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2016 (1) TMI 867 - ITAT DELHI

2016 (1) TMI 867 - ITAT DELHI - TMI - Disallowance of depreciation - no business activity has been carried out by the assessee during the Assessment Year under consideration - Held that:- The assessee company is entitled for depreciation on computer and software during the year under assessment (Assessment Year 2008-09 and 2010- 11) though not actually used for the purpose of business on the grounds inter alia that when during the previous Assessment Year i.e. Assessment Year 2007-08, the assess .....

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preciation; that though the usage of machinery in the business was not in the relevant assessment year but in the earlier financial year its entire machinery remained in “ready to use” mode because the assessee company has come up with logical explanation that due to not having received any order for technical consultancy nor it carried out any training activity, the income from its business comes to ‘nil’; that when the A.O. has accepted the contention of the assessee that it has made sales rep .....

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he claim of sale and purchase but when the Revenue has accepted the audited profit and loss statement, they cannot be allowed to sail in two boats; that when the assessee company has not sold, discarded, demolished or destroyed the assets during the previous year, the assessee has certainly become entitled for depreciation.- Decided in favour of the assessee.

Expenses against the income - income from other sources OR business income - Held that:- CIT(A) has himself allowed the expendi .....

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wise, when the trading by the assessee company is accepted by the Revenue as incidental to its main business during the earlier years, the income cannot be treated as income from other sources rather it is a business income. - Decided in favour of the assessee. - I.T.A. No. 713 /2012, I.T.A. No. 5930/Del/2013 - Dated:- 18-1-2016 - Shri N. K. Saini, Accountant Member And Shri Kuldip Singh, Judicial Member For the Appellant : Shri R. M. Mehta, Adv For the Respondent : Ms. Kesang Y Shirpa, Sr. DR O .....

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ctively on the grounds inter alia that: A. I.T.A.No. 713/Del./2012: 1. On the facts and circumstances of the case and in law, the learned CIT (Appeals) has erred in upholding the disallowance of depreciation of ₹ 44,61,784/- made by the Assessing Officer on the ground that no business has been carried on by the appellant. The CIT (A) ought to have allowed the depreciation claimed because the appellant had carried out the allied business activity of sale of insurance related books. 2. On th .....

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expenditure incurred by the appellant under the heads "Insurance Expenses" - ₹ 5003/-, "Miscellaneous Expenses" ₹ 16,840/- and "Travelling & Conveyance" - ₹ 5,355/ - without specifying any reason for not allowing the same. B. I.T.A.No. 5930/Del/2013: On the facts and circumstances of the case and in law, the learned CIT (Appeals) has erred in upholding the disallowance of depreciation of ₹ 8,88,239/ - made by the Assessing Officer on the .....

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ted to scrutiny and consequent upon the notices issued u/s 142(1) and 143(2) of the Act, Shri J.P. Chawla, CA along with Shri A.K. Mathur, AR attended the proceedings filed necessary details and discussed the case. 4. The assessee is engaged in the business of I. T. Services and was providing technical consultancy and training in the past. However, during the year under consideration, the company has not provided any consultancy and training and shown the income as nil in the P & L account s .....

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at ₹ 5,000/- p.a. on computer. The assessee has failed to furnish addresses of the employees, vouchers in respect of sale and purchase have not been submitted. So, the income declared by the assessee as trading income and other income amounting to ₹ 52,503/- is assessed under the head income from other sources and the claim of business expenses of ₹ 22,485/- (personal expenses), ₹ 3,57,531/- (Administration, selling expenses and ₹ 44,61 ,784/- (depreciation as per .....

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2012 and ₹ 8,88,239/- in I.T.A. No.5930//Del/2013 without having any material on record to prove the fact that the assessee company had closed its business prior to the Assessment Year 2008-09 and in fact, the assessee company has made sales during these Assessment Years but due to lack of business order, trading business could not be carried out. 8. On the other hand, Ld. D.R. relied upon the order passed by Ld. CIT(A) and contended that since no trading business has been shown by the ass .....

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purchase. The appellant has provided only computerized ledger account and original sales / purchase voucher have not been produced even during the appellate proceedings. The authorities below noticed that most of the sales are shown to the sister concern M/s. Ritu Insurance Services Ltd. related to insurance books etc. and there is no evidence of purchasing of material for M/s. Chawla Printers. So, in the absence of vouchers, the claim of sale and purchase of assessee is declined. Ld. CIT(A) rel .....

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the assessee during the Assessment Years 2008- 09 & 2010-11 on the grounds inter alia that when the assessee has not received any order for providing technical consultancy nor it has carried out any traiding activities, the question of claiming depreciation on computer and other assets does not arise; that assessee has failed to prove that the computer and other accessories continued to be installed at the old premises; that the assessee does not own any property where these computer could .....

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ate its business activities therefrom, they were not supposed to come to the conclusion that no business activities were being carried out by the assessee company. At the same time, Ld. CIT(A) by allowing the expenditure of the assessee relating to audit fees (Rs.20,000/), communication expenses (Rs.3446), legal and professional charges (Rs.39256/-), electricity and water (Rs.3,273/-), bank interest and charges (Rs.7353), printing and stationary (Rs.482) u/s 57 of the I T Act. directed the A.O. .....

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nder assessment. 13. Identical issue has come up for determination before the Hon'ble Jurisdictional High Court in case entitled CIT Vs Yamaha Motor India (P) Ltd, 328 ITR 297. For ready reference, the operative part at para 6, 7 & 8 of the judgement in Yamaha Motor India (P) Ltd. (supra) is reproduced as under: 6. The relevant and related provisions, in this regard, for decision of the issue are Section 32(1) which requires that the assets are used for the purposes of the business, Sect .....

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s Services vs. CIT, 123 ITR 404. In this view of the matter, we need not refer the judgments of any other Court as we are bound by the earlier judgments of this Court. In fact, we also agree with the ratio of both the decisions which hold that as long as the machinery is available for use, though not actually used, it falls within the expression "used for the purposes of the business" and the assessee can claim the benefit of depreciation. Looking a the facts from this point of view, a .....

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not stand together. However, if we adopt a harmonious reading of the expressions "used for the purposes of the business" and "discarded" then it would show that "used for the purposes of the business" only means that the assessee has used the machinery for the purposes of the business in earlier years. It is not disputed that in the facts of the present case, and as discussed above, that the machinery in question was in factusecf1fltl1e previous year and depreciatio .....

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the depreciation is allowed on discarded machinery after allowing inter alia an adjustment for scrap value, yet, on the other hand user would be required of the discarded machinery which use is not possible because of various reasons viz. the age of the machinery, or that it has become obsolete as new technology has come in and so on. We thus hold that the discarded machinery may not be actually used in the relevant previous year as long as it is used for the purposes of business in the earlier .....

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ancy and training fee at ₹ 4,35,90,000/- , income from trading activities at ₹ 9,75,607/- and other income at ₹ 3,50,381/- but shown the income from technical consultancy and training fee at nil in Assessment Years 2008-09 and 2010-11, it is entitled for depreciation u/s 32 of the Act as the same has not been discarded by the assessee company; that when the machinery in question was in fact used in the earlier year and depreciation was allowed on block of assets, the assessee c .....

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it has made sales of ₹ 5,84,355/- representing trading items incidental to its main business activity and has earned profit of ₹ 49,715/- from such activity, he cannot disallow the depreciation claimed by the assessee; that even Ld. CIT(A) has erred in doubting the trading activities stated to have been carried out by the assessee company during the Assessment Year 2008-09 without any investigation though in the past, such activity has been accepted by the Revenue specifically; that .....

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