TaxTMI 
TaxTMI 
2011 (6) TMI 206
X X X X Extracts X X X X
X X X X Extracts X X X X
.... re-export of assets. The assessee is a company registered in Netherlands and a tax resident of Netherlands. The assessee is in the business of dredging and had during the relevant year done dredging work at the Indian ports. There is no dispute that the assessee company had permanent establishment (PE) in India and that income attributable to the PE has to be assessed in the name of the assessee. While computing the income from PE, assessee had claimed depreciation on India Dredging Vehicle - HAM 924 and plant and machinery. The Assessing Officer noted that these assets which had been entered by the assessee in the block of assets had been transferred out during the year from India. The Assessing Officer observed that for the purpose of ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the same or similar activities or under similar conditions and dealing wholly independently with the enterprise of which it is a PE, while computing income from the PE. Further, Para 3 of Article 7 allowed deduction on account of expenses which incurred for the purpose of PE including the executive and general administration, in determining the profit of the PE. The CIT(A) further observed that since DTAA did not provide for manner and method of computation as well as allowance of depreciation, the depreciation had to be allowed in accordance with the provisions of Income-tax Act in view of the provisions contained in para 2 of Article 3 of DTAA. The CIT(A) referred to the provisions under section 43(6) of the I.T. Act which defines wr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h it was held that expressions "demolished" or "destroyed" meant physical demolition or destruction. It was further submitted that even compulsory acquisition of the asset did not amount to sale as held by Hon'ble Supreme Court in CIT v. Bombay Burmah Training Corpn. [1986] 161 ITR 386/27 Taxman 314. In any case, it was further argued that same issue has already been decided by the Tribunal in assessee's own case in assessment year 1997-98 in ITA No. 3474/M/00 in which the Tribunal vide order dated 30-6-2000 allowed the claim of depreciation in identical situation. The Tribunal also allowed the claim in assessment year 2000-01 in ITA No. 7559/Mum./2004. The revenue had raised a specific question of law whether re-exporting asset outside Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot be treated as demolition/destruction of the assets. The assets can also not be treated as sold as assessee continued to be the owner of the assets. There is no dispute that the assets had been used during the year in the business of the PE. In our view depreciation has to be allowed in case of the assets have been used during the year while computing the income of the PE. The transfer of the assets to some other site does not mean demolition/destruction or discarding of the assets. We agree with the ld. Authorised Representative for the assessee that the expression "demolished", "destroyed" means physical demolition or destruction as held by Hon'ble Calcutta High Court in the case of Bengal Assam Steamship Co. Ltd. (supra). It can also n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he dredger was on a standby for a period of 7 days from 3-11-1997 to 9-11-1997. The Assessing Officer noticed from the copy of agreement that no hire charges were payable during idle time. The assessee had made payment for the standby period also. The assessee argued that the dredger had to be kept in standby position for cleaning, dry docking etc. and therefore, hire charges had to be paid for this period also. The Assessing Officer did not accept the contention raised and disallowed the hire charges for standby period which amounted to Rs. 22,42,485. The assessee disputed the decision of the Assessing Officer and submitted before the CIT(A) that the hire charges paid for standby period had to be allowed. The CIT(A) observed that the hire ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for no hire rentals during idle time, the Assessing Officer held that no hire rentals were payable for the standby period. The case of the assessee is that during period of use, the dredger has to be kept on standby for cleaning, dry-docking etc., and therefore, standby period can not been treated as idle period. The claim of the assessee is supported by the judgment of Hon'ble Madras High Court in the case of Southern Petrochemical Industries Corpn. Ltd. (supra) in which it has been held that depreciation is allowable for standby period which means that standby period has to be treated as period of use. There is no dispute that the dredger was on standby as the Assessing Officer himself had noted that the dredger was on standby for a perio....