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TMI Blog2017 (6) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... urnace : 1,40,56,407 (at the assessee's Fastener Division, Padi) b) Disallowance of deduction under section 80-IB : 2,77,65,509 We shall take up each in seriatim. 3. The claim for depreciation was made on the basis of the plant under reference, a furnace, being an air pollution control equipment (eligible for depreciation at the rate of 100 per percent), at 50% (i.e., 50% of the eligible rate) of its cost of Rs. 281.13 lacs, being purportedly commissioned on 31/3/2004, the date on which it was added as an item of 'Fixed Assets' (refer Annexure 5 to Form 3CD). The assessee was called upon to justify it's claim; adduce proof of commissioning as well as the date on which the plant (hardening and tempering furnace) landed in the assessee's factory. The assessee replied (vide letter dated 27/12/2006), stating that it had wrongly classified the machinery as an air pollution control equipment, which though is an energy-saving device (being an item under Col. III(8)(ix)(A)(b) of Part A of Appendix I to the Income Tax Rules, 1962 or 'Rules'), entitled to depreciation. at the rate of 80%. The claim was accordingly stated as withdrawn for the balance excess, i.e., Rs. 28,11,281. The same p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.. 1,12,45,126. Aggrieved, both the parties are in appeal. 4. Before us, the assessee's principal case was that the machinery had been subject to trial run (i.e., at the supplier's premises) on 18.02.2004, prior to it's dispatch, in the presence of the assessee's engineers, adducing a test certificate/ note by the supplier certifying its performance as satisfactory. That is, it had been put-to-use, relying on the decision in Asst. CIT v. Chennai Petroleum Corporation Ltd. [2010] 125 ITD 396 (Chny) (TM) [2 ITR (Trib.) 325]. No penalty could be levied even if the assessee's claim is wrong. On being questioned about the date of receipt of the machinery by the assessee at its' premises, the ld. AR could furnish no satisfactory answer, even as the same would in any case have to be with reference to some material on record. The Revenue's case was that the assessee's entire conduct, right from the claim of depreciation as an air pollution control equipment, is misleading and needs to be kept in view for the purpose of levy of penalty as well as it's claim of having furnished all the material facts. Further, the excess was not withdrawn per a revised return and, further, was only on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. CIT [1975] 98 ITR 167 (SC)). Be that as it may, the plant being not received (at the assessee's site) the question of it being commissioned or put to trial production (by year-end) does not arise. The controversy as to whether the machinery, which is ready-to-use, could be regarded as 'put to use', thus, does not arise in the given facts and circumstances of the case, even as ld. CIT(A) relied on Maps Tours and Travels (supra), while the ld. DR relies on Vinod Bhargava v. CIT [2014] 367 ITR 122 (TN & AP). In the latter two decisions, it stands clarified that mere installation or preparation for user cannot amount to user, and that there must be actual, effective and real user in the commercial sense, referring to case law, even as the Hon'ble jurisdictional High Court in Maps Tours & Travels (supra) also draws on the decision in Liquidators of Pursa Limited v. CIT [1954] 25 ITR 265 (SC). The test running at the supplier's premises, as contended before us, is only to confirm if the plant being delivered, being from a foreign land, is in a OK state, and cannot in any manner be regarded as commissioning of it's plant by the assessee. The assessee's case, as made before us, is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's explanation/case as advanced before us. On merits, the argument is, again, without any basis, both on facts and in law. On facts, it presumes acquisition, considering on that basis the relevant capital asset as entering the block of assets, w.r.t. the WDV of which only depreciation is allowable. The transfer of movable property, which the subject machinery is, is on delivery, which has not taken place as on 31.3.2004, and only where-upon the asset can be said as having been acquired. There is nothing on record evidencing that delivery had taken place at the assessee's premises by that date. The argument is without any factual basis and, accordingly, fails. Further, even assuming constructive delivery at the sellers' premises, so that the plant stands acquired, it is only upon being put to use that it shall enter the block of assets. This is as depreciation, though reckoned with reference to WDV of a block of assets, is yet allowed only on the several assets comprising it (for the time being) on being put-to-use. This is abundantly clear from the language of the second proviso to s. 32(1), which reads as under: 'Depreciation. 32. (1) In respect of depreciation of- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Indian Refrigerator Company Ltd. (in ITA Nos.3949/Mum/2013 & 941/Mum/2014 dated 18/1/2017). Not a single case law supporting the proposition stands advanced, which, in fact, cannot be said to be or cast in terms of a proposition, with, on the contrary, the Revenue placing reliance on case law, which are on the point, covering different aspects of the matter. In any case of the matter, that depreciation for the first year is subject to the condition of user is unexceptional, being also implicit in the assessee's contention, as made before us, i.e., of the furnace having been subject to trial production and, thus, 'used', and it's claim at 50%, which is only on being put to use for a period less than 180 days during the relevant year. The assessee's claim, in fact, is not a wrong or erroneous claim, much less bona fide, but a false claim. Finally, we may consider the aspect of the claim for depreciation at a higher rate, since withdrawn, i.e., for Rs. 28.11 lacs, which is the subject matter of the Revenue's appeal. We, again, observe the assessee's claim as sans any explanation. The said withdrawal has only been on the Revenue (AO) seeking a specific explanation from the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear at the regular (normal) rate of depreciation! In fact, the claim was raised before the first appellate authority as well, though was not pressed (refer Sr. No.2, pg. 1 of the penalty order). Again, the Tribunal, as it appears, restored the matter back to the AO, i.e., for the entire claim of Rs.. 140.56 lacs, including the 'withdrawn' claim for Rs. . 28.11 lacs (refer para 3(3)/pg.2 of the penalty order). Each case must depend on its circumstances (ref.: CIT v. Vedlapatla Veera Venkataramiah. [1943] 11 ITR 308 (Mad); Maney & Co. v. CIT [1963] 47 ITR 434 (Ker)). The law with regard to admission is again trite, with in fact 'revision' of a return of income, where not bona fide, and only on detection, so that it (the revision) is not voluntary, is not valid in the eyes of law, so as to save penalty. Reference in this context be made to the decisions in CIT v. JKA Subramania Chettiar [1977] 110 ITR 602 (Mad); Sivagaminatha Moopanar v. CIT .[1964] 52 ITR 591 (Mad); Ayyasoami Nadar & Bros. v. CIT [1956] 30 ITR 565 (Mad). Nothing thus turns on the plea as to 'withdrawal' of the claim, which is, again, false, with there being nothing to show that the excess claim was inadvertent, not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re no basis for the claim in the absence of any positive income (from the four eligible units), the assessee relied on the decision in CIT v. Sona Koyo Steering Systems Ltd. [2010] 321 ITR 463 (Del). Why, the tribunal itself had for the following year, i.e., AY 2005-06, remanded back to the file of the AO for consideration of the assessee's claim with reference to the said decision (in ITA No.956/Mds/2011 dated 15.07.2016/copy on record). 8. We have heard the parties, and perused the material on record. The facts necessary for the computation of income, i.e., qua the said deduction, reflecting non-set off of the loss from two eligible units against the profit from the other two units, is borne out by the assessee's return (copy on record) as well as other material on record. Further, there is no unabsorbed brought forward loss from the two profit making units (refer para 4, pg. 4 of the assessment order), on the profit from which the deduction stands claimed. Section 80IB(13) makes, inter-alia, the provision contained in sub-section (5) of s. 80-IA, which reads as under, applicable to s. 80-IB: 'Deductions in respect of profits and gains from industrial undertakings or enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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