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2015 (7) TMI 833

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..... Decided in favour of assessee. Clim of depreciation - CIT(A) denied depreciation for the reason that assessee has not carried on any business during the year and the assets were not put to use - Held that:- As relying on case of ACIT Vs. Chennai Petroleum Corporation Ltd. [2009 (8) TMI 970 - ITAT CHENNAI] in order to claim depreciation under s. 32 it is not necessary that the machinery in question should have been actually used in the relevant previous year for the purpose of business and it is sufficient if the same is kept ready for use during the relevant previous year, though not actually used due to circumstances beyond the assessee's control. See. 32 has received several amendments but there is no amendment which has clarified that depreciation would be allowed only if the asset in question was actually used during the relevant previous year and merely keeping ready for being used in the business was not sufficient. When the interpretation of s. 32, especially of the word "used" appearing in that section was the subject-matter of a judgment of the Bombay High Court as long back in 1937 in the old IT Act, the same word which is used in s. 32 of the 1961 Act must receive th .....

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..... inery and all the plant machinery were old. It was the observation of the Assessing Officer that no evidence / details were filed at the time of regular assessment or at the time of completion of assessment on 24.12.2008 to show that machinery purchased in 1999 was after STPI approval, therefore he denied exemption under section 10A of the Act. Assessee preferred appeal before the Commissioner of Income Tax (Appeals) contending that claim of exemption made under section 10A is proper. The assessee has furnished various details in support of its contention that claim under section 10A is in order. On examining the details furnished by the assessee and the remand report submitted by the Assessing Officer, the Commissioner of Income Tax (Appeals) allowed the claim of the assessee under section 10A against which Revenue is in appeal before us. 5. In the grounds of appeal, Revenue contended that Assessing Officer disallowed assessee's claim since the assessee did not furnish details about new machinery purchased and used in 10A unit. The assessee has not furnished any details to substantiate its claim that new machinery was used in 10A unit and the value of old machinery did no .....

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..... na High Court in the case of CIT v. Excel Softech Lt (2008) 13 DTR (P H) 201 that exemption u/s 10 B is admissible, even when development of computer software was started prior to AY 2001-02. In appellant's case, the company itself was incorporated on 24.09.1999 and business was carried out only thereafter. Even various items of computers and stentura machines were imported thereafter. He further argued that the AO has not gone through 154 application dated 22.02.2002. It is clear from the above that 35 computers and 25 stentura machines were put to use only after 31.3.2000 and the depreciation for the AY 2001-02 has been claimed accordingly. The return of income for the AY 2001-02 was filed on 28.03.2002 duly accompanied by audit report and report u/s l0A of the Act in form no. 56F and accordingly deduction u/s 10A of ₹ 18,78,912/- was claimed as per law. 4.2 The written submission of the appellant was forwarded to the AO on 08.09.2010 for his comments. The I.T.O. Company Ward 11(1) vide letter dated 02.06.2010 requested for further time because all the issues needed to be verified and investigated. Subsequently) he has submitted his report vide letter No.F.no.AABCK37 .....

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..... or the purpose of working out eligible depreciation. Hence, the additions made in the ex-parte order needs to be deleted. 4.4 I have carefully considered the facts of the case, submission of the appellant, remand report of the AO and the rejoinder of the appellant. I have also perused various details including copies of the green card issued by the Director of STPI, customs bond register, Form NO.56F etc. The ld. AR has also stated that the entire proceeds were received in foreign exchange and though the appellant was also entitled for deduction u/s. 80HHC, the same was not claimed since the appellant was entitled for deduction u/s l0A. The AO has also not contested the claim of the appellant in the remand report. Hence, the disallowance of claim u/s l0A is deleted. Accordingly, the ground is allowed. 8. On going through the order of the Commissioner of Income Tax (Appeals) we find that assessee has purchased machines after approval of STPI. Computers and stentura machines were imported thereafter. The return of income for the assessment year 2001-02 was filed on 28.3.2002 duly accompanied by audit report and report in Form No.56F and deduction under section 10A was claimed .....

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..... or the reason that assessee has not carried on any business during the year and the assets were not put to use. It was the submission of the assessee that plant machinery was ready for use and failed to get orders from customers, in other words, plant machinery was kept ready for use. The Third Member of Chennai Bench of this Tribunal in the case of ACIT Vs. Chennai Petroleum Corporation Ltd. (supra) considered the situation where depreciation was not allowed by the Assessing Officer on the machinery kept ready for use, the assessee could not use the machinery for want of raw materials. In such circumstances, Third Member of Chennai Bench held that assessee is entitled for depreciation as the machinery was kept ready for use during the entire previous year. The relevant portion of the order is as under:- Even after the introduction of block of assets concept, there is no change in the legal position to the effect that the assessee would be entitled to depreciation even though the assets in question were not actually put to use in the relevant previous year, but were kept ready for being put to use for the purpose of the business. Thus, in order to claim depreciation under s .....

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