TMI Blog2015 (7) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Governor and Chief Minister of A.P. on 22.10.2007, the A.O. has formed an opinion that the business of the assessee has commenced from that date. Hence, depreciation @ 15% will not be allowed as the assets on which depreciation has been claimed is put to use for less than 180 days - Held that:- The term ‘used’ as employed in section 32(1) has to be given a wider meaning and will also include passive user of the asset. It has been held that if the machinery or plant is ready for use but it is not actually used, still then assessee will be eligible for depreciation. If we apply the aforecited principle to the facts of the present case, it is to be seen that the plant and machinery and electrical installation on which assessee has claimed full depreciation were acquired in the preceding assessment year. Therefore, it can be safely concluded that the plant and machinery as well as electrical installation were ready for use in the impugned assessment year. Only because the inauguration took place in October, 2007 that cannot be a sole criteria to deny assessee’s claim of depreciation at the full value when there is no material brought on record by the department to show that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year. Being aggrieved of such disallowance, assessee preferred appeal before the Ld. CIT(A). Before the first appellate authority, it was submitted by the assessee that A.O. has not passed any order under section 201 treating the assessee as assessee-in-default and as such, no disallowance under section 40(a)(ia) could be made. Further, it was submitted by the assessee that the entire expenditure having been actually paid to the concerned parties before the end of the relevant previous year, disallowance under section 40(a)(ia) cannot be made in view of the decision of ITAT, Vizag Special Bench in the case of Merlyn Shipping and Transport 146 TTJ (1) and the decision of Hon ble A.P. High Court in ITTA.No.352 of 2014 dated 24.06.2014 in case of CIT vs. Janapriya Engineers Syndicate. The learned CIT(A) finding merit in the submissions of the assessee and following the decision of ITAT Special Bench in the case of Merlyn Shipping and Transport (supra), deleted the addition made by the Assessing Officer. 4. We have considered the submissions of the parties and also perused the materials on record. The department has not disputed the fact that the expenditure claimed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that on all other assets, the assessee has claimed depreciation @ 50% of normal rate of depreciation as it is used for less than 180 days. From the aforesaid facts, the A.O. was of the opinion that the assessee having commenced its business only on 22.10.2007, it could not have used its assets before that date. Hence, assessee s claim of depreciation @ 15% on opening WDV of plant and machinery and electrical equipment is not correct. Since assessee s claim of full depreciation @ 15% was allowed in the original assessment resulting in escapement of income, the A.O. reopened the assessment under section 147 by issuing notice under section 148 of the Act on 29.08.2011 which was served on the assessee on 20.09.2011. As observed by the A.O., in response to the notice issued under section 148, there was no compliance from the assessee. It is also observed by the A.O. that show cause letter dated 14.08.2012 proposing to complete the assessment exparte under section 147 as well as another letter dated 14.09.2012 directing the assessee to file its objections on or before 26.06.2012 also failed to evoke any response from the assessee. Therefore, the A.O. finding no other option, proceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering the submissions of the assessee however did not find merit in the same. She observed that when the formal inauguration of newspaper took place on 22.10.2007, the logical conclusion would be that assessee s business commenced with the formal inauguration. The Ld. CIT(A) also observed that assessee has not brought any evidence on record to establish its claim that the business actually commenced in the previous assessment year. As far as assessee s submission that opening WDV cannot be disturbed, Ld. CIT(A) stated that since the WDV for the current year was the same as the actual cost of the asset and since assessee has not claimed any depreciation till 01.04.2007, the assessee s contention cannot be accepted. Being aggrieved, assessee is in appeal before us. 10. The Ld. Counsel for the assessee more or less reiterating the submissions made before the departmental authorities submitted that only because in the Director s Report, it has been mentioned that the inauguration of the newspaper took place on 22.10.2007, it will not be reasonable to conclude that assessee s business had not commenced till that date. Learned A.R. referring to the balance sheet for the A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, to qualify for full amount of depreciation, two conditions have to be satisfied as per second proviso to section 32(1). Firstly, the asset on which depreciation is claimed, must have been acquired by the assessee during the previous year and secondly, it must have been put to use for the purpose of business or profession for a period of more than 180 days. If we apply the aforesaid statutory provisions to the facts of the present case, it is to be seen that the assets on which the assessee has claimed depreciation at the full rate i.e., 15% were acquired during the previous year relevant to the A.Y. 2007-2008 and have been shown as opening WDV as on 01.04.2007. There is no dispute to the aforesaid factual position as the department also has accepted the opening WDV shown by the assessee. Therefore, the other condition which remains to be satisfied by the assessee for claiming full depreciation is, whether the assessee has put to use such assets for the purpose of his business or profession for more than 180 days in the relevant previous year. Only relying upon the Director s Report wherein it is mentioned that inauguration of newspaper happened on 22.10.2007, the A.O. has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation. Similar view has also been expressed in the following decisions i.e., (1) CIT vs. Oswal Agro Mills Ltd., 238 CTR 113 (2) CIT vs. Oswal Woollen Mills Ltd., 206 CTR 141 (P H). Therefore, the principle of law which emerges from the aforesaid judicial precedents is to the effect that the term used as employed in section 32(1) has to be given a wider meaning and will also include passive user of the asset. It has been held that if the machinery or plant is ready for use but it is not actually used, still then assessee will be eligible for depreciation. If we apply the aforecited principle to the facts of the present case, it is to be seen that the plant and machinery and electrical installation on which assessee has claimed full depreciation were acquired in the preceding assessment year. Therefore, it can be safely concluded that the plant and machinery as well as electrical installation were ready for use in the impugned assessment year. Only because the inauguration took place in October, 2007 that cannot be a sole criteria to deny assessee s claim of depreciation at the full value when there is no material brought on record by the department to show that the plant and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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