TaxTMI 
TaxTMI 
2023 (6) TMI 1114
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....laimed in respect of fixed assets addition made during the impugned 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. Witho....
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.... of Rs. 12,808/- on same principles on which the depreciation on plant and machinery of Rs. 84,240/- was allowed by him. 3.8. As regards denial of depreciation 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 ....
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....ime and the documents were furnished. During the course of assessment proceedings, the AO observed that the assessee has acquired new assets of Rs. 4,22,01,852/- during the previous year and claimed depreciation as under:- S. No Description 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 furn....
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....g the entire material, remand report and the rejoinder partly allowed the appeal of the assessee by observing as under:- "4.3 The submissions of the appellant have duly been considered. As regards the admission of the additional evidence, frequent change in management of the company and employees 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 'b....
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....d prudently and had put the assets to use. 4.8 Now as regards addition to vehicles, 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 that the same was used for business purposes. 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....
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....not by the said individual. So the action of the AO in disallowing depreciation on these items is upheld." 5. In respect of the second issue on the income earned by the assessee through extinguishment of liability, the CIT(Appeals) dismissed the ground raised by the assessee and enhanced the income of the assessee by Rs. 15,41,161. 6. Aggrieved from the above assessment 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 Addit....
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..... It is submitted that the Assessee was acquired by MindTree Ltd., on 17.12.2007 and subsequently its name was changed to MindTree Technologies Ltd. Upon company petition filed for merger of the appellant company with that of MindTree Ltd., the Honorable Karnataka High Court approved the merger with the appointed date being 01.04.2008. 1.10. The aforesaid facts were brought to the notice of the Learned Assessing Officer. The Appellant, in the course of assessment proceedings, submitted copy of the fresh certificate of incorporation 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 furni....
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....and physical verification of fixed assets was done at reasonable intervals. The statutory auditors have stated that no material discrepancies were noticed on physical verification of the fixed assets. 1.22. In the CARO Report produced during the course of assessment, the statutory auditor had certified the correctness and appropriateness with respect to the fixed assets as under: • the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets; • the fixed assets have been physically verified by the management at reasonable intervals; • any material 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....
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....Corpn. vs. JCIT [2006] 280 ITR 100 (Allahabad); → ACIT vs. Best & Crompton Engg. Projects Ltd., [2011] 12 taxmann.com 34 (Chennai); 1.29. In Kasat Textiles Pvt. Ltd. vs. ACIT 66 ITD 510 (Pune), it was held that information in a person's books of accounts, unless proved wrong, should be accepted. 1.30. Thus, it is undisputed fact that the aforesaid Auditor's Report and Form 3CD have not been disregarded by the lower authorities either during the assessment proceeding or in the remand proceeding. It is also submitted that for all other purposes the lower authorities have accepted the Auditor's Report and tax audit report in Form 3CD. 1.31. Hence, 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 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); - Rapi....
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....te evidence of use after the lapse of 16 years rather than applying the principle of "preponderance of probability" and "prudency". 1.38. It is submitted that lower authorities have not doubted the transaction of purchase of fixed assets. It is also submitted that the lower authorities ought to have appreciated that even after the lapse of 14 years, the Appellant put its efforts to get vendor confirmation for having purchased the software tool. 1.39. It is submitted that the lower authorities ought to have allowed depreciation by applying the principle of "preponderance of probability". 1.40. It is submitted that the Income-tax Act,1961 is not governed by strict rules of evidence and it is the preponderance of probabilities of events in its normal course of happening governs the fastening of liability under the Act subject of course to the specific stipulations as are contained in the provisions of the Statute. 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 mea....
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....e not justified in denying depreciation without looking into substance over form. In this regard, we rely on the following decisions: * JuggilalKamlapat (1971) 1 SCC 477; * Poona Electric Supply 57 ITR 121 SC; * Karnataka State Beverages Corporation Ltd. vs. CST (2008) 12 STJ 30 (CESTAT-Bangalore); 1.49. As submitted earlier, it is humanly impossible to carry out the scale of operations achieved by the Appellant without the impugned assets. It is also submitted that it is impractical for the lower authorities to insist on furnishing the evidence, now, regarding asset being put to use which were acquired 16 years back. 1.50. As stated earlier, the Appellant company was subject to change in ownership and management. During the impugned previous year, the present company never had any shares nor any control in the Assessee company. In the light of this, the Appellant furnished whatever maximum it could furnish. Considering this factor, the lower authorities ought not to have insisted on absolute evidence of user. 1.51. We rely on the decision in PCIT vs. Ajmer VidyutVitran Nigam Ltd., (2022) 447 ITR 186 (Raj.). 1.52. The a....
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....anda vs. CIT [2009] 180 Taxman 368 (Mad) ¤ In the following decisions, Courts have recognised the principles of impossibility of performance: → Dalmia Power Ltd., vs. ACIT (2020) 420 ITR 339 (SC) [Para 8]; → Life Insurance Corporation of India vs. CIT [1996] 219 ITR 410 (SC); → Karnataka State Industrial and Infrastructure Development Corporation Ltd., vs. DCIT [2021] 431 ITR 255 (Karnataka); → PCIT vs. Ennoble Construction [2022] 447 ITR 444 (Kar.) [Para C(i)]; → City Union Bank Ltd., vs. ACIT (2020) 425 ITR 475 (Madras) [Para 14]; → Lalitha Jewellery Mart (P.) Ltd., vs. DCIT (2017) 399 ITR 425 (Madras) [Para 42]; 1.59. In UOI v. Harjeet Singh Sandhu [2001] 5 SCC 593, the court went by the dictionary meaning of the term "impracticable" in proximity with the term "impossibility". It is submitted that, even in the instant case, the lower authorities insisting on absolute evidence of use after the lapse of 16 years is sheer "impracticable", thereby it is "impossible" for the Appellant to comply with. 1.60. Without prejudice to the above, it is submitted that the Learn....
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....losed as Annexure 6. 1.68. In identical facts and circumstances, for AY 2007-08 the user test was never the basis of the Learned Assessing Officer of denying the depreciation during the assessment proceeding or during the remand proceeding. 1.69. We rely on the decision in PCIT vs. Petronet V K Ltd., 2016-TIOL-3066HC-AHM-IT, [Paras 1, 2 & 3]. 1.70. It is submitted that during the remand proceeding before the Learned Assessing Officer for AY 2006-07, the Appellant furnished vendor confirmation for having purchased the software tool. It is also submitted that the Appellant furnished copy of the bill of entry for home consumption attested by the Customs authority of India. Even this would establish that the software tool was used upon customs clearance. 1.71. Such being the case, it is submitted that user test cannot be the basis for denying the depreciation for the impugned AY 2006-07. 1.72. In the following decisions, the Courts have applied the "principle of consistency": * Parshuram Pottery Works Ltd. v. ITO [1977] 106 ITR 1 (SC) * Bharat Sanchar Nigam Ltd. v. UOI [2006] 282 ITR 273 (SC) * CIT v Excel Industri....
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....mpugned AY 2006-07, when the Learned Assessing Officer has accepted that depreciation should be allowed and the Learned Commissioner (Appeals) allowed depreciation in an identical facts and circumstances in the Appellant's own case for the AY 2007-08. Copy of the order of the Learned Commissioner (Appeals) for the AY 2007-08 is enclosed as Annexure 6. 3. As regards denial of depreciation of Rs. 12,808/- in respect of plant and machinery: [Ground Nos. 3.7.1 & 3.7.2] 3.1. It is submitted that the Learned Commissioner (Appeals) is not justified in denying depreciation of Rs. 12,808/- in respect of addition to plant and machinery of Rs. 1,70,768/-, when in fact the Learned Assessing Officer had not denied the same in the assessment order. 3.2. As submitted earlier, the Appellant claimed total depreciation of Rs. 2,46,92,097/- [i.e., in respect of both WDV & assets acquired during the year], the asset wise breakup of the same is as under: Sl. No. Description of Assets Depreciation claimed 1 Plant & Machinery 19,126 2 Computer & Systems 32,14,566 3 Software Tools 2,05,98,380 4 Vehicles 3,24,669 5 Office Equipme....
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....im. 4. As regards denial of depreciation of Rs. 57,067/- in respect of vehicles: [Ground Nos. 3.8.1 & 3.8.2] 4.1. It is submitted that 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. In this regard, we rely on the submission made in paragraphs 5.2 to 5.6 (supra). 4.2. Without prejudice to the above, it is submitted that 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. 5. As regards denial of depreciation of Rs. 1,507/- in respect of office equipments: [Ground Nos. 3.9.1 & 3.9.2] 5.1. It is submitted that the Learned Commissioner (Appeals....
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....ame was credited to P&L Account being grouped under 'Other Income'. Copies of the relevant extract of the P&L Account and Schedule of 'Other Income' are herewith enclosed as Annexures 8 & 9. 6.4. It is submitted that, as the above gain is on capital account, the same was reduced from the profits as per P&L Account in the statement of computation of total income. 6.5. It is submitted that the Learned Assessing Office taxed the aforesaid amount of Rs. 10,62,493/- under section 41(1) of the IT Act. 6.6. As regards applicability of section 41(1), the Appellant submitted the following to CIT (A) as under: (1) It is submitted that the software tool written off in the books of accounts is not an expenditure allowable under the IT Act, as the same is capital in nature. Further, admittedly, the same was also never claimed as deduction while computing the total income. (2) The liability that arose on account of purchase of such capital asset is capital in nature and extinguishment of same is capital receipt. (3) It may be noted that, as the original liability arose on account of purchase of a software tool which is capital in nature, the ....
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....41(1) of the IT Act. 6.7. A reference may be made to paragraph 5.2 of the Order of the Learned Commissioner (Appeals). 6.8. It is submitted that the aforesaid nothings of the Learned Commissioner (Appeals) are perverse for the reason that (i) in so far as applicability of section 41(1), the Appellant had furnished submissions dated 09.08.2011 and 13.12.2022 and (ii) in so far as applicability of section 50, it was explained during the appellate proceedings that the Appellant had reduced the amount of Rs. 1,08,48,556/- from the WDV as per the section 50 and also furnished explanation vide submission dated 13.12.2022. 6.9. It is submitted that during the appellate proceeding, the Learned Commissioner (Appeals) accepted that contention of the Appellant that the amount of Rs. 10,62,493/- cannot be taxed as income in the hands the Appellant under section 41(1), by way of issuing notice vide ITBA/APL/F/APL_1/2022-23/1047700761(1), dated 29.11.2022, to treat the Rs. 88,67,745/- as value of benefit arising from business under section 28(iv). 6.10. Thus, it is submitted that the contention that the aforesaid amount of Rs. 10,62,493/- cannot be taxed as in....
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....f section 28(iv). It may be noted that the aforesaid amendment is proposed to come into effect prospectively i.e., FY 2023-24/ AY 2024-25 onwards. Hence, it is submitted that for the impugned AY 2006-07, cash benefit does not fall under section 28(iv) of the IT Act. 6.23. Therefore, it is submitted that section 28(iv) of the IT Act does not apply in the instant case. 6.24. It is submitted that the Learned Commissioner (Appeals) has enhanced the income by erroneously relying on the decision in Binjrajka Steel Tubes Ltd. vs. ACIT [2011] 130 ITD 46 (Hyd.). 6.25. It is submitted that the Learned Commissioner (Appeals) is not justified in failing to appreciate that liability written off in respect of depreciable asset (i.e., software tool) falls under section 43(6)(c)(ii) read with section 43(6)(c)(i) and not under section 28(iv) of the IT Act. 6.26. A reference may be made to section 43 (6) of the IT Act (As applicable for the impugned year). 6.27. Section 43(6)(c), defining WDV of a block of assets, clearly stipulates a reduction from the opening WDV for the 'moneys payable' in respect of any asset falling within a block of assets, ....
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....ly. 6.37. As submitted earlier, the instant case of the Appellant is that the asset (i.e., software tool) is 'discarded' and not a case of 'sale'. 6.38. The undisputed fact is that the balance amount of Rs. 1,08,48,556/- was payable by the Appellant to the vendor (i.e., M/s.Magma Design Automation Inc.) in respect of aforesaid discarded software tool and the said entire amount was waived by the said vendor (i.e., M/s.Magma Design Automation Inc.). 6.39. As submitted earlier, 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. 6.40. Applying the ratio of the Hon'ble Supreme Court (supra), the amount of Rs. 1,08,48,556/- waived by the vendor (i.e., M/s.Magma Design Automation Inc.) needs to be regarded as amount received by the Appellant towards discarding of the software tool. 6.41. As demonstrated earlier, the Appellant reduced entire amount of Rs. 1,08,48,556/- [which is waived by the vendor] has been reduced from the WDV of the block of asset as per the mandate of section 43(6)(c)(ii) read with section 43(6)(c)(i). 6.42. It is subm....
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....submitted that "income" referred to in section 28 and "profits and gains" referred to in section 28 (i) has to be ascertained on the basis of applying ordinary principles of commercial accounting. 6.51. It is submitted that the Learned Commissioner (Appeals) has erred in treating the deprecation allowed in the earlier year as income for the impugned year. 6.52. In the following decision, Courts have held that depreciation is an allowance: - CIT vs. Bombay State Transport Corporation (1979) 118 ITR 399, 405 (Bom.); - CIT vs. EleconEngg. Co. Ltd., (1974) 96 ITR 672 (Guj.) affirmed by the Hon'ble Supreme Court in (1987) 166 ITR 66 (SC); - CIT vs. Oswal Agro Mills Ltd., [2012] 341 ITR 467 (Delhi); - JCIT vs. Essar Shipping Ltd., (2006) 102 ITD 71 (Mum.); 6.53. Explanation 5 to section 32 of the IT Act mandates that depreciation shall be allowed whether or not the assessee has claimed depreciation in computing total income. 6.54. A reference may be made to Circular No. 14/ 2001, dated 12.12.2001 [Paras 30.1 to 30.5]. 6.55. It is submitted that depreciation is an allowance and mandatorily allowable under the....
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.... (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 ITD 46 (Hyd.), is distinguished as under: (a) In the said case, during the FY 2003-04 (i.e., AY 2004-05) the assessee purchased machinery for a consideration of Rs. 6 Crores and claimed depreciation on the same. During the subsequent year i.e., FY 2004-05 (i.e., AY 2005-06), by virtue of out of court settlement of dispute, the cost machinery was reduced from Rs. 6 Crores to Rs. 4 Crores. However, in the instant case, there is no dispute with respect to consideration and the consideration remained unchanged. It is rather a case of the vendor consenting for waiver resulting in write back of balance payable of Rs. 1,08,48,556/-. (b) In the said case, the machinery was not sold or discarded or demolished or destroyed during the year. Hence, there was no occasion for the assessee to reduce the same from the written down value of the block of asset under section 43(6)(c)(i)(B) of the IT Act. In the instant case, the software tool was discarded. Therefore, the instant case fell within....
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....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 assessed income. 7.6. In Board Circular No. 37/2016 dt. 02.11.2016, it has been provided that enhanced deduction under Chapter VI-A would be available on income increased as a result of disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act. 7.7. It is submitted that though the above circular deals with deduction under Chapter VI-A, the same should apply to section 10A as well as the section 10A is a deduction provision after amendment by the Finance Act, 2000 with effect from 1.4.2001. As per CIT v. Yokogawa India Ltd. [2017] 391 ITR 274 (SC), section 10A/ 10AA has to be given at Chapter IV level. 7.8. As per section 29, profits and gains will have to be computed by applying provisions of sections 28-43D. Hence, income as increased as a result of denial of depreciation claimed under section 32 and income enhanced under section 28(iv) being part of profits an....
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....rly 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 reliance on the Audit report to contend that the assets were put to use is not final and relied on the judgement of the ITAT Delhi in ITA No. 2743/Del/2016 in the case of DCIT vs. M/s Railtel Corporation of India Ltd.in which it has been held as under:- "(3.2) The Ld. AR of the assessee failed to bring to our attention any judicial precedents or any statutory provisions to show that the audit report by statutory auditors and/or the opinion of the statutory auditor is binding or final for all statutory authorities; even if the statutory auditor is appointed by the office of CAG and further even if the office of CAG conducts supplementary audit. The report(s)/opinion(s) of statutory auditor(s) are meant to aid and assist the statutory authorities and are not aimed to curtail their d....
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....ent, 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 provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary-Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 5 SCC 515 'The legislative casus omissus cannot be supplied by judicial interpretative process. Language of section 6(1) is plain and unambiguous. There is no scope for reading something into it, as was done in N. Narasimhaiah's case (supra). In D.C. Nanjudaiah's case (supra), the period was further stretched to have the time period run from date of service of the High Court's order. Such a view cannot be reconciled with the language of section 6(1). If the view is accepted it would mean that a case can be cove....
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....ia 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 finality should not be re-opened. The present judgment shall operate prospectively to the extent that cases where awards have been made and the compensations have been paid, shall not be reopened, by applying the ratio of the present judgment. The appeals are accordingly disposed of and the subsequent notifications containing declaration under section 6 are quashed." 9. The ld. DR has further relied on the judgment of the Hon'ble Bombay High Court in the case of Dinesh kumar Gulabchand Agrawal v. CIT (2004) 267 ITR 768 (Bom) where it was held that the word "used" in section 32 denotes actually used and not merely ready for use. He also strongly relied on the para 4.5, 4.6 & 4.7 of the CIT(A)'s order. Relia....
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....owed 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 for depreciation @ 60% of Rs. 93,600 and Rs. 64,480 which were purchased by the assessee on 26.8.2005 and 17.8.2005 and part of the computer s & systems of Rs. 26,46,706 as evident from page 83 of PB. The CIT(A) has decided the issue only on the disallowance of depreciation on assets considered by the AO and therefore, there was no requirement of giving enhancement notice by the CIT(A) separately. 12. The argument of the assessee that depreciation has been allowed in the successive year is also not tenable since every year is independent assessment year based on the facts of the case. The issue of claim of depreciation u/s. 32 is settled by the decision of the Hon'ble Karnataka High Court in the cas....
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....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 construction leads to a result not intended to sub-serve the object of the legislation, another construction, permissible in the context, should not be adopted. 12. CST v. Jaswant Singh Charan Singh [1967] 19 STC 469 (SC) is also a judgment of the Supreme Court in which the Supreme Court has said that while interpreting items in Statutes like the Sales-tax Acts, resort should be had not to the scientific or technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense. There cannot be any quarrel over these well-accepted principles of law. The question is a....
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....sed 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. [1994] 206 ITR 6821 also noticed the Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265 (SC), and thereafter it ruled that under sub-section (1) of section 32 there should be actual user of plant and machinery for the purposes of business. 18. The Bombay High Court has ruled that the word 'used' in section 32 of the Income-tax Act, 1961, denotes that the asset has been actually used and not that it is merely ready for use. The expression 'used' means actually used for the purposes of the business. A Special Leave Petition filed against the said judgment stood dism....
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....oks 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 its books of accounts. For this purpose, it worked out the allowable depreciation up to 31.12.2005 (as per Company Act) at Rs. 49,93,512/- and the depreciated value of the asset at Rs. 97,86,063/- {Rs. 1,47,79,575(-) Rs. 49,93,512} as on 31.12.2005. Since the amount payable to M/s Magma Design as on 31.12.2005 was Rs. 1,08,48,556/-, by extinguishing this liability it arrived at a gain of Rs. 10,62,493/- {Rs. 1,08,48,556 (-) Rs. 97,86,063), which it had treated as being on capital account but disputed by the AO. As regards treatment given in block of asset, it just reduc....
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....nder 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 partly allowed:" 5.8 Considering above the amount of Rs. 65,09,134/-, being the excess depreciation claimed in AY 2004-05, was required to be offered to tax by the appellant as per provisions of Section 28(iv) of the Act. The argument of the appellant that the above decision of the ITAT was no longer holds good in view of the decision of SC in the case of Mahindra and Mahindra Ltd (Supra), is misplaced as the facts of this case is entirely different from the case under consideration and the same has already been discussed....
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....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 follows: "Explanation.-For the purposes of sub-section (3),- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, 5.12 As such the amount of Rs. 1,08,48,556/- is not the money payable which is required to be reduced from wdv. 5.13 Con....