2023 (6) TMI 1114
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....gned year: 3.1. The Learned Commissioner (Appeals) is not justified in denying depreciation even when the Appellant satisfied all the conditions to justify its claim. 3.2. The Learned Commissioner (Appeals) is not justified in applying user test by failing to appreciate that it was never the basis of the Learned Assessing Officer of denying the depreciation during the assessment proceeding. 3.3. Without prejudice to the above, the Lower Authorities are not justified in denying depreciation when the Appellant discharged its onus of establishing that the assets were put to use for the purpose of business of the Appellant on the basis of auditors' report, tax audit report and its business exigencies. 3.4. Without prejudice to the above, the Learned Commissioner (Appeals), having not doubted that the appellant acquired the impugned assets at the stated costs during the course of the previous year, is not justified in insisting on absolute evidence of use after the lapse of 16 years rather than applying the principle of "preponderance of probability" and "prudency". 3.5. Without prejudice to the above, the Learned Commissioner (Appeals) is not justified in denying depreci....
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....preciation of Rs. 57,067/- in respect of vehicles: 3.8.1. The Learned Commissioner (Appeals) is not justified in denying depreciation of Rs. 57,067/- in respect of addition to Vehicles of Rs. 7,60,896/-, when in fact the Learned Assessing Officer had not denied the same in the assessment order. 3.8.2. Without prejudice to the above, the Learned Commissioner (Appeals) is not justified in denying depreciation by stating that "the appellant could have brought on record the documents relating to the registration of vehicle and it's insurance to show that the same was put to use. It could have brought on record the log book to show the same was put to use", by failing to appreciate that such information would not be available with the Appellant as the life of the vehicles does not last for 16 years. 3.9. As regards denial of depreciation of Rs. 1,507/- in respect of office equipments: 3.9.1. The Learned Commissioner (Appeals) is not justified in denying depreciation of Rs. 1,507/- in respect of addition to office equipment of Rs. 20,085/-, when in fact the Learned Assessing Officer had not denied the same in the assessment order. 3.9.2. Without prejudice to the above, th....
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....on of Assets Amount % of Depreciation Amount 1 Computers & Systems 26,46,706 60% 15,88,024 2,06,463 30% 61,939 2 Software Tools 3,04,45,609 60% 1,82,67,366 76,35,142 30% 22,90,543 3 Vehicles 7,60,896 7.5% 57,067 4 Office Equipment 2,31,943 15% 34,791 20,085 7.5% 1,507 Total Depreciation 2,23,01,237 2.1. The assessee was asked to furnish evidence in respect of the acquisition of new assets. The assessee furnished details of the list of fixed assets addition during the FY 2005-06 and enclosed copies of two invoices indicating the purchase of assets worth of Rs. 64,480/- dated 20.08.2005 and Rs. 93,600/- dated 17.08.2005 and in regard to balance of assets, the AR of the assessee stated that it was very difficult to produce the copies of all the new assets purchased and contended that sample of two assets have already been furnished and requested to complete the assessment on the basis of evidence furnished. The AO after referring to section 32 of the Act observed as under:- "3.2 As per the provisions of section 32 of the I.T.Act, the depreciation shall be allowed when the assets are owned by the assess....
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.... can be considered as sufficient cause for the failure of the appellant to produce the same during assessment proceedings. So the same ,9 are admitted. 4.4 As regards the argument of the appellant that the AO has changed the reasons for denial of depreciation in his remand report, the same does not have any merit. Non-production of the requisite evidence during assessment proceedings was the fault of the appellant although the same might have been for genuine reasons. However when such additional evidence is produced, the AO cannot be stopped from giving fresh reasons for the disallowance after examining the same. In this case, at the time of assessment the appellant had failed to prove the ownership of the fixed assets. So the depreciation had been disallowed by the AO on the basis of the same and he was not required to examine the aspect of 'put to use' or 'business purpose'. However when the additional evidence was filed, the AO was well within his right to examine the allow ability of the depreciation on the basis of 'put to use' or 'business purpose' and the onus was upon the appellant to prove the same by bringing sufficient material on recor....
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....urposes. However, no such evidence has been brought on record. Fixed assets show addition of two vehicles during the year. The invoice related to one is stated to be dated 28.01.2006 (invoice not produced) and for the other it is dated 20.03.2006. However there isn't any detail of date of actual delivery, date of registration and date of insurance. So on this basis the AO could not have allowed depreciation to the appellant as even passive user of the vehicle is not possible in absence of delivery/registration/insurance. So disallowance of depreciation on the vehicles is upheld. 4.9 For plant and machinery, the details on the invoices show that a Scan Emulator Pod and a starter kit, with total value of Rs. 84,240/- were duly delivered on 24.10.2005. Since these items do not need any specific installation and can be used instantly, the depreciation on the same at half the normal rate would be available to the appellant as business usage of the same cannot be doubted or it can always be considered that the same were available for use. However as regards the balance amount of Rs. 1,70,768/-, since no such details of the delivery have been produced by the appellant, the depreciat....
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....sment order, the assessee filed appeal before the Tribunal and synopsis of the assessee submitted which is as under:- 1.1. As regards denial of depreciation of Rs. 2,22,06,388/- claimed in respect of fixed assets addition made during the impugned year: [Ground Nos. 3.1 to 3.5] 1.2. It is submitted that the Learned Assessing Officer disallowed the depreciation allowance of Rs. 2,22,06,388/- claimed on the fixed assets additions made during the impugned assessment year, merely on the basis that the Appellant failed to produce all of the invoices. 1.3. The depreciation schedule as per the provisions of the IT Act is herewith enclosed as Annexure 2. 1.4. The breakup of the additions to fixed assets made during the impugned year is as under: Sl. No. Description of Assets Additions made during April' 2005 to September' 2005 Additions made during October 2005 to March' 2006 Total 1 Plant & Machinery - 2,55,008 2,55,008 2 Computer & Systems 26,46,706 2,06,463 28,53,169 3 Software Tools 3,04,45,609 76,35,142 3,80,80,751 4 Vehicles - 7,60,896 7,60,896 5 Office Equipment 2,31,943 20,085 2,52,028 Total 3,33,24,2....
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....corporation consequent upon change of name and copy of the order of Honourable Karnataka High Court in respect of merger of companies. 1.11. For the above reasons, the documents regarding fixed assets could not be immediately retrieved by the Appellant. The frequent change in the ownership of the Assessee company as well in its management and employees made it difficult for the Appellant to furnish the necessary documents to the assessing officer. 1.12. In the aforesaid background, it is submitted that the Learned Assessing Officer ought not to have insisted all the bills and invoices in relation to purchase of fixed assets should be furnished within the time frame suggested by him. He ought to have appreciated the difficulty expressed by the Appellant in having to produce the same within such short span of time. 1.13. It is submitted that the invoices could be retrieved by the Appellant only after the assessment. Copies of the invoices were furnished before the Learned Commissioner (Appeals) vide submission dated 09.08.2011. 1.14. In this regard, a reference may be made to the brief background as observed and accepted by the Learned Commissioner (Appeals) [Para 4.1, 4.3, 4....
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....ial discrepancies were noticed on such verification and if so, the same have been properly dealt with in the books of account; 1.23. A reference may be made to the Tax Audit report in Form 3CD certified by the Chartered Accountant as per the section 44AB of the IT Act, the relevant extracts of which read as follows: 14. Particulars of depreciation allowable as per the income tax., 1961 in respect of each asset or block of assets, as the case may be, in the following form: a) Description of asset/block of assets. Refer Annexure - 5and 5A b) Rate of depreciation Refer Annexure - 5. and 5A c) Actual cost or written down value as the case may be Refer Annexure - 5. and 5A d) Additions/deductions during the year with dates; in case of addition of an asset, date put to use; including adjustments on account of Refer Annexure - 5. and 5A i. Modified Value Added Tax credit claimed and allowed under the Central Excise Rules, 1944, in respect of assets acquired on or after 1st March, 1944. ii. Change in rate of exchange of currency, and iii. Subsidy or grant or reimbursement, by whatever name called e) Depre....
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.... of the Appellant on the basis of auditors' report and tax audit report. 1.32. We rely on the decision in Mahanagar Telephone Nigam Ltd., vs. Addl. CIT [2006] 100 TTJ 1 (Delhi) [Paras 76 & 77]. 1.33. In the following decisions, the Courts have relied upon auditor's report and tax audit report: - CIT vs. S.R. Fragrances Ltd., [2004] 270 ITR 560 (Delhi); - Rapicut Carbides Ltd., vs. DCIT [1999] 102 Taxman 148 (Ahmedabad - ITAT) (Mag.); - Milkfood Limited vs. DCIT [2000] 111 Taxman 323 (Delhi) (Mag.); 1.34. It is submitted that the lower authorities have not brought on record to show that the fixed assets were not put to use by the Appellant during the impugned year. Thus, it submitted that both the lower authorities having not dislodged the onus of disproving the claim of the Appellant on the basis of auditor's report and tax audit report, the Appellant's reliance on the auditor's report and tax audit report ought to have accepted. In this regard, reference may be made to the following cases: * CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC); * UOI and Others v. Garware Nylons Limited and Other AIR 1996 SC 3509: (1996) 10 SCC 413: (1996) 87 ELT 12 (....
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....tatute. In this regard, we rely on the decision in Dhakeswari Cotton Mills Ltd., vs. CIT (1954) 26 ITR 775 (SC). 1.41. The phrase "preponderance of probability" comes from decision in Charles R. Cooper v. F.W. Slade, (1857-59) 6 HLC 746, which means "more probable and rational view of the case". 1.42. In Arvind M. Kariya vs. ACIT (2013) 153 TTJ 422 (Mum.) it was held as follows: "20. Needless to say that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities,.....'' 1.43. In CIT v. Dwarkadish Investment P. Ltd. [2011] 330 ITR 298 (Delhi) HC it was held that where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. 1.44. In CIT vs. LalBabu (1980) 122 ITR 1006 the Hon'ble Patna High Court held that, the assessees need only to show that his plea stands the test of preponderance of probability. If the assesses give a plausible explanation against the additions made to his income, the onus will then shift to the Department to show that the assessee's explanation was false or not worth....
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....e decision in PCIT vs. Ajmer VidyutVitran Nigam Ltd., (2022) 447 ITR 186 (Raj.). 1.52. The action of the lower authorities in rejecting depreciation in respect of acquisition of assets during the year 2005-06 defies the test of human probability. 1.53. We rely on the decision in PurshottamKhatri vs. CIT (2019) 419 ITR 475 (SC) [Paras 1 & 2]. 1.54. We rely on the decision in CIT vs. Allergan India (P.) Ltd., [2015] 371 ITR 38 (Karnataka) [Paras 4, 6 & 7]. 1.55. In Smt. Rajrani Gupta v. DCIT [2013] 257 CTR 47 (Bombay) [para 33], it was held that (human probability) is "a degree of probability of a prudent man taking into account the probable behaviour of a reasonable man along with surrounding circumstances.'' 1.56. In this regard, we rely on the following cases: * J.S. Parkar vs. V.B. Palekar&Ors., (1974) 94 ITR 616 (Bombay); * CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC); * SumatiDayal vs. CIT, (1995) 214 ITR 801 (SC); 1.57. It is submitted that the human probability test is also applied in the following cases: * Rajendran&Ors. vs. ACIT (2006) 204 CTR (Mad) 9; * Hacienda Farms (P) LTD. vs. CIT (2011) 239 CTR (Del) 212 (Paras 7 & 8); * Major Metals L....
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....ires a proper installation and such date can always be ascertained from the system", by failing to appreciate that computers & systems do not last for 16 years. 1.61. It is submitted that as the computers & systems do not have such long life of 16 years, the Appellant could not show the date installation through the computer systems. 1.62. It is submitted that the Learned Commissioner (Appeals) ought to have appreciated that for computers & systems, as per section 32 read with New Appendix I to Rule 5, the rate of depreciation prescribed is 60%. Thus the computer systems depreciate rapidly at the rate of 60% in a year. Such being the case, the department cannot expect the Appellant to show the date of installation of through the computer systems after the lapse of 16 years. 1.63. It is submitted that the Learned Commissioner (Appeals) is not justified in applying user test by failing to appreciate that it was never the basis of the Learned Assessing Officer of denying the depreciation during the assessment proceeding. 1.64. As submitted earlier, due to frequent change in ownership and management, the appellant could not furnish all the invoices during the assessment proceed....
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....IT v. Shivsagar Estate [2007] 257 ITR 59 (SC) * RadhaswamySatsang v. CIT [1992] 193 ITR 321 (SC) * CIT vsSridev Enterprises [1991] 192 ITR 165 (Karnataka) * CIT v. A.R.J. Security Printers [2003] 264 ITR 276 (Delhi) * CIT v. Neo Polypack Pvt. Ltd. [2000] 245 ITR 492 (Delhi) * CWT v. Allied Finance (P.) Ltd. [2007] 289 ITR 318 (Delhi) * B.F. Varghese No.2 v. State of Kerala [1969] 72 ITR 726 (Ker.) * PradipRamanlal Seth v. UOI [1991] 204 ITR 866 (Guj.) * Aggarwal Warehousing & Leasing Ltd. [2002] 257 ITR 235 (MP) * Dy. CIT v. United Vanaspati [2004] 88 ITD 313 (CHD)(TM) 2. As regards denial of depreciation of Rs. 2,05,57,909/- in respect of software tools: [Ground Nos. 3.6.1 to 3.6.4] 2.1. It is submitted that the Learned Commissioner (Appeals) ought to have allowed depreciation of Rs. 2,05,57,909/-, when the Learned Assessing Officer in the remand report had stated that "However, considering the nature of business the assessee is engaged in i.e. Software development, it is possible that these software tools were used for assessee business purpose". 2.2. Without prejudice to the above, it is submitted that the Learned Commissioner (Appeals) is not j....
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....7 5 Office Equipment 36,928 Total 2,23,20,361 3.4. The breakup of the depreciation denied by the Learned Assessing in respect of aforesaid fixed assets is as under: Sl. No. Description of Assets Amount in Rs. 1 Computer & Systems 16,49,963 2 Software Tools 2,05,57,908 3 Vehicles 57,067 4 Office Equipment 36,928 Total 2,23,01,237 Less: Depreciation Allowed 94,848 Depreciation Disallowed 2,22,06,388 3.5. It may be noted that out of the depreciation of an amount of Rs. 2,23,20,361/- claimed in respect of fixed assets acquired during the year, the Learned Assessing Officer has denied depreciation of Rs. 2,22,06,388/-. 3.6. Thus, it is submitted that the Learned Assessing Officer has not denied deprecation on the following assets which were acquired during the impugned year: Sl. No. Description of Assets Depreciation allowed 1 Plant & Machinery 19,126 2 Vehicles 57,067 3 Office Equipment 36,928 3.7. Hence, it is submitted that depreciation claimed by the Appellant on plant and machinery has not been denied by the Learned Assessing Officer. 3.8. It is also submitted that the Lea....
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....ees, could have some weight, being a normal practice", ought to have allowed depreciation on office equipments. 6. As regards the addition of Rs. 26,03,654/- [Rs. 10,62,493/- + Rs. 15,41,161/-] in respect of liability written off: [Ground Nos. 4.1 to 4.4] 6.1. It is submitted that the Learned Commissioner (Appeals) is not justified in making addition of Rs. 26,03,654/- [Rs. 10,62,493/- + Rs. 15,41,161/-] in respect of liability written off by erroneously invoking section 28(iv) of the IT Act. 6.2. It is submitted that the software tool was purchased from one M/s.Magma Design Automation Inc. for a sum of Rs. 1,47,79,575/- and the same was capitalized in the books of accounts on 23.06.2004 (i.e., FY 2004-05/AY 2005-06]. 6.3. Subsequently, in the impugned AY 2006-07 [i.e., FY 2005-06], it was found that, the tool was of no help in development or designing of software the same was de-capitalized in the books of accounts. This was done by taking the following steps: a) The original cost of software tool of Rs. 1,47,79,575/- was reduced by the depreciation debited to P&L A/c upto 31.12.2005 of Rs. 49,93,512/-. b) The resultant balance of Rs. 97,86,063/- was debited to an ac....
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.... arose on account of purchase of Software tool which was capitalized in the books of account of the appellant {i.e., capital liability} is not a trading liability. Such being the case, in the instant case question of allowability/deduction in any earlier assessment years did not arise at all. Hence, the question of invoking section 41 and treating the aforesaid write back of capital liability as income also does not arise. (7) It is also submitted that section 41 (1) (a) cannot be invoked for the following reasons: * An allowance or deduction has been made in any earlier assessment year in respect of loss, expenditure or trading liability; AND * Subsequently, benefit obtained is not in respect of any trading liabilities by way of remission or cessation thereof; (8) We rely on the following decisions: * CIT vs. Mahindra and Mahindra Ltd., [2018] 404 ITR 1 (SC); * Nectar Beverages (P.) Ltd., vs. DCIT [2009] 314 ITR 314 (SC); * CIT vs. SadenVikas India Ltd 2010-TIOL-82-HC-DEL-IT; * Rayala Corporation P. Ltd. vs. ACIT [2009] 319 ITR (AT) 158 (Chennai); (9) It is also submitted that section 41 (2) of the IT Act does not apply to the instant case of the Appellant ....
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....rued to the Appellant as the unpaid liability was reduced from the block of assets. 6.15. Without prejudice to above, it is submitted that the section 28(iv) of the IT Act is not applicable. The said section provides that the value of any benefit or perquisite, whether convertible into money or not, arising from business or profession shall be chargeable to income tax under the head profits and gains of business or profession. 6.16. It clearly says that benefit or perquisite can be in any form, which can be converted into money. 6.17. Therefore, in order to invoke the provision of section 28(iv) of the IT Act, the benefit which is received has to be in some form other than in the shape of money as held in CIT vs. Mahindra and Mahindra Ltd., [2018] 404 ITR 1 (SC). 6.18. We rely on the decision in CIT vs. Mahindra and Mahindra Ltd [2018] 404 ITR 1 (SC) [Para 11, 13 & 17]. 6.19. Thus, it is submitted that as per the Hon'ble Supreme Court in Mahindra and Mahindra Ltd (supra), waiver of liability amounts to receipt of cash/ money in the hands of debtor and in such case, section 28(iv) is not applicable. 6.20. A reference may be made to the Finance Bill' 2023, wherein amendme....
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....t is undisputed fact that in the impugned AY 2006-07 [i.e., FY 2005-06], it was found that, the software tool was of no help in development or designing of software the same was de-capitalized in the books of accounts. In other words, the software tool has been discarded by the Appellant during the impugned year. 6.31. It is also submitted that the Learned Commissioner (Appeals) has accepted that the case of the Appellant is that the asset (i.e., software tool) has been discarded by the Appellant during the impugned year [Refer: Para 5.10]. 6.32. Hence, it is submitted that the case of the Appellant falls within the ambit of section 43(6)(c)(ii) read with section 43(6)(c)(i). 6.33. Thus, whenever an individual asset which is already forming part of the block of asset is discarded, the moneys payable in respect of such asset has to be reduced from the WDV. 6.34. For the purpose of section 43 (6) the meaning of the term "moneys payable" would be same as per Explanation (1) to section 41(4). 6.35. The term 'moneys payable' includes: (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold....
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....d in sections 30 to 43D. 6.47. From the combined reading of section 28 (i) and section 29, it is submitted that it is the "profit and gains" or "income" which is chargeable to tax under the head "Profits and gains of business or profession". 6.48. The words "Profits and Gains" referred to in Sections 28 and 29 of the Act deals with only Commercial profits as understood in the Commercial parlance as held by Lord Halsbury in Gresham Life Assce. Soc. V. Styles 3 TC 185 [HL] "in its natural and proper sense i.e. in a sense which no Commercial man would misunderstand". This principle has been approved by the Privy Council in Pondicherry Railway Co. Ltd. v. CIT 5 ITC 363, and by the Supreme Court in BadridasDaga v. CIT [1958] 34 ITR 10, Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 [SC] and CIT v. BaiShirinbai [K] Kooka [1962] 46 ITR 86. 6.49. We rely on the following decisions: ∝ CIT vs. UP State Industrial Development Corporation (1997) 225 ITR 703 (SC); ∝ CIT vs. Mehsana District Co-Operative Milk Producers Union Ltd. [2005] 146 Taxman 355 [Guj.]; ∝ Tamil Nadu Minerals Ltd. vs. JCIT [2005] 95 ITD 294 (Chennai)/[2006] 100 TTJ 738 (Chennai); 6.50. Thus, it is ....
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.... AnupamSushilGarg vs. CIT [2004] 265 ITR 474 (Allahabad); α Chowhan Machinery Mart vs. State of Orissa and Others [2009] 19 VST 178 (Orissa) HC; 6.60. It is fairly well settled principle of interpretation that normally no word or expression used in any statute can be said to be redundant or superfluous. In the instant case, it is submitted that the manner in which the Learned Commissioner (Appeals) has gone about treating the past depreciation as income of the impugned year has rendered sections 43(6)(c)(ii) read with section 43(6)(c)(i)(B) and section 50 redundant. In this regard, we rely on the following decisions: - CIT vs. Hindustan Bulk Carriers Ltd (2003) 259 ITR 449 (SC); - CIT vs. Distributors (Baroda) (P.) Ltd. (1972) 83 ITR 377 (SC); - CIT vs. S. Teja Singh [1959] 35 ITR 408 (SC); - R & B Falcon (A) Pty. Ltd. vs. CIT [2008] 301 ITR 309 (SC); - Grasim Industries Ltd vs. Collector of Customs (2002) 128 STC 349 (SC); - CIT vs. Infosys Technologies Ltd. (2007) 293 ITR 146 (Karn.); - BalmukundAcharya vs. DCIT and others [2009] 310 ITR 310 (Bom) HC; 6.61. In the following paragraphs, the case in Binjrajka Steel Tubes Ltd. vs. ACIT [2011] 130 I....
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....e Court in Mahindra and Mahindra Ltd., [supra]. 7. Without prejudice, as regards allowability of deduction under section 10A of the IT Act: {Ground No. 5} 7.1. Without prejudice to the above, Lower Authorities having disallowed depreciation and made addition in respect of liability written off ought to have computed the deduction 10A of the IT Act by taking revised profits. 7.2. It is submitted that during the assessment proceeding the Appellant furnished STP Certificate, Customs Bonded Warehouse License (Customs Certificate) and Form 56F vide submission dated 14.11.2008. Copy of the said submission is herewith enclosed as Annexure 9. 7.3. It is submitted that the eligibility of deduction under section 10A in the case of Appellant is not doubted by Learned Assessing Officer. 7.4. It is submitted that the as the Appellant filed return of income declaring loss of Rs. 2,24,61,220/-, there was no occasion to claim deduction under section 10A in its return of income. 7.5. Without prejudice to the above, assuming without conceding that the depreciation is not allowable for the impugned year, the Appellant is eligible for deduction under section 10A of the IT Act on the asses....
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....11 (SC); * California Software Co. Ltd. v. CIT [2020] 422 ITR 514 (Madras); * CIT v. S.K. Srigiri& Bros. [2008] 298 ITR 13 (Karnataka); * CIT v. Mandavi Builders [ITA No. 307/2015, dt. 22.09.2020, Karnataka]; * CIT v. Ntrance Customer Services Pvt. Ltd. [2015-TIOL-2748-HCMUM-IT]; * ITO v. Keval Construction [2013] 33 taxmann.com 277 (Gujarat) (para 5). Therefore, it is prayed before this Honourable Tribunal that, considering the above submission of the Appellant, the appeal may be allowed." 7. On the other hand, the ld. DR relied on the order of the lower authorities and submitted that during the course of assessment proceedings the assessee could not prove the ownership of the assets as well as the active/passive user of the assets. He submitted that section 32 clearly says that first the assets should be owned by the assessee and it should be used for the purpose of the business, but the assessee could not substantiate the ownership of the assets as well as whether the assets were used by the assessee during the impugned year and date of put to use even in the rejoinder to the remand report before the CIT(Appeals). The ld. DR also submitted that assessee's reli....
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....t to approval by the company in its general meeting, but also subject to examination by Registrar of Companies and his satisfaction that the accounts of the assessee are maintained in accordance with the requirements of the Companies Act. 8. The ld. DR has also relied on the judgment of Hon'ble Supreme Court in the case of Sri Padmasundar Rao v State of Tamilnadu, CIVIL APPEAL NO. 2226 OF 1997 [2002] 37 SCL 425 (SC) in which it has been held as under:- "7A. The Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board [1972] 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. .............. 11. While interpreting a provision the Court only interprets the law and cannot legislate it. If a provis....
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....uch that it rarely emerges.] 13. The plea relating to applicability of the stare decisis principles is clearly unacceptable. The decision in K. Chinnathambi Gounder's case (supra) was rendered on 22-6-1979 i.e., much prior to the amendment by the 1984 Act. If the Legislature intended to give a new lease of life in those cases where the declaration under section 6 is quashed, there is no reason why it could not have done so by specifically providing for it. The fact that the Legislature specifically provided for periods covered by orders of stay or injunction clearly shows that no other period was intended to be excluded and that there is no scope for providing any other period of limitation. The maxim 'actus curia neminem gravibit' highlighted by the Full Bench of the Madras High Court has no application to the fact situation of this case. 14. The view expressed in N. Narasimhaiah's case (supra) and D.C. Nanjudaiah's case (supra), is not correct and is overruled while that expressed in A.S. Naidu's case (supra) and Oxford English School's case (supra) is affirmed. 15. There is, however, substance in the plea that those matters which have obtained f....
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....d for business purposes. In the remand report, the AO has not given a clear finding, but he has stated that the assessee was unable to prove the claim that assets were used for business purpose and he has given his opinion in the remand report based on the nature of business of the assessee. However, the assessee was bound to maintain the records and produce evidence in support of its claim of depreciation and therefore the contention of the assessee that it is a very old case after a lapse of 16 years will also not help the case of the assessee. The assessee has also challenged that the CIT(A) has not given depreciation allowance on certain assets as per grounds of appeal whereas the AO has not disallowed depreciation and CIT(A) has also not given any enhancement notice is also not tenable. On going through the assessment order regarding disallowance of depreciation, the AO has disallowed depreciation on Computers and systems, software tools, vehicles and office equipment of Rs. 2,22,06,388. The total depreciation claimed by the assessee is Rs. 2,23,01,236, out of which the AO has allowed depreciation on purchase of two fixed assets viz., networking equipments, which are eligible ....
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....stion as to whether the trial production could be termed as 'used for the purposes of section 32 of the Act'. That judgment also is not available to the assessee in the case on hand. That was a case in which the Court considered the question as to whether the machinery kept ready for use can be given the benefit of depreciation. In that case, it is seen that the revenue conceded that 'ready for use' would mean passing user of the asset'. It was in the light of no contest. 10. In Jagatram Ahuja v. CGT [2000] 246 ITR 6091 is a judgment of the Supreme Court. The Supreme Court notices the object of Gift-tax Act visa-vis Estate Duty Act. The Supreme Court ruled that 'the words and expressions defined in one statute as judicially interpreted do not afford a guide to the construction of the same words or expressions in another statute unless both the statutes are pari materia Statute'. 11. Keshavji Ravji & Co. v. CIT [1990] 183 ITR 12 (SC) is again a judgment of the Supreme Court in which the Court says that the Court could not resort to the so-called 'equitable construction' of a taxing statute is not to say that, where a strict literal constructio....
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....ntilal Trikamlal [1976] 4 SCC 643 : AIR 1976 SC 1935. Thereafter, in para 9, the Court ruled as under:- "We are in no doubt whatever, therefore, that it is only land which is actually in use for an industrial purpose as defined in the said Act that can be assessed to non-agricultural assessment at the rate specified, for land used for industrial purposes. The wider meaning given to the word 'used' in the judgment under challenge is untenable. Having regard to the fact that the said Act is a taxing statute, no Court is justified in imputing to the Legislature an intention that it has not clearly expressed in the language it has employed." 15. From these judgments, what is clear to us is that for the purpose of depreciation, machinery has to be actually used in terms of the Statute. A kept ready theory is not available in the light of the Apex Court rulings. 16. After noticing these judgments, the Madhya Pradesh High Court has ruled that the basic concept underlying the allowance of depreciation is that it should result, as consequence of the machinery being actually used or employed in the earning of income. 17. The Calcutta High Court in CIT v. Oriental Coal Co. Ltd....
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....ecause the assets purchased in the previous year were returned to the vendor and the balance of liabilities were reduced from the fixed assets, therefore it is not taxable. The CIT(A) has also enhanced the liabilities write off by Rs. 15,41,161. The findings of the CIT(Appeals) are as under:- "5.5 The submissions of the appellant have duly been considered. A perusal of the material available on record shows that in relation to purchase of certain software tools from M/s Magma Design Automation Inc., the appellant had capitalized an amount of Rs. 1,47,79,575/- in its books of account on 23.06.2004. This has also been informed by the appellant that during FY 2004-05 it had made a payment of Rs. 39,31,019/- to M/s Magma and an amount of Rs. 1,08,48,556/- only was thus outstanding as on 01.04.2005. During AY 2005-06, while filing its return of income, the appellant had claimed a depreciation of Rs. 88,67,745 (@60%) and thus written down value (wdv) in relation to this asset as on 01.04.2005 was Rs. 59,11,830/-. During the year under consideration, the appellant came to a conclusion that the said tool was not of any help to it and it decided to return it and de-capitalized the same in....
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....he Assessing Officer observed that as per point No. 3 in the Notes of Accounts, the Auditors have pointed out that by virtue of settlement of dispute with....................................... ............................ ............................ 9. We may note at this juncture that even though the dispute before us and the arguments of the parties before us, centre around the provisions of section 41 of the Act, it is well within the powers of this Tribunal to consider any disallowance/addition that may be warranted under any other provision of the Income-tax Act, while giving relief to the assessee in the context of addition made under section 41 of the Act. We are fortified in this behalf by the decision of the Hon'ble Calcutta High Court in the case of Steel Containers Ltd. v. C1T [1978] 112 ITR 995, wherein it was held that when the Tribunal finds that disallowance of a particular expenditure by the authorities below is not proper, the Tribunal is competent to sustain the whole or part of the disputed disallowance under a different section under which it is properly so disallowable. In this view of the matter, the ground raised by the assessee on this issue is p....
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.... which would be reduction of Rs. 43,39,422/- from wdv as per the above referred decision of ITAT. So the wdv of this asset would be Rs. 15,72,408/- {Rs. 59,11,830 (-)Rs. 43,39,422}. (b) Secondly, the effect of discarding the asset as a whole; which would be the amount receivable in relation to this discarded asset. Since the software tool was returned, its scrap value would be NIL. 5.11 As regards argument of the appellant that the provisions of Section 43 (6)(c)(i)(B) of the Act are applicable, the same is misplaced as the said provision relates to AY 1988-89 only. The relevant applicable provisions are that of Section 43(6)(c)(ii) of the Act. Further the appellant has sought to convey that the word `money payable' in Section 43(6)(c)(i)(B) of the Act [which is also relevant for Section 43(6)(c)(ii) of the Act] means the amount of Rs. 1,08,48,556/-, which was payable by it to M/s Magma Design but written off. This interpretation of the section is also misplaced. The meaning of word 'money payable' is given in Explanation 4 to clause (c) of Section 43(6) of the act and the same is stated to be as per Explanation below Section 41(4) of the Act. The same reads as foll....
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....vendor. Therefore the case law relied on by the ld. AR in the case of Commissioner v. Mahindra & Mahindra Ltd. (supra) is distinguishable on facts of the case on hand. On careful consideration of the CIT(A)'s order as noted above, I am of the view that the CIT(A) has passed a good and reasoned order and I find no reason to interfere with his order. Accordingly the grounds of the assessee are rejected. 18. Vide Ground No.5 the assessee has raised the issue that if disallowance of the depreciation on assets and liability written off is upheld, computation of revised profits as per the section 10A of the Act is to be allowed. However, this issue was not raised before the CIT(A). In this regard, the ld AR in the written submissions at para 7 has submitted in support of the claim that Circular No.37/2016 dated 2.11.2016 is applicable for the enhanced income disallowed under the business income of the assessee and the assessee is eligible for claiming deduction u/s. 10A of the Act. In this regard, he has also submitted documents which are placed at pages 106 to 127 of PB which are copies of STP certificates, customs bonded warehouse licence (customs certificate and Form 56F) etc. furnis....