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2016 (1) TMI 867 - AT - Income TaxDisallowance of depreciation - no business activity has been carried out by the assessee during the Assessment Year under consideration - Held that:- The assessee company is entitled for depreciation on computer and software during the year under assessment (Assessment Year 2008-09 and 2010- 11) though not actually used for the purpose of business on the grounds inter alia that when during the previous Assessment Year i.e. Assessment Year 2007-08, the assessee disclosed receipt from technical consultancy and training fee, income from trading activities and other income but shown the income from technical consultancy and training fee at ‘nil’ in Assessment Years 2008-09 and 2010-11, it is entitled for depreciation u/s 32 of the Act as the same has not been discarded by the assessee company; that when the machinery in question was in fact used in the earlier year and depreciation was allowed on block of assets, the assessee company is entitled for depreciation; that though the usage of machinery in the business was not in the relevant assessment year but in the earlier financial year its entire machinery remained in “ready to use” mode because the assessee company has come up with logical explanation that due to not having received any order for technical consultancy nor it carried out any training activity, the income from its business comes to ‘nil’; that when the A.O. has accepted the contention of the assessee that it has made sales representing trading items incidental to its main business activity and has earned profit from such activity, he cannot disallow the depreciation claimed by the assessee; that even Ld. CIT(A) has erred in doubting the trading activities stated to have been carried out by the assessee company during the Assessment Year 2008-09 without any investigation though in the past, such activity has been accepted by the Revenue specifically; that no doubt, the assessee has not produced the vouchers to prove the claim of sale and purchase but when the Revenue has accepted the audited profit and loss statement, they cannot be allowed to sail in two boats; that when the assessee company has not sold, discarded, demolished or destroyed the assets during the previous year, the assessee has certainly become entitled for depreciation.- Decided in favour of the assessee. Expenses against the income - income from other sources OR business income - Held that:- CIT(A) has himself allowed the expenditure of the assessee relating to audit fees, communication expenses, legal and professional charges, electricity and water, bank interest and charges, printing and stationary u/s 57 and directed the Assessing Officer to allow thee expenses against the income determined u/s 57, as business expenditure, the assessee is proved to be carrying out the business activities from which it has shown the business income during the year under assessment and consequently entitled for depreciation. Even otherwise, when the trading by the assessee company is accepted by the Revenue as incidental to its main business during the earlier years, the income cannot be treated as income from other sources rather it is a business income. - Decided in favour of the assessee.
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