TaxTMI 
TaxTMI 
2018 (1) TMI 978
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....gainst returned income of Rs. 61,87,241/- inter-alia making various disallowances on account of interest (Rs.4,46,817/-), depreciation (Rs.89,41,080/-) and disallowance (Rs.26,06,967/-) u/s. 43B of the Act vide his order dt. 09-02-2015 passed u/s. 143(3) of the Act. 3. Ground no.1 relates to deletion of disallowances of Rs. 89,41,080/- and Rs. 4,46,817/- on account of depreciation and interest respectively by the CIT-A. 4. On perusal of records, the AO found that during the previous year the assessee was not engaged in manufacturing activities. In the Tax Audit Report, hereinafter in short 'TAR', the AO found that the assessee claimed deprecation on plant & machinery, factory building and electric installation as under:- Plant & Machinery Rs.8041396.46 Factory installation Rs.444267.96 Electrical installation Rs.455415.50 Total Rs.8941079.92 Say Rs.8941080/- 5. The AO show caused the assessee why not the disallowance on depreciation on unused machinery can be made. The assessee explained that the depreciation is allowable since the machinery is put to use in earlier year and, therefore, the depreciation cannot be disallowed. The AO held ....
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....'used' should have a wider meaning so as to include not only actual but also passive user. CIT Vs. Refrigeration & Allied Industries Ltd 247 ITR 12(Del) Held that depreciation should be allowed even through the assets could not be used during the year, since the obligation to keep the machinery in good working condition sot that it can be used at any moment was present. Hira Financial Services Ltd 298 ITR 245(Mad) Held that where the assessee could not use the plant & machinery for strike, but kept them ready for use it shall be considered that the plant & machinery were used for the purpose of the business. General Corporation Ltd Vs. CIT (1935) 003 ITR 0350(Mad) CIT Vs. Bharat Nidhi Ltd (1966) 060 ITR 0520 (P&H) CIT Vs. Harish Chander Jaggannath Prasad (1961) 043 ITR 0231(P&H), KarsondasRanchhoddass Vs. CIT (1972) 083 ITR 0001(Bom.) CIT Vs. Bharat Insurance Co. Ltd (1983) 142 ITR 0342(Del) 7. The CIT-A after considering the above submissions of the assessee held that the assessee is entitled to claim depreciation and, therefore, directed the AO to delete the addition of Rs. 89,41,08/- on account of depreci....
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....s only a case of temporary lull in the business against which the machineries were not put to use. On introduction of concept of block assets the provisions of section 32 of the Act by the Tax Laws (Amendment) Act, 1986, which came into force w.e.f 1-4-1980 the concept of usage of asset(s) for the purpose of claiming of depreciation has become redundant. Apart from the above, the law laid down by the several decisions cited by the assessee before the CIT-A clearly permits the allowance of depreciation, when the machineries are kept for ready to use. On perusal of the case laws relied on by the assessee before the CIT-A, in our opinion that the CIT-A has rightly appreciated the facts and has rightly come to the conclusion that the assessee is entitled to claim the deprecation and accordingly, directed the AO to delete the impugned addition on this issue. We further find that the CIT-A has discussed the issue thoroughly with various case laws. We do not find any infirmity in the impugned order of the CIT-A in directing and deleting the same to the AO. Thereby, the ground on the issue of deletion of depreciation of Rs. 89,41,080/- raised by the revenue is dismissed. 10. Next effect....
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....e said loan has been used for any other purpose. The working capital loan was also used for working capital requirement. Beside the above, the assessee had interest free unsecured loan amounting to Rs. 4,65,52,948/- and own fund amounting to Rs. 9,04,93,522/-. The assessee has not given interest free loan of Rs. 99,20,152/- as found by the AO. The sum of Rs. 99,20,152/- appearing under the head' short term loan & advances 'represents business advances and recoverable on account of different taxes and deposits. The details of Rs. 99,20,152/- are as under :- Name Amount (Rs.) Purpose Deputy Commissioner of Commercial taxes 15,48,479 Sales tax Security Deposit (JSEB) 21,200 Security deposit to JSEB FA & CAO South eastern Railway 80,570 To Railway Ashe Controls Pvt Limited 15,366 Purchase Advance Essel Mining & Industries Limited 5,72,122 Purchase Advance Map Mines & minerals Limited 5,50,000 Purchase Advance New India Mineral 1,81,491 Purchase Advance Padma Logistic & and Khanij P.Ltd 88,801 Purchase Advance Pradeep Coke Industries 1,25,889 Purchase Advance Sakchi Industries ....
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.... AO in disallowing Rs. 4,46,817/- as interest for non-business purpose is erroneous and unjustified and accordingly directed the AO to delete the addition of Rs. 4,46,817/- by observing as under:- "I have carefully considered the material before me, I found that the AO has erred in holding that the appellant had failed to establish the nexus between interest paid and interest free advances. The A.R of the appellant in his written submission has categorically mentioned that the company had taken interest bearing loan from Indian Overseas Bank of Rs. 2,72,69,998/- and working capital loan from Indian Overseas Bank Rs. 27,74,806/-. The above entire loan was used for acquisition of plant and machinery and no part of the said loan has been used for any other' purposes. The working capital loan was also used for working capital requirement. The appellant above assessee had interest free unsecured loan amounting to Rs. 4,65,52,948/- and also had own funds amounting to Rs. 9,04,93522/-. Therefore, the finding of the AO that assessee has given interest free loan out of interest-free funds is not correct. The sum of Rs. 99,20,152/- appearing under the heading short term loan and....