AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 453
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....raised no objection for the condonation of delay. This, in our considered opinion after considering the facts and circumstances of the case, condonation petition deserves to be considered and same is condoned and the hearing proceeded with. 3. First inter-connected issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the disallowance made by Assessing Officer for Rs. 32,38,637 on account of depreciation. For this, Revenue has raised the following grounds of appeal:- "That the CIT(A) has erred in law as well as in fact in deleting the disallowance of claim of the assessee for depreciation to the tune of Rs. 32,38,637/- for F.Y 2004-05 without considering the fact that the machinery was first put to use by the assessee in the month of May, 2005 i.e. beyond the F.Y 2004-05. That the CIT(A) has erred in law as well as in fact in deleting the disallowance of claim of the assessee for depreciation to the tune of Rs. 32,38,637/- for F.Y 2004-05 without considering the fact that the assessee constantly tried to establish its false claim by furnishing different dates as the date of installation (such as 12/03/2005 and 14/03/2005). 4. Facts in brief as culled o....
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.... been written that installation started on 26-02-05 and the date of installation of machine was 14-03-05. We also enclosed herewith the copy of the said installation report for your kind perusal. Again, a letter from Wipro GE Health Care dt. 17-12-07 is also enclosed herewith which mentioned that the unit was completely installed in all respects on 14-03-05. During the course of assessment the assessee also filed a letter dt. 17-12-07 explaining why depreciation on the Gamma camera should be allowed. The copy of the letter is enclosed. The AO also did not make any comment on the bills received as payment for customers and made a remark that "no test can be carried out for commercial purpose by accepting fees from customers, with an equipment under trial." Such comment is uncalled for and reveals the biased of the AO in disallowing the claim of depreciation." Considering the facts and circumstances, Ld. CIT(A) deleted the addition made by AO by observing as under:- "2.3 I have carefully considered the observation of the Assessing Officer in the assessment order and also the submission of the Ld. A/R. In the present case, the appellant company has purchased Gamma Camera ....
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....submitted the test report for using machine which is placed on page 7 of the paper book. Ld. AR further submitted the machine was ready to use for commercial production after the aforesaid trial run. He also relied on the order of Ld. CIT(A). 7. We have heard the rival contentions of both the parties and perused the materials available on record. From the aforesaid facts, we find that AO has disallowed the depreciation claimed by assessee on the ground that machine has not been put to use in the year under consideration. However from the submission, we find that machine was ready to use in the year under consideration on 15.03.2004 as evident from the testing report which is placed on page 7 of the paper book. In similar facts and circumstances, several courts have decided this issue in favour of assessee. In holding so we find support from the judgment of Hon'ble High Court of Calcutta in the case of CIT Vs. Union Carbide (I) Ltd. 254 ITR 0488. The relevant extract of the judgment is reproduced below. "Depreciation/Investment allowance-User for business-Trial production- Once it is shown that the assessee has put the machinery to use for the purpose of its business, further enq....
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....e borrowed capital by debiting the profit and loss a/c. Similarly, assessee has incurred a sum of Rs. 30,375/- as management consultation fees in the connection of aforesaid machine by debiting profit and loss a/c. The Assessing Officer during the course of assessment proceeding observed that the installation process for the machine was completed on 14.03.2005 but it functionally started on 03.05.2005. Such observation of the AO was based on the handing/ taking over report given by the machine supplier. The AO further observed that warranty period of the said machines started with effect from 03.05.2005. On question by the AO for disallowing the aforesaid sum on the ground of not putting the machine into use in the year under consideration, the assessee could not make any satisfactory reply. Accordingly, the AO opined that the assessee is not entitled to claim the interest and management consultation fees in the year under consideration and accordingly disallowed the aforesaid expense and added back to the total income of assessee. 9. Aggrieved, assessee preferred an appeal before Ld. CIT(A). It was submitted by assessee before the ld. CIT(A) that the disallowance was based on the....
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....nt of expense incurred on repair and maintenance. For this, Revenue has raised following grounds:- "That the CIT(A) had erred in law as well as in fact in deleting the disallowance of claim of the assessee for repair and maintenance to the tune of Rs. 5,56,950/- without considering the fact that such expenses was in relation to installation of a capital asset and would fetch long term enduring benefit to the assessee, hence should be treated as capital expenses. 12. The assessee has incurred repair expense on the building for Rs. 5,56,950/- which was debited in the profit and loss account of assessee. The AO during the course of assessment proceedings found that the repair expense has been incurred in this connection building / room where the new machinery has to be installed. Therefore, the AO treated the same as capital expenditure and disallowed the same and added to the total income of the assessee. 13. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before ld. CIT(A) submitted that the repair expense has been incurred on a rental premises and therefore such expense cannot fetch any long term enduring benefit. The moment, assessee will vacate the pr....
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....s appeal is that ld. CIT(A) erred in directing the AO to allow the unabsorbed depreciation for the AY 1996-97 to be carried forward though it was lawfully allowed till AY 2004-05. For this, Revenue has raised following grounds:- "That the CIT(A) had erred in law as well as in fact in directing to allow the unabsorbed depreciation loss for the AY 1996-97 without considering the fact that the same was supposed to be carried forward for eight years immediately succeeding the AY 3004-05. So the claim to set off loss for A.Y 1996-97 in A.Y 2005-06 was not tenable." The AO did not allow the unabsorbed depreciation pertaining to the AY 1996-97 to be carried forward in the year under consideration on the ground that the unabsorbed depreciation can be carried forward only upto 8 AYs which have been lapsed in the assessment year 2004-05. 16. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before ld. CIT(A) submitted that unabsorbed depreciation can be set off against any income of the subsequent years. The ld. CIT(A) called for the remand report from the AO on the submission of the assessee but the AO failed to comply the direction of the ld. CIT(A). Accordingly ....
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....sessee on 1st day of April, 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years. Current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then suc....