TaxTMI 
TaxTMI 
2019 (1) TMI 200
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.... T. Act, 1961. 2. confirming the above penalty on the ground that the deduction claimed by the appellant of Rs. 42,45,129 on account of fixed assets written off as a revenue expenditure was incorrect and hence, the penalty us/. 271 (1) ( c) was attracted. 3. confirming the above penalty on the ground that the deduction claimed by the appellant as stated above was not a bonafide deduction but it was a wrong claim made in the return of income & hence, penalty u/s. 271 (1)( c ) was attracted. 4. confirming the above penalty on the ground that the appellant had accepted the disallowance as stated above and had not preferred any appeal and hence, penalty u/s. 271 (1)( c ) was attracted. 5. not appreciating the fact that the appellant was under a bonafide impression that the deduction claimed by the appellant was allowable u/s. 32 (1)(iii) of I. T. Act, 1961 & it was so shown separately in the profit & loss account under Schedule 9 - 'Administrative Expenses' as 'Fixed Assets' w/o. Rs. 42,45,129. 6. not appreciating the true ratio of the Supreme Court judgment in CIT Vs. Reliance Petroproducts Limited - 2010] 322 ITR 158. ....
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....rative Expenses" which were claimed by the assessee as revenue expenditure in the return of income filed with the Revenue , vide assessment order dated 28.01.2016 passed by the AO u/s 143(3) r.w.s. 147 of the 1961 Act , by holding as under:- "3. Disallowance of capital loss treated as revenue expenditure 3.1. On perusal of records it is seen that the assessee has debited an amount of Rs. 42,45,129/- on account of 'Fixed assets written off' under the head Administrative Expenses and claimed the same as revenue expenditure. However, this amount is clearly a capital loss and therefore the assessee's claim of the same as revenue expenditure is ineligible. Therefore, vide notice u/s 142(1) dt 7.1.2016, the assessee was required to show cause why a sum of Rs. 42,45,129/- should not be disallowed and added back to your total income. 3.2. In response the assesee made submission on 15.1.2016 which is reproduced as under : We wish to inform during the period we have shifted our Mumbai office location, and we have relocated furniture and fixtures which can be moved to new premises, and there were certain fixed assets like fitting and interiors which....
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....claimed that it has not concealed any information while filing its return of income as the fixed asset write off amounting to Rs. 42,45,129/- was apparently shown on the face of Profit & Loss Account , on the basis of which the reopening of the assessment was done by the AO. It was also submitted that this matter was very much available at the time of framing scrutiny assessment u/s 143(3) and hence it could not be said that there was any concealment of income or furnishing of inaccurate particulars by the assessee in the return of income filed with Revenue. It was submitted that instead it was a difference of opinion at the time of filing of return of income. 5. The Ld. AO rejected the contentions of the assessee and levied penalty of Rs. 14,42,920/- u/s 271(1)(c) of the 1961 Act vide orders dated 29.07.2016 , by holding as under:- "9. The submission of the assessee was perused but the same is not acceptable as the loss on write off of fixed assets is a capital loss and should have been added back in computation of income. The reason for which the write off has been done is immaterial and does not affect the nature of the claim. As the write off pertained to an asset, ....
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.... and audited financial statements as to the claim of loss on account of fixed assets written off to the tune of Rs. 42,45,129/-. Our attention was drawn to page 19/20 of the paper book filed by the assessee wherein Profit and Loss Account for the year ended 31.03.2010 is placed along with Schedule 9 consisting of Administrative Expenses . There is a disclosure of Fixed Asset written of of f Rs. 42,45,129/- in the said schedule 9 which is placed in paper book/page 20. It was submitted that the originally revenue framed assessment u/s. 143(3) vide assessment order dated 30.03.2013 , wherein no additions were made to that effect . The said assessment order dated 30.03.2013 passed u/s 143(3) is placed in the paper book filed by the assessee(page 21/22/pb) wherein no disallowances towards fixed assets written off to the tune of Rs. 42,45,129/- claimed as revenue expenses was made. It was submitted that it was only in proceedings u/s 147 of the 1961 Act by way of reopening of the concluded assessment wherein additions were made by Revenue by way of disallowance of loss on account of fixed assets written off as Revenue expenditure. The ld counsel for the assessee submitted that it has tru....
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....xture at the old office which was damaged/unusable were not taken to new office and were written off in the books of accounts as revenue loss keeping in view provision of Section 32(1)(iii) of the 1961 Act. However, later the assessee realised its mistake in claiming the said loss because loss on fixed assets written off in books of accounts on being destroyed, demolished, discarded or sold is allowed as provided u/s 32(1)(iii) only in the case of tax-payer engaged in the generation or generation and distribution of power as specified u/s. 32(1)(i), while in the case of other tax-payers concept of block of asset is followed as provided u/s 32(1)(ii) which is subject to provisions of Section 50 of the 1961 Act. The assessee did not file any appeal against assessment framed u/s 143(3) r.w.s. 147 wherein aforesaid additions to the tune of Rs. 42,45,129/- was made to the income of the assessee and the said assessment attained finality. The concept of Block of Asset was introduced for tax-payers (other than engaged in generation or generation and distribution of power) by the Taxation Laws (Amendment and Miscellaneous Provision ) Act, 1986 w.e.f. 01.04.1988 . Earlier , the concept of te....
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....dertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed;] (ii) [in the case of any block of assets, such percentage on the written down value thereof as may be prescribed:] [***] [Provided [***] that no deduction shall be allowed under this clause in respect of- (a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 [but before the 1st day of April, 2001], unless it is used- (i) in a business of running it on hire for tourists ; or (ii) outside India in his business or profession in another country ; and (b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42 :] [Provided further that where an asset referred to in clause (i) or clause (ii) [or clause (iia)] [or the first proviso to clause (iia)], as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for....
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....r cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991:] [Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in [clause (xiii), clause (xiiib) and clause (xiv)]of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged compan....
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....rise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia)shall have effect, as if for the words "twenty per cent", the words "thirty-five per cent" had been substituted :] Provided [further] that no deduction shall be allowed in respect of- (A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or (C) any office appliances or road transport vehicles; or (D) any ma....
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.... "7. We find that the CIT(A) as well as Tribunal has after placing reliance upon Institute of Personnel Banking Selection (IBPS) (supra) that the income of the Trust is required to be computed on commercial principles have implicitly upheld the application of the principle laid down in Section 32(1)(iii) of the Act in respect of depreciation. The aforesaid provision takes care of a situation where a plant and machinery is discarded/ destroyed in the previous year, the amount of money received on sale as such or as scrap or any insurance amount received to the extent it falls short of the written down value is allowed as depreciation, provided the same is written off in the books of account. In this case, the Respondent-Assessee could not sell the hospital equipments as scrap nor the Assessee could use the hospital equipments. Therefore, the written down value of the hospital equipments, was to be allowed as depreciation. This is so, provided the hospital equipment (asset) is written off in its books of accounts. This has been admittedly done i.e. writing off from its books. Thus, the nomenclature, as additional depreciation rather then depreciation, is the only objection of the....