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TMI Blog2012 (10) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... year at Pune. The AO after examination of details furnished by the assessee noticed that total investments during the year at Pune was Rs.6,00,42,980/-, which also included part of the investment before 30.09.2003. The assesse had claimed full depreciation in respect of assets at the entertainment center. The AO noted that the first sale bill of the entertainment center at Pune was dated 01.01.2004 and therefore, the business activity of the entertainment center had only started from 01.01.2004. The AO therefore, asked the assessee to explain as to why depreciation in respect of assets should not be allowed only @50%. The assessee explained that for the purpose of entertainment center, the assessee had purchased the premises in a bare state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ildings, plant and machinery used in the entertainment center was allowable only @50% of normal rate. He, therefore, disallowed 50% of the depreciation claimed amounting to Rs.33,08,581/- as per computation given below. No. Particulars Addition Pune Rate of depreciation Disallowance of depreciation u/s.32 of the I.T. Act 1. Plant & Machinery 3,924,374 25% however restricted to 50% of the same 490,547 2. Furniture & Fixtures 484,116 15% however restricted to 50% of the same 36,309 3. Building Premises 55,634,490 10% however restricted to 50% of the same 2,781,725 3,308,581 3. The assessee disputed the decision of AO and submitted before CIT(A) that it had acquired the premises before 30.9.2003 and pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the said letter the assessee had also given details of investment made prior to 30.9.2003 in relation to furniture and equipments which are available at page 24 of the paper book. The said details show that the assessee had installed two fitness machines prior to 30.9.2003. It was pointed out that CIT(A) had not examined these aspects. Business had been set up before 30.9.2003 as entertainment center was ready for use. He referred to the judgment of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. O.P. Khanna & Sons (140 ITR 558) and on the decision of the Tribunal in the case of Chakradhari Wheels (P.) Ltd. vs. ITO (154 Taxmann 77) in support of the plea. It was accordingly urged that the order of CIT(A) may be set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 30.9.2003 and all other assets of the entertainment centre such as video games, gymnasium equipment, music system etc. had been purchased in the second half of the year and the first bill had been raised only in January, 2004. It has been accordingly held that the entertainment centre had been set up after 30.9.2003 and depreciation was allowable @ 50% of normal rate. The details of computation of disallowance of depreciation have been given in para 2.1 of this order. 5.1 In our view only on the ground that the first bill had been raised in the latter half of the year, it will not be appropriate to hold that the business had not been set up before 30.9.2003. It is a settled legal position that once business has been set up and ready to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new building. The issue was whether the new building could be said to have used for the purpose of business in the intervening period when electrical fittings etc. were being installed and it was held that the building had been used for the purpose of business. The said case is obviously different as in the said case business had already been set up and it was only a case of shifting and, therefore, new building was treated as used for the purpose of business. The decision of the Tribunal in the case of Chakradhari Wheels (P.) Ltd. vs. ITO (supra), is also distinguishable. In that case it was held by the Tribunal that once the business has been set up, expenses have to be allowed even if the actual commencement has not taken place. 5.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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