2012 (9) TMI 1013

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....c) of the I.T. Act levied by A.O. of Rs. 3,96,495/-." 3. The assessee filed its return of income on 6-10-2005 declaring total income at Rs. Nil. The case was selected for scrutiny and the assessment was completed u/s.143(3). In this case during the course of assessment proceedings the A.O. observed that the assessee had claimed the depreciation of Rs. 21,67,087/- @ 50% on the machinery purchased under TUF Scheme. The A.O. was of the view that the assessee is not entitled to the depreciation for the reason that only plant and machinery used in weaving processing and garment sector of Textile Industry and purchased under TUF Scheme on or before 1-4-2004 are eligible for depreciation @ 50%.Since the assessee has purchased the machinery for te....

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....ank under TUF Scheme. Since loan was made available to it under TUF scheme it was under bonafide belief that it was also entitled to depreciation on the purchase of machinery under TUF Scheme at 50%. CIT (A) after considering the contentions of the assessee deleted the penalty imposed by A.O. by holding as under:- "2.3. I have considered the submission made by the appellant and the observation of the A.O. I agree with the appellant that it is a bonafide claim, since the appellant had been allowed loan by the Bank under TUF scheme to purchase machinery for texturizing machine. The depreciation rules are governed by the Income tax Rules and not by the schemes of any Bank. Therefore, the disallowance has been made which has been confirmed bo....

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.... the rival submissions and perused the material on record. The factual position on the basis of assessment orders and submissions that emerges is that assessee had availed loan from bank under TUF Scheme for purchase of machinery. As per Income Tax Rules, Appendix I, Part-III, itemNo.6, machinery and plant used in weaving, processing and garment sector of textile industry, which is purchased under TUFS on or after 1st April, 2001 but before 1st April, 2004 and is put to use before 1st April, 2004 are eligible for depreciation @ 50%. It is an undisputed fact that assessee is in the business of manufacturing of texturised yarn and had purchased machinery by availing loan under TUFS scheme. The assessee was under a bonafide belief that since i....

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....y Ministry of Textile. The assessee was under an impression that the claim of depreciation was as per the specific rates prescribed, however, it was found by the A.O. that that specific rate of depreciation was not admissible as per the Income Tax Rules, 1962. 5.1. On due examination of the circumstances, once the claim of depreciation was not altogether bogus or malafides but the dispute was in respect of the correct rate of depreciation, then in our considered view that though the rate of depreciation as per A.O. was correct but assessee's action should not be held as concealment of income or furnishing of inaccurate particulars. It is also evident that still the assessee is harping upon the interpretation of Appendix Annexure to I.T. R....