Aircraft owner entitled to 40% depreciation under Section 32 despite limited operational days in first year

The ITAT Delhi ruled in favor of the assessee regarding depreciation on a newly purchased aircraft. The AO had allowed only 20% depreciation instead of 40%, arguing the aircraft was used for less than 180 days based on the airworthiness certificate date. The ITAT held that the assessee was the de facto and de jure owner from July 2012, and "used for business purposes" under Section 32 doesn't require revenue generation - readiness for use suffices. The tribunal restored issues regarding deferred revenue expenditure and repair/maintenance expenses to CIT(A) for fresh consideration, but upheld the disallowance of interest on TDS as non-allowable expenditure.

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Issues Involved:
1. Disallowance of depreciation on aircraft.
2. Disallowance of deferred revenue expenditure.
3. Disallowance of prior period expenses.
4. Disallowance of repair and maintenance expenses.
5. Disallowance of interest on TDS.

Summary:

Issue 1: Disallowance of Depreciation on Aircraft
The AO disallowed the full depreciation claimed by the assessee on a new aircraft, allowing only 20% instead of 40%, based on the certificate of airworthiness issued by the Director General of Civil Aviation, which indicated the aircraft was put to use for less than 180 days. The Tribunal held that the phrase "used for the purpose of business" does not mean generating revenue only. The aircraft was acquired and made ready for business purposes, thus depreciation should be allowed. The Tribunal set aside the findings of the lower authorities and decided in favor of the assessee.

Issue 2: Disallowance of Deferred Revenue Expenditure
The AO disallowed the deferred revenue expenditure claimed by the assessee for engine improvement and repairs on a leased helicopter. The Tribunal referred to a previous decision for AY 2012-13, where the issue was restored to the AO for re-examination. The Tribunal decided to restore this issue to the AO for re-examination in line with the previous year's directions.

Issue 3: Disallowance of Prior Period Expenses
The AO disallowed expenses of Rs. 8,81,697/- as prior period expenses. The assessee argued that these expenses were crystallized in the current year. The Tribunal found merit in the assessee's argument and restored the issue to the CIT(A) for re-examination, giving the assessee an opportunity to present evidence that the expenses were indeed crystallized in the relevant assessment year.

Issue 4: Disallowance of Repair and Maintenance Expenses
The AO disallowed Rs. 9,35,472/- on account of repair and maintenance expenses due to lack of supporting invoices. The Tribunal found that the assessee had provided invoices and payment evidence, which the AO failed to consider. The Tribunal restored this issue to the CIT(A) for fresh consideration, allowing the assessee to present the supporting evidence.

Issue 5: Disallowance of Interest on TDS
The AO disallowed Rs. 36,912/- on account of interest on TDS, which the assessee had surrendered. The Tribunal upheld the disallowance, stating that interest on TDS is not an allowable expenditure.

Conclusion:
The appeal was partly allowed. The Tribunal decided in favor of the assessee on the depreciation issue, restored the deferred revenue expenditure and prior period expenses issues to the AO/CIT(A) for re-examination, and upheld the disallowance of interest on TDS. The repair and maintenance expenses issue was also restored to the CIT(A) for fresh consideration.

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