Tribunal denies depreciation claim for unused machine & supports deletion of addition under IT Act

The tribunal upheld the disallowance of depreciation claimed by the assessee for a machine not put to use in the assessment year. Additionally, the tribunal supported the deletion of an addition made under section 41(1)(a) of the IT Act, as the liabilities in question were not new credits but outstanding liabilities. Both the appeal and cross-objection filed by the assessee were dismissed, along with the appeal filed by the Revenue.

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Issues involved:
1. Disallowance of depreciation claimed by the assessee.
2. Addition made by the AO under section 41(1)(a) of the IT Act.

Disallowance of Depreciation:
The assessee claimed depreciation on a machine purchased during the year, but the AO disallowed it as the machine was not put to use during the year. The CIT(A) upheld the disallowance stating that the gate-pass entry showed the machine entered the premises later than the purchase date. The assessee contended that the machine was indeed brought to the premises on the purchase date. However, the tribunal found that the gate-pass entry on a later date was a crucial piece of evidence against the assessee. As the machine was not proven to have been put to use in the assessment year, the depreciation claim was rightly disallowed.

Addition under Section 41(1)(a):
The AO made an addition on account of credits in the balance sheet, which the assessee contended were outstanding liabilities and not new credits. The CIT(A) deleted the addition, emphasizing that as long as the assessee does not deny the liability, addition under section 41(1)(a) cannot take place. The liabilities existed in the accounts, were not written off, and the assessee accepted the payments had to be made. The tribunal agreed with the CIT(A), citing various decisions supporting the deletion of such additions in similar circumstances. As there was no cessation of liabilities or remittance indicated, the addition made by the AO was not sustainable. Therefore, the tribunal upheld the decision of the CIT(A) in deleting the addition under section 41(1)(a). Consequently, the cross-objection filed by the assessee supporting the CIT(A) also became infructuous and was dismissed. Ultimately, both the appeal and cross-objection filed by the assessee and the appeal filed by the Revenue were dismissed.

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