TaxTMI 
TaxTMI 
2015 (1) TMI 1396
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....essee has impugned the findings of the Commissioner of Income-tax(Appeals) with respect to confirming disallowance of depreciation on Sivaganga Beverage Division amounting to Rs. 1,34,84,636/-. 4. The Revenue in its appeal has raised as many as 8 grounds. Ground Nos.1 and 8 are general in nature. In ground Nos. 2 and 3, the Revenue has assailed the findings of the Commissioner of Income-tax(Appeals) with regard to deletion of addition made on account of depreciation on assets, where the assets were not used for commercial production. In ground Nos. 4 to 7, the Revenue has challenged the findings of the Commissioner of Income-tax(Appeals) with respect to treating income from letting out of residential property of the assesseecompany as 'business income'. 5. The brief facts as emanating from the records are : The assessee is a public limited company and is engaged in the business of manufacturing and sale of sugar, industrial alcohol, power generation and soya products. The assessee filed its return of income for the assessment year 2008-09 declaring loss of Rs. 118,56,41,840/- under normal provisions and book profit of Rs. 35,74,15,022/- under sec.115JB of the Income-tax Act, 1961....
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....on on the assessee's eligibility to claim depreciation. 7. Shri N. Rengaraj, representing the Department, vehemently supported the findings of the First Appellate Authority in respect of disallowance of depreciation on Sivaganga Beverage Division. However, the ld. DR has assailed the findings of the Commissioner of Income-tax(Appeals) in allowing depreciation on the three projects i.e., Modakurichi Sugar Project, Modakaurichi Cogen Project and Sivaganga Cogen Project. In respect of the findings of the Commissioner of Income-tax(Appeals) in treating rental income as business income, the ld. DR submitted that the Commissioner of Incometax( Appeals) has erred in considering the fact that the assessee has let out the buildings, which were not required by it, therefore, the rent receipts partake the character of income from 'house property'. The ld. DR prayed for reversing the findings of the Commissioner of Income-tax(Appeals) on the above two issues. The ld. DR in support of his submissions placed reliance on following decisions: (i) DCIT vs. Yellamma Dasappa Hospital, 290 ITR 353 (Kar.) (ii) CIT vs. Chennai Properties & Investments Ltd., 266 ITR 685 (Mad.) (iii) Southern Petr....
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....ages Division, raw material was consumed and production during the trial run was sent for analysis and found suitable for marketing purposes. Thus, it is clear beyond any doubt that the Beverages Division was ready for commencement of commercial production but due to unavoidable circumstances which were beyond the control of the assessee, the commercial production did not commence. When the assessee completed all the required formalities for start of commercial production, then, merely because the commercial production could not commence due to the circumstances for which the assessee is not responsible, the claim of depreciation cannot be denied solely on the basis. In the case of ACIT vs. Chennai Petroleum Corporation Ltd (supra), this Tribunal vide its majority decision has held that, even though the assets in question were not actually put to use in the relevant previous year but kept ready for full use for the purpose of business, the assessee is entitled to get depreciation. So in order to get depreciation u/s.32, it is not necessary that the machinery in question should have been actually used in the relevant previous year for the purpose of business and it is sufficient if ....
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....y Agro Industries Ltd. reported as 164 Taxman 567(2007) has held that machinery used in trial run production would be entitled to depreciation. Similar view has been taken by the Hon'ble Gujarat High Court in the case of ACIT v. Ashima Syntex Ltd. reported as 251 ITR 133. The ld. DR has drawn support from the decisions of Hon'ble Karnataka High Court in the case of Yellamma Dasappa Hospital (supra) and Bangalore Bench of the Tribunal in the case of Mohit K. Mehta (supra). In both the cases facts are entirely different. In the aforesaid cases, the assets were never used, not even for trial run. The assets were kept in the state of readiness and were not put to use. Therefore, the decisions will not be applicable in the facts and circumstances of the present case. We do not find any error in the findings of the Commissioner of Income-tax(Appeals) in allowing depreciation on the aforesaid three projects. 10. The second issue in appeal of the Revenue is rental receipts being treated as 'business income'. The assessee during the relevant period received rental income of Rs. 55,20,726/- and offered the same as business income. Rental income includes, income from letting out of staff qua....