TMI Blog1994 (10) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... : " Depreciation on new addition : A. S. S. Machine : Value Rs. 9,92,050. The assessee has imported this new machine from Japan. The total cost according to the assessee comes to Rs. 9,92,050. On a verification of the case records connected with this purchase, the machinery in question reached Cochin Harbour on 27-3-1986. The machinery was cleared by the Canara Bank, Trichur. There were some differences with the Customs Department towards customs duty payable and the matter was finally settled on payment of Rs. 6,21,000 towards duty and the same has been debited to a/c. on 28-4-1986 vide P. 11 of the Day Book. The machinery was brought by the vehicle owned by the India Photo House, Chembottil Lane, Trichur and reached Trichur on 7th May ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts for the purchase of the machinery and the accountant was under the wrong presumption that once the account is debited, the assessee was entitled to depreciation allowance. The learned Assessing Officer rejected this explanation of the assessee for the reason that it is an elementary principle that depreciation is an allowance towards wear and tear of a machinery and unless it is put to use, there cannot be any wear and tear. That the assessee committed a bonafide mistake in this respect is too incredible a claim to be accepted. Thus, he levied penalty not only in respect of the amount of depreciation disallowed but also in respect of the additions made to the income under section 68 of the Income-tax Act, 1961. The assessee carried the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... krishnan, the learned departmental representative submitted that ignorance of law is no excuse and by claiming depreciation to which the assessee is not entitled, the assessee was attempting to get tax advantage because in case the claim was allowed, it would be entitled to carry forward the unabsorbed depreciation to the succeeding year to set it off against the income of the succeeding year.Thus, even if tax advantage was not gained this year, the assessee could have gained tax advantage in the succeeding year. Therefore, it cannot be said that the assessee has acted bonafidely. The penalty was rightly levied. 5. Having regard to rival submissions, we cancel the levy of penalty. It is not in dispute that the assessee was adopting cash s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined resulting in a tax demand of Rs. 65 and the income in the succeeding years, viz., 1987-88 and 1988-89 have resulted in loss as per details furnished by the revenue. In the circumstances, it cannot be said that the assessee has acted with a motive to gain undue tax advantage either in this year or even in the succeeding years in the guise of carry forward of unabsorbed depreciation. May be the assessee has acted negligently when it claimed depreciation on machinery not installed. An act done in good faith is one when it is done honestly though negligently. Therefore, in the facts and circumstances of the case, we hold that mens rea cannot be attributed to the assessee though its claim in respect of depreciation on the uninstalled new ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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