of ₹1,90,85,26,440. During scrutiny, the Assessing Officer disallowed the dunnage expenses and made the above addition, holding that the expenditure was capital in nature. The CIT(A) upheld the assessment, following which the assessee appealed before the ITAT.
Before the Tribunal, the assessee’s counsel argued that the issue was already settled in the assessee’s favour in earlier years—Assessment Years 2012–13 and 2017–18—where the Tribunal had allowed similar claims. Relying on the ITAT order dated 8 August 2022 in ITA No. 353/Del/2021 for AY 2017–18, the assessee sought deletion of the addition. The Departmental Representative, however, supported the orders of the lower authorities.
The Tribunal noted that the same issue had been examined earlier in the assessee’s own cases for AYs 2012–13 and 2017–18, where it was held that there were two distinct types of dunnage—ordinary and special. Ordinary dunnage, used once and discarded after a year, had a short life and was consistently treated as revenue expenditure. Special dunnage, on the other hand, was a high-efficiency flooring material with a life expectancy of over five years, capitalized in the books and depreciated at 16% per annum. The Tribunal in those years had accepted this differential treatment based on usage and life expectancy.
