ITAT allows appeal, deletes penalty under section 271(1)(c) for claiming depreciation on assets 'kept ready'. The ITAT allowed the appeal, deleting the penalty imposed under section 271(1)(c) of the IT Act for claiming depreciation on assets 'kept ready' for use, ...
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ITAT allows appeal, deletes penalty under section 271(1)(c) for claiming depreciation on assets 'kept ready'.
The ITAT allowed the appeal, deleting the penalty imposed under section 271(1)(c) of the IT Act for claiming depreciation on assets 'kept ready' for use, citing the lack of clear provisions against such claims and emphasizing that penalties should not be imposed for technical breaches. The judgment was delivered on 08/01/2010.
Issues: Penalty under section 271(1)(c) for claiming depreciation on assets 'kept ready' for use.
Detailed Analysis: The appeal was against the penalty imposed under section 271(1)(c) for claiming depreciation on assets 'kept ready' for use during the assessment year 2003-04. The Assessing Officer (AO) disallowed the depreciation claim as there was no production, stating that assets must be used for business to avail depreciation. The ld. CIT(A) upheld the penalty, stating that the assets must be put to use for depreciation claim as per section 32 of the Act.
The assessee argued that the depreciation claim for assets 'kept ready' was valid, citing the decision in CIT vs. Vibros Orgnics Ltd. where the Tribunal canceled penalty proceedings under section 271(1)(c) for a similar case. Another case, CIT vs. M/s Panacea Biotech Ltd., highlighted that passive use of assets in business qualifies for depreciation claim. The ld. DR relied on the lower authorities' orders.
The ITAT found that the assessee's conduct was not contumacious as there was no clear provision disallowing depreciation for assets 'kept ready' for use. Referring to the decision in Hindustan Steel vs. State of Orissa, the ITAT emphasized that penalties should not be imposed for technical breaches or when the offender believed they were acting lawfully. Therefore, the ITAT set aside the penalty under section 271(1)(c) based on the lack of clear provisions against claiming depreciation on assets 'kept ready' for use.
In conclusion, the ITAT allowed the appeal, deleting the penalty imposed under section 271(1)(c) of the IT Act. The judgment was delivered on 08/01/2010.
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