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M/s. SPR Publications P. Ltd. and others Versus ACIT, Circle 3 (2) Hyderabad and others

2015 (7) TMI 117 - ITAT HYDERABAD

Disallowance made u/s.40(a)(ia) - TDS remittance made before the due date of filing of return of income was not in conformity with the provisions of section 40(a)(ia) - Held that:- The department has not disputed the fact that the expenditure claimed by the assessee which is the subject matter of disallowance under section 40(a)(ia) was entirely paid during the relevant previous year and nothing remained payable on the last day of the previous year. Therefore, in view of the principles laid down .....

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the newspaper publication was inaugurated 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 .....

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ssessment 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 machinery and electrical installations were not ready for use prior to 22.10.2007. Therefore, considering the totality of the facts and circumstances of the case, we hold that disallowance of 50% out of the total depreciation claimed by the assess .....

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008-2009. First we will deal with the Revenue s appeal being ITA.No.338/Hyd/2015. The only effective ground raised by the department reads as under : 2. The Ld. CIT(A) ought to have upheld the disallowance made u/s.40(a)(ia) as the TDS remittance made before the due date of filing of return of income was not in conformity with the provisions of section 40(a)(ia). 2. Briefly the facts relating to this issue are, the assessee a company is engaged in the business of publishing of news papers. For t .....

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ng tax at source. Rent ₹ 11,02,000 Transport Charges ₹ 36,47,987 Rent on Education Centre & District Offices. ₹ 33,79,135 Total Rs.1,07,14,603 3. Since the assessee had failed to deduct tax while making the aforesaid payments, the A.O. disallowed the expenditure claimed by applying the provisions of section 40(a)(ia) and added back the amount of ₹ 1,07,14,603 to assessee s income for the impugned assessment year. Being aggrieved of such disallowance, assessee preferre .....

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he 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 .....

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not sustainable. The Ld. CIT(A) having deleted the addition by following the decision of the ITAT, Vizag Special Bench as aforesaid, we do not find any infirmity in the order of the Ld. CIT(A), which is accordingly upheld. Ground No.2 raised by the Revenue is dismissed. 5. In the result, appeal of the Revenue is dismissed. ITA.No.351/Hyd/2015 - A.Y. 2008-09 : 6. In this appeal, assessee has raised in total 9 grounds. Ground Nos. 1 and 9 being general in nature do not require any specific adjudi .....

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g to ₹ 38,43,674. 7. At the outset, we propose to deal with the grounds raised by the assessee on merits. Briefly the facts relating to the issue in dispute are, assessee, as stated earlier, is engaged in the business of newspaper publication. Assessment in the case of the assessee was completed under section 143(3) of the Act by virtue of the order passed under section 143(3) of the Act on 06.12.2010 determining the loss at ₹ 1,47,12,817. Subsequently, as observed by the A.O. in the .....

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ther observed 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 .....

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s 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 to complete the assessment exparte under section 144 of the Act. The A.O. noticed that the depreciation claimed by the assessee at ₹ 3,45,43,794 comprises of depreciation claimed at 15% amounting to ₹ 76,87,348 on opening WDV of plant and machinery worth ₹ 5,12,48,988 a .....

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e is not eligible for depreciation @ 15% on opening WDV of plant and machinery, electrical equipment, but is eligible for 50% of the depreciation. Therefore, he restricted the depreciation at 7.5%. Accordingly, he disallowed the excess depreciation of ₹ 38,43,674 and the loss determined was reduced by that amount. Being aggrieved of disallowance of depreciation, assessee preferred appeal before the first appellate authority. 8. In the course of hearing of appeal before the Ld. CIT(A), it w .....

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hough, assessee has not claimed any depreciation in the initial year of purchase, but it cannot prevent the assessee from claiming depreciation at the appropriate rate in the subsequent assessment year. It was also submitted that without disturbing the WDV of the assets of the earlier years, it will not be possible to change the WDV of its assets for the subsequent assessment year. In support of such contention, assessee relied upon the decision of Hon ble Bombay High Court in the case of CIT-LT .....

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tually 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 autho .....

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01.04.2007. Moreover, there being no material before the department that assessee has not put to use the assets for the purpose of its business, disallowance of depreciation only relying upon the fact that inauguration of newspaper took place on 22.10.2007 is without basis. 11. Learned D.R. on the other hand, referring to letters of the assessee submitted before the A.O., which forms part of the assessment record, submitted that assessee in the said letters have categorically stated that busines .....

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een from the reasons recorded as well as the discussions made in the assessment order, only on the basis of the fact that the newspaper publication was inaugurated 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. Ld. CIT(A) has also confirmed the view express .....

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of less than 180 days in that previous year, deduction under section 32(1) in respect of such asset shall be restricted to 50% of the amount calculated at the percentage prescribed for an asset. Thus, 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 .....

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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 that business of assessee had commenced on 22.10.2007. The assessee on the other hand, has pleaded that .....

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ere not put to use for the purpose of assessee s business prior to 22.10.2007. In this regard, it is necessary to observe that the words used in section 32(1) are used for the purpose of business or put to use for the purpose of business. The provision does not use the expression commencement of business . 13. The expression used for the purpose of business or put to use for the purpose of business as employed in section 32(1) of the Act has come up for interpretation time and again before diffe .....

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ala High Court in the case of CIT vs. Geo Tech Construction Corporation (2000) 244 ITR 452 held that if the asset on which depreciation is claimed is ready for use, then depreciation is allowable. While coming to such conclusion, the Hon ble High Court observed that the word used in section 32(1) is to be given a wider meaning. The Hon ble Madhya Pradesh High Court in the case of CIT vs. Premier Industries (India) Limited (2010) 323 ITR 672 (M.P.) held that even if a machine is kept idle but is .....

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