TMI Blog2014 (6) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly or partly by the assessee and used for the purposes of the business and further depreciation is allowed on any block of assets at such percentage on the written down value thereof, as may be prescribed - the assessee has not brought any material on record to substantiate its claim that it was using the central technical area equipments for preparing programmes - the FM radio business can be considered as "set up" only when both central technical area and common transmission infrastructure divisions are made functional - the assets would enter into the "block" only upon using them for the purposes of business – claim of depreciation denied – Decided in favour of Revenue. Disallowance of additional depreciation claimed on EM radio equipments – Held that:- The object of allowing additional depreciation, an accelerated depreciation, is to encourage new investments - the proviso lists out machineries (and not assessees) which are not eligible for deduction u/s 32(1) (iia) of the Act, even if the assessee is engaged in the manufacture or production of articles or thing - the purpose of allowing additional depreciation under section 32(1) (iia) is to allow deduction only on thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration, the assessee claimed deduction under rule 9B(4) of the Rules at Rs. 77,50,000, being the cost of acquisition of the satellite and terrestrial television rights of five Malayalam films acquired during the financial years 2004-05 to 2005-06. The Assessing Officer noticed that the assessee did not make commercial use of the said films in any of the financial years, i.e., from 2004-05 to 2006-07 and hence no income was generated out of the acquisition of film rights. The Assessing Officer noticed that, as per rule 9B of the Income-tax Rules, generation of income either in the year of purchase of rights or in the subsequent year is the primary condition for allowing deduction under that rule either in the year of purchase or in the succeeding year. Accordingly the Assessing Officer held that the question of deduction of cost of rights of films purchased during the year under consideration does not arise. Similarly he held that deduction of cost of rights acquired in the earlier years and brought forward during the current year also does not arise at all. The Assessing Officer noticed that the assessee had claimed identical deductions in the earlier years also and it has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g depreciation and merely keeping it ready does not entitle the assessee to claim depreciation. The assessee also submitted that the FM radio operations can be divided into two divisions namely, central technical area (CTA) and common transmission infrastructure (CTI). The assessee submitted that the central technical area division produces the programmes and hence, the assets acquired for the said purpose are fully under its control. The common transmission infrastructure division are assets in the nature of "infrastructure created by the assessee at All India Radio (AIR)" for transmitting various programmes produced by central technical area. The assessee submitted that the central technical area was ready in the previous year but the common transmission infrastructure was not. Accordingly it was submitted the assessee has shown common transmission infrastructure equipments as "asset under construction". However, the Assessing Officer held that the very fact that the common transmission infrastructure was not ready dearly proves that the FM radio operation was not even "set up" during the year underconsideration. The Assessing Officer also observed that the assessee could commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said contentions and accordingly allowed the claim of depreciation. The learned Commissioner of Income-tax (Appeals) in this regard, placed reliance on the following case laws:- (a) CIT v. Saurashtra Cement and Chemical Industries Ltd. (1973) 91 ITR 170 (Guj) ; (b) CIT v. ESPN Software India P. Ltd. (2008) 301 ITR 368 (Delhi). 5.2 With regard to the claim of additional depreciation, the learned Commissioner of Income-tax (Appeals) concurred with the view taken by the Assessing Officer that the activities carried on in FM radio station cannot be considered as manufacture or production of articles or things. Accordingly, he confirmed the disallowance of additional depreciation claimed by the assessee. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), both the parties have filed these appeals before us. 6. Before proceeding to adjudicate the issues urged on merits, we prefer to address a legal issue urged by the learned authorised representative. Learned counsel for the assessee questioned the right of the Department to file appeal before the Tribunal. According to the learned authorised representative, the Assessing Officer did not appear befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons best known to him, in our view, it does not mean that the Assessing Officer has lost the right to file appeal before the Tribunal. Even by appearing before the learned Commissioner of Income-tax (Appeals), the Assessing Officer could utmost support his order. On the contrary, it is the responsibility of the assessee to challenge all the points that have been decided against him by the Assessing Officer in the appeal filed before the learned Commissioner of Income-tax (Appeals). If the assessee has accepted certain adverse points by not raising contentions in the appeal filed before the learned Commissioner of Income-tax (Appeals), then he may nc.. be entitled to urge the same before the Tribunal as held by the hon'ble Kerala High Court in the case of P. R. Namhari Rao v. CIT (2008) 299 ITR 400 (Ker). However, the ratio of the said decision cannot be applied to the appeal filed by the Assessing Officer before the Tribunal, since the Assessing Officer gets the right to file appeal before the Tribunal only after the receipt of order passed by the learned Commissioner of Income-tax (Appeals). Since the Assessing Officer does not have right to file appeal before the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. 8.1 The Assessing Officer rejected the claim of normal depreciation on the ground that the FM radio equipments were not put to use by the assessee. It is an admitted fact that the FM radio operation can be commenced only after receipt of licence from the Ministry of Communications and Information Technology, Government of India. The director of the assessee-company has filed an affidavit dated February 5, 2013 before us, wherein the assessee has confessed that the licence to operate the FM stations was received by it only on August 8, 2007. Now the question that arises is whether the assessee is entitled to claim depreciation on FM radio equipments during the year under consideration, even if it did not have licence to operate FM radio stations ? 8.2 The main contention of the assessee is that it is eligible to claim depreciation, if the assets are kept ready for use. One more important submission of the assessee is that it had to prepare the programmes, serials, talk shows, etc., prior to obtaining the licence and then only it can immediately start broadcasting the programmes on air. According to the assessee, it was using all the equipments for preparing the programme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not ready by the end of the year under consideration and hence, in our view, the Assessing Officer was right in holding that the business of the assessee cannot be considered as "set up" during the year under consideration. 8.5 The view expressed by the Assessing Officer finds support from the decision rendered by the hon'ble jurisdictional Kerala High Court in the case of CIT v. Air Travel Enterprises India Ltd. (2004) 265 ITR 537 (Kerala). In the said case, the assessee therein took delivery of vehicles on March 30, 1992. The assessee took the vehicle from Emakulam to Thiruvanan-thapuram on the basis of a temporary permit valid up to April 24, 1992. The assessee got registration as non-transport vehicle on April 3,1992 with retrospective effect from March 30, 1992. Thereafter the assessee had applied for and obtained a contract carriage licence only on May 5, 1992. Before the Assessing Officer, the assessee had submitted that it had used the vehicle on April 1, 1992 for taking a tourist party. Under these factual aspects, the question that came for consideration of the hon'ble Kerala High Court is whether it can be said that the vehicle was kept ready for use on March 30, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased by the assessee during the year under consideration, that too after September, 2005. The depreciation is allowed under section 32(1) of the Act only if the assets are owned wholly or partly by the assessee and used for the purposes of the business and further depreciation is allowed on any block of assets at such percentage on the written down value thereof, as may be prescribed. A careful reading of the provisions of section 32(1) would show that the assessee has to satisfy following conditions cumulatively in order to become eligible to claim depreciation:- (a) The assets should be in the category of assets prescribed in section 32(1). (b) The assets should be owned by the assessee either wholly or partly. (c) The assets should have been used for the purposes of the business. Once these three conditions are satisfied, then the depreciation is allowed on "block of assets" at such rates as may be prescribed. A careful reading of the abovesaid provisions would show that the asset would enter into the "block" only on satisfying all the three conditions mentioned above. After so entering into the block; the asset would lose its individual identity only in the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle or thing and accordingly they have rejected the claim of additional deduction made by the assessee. 9.2 Before us, the learned authorised representative contended that the additional depreciation is "assessee specific" and not "asset specific", since the section uses the words "an assessee engaged in the business of manufacture or production of any article or thing". That is to say, according to the learned authorised representative, if the assessee is engaged in the business of manufacture or production of any article or thing, he would be entitled to claim deduction of additional depreciation under section 32(1) (iia) in respect of all the assets purchased by it, even if those assets are not used for the purpose of production or manufacture of articles or things. Since the assessee herein is also engaged in the business of publishing newspapers and magazines, the learned authorised representative contended before us that the assessee should be considered as having engaged in the business of manufacture or production of article or thing and accordingly the additional depreciation should be allowed on FM radio equipments. 9.3 We are unable to agree with the said contention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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