TMI Blog2023 (6) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had purchased assets and created liability and later on it found that the assets were not suitable for the business and the assets were returned to the vendor. Therefore the case law relied on by the ld. AR of Mahindra Mahindra Ltd. [ 2018 (5) TMI 358 - SUPREME COURT] is distinguishable on facts of the case on hand. CIT(A) has passed a good and reasoned order and find no reason to interfere with his order. Accordingly the grounds of the assessee are rejected. Computation of revised profits as per the section 10A if disallowance of the depreciation on assets and liability written off is upheld - HELD THAT:- Since we have upheld the order of the CIT(A) treating the disallowance made as business income and the issue has not been examined in the light of section 10A, therefore considering the documents submitted by the assessee, remit this issue to the AO for examination in light of section 10A of the Act and decision in accordance with law, after providing opportunity of being heard to the assessee. The assessee is directed not to seek unnecessary adjournments and cooperate in early disposal of the case. This ground is allowed for statistical purposes. - ITA No.27/B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate that computers systems do not last for 16 years. 3.6. As regards denial of depreciation of Rs. 2,05,57,909/- in respect of software tools: 3.6.1. The Learned Commissioner (Appeals) ought to have allowed depreciation of Rs. 2,05,57,909/-, when the Learned Assessing Officer in the remand report had stated that However, considering the nature of business the assessee is engaged in i.e. Software development, it is possible that these software tools were used for assessee business purpose . 3.6.2. Without prejudice to the above, the Learned Commissioner (Appeals) is not justified in denying depreciation by stating that tools requires registration at the time of installation as at that point of time some 'PIN' is required to be entered. So the date of first usage of such tools can always be ascertained', by failing to appreciate that such information would not be available with the Appellant as the shelf life of software does not last for 16 years. 3.6.3. The Learned Commissioner (Appeals) ought to have allowed depreciation on software tools on the same principles on which the depreciation on plant and machinery [Scan Emulator Pod] was allowed. 3.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housekeeping work and pantry/ cafeteria for the welfare of the employees, could have some weight, being a normal practice ,ought to have allowed depreciation on office equipments. 4. As regards the addition of Rs. 26,03,654/- [Rs. 10,62,493/- + Rs. 15,41,161/-] in respect of liability written off: 4.1. The Learned Commissioner (Appeals) is not justified in making addition of Rs. 26,03,654/- [Rs. 10,62,493/- + Rs. 15,41,161/-] in respect of liability written off by erroneously invoking section 28(iv) of the IT Act. 4.2. The Learned Commissioner (Appeals) is not justified in failing to appreciate that liability written off in respect of depreciable asset (i.e., software tool) falls under section 43(6)(c)(i)(B) and not under section 28(iv) of the IT Act. 4.3. The Learned Commissioner (Appeals) is not justified in failing to appreciate that there are no provisions under IT Act to treat the depreciation allowed in the past years as income in the subsequent year. 4.4. Without prejudice to the above, the Learned Commissioner (Appeals) has failed to appreciate that waiver of any amount payable would amount to receipt of cash which therefore does not fall under section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93,600/- dated 17.08.2005 and in regard to balance of assets, the AR of the assessee stated that it was very difficult to produce the copies of all the new assets purchased and contended that sample of two assets have already been furnished and requested to complete the assessment on the basis of evidence furnished. The AO after referring to section 32 of the Act observed as under:- 3.2 As per the provisions of section 32 of the I.T.Act, the depreciation shall be allowed when the assets are owned by the assessee and used for the purpose of business or profession. The assessee was specifically asked to produce the evidence in respect of the ownership of assets. The assessee s AR expressed his difficulty to furnish the evidence with regard to the ownership of the new assets acquired by the assessee during the previous year except for two sample invoices. Hence, it is reasonably presumable that the assessee does not own the properties and thus it is not eligible for claim of depreciation. Hence, the depreciation claimed on the new assets, except the assets relating to which the invoices have been produced is rejected and added to the income returned. The computation of depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stopped from giving fresh reasons for the disallowance after examining the same. In this case, at the time of assessment the appellant had failed to prove the ownership of the fixed assets. So the depreciation had been disallowed by the AO on the basis of the same and he was not required to examine the aspect of 'put to use' or 'business purpose'. However when the additional evidence was filed, the AO was well within his right to examine the allow ability of the depreciation on the basis of 'put to use' or 'business purpose' and the onus was upon the appellant to prove the same by bringing sufficient material on record as it had claimed depreciation. The appellant cannot blame the AO for raising the issue after 14 years as here again the fault lay with the appellant of not timely producing the necessary evidence. This is also noted that the appellant had delayed even the appellate proceedings by not attending the hearings repeatedly. In earlier stages it had not even intimated the correct address for service of hearing notices. The AO has correctly examined the additional evidence in details and so the arguments of the appellant on this issue are f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of depreciation on the vehicles is upheld. 4.9 For plant and machinery, the details on the invoices show that a Scan Emulator Pod and a starter kit, with total value of Rs. 84,240/- were duly delivered on 24.10.2005. Since these items do not need any specific installation and can be used instantly, the depreciation on the same at half the normal rate would be available to the appellant as business usage of the same cannot be doubted or it can always be considered that the same were available for use. However as regards the balance amount of Rs. 1,70,768/-, since no such details of the delivery have been produced by the appellant, the depreciation has rightly been disallowed by the AO. 4.10 As regards software tools, it is a common knowledge that usage of such tools requires registration at the time of installation as at that point of time some `PIN' is required to be entered. So the date of first usage of such tools can always be ascertained. However the appellant has not brought anything on record to show the same. Unless installed, these tools can also not be considered as ready to use. So the action of the AO in disallowing depreciation on these software tool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce all of the invoices. 1.3. The depreciation schedule as per the provisions of the IT Act is herewith enclosed as Annexure 2. 1.4. The breakup of the additions to fixed assets made during the impugned year is as under: Sl. No. Description of Assets Additions made during April 2005 to September 2005 Additions made during October 2005 to March 2006 Total 1 Plant Machinery - 2,55,008 2,55,008 2 Computer Systems 26,46,706 2,06,463 28,53,169 3 Software Tools 3,04,45,609 76,35,142 3,80,80,751 4 Vehicles - 7,60,896 7,60,896 5 Office Equipment 2,31,943 20,085 2,52,028 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... France). Consequent to the said acquisition the Assessee company applied for a name change and approval for the name change was obtained from the Registrar of Companies on 07.07.2006 and accordingly the name of the Assessee company was changed to TES P.V. Electronic Solutions (P) Ltd . Even at this point in time, the Appellant did not hold any shares in it. 1.9. It is submitted that the Assessee was acquired by MindTree Ltd., on 17.12.2007 and subsequently its name was changed to MindTree Technologies Ltd. Upon company petition filed for merger of the appellant company with that of MindTree Ltd., the Honorable Karnataka High Court approved the merger with the appointed date being 01.04.2008. 1.10. The aforesaid facts were brought to the notice of the Learned Assessing Officer. The Appellant, in the course of assessment proceedings, submitted copy of the fresh certificate of incorporation consequent upon change of name and copy of the order of Honourable Karnataka High Court in respect of merger of companies. 1.11. For the above reasons, the documents regarding fixed assets could not be immediately retrieved by the Appellant. The frequent change in the ownership of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscrepancies were noticed on such verification. 1.21. It is amply clear that the statutory auditors have verified the particulars regarding the fixed assets. The statutory auditors have also observed that the Appellant had a programme of physical verification of the fixed assets and physical verification of fixed assets was done at reasonable intervals. The statutory auditors have stated that no material discrepancies were noticed on physical verification of the fixed assets. 1.22. In the CARO Report produced during the course of assessment, the statutory auditor had certified the correctness and appropriateness with respect to the fixed assets as under: the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets; the fixed assets have been physically verified by the management at reasonable intervals; any material discrepancies were noticed on such verification and if so, the same have been properly dealt with in the books of account; 1.23. A reference may be made to the Tax Audit report in Form 3CD certified by the Chartered Accountant as per the section 44AB of the IT Act, the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed assets. They have failed to appreciate that the statutory auditors have verified the additions to fixed assets under CARO and the tax auditors have certified the additions for reporting in Form 3CD. 1.28. It is submitted that the statutory audit and tax audit were conducted by one of the most reputed audit firms i.e., Deloitte Haskins Sells. The lower authorities ought not to have brushed aside their report and certification. In this regard, we rely on the following decisions: CIT vs. VibhuTalwar [2011] 11 taxmann.com 419 (Delhi); UP Financial Corpn. vs. JCIT [2006] 280 ITR 100 (Allahabad); ACIT vs. Best Crompton Engg. Projects Ltd., [2011] 12 taxmann.com 34 (Chennai); 1.29. In Kasat Textiles Pvt. Ltd. vs. ACIT 66 ITD 510 (Pune), it was held that information in a person s books of accounts, unless proved wrong, should be accepted. 1.30. Thus, it is undisputed fact that the aforesaid Auditor s Report and Form 3CD have not been disregarded by the lower authorities either during the assessment proceeding or in the remand proceeding. It is also submitted that for all other purposes the lower authorities have accepted the Auditor s Report and tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ought to have allowed the depreciation. Such being the case, it is submitted that the depreciation could have been allowed on the basis of business exigency. 1.37. Without prejudice to the above, it is submitted that the Learned Commissioner (Appeals), having not doubted that the Appellant acquired the impugned assets at the stated costs during the course of the previous year, is not justified in insisting on absolute evidence of use after the lapse of 16 years rather than applying the principle of preponderance of probability and prudency . 1.38. It is submitted that lower authorities have not doubted the transaction of purchase of fixed assets. It is also submitted that the lower authorities ought to have appreciated that even after the lapse of 14 years, the Appellant put its efforts to get vendor confirmation for having purchased the software tool. 1.39. It is submitted that the lower authorities ought to have allowed depreciation by applying the principle of preponderance of probability . 1.40. It is submitted that the Income-tax Act,1961 is not governed by strict rules of evidence and it is the preponderance of probabilities of events in its normal course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing decisions wherein Courts have applied the principles of preponderance of probabilities : UOI vs. GanpatiDealcom (P.) Ltd., [2022] 447 ITR 108 (SC); PCIT vs. Ennoble Construction [2022] 447 ITR 444 (Kar.); 1.48. It is submitted that the lower authorities are not justified in denying depreciation without looking into substance over form. In this regard, we rely on the following decisions: JuggilalKamlapat (1971) 1 SCC 477; Poona Electric Supply 57 ITR 121 SC; Karnataka State Beverages Corporation Ltd. vs. CST (2008) 12 STJ 30 (CESTAT-Bangalore); 1.49. As submitted earlier, it is humanly impossible to carry out the scale of operations achieved by the Appellant without the impugned assets. It is also submitted that it is impractical for the lower authorities to insist on furnishing the evidence, now, regarding asset being put to use which were acquired 16 years back. 1.50. As stated earlier, the Appellant company was subject to change in ownership and management. During the impugned previous year, the present company never had any shares nor any control in the Assessee company. In the light of this, the Appellant furnished what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia P. Ltd. vs. ACIT [2014] 31 ITR (Trib.) 722 (Delhi) [Para 12] Swami Premananda vs. CIT [2009] 180 Taxman 368 (Mad) In the following decisions, Courts have recognised the principles of impossibility of performance: Dalmia Power Ltd., vs. ACIT (2020) 420 ITR 339 (SC) [Para 8]; Life Insurance Corporation of India vs. CIT [1996] 219 ITR 410 (SC); Karnataka State Industrial and Infrastructure Development Corporation Ltd., vs. DCIT [2021] 431 ITR 255 (Karnataka); PCIT vs. Ennoble Construction [2022] 447 ITR 444 (Kar.) [Para C(i)]; City Union Bank Ltd., vs. ACIT (2020) 425 ITR 475 (Madras) [Para 14]; Lalitha Jewellery Mart (P.) Ltd., vs. DCIT (2017) 399 ITR 425 (Madras) [Para 42]; 1.59. In UOI v. Harjeet Singh Sandhu [2001] 5 SCC 593, the court went by the dictionary meaning of the term impracticable in proximity with the term impossibility . It is submitted that, even in the instant case, the lower authorities insisting on absolute evidence of use after the lapse of 16 years is sheer impracticable , thereby it is impossible for the Appellant to comply with. 1.60. Without prejudice to the above, it is submitted that the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntical facts and circumstances, for AY 2007-08 the user test was never the basis of the Learned Assessing Officer of denying the depreciation during the assessment proceeding or during the remand proceeding. 1.69. We rely on the decision in PCIT vs. Petronet V K Ltd., 2016-TIOL-3066HC-AHM-IT, [Paras 1, 2 3]. 1.70. It is submitted that during the remand proceeding before the Learned Assessing Officer for AY 2006-07, the Appellant furnished vendor confirmation for having purchased the software tool. It is also submitted that the Appellant furnished copy of the bill of entry for home consumption attested by the Customs authority of India. Even this would establish that the software tool was used upon customs clearance. 1.71. Such being the case, it is submitted that user test cannot be the basis for denying the depreciation for the impugned AY 2006-07. 1.72. In the following decisions, the Courts have applied the principle of consistency : Parshuram Pottery Works Ltd. v. ITO [1977] 106 ITR 1 (SC) Bharat Sanchar Nigam Ltd. v. UOI [2006] 282 ITR 273 (SC) CIT v Excel Industries Ltd [2013] 358 ITR 295 (SC) Berger Paints India Ltd. v. CIT [2004] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed depreciation in an identical facts and circumstances in the Appellant s own case for the AY 2007-08. Copy of the order of the Learned Commissioner (Appeals) for the AY 2007-08 is enclosed as Annexure 6. 3. As regards denial of depreciation of Rs. 12,808/- in respect of plant and machinery: [Ground Nos. 3.7.1 3.7.2] 3.1. It is submitted that the Learned Commissioner (Appeals) is not justified in denying depreciation of Rs. 12,808/- in respect of addition to plant and machinery of Rs. 1,70,768/-, when in fact the Learned Assessing Officer had not denied the same in the assessment order. 3.2. As submitted earlier, the Appellant claimed total depreciation of Rs. 2,46,92,097/- [i.e., in respect of both WDV assets acquired during the year], the asset wise breakup of the same is as under: Sl. No. Description of Assets Depreciation claimed 1 Plant Machinery 19,126 2 Computer Systems 32,14,566 3 Software Tools 2,05,98,380 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. Description of Assets Depreciation allowed 1 Plant Machinery 19,126 2 Vehicles 57,067 3 Office Equipment 36,928 3.7. Hence, it is submitted that depreciation claimed by the Appellant on plant and machinery has not been denied by the Learned Assessing Officer. 3.8. It is also submitted that the Learned Commissioner (Appeals) has not issued any notice of enhancement during the appellate proceeding. 3.9. Such being the case, it is submitted that it is not permissible for the Learned Assessing Officer to advise on denial of depreciation (i.e., in the remand report) and for the Learned Commissioner (Appeals) to deny the depreciation claimed by the Appellant on plant and machinery. 3.10. Without prejudice to the above, it is submitted that the Learned Commissioner (Appeals) ought to have allowed depreciation of Rs. 12,808/- on same principles on which the depreciation on plant and machinery of Rs. 84,240/- was allowed by him. 4. As regards den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same was capitalized in the books of accounts on 23.06.2004 (i.e., FY 2004-05/AY 2005-06]. 6.3. Subsequently, in the impugned AY 2006-07 [i.e., FY 2005-06], it was found that, the tool was of no help in development or designing of software the same was de-capitalized in the books of accounts. This was done by taking the following steps: a) The original cost of software tool of Rs. 1,47,79,575/- was reduced by the depreciation debited to P L A/c upto 31.12.2005 of Rs. 49,93,512/-. b) The resultant balance of Rs. 97,86,063/- was debited to an account created by the name Extinguishment of Liability . Copy of the ledger account of Extinguishment of Liability is herewith enclosed as Annexure 7. c) The balance outstanding in the party s account towards the above software tool was Rs. 1,08,48,556/- at the time of decapitalisation. The said balance was credited to Extinguishment of Liability by debiting the party s account. Post this entry, the party s account stood closed. d) The closing balance in Extinguishment of Liability account showed gain of Rs. 10,62,493/-. The same was credited to P L Account being grouped under Other Income . Copies of the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, expenditure or trading liability; AND Subsequently, benefit obtained is not in respect of any trading liabilities by way of remission or cessation thereof; (8) We rely on the following decisions: CIT vs. Mahindra and Mahindra Ltd., [2018] 404 ITR 1 (SC); Nectar Beverages (P.) Ltd., vs. DCIT [2009] 314 ITR 314 (SC); CIT vs. SadenVikas India Ltd 2010-TIOL-82-HC-DEL-IT; Rayala Corporation P. Ltd. vs. ACIT [2009] 319 ITR (AT) 158 (Chennai); (9) It is also submitted that section 41 (2) of the IT Act does not apply to the instant case of the Appellant for the reason that the provisions of section 41 (2) are applicable in a case of assets of an undertaking engaged in generation or generation and distribution of power. In this regard, a reference may be made Circular No. 772, dated 23.12.1998 [Para 16.1]. (10) Therefore, it is submitted that the amount of Rs. 10,62,493/- cannot be treated as income in the hands of the Appellant by invoking section 41(1) of the IT Act. 6.7. A reference may be made to paragraph 5.2 of the Order of the Learned Commissioner (Appeals). 6.8. It is submitted that the aforesaid nothings of the Learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 28(iv) of the IT Act, the benefit which is received has to be in some form other than in the shape of money as held in CIT vs. Mahindra and Mahindra Ltd., [2018] 404 ITR 1 (SC). 6.18. We rely on the decision in CIT vs. Mahindra and Mahindra Ltd [2018] 404 ITR 1 (SC) [Para 11, 13 17]. 6.19. Thus, it is submitted that as per the Hon ble Supreme Court in Mahindra and Mahindra Ltd (supra), waiver of liability amounts to receipt of cash/ money in the hands of debtor and in such case, section 28(iv) is not applicable. 6.20. A reference may be made to the Finance Bill 2023, wherein amendment to section 28(iv) has been proposed. 6.21. A reference may be made to relevant extract from the Memorandum to the Finance Bill 2023. 6.22. Thus, it is clear that benefit or perquisite provided is in cash or in kind or partly in cash and partly in kind does not fall within the ambit of section 28(iv). It may be noted that the aforesaid amendment is proposed to come into effect prospectively i.e., FY 2023-24/ AY 2024-25 onwards. Hence, it is submitted that for the impugned AY 2006-07, cash benefit does not fall under section 28(iv) of the IT Act. 6.23. Therefore, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, it is submitted that the case of the Appellant falls within the ambit of section 43(6)(c)(ii) read with section 43(6)(c)(i). 6.33. Thus, whenever an individual asset which is already forming part of the block of asset is discarded, the moneys payable in respect of such asset has to be reduced from the WDV. 6.34. For the purpose of section 43 (6) the meaning of the term moneys payable would be same as per Explanation (1) to section 41(4). 6.35. The term moneys payable includes: (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, 6.36. It may be noted that the term moneys payable has been defined inclusively. 6.37. As submitted earlier, the instant case of the Appellant is that the asset (i.e., software tool) is discarded and not a case of sale . 6.38. The undisputed fact is that the balance amount of Rs. 1,08,48,556/- was payable by the Appellant to the vendor (i.e., M/s.Magma Design Automation Inc.) in respect of aforesaid discarded software tool and the said entire amount was waived by the said vendor (i.e., M/s.Magma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commercial man would misunderstand . This principle has been approved by the Privy Council in Pondicherry Railway Co. Ltd. v. CIT 5 ITC 363, and by the Supreme Court in BadridasDaga v. CIT [1958] 34 ITR 10, Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 [SC] and CIT v. BaiShirinbai [K] Kooka [1962] 46 ITR 86. 6.49. We rely on the following decisions: CIT vs. UP State Industrial Development Corporation (1997) 225 ITR 703 (SC); CIT vs. Mehsana District Co-Operative Milk Producers Union Ltd. [2005] 146 Taxman 355 [Guj.]; Tamil Nadu Minerals Ltd. vs. JCIT [2005] 95 ITD 294 (Chennai)/[2006] 100 TTJ 738 (Chennai); 6.50. Thus, it is submitted that income referred to in section 28 and profits and gains referred to in section 28 (i) has to be ascertained on the basis of applying ordinary principles of commercial accounting. 6.51. It is submitted that the Learned Commissioner (Appeals) has erred in treating the deprecation allowed in the earlier year as income for the impugned year. 6.52. In the following decision, Courts have held that depreciation is an allowance: - CIT vs. Bombay State Transport Corporation (1979) 118 ITR 399, 405 (Bom.); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with section 43(6)(c)(i)(B) and section 50 redundant. In this regard, we rely on the following decisions: - CIT vs. Hindustan Bulk Carriers Ltd (2003) 259 ITR 449 (SC); - CIT vs. Distributors (Baroda) (P.) Ltd. (1972) 83 ITR 377 (SC); - CIT vs. S. Teja Singh [1959] 35 ITR 408 (SC); - R B Falcon (A) Pty. Ltd. vs. CIT [2008] 301 ITR 309 (SC); - Grasim Industries Ltd vs. Collector of Customs (2002) 128 STC 349 (SC); - CIT vs. Infosys Technologies Ltd. (2007) 293 ITR 146 (Karn.); - BalmukundAcharya vs. DCIT and others [2009] 310 ITR 310 (Bom) HC; 6.61. In the following paragraphs, the case in Binjrajka Steel Tubes Ltd. vs. ACIT [2011] 130 ITD 46 (Hyd.), is distinguished as under: (a) In the said case, during the FY 2003-04 (i.e., AY 2004-05) the assessee purchased machinery for a consideration of Rs. 6 Crores and claimed depreciation on the same. During the subsequent year i.e., FY 2004-05 (i.e., AY 2005-06), by virtue of out of court settlement of dispute, the cost machinery was reduced from Rs. 6 Crores to Rs. 4 Crores. However, in the instant case, there is no dispute with respect to consideration and the consideration remained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bonded Warehouse License (Customs Certificate) and Form 56F vide submission dated 14.11.2008. Copy of the said submission is herewith enclosed as Annexure 9. 7.3. It is submitted that the eligibility of deduction under section 10A in the case of Appellant is not doubted by Learned Assessing Officer. 7.4. It is submitted that the as the Appellant filed return of income declaring loss of Rs. 2,24,61,220/-, there was no occasion to claim deduction under section 10A in its return of income. 7.5. Without prejudice to the above, assuming without conceding that the depreciation is not allowable for the impugned year, the Appellant is eligible for deduction under section 10A of the IT Act on the assessed income. 7.6. In Board Circular No. 37/2016 dt. 02.11.2016, it has been provided that enhanced deduction under Chapter VI-A would be available on income increased as a result of disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act. 7.7. It is submitted that though the above circular deals with deduction under Chapter VI-A, the same should apply to section 10A as well as the section 10A is a deduction provision after amendment by the Finance Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the above submission of the Appellant, the appeal may be allowed. 7. On the other hand, the ld. DR relied on the order of the lower authorities and submitted that during the course of assessment proceedings the assessee could not prove the ownership of the assets as well as the active/passive user of the assets. He submitted that section 32 clearly says that first the assets should be owned by the assessee and it should be used for the purpose of the business, but the assessee could not substantiate the ownership of the assets as well as whether the assets were used by the assessee during the impugned year and date of put to use even in the rejoinder to the remand report before the CIT(Appeals). The ld. DR also submitted that assessee s reliance on the Audit report to contend that the assets were put to use is not final and relied on the judgement of the ITAT Delhi in ITA No. 2743/Del/2016 in the case of DCIT vs. M/s Railtel Corporation of India Ltd.in which it has been held as under:- (3.2) The Ld. AR of the assessee failed to bring to our attention any judicial precedents or any statutory provisions to show that the audit report by statutory auditors and/or the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder:- 7A. The Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington v. British Railways Board [1972] 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. .. 11. While interpreting a provision the Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 5 SCC 515 'The legislative casus omissus cannot be supplied by judicial interpretative process. Language of section 6(1) is plain and unambiguous. There is no scope for reading something into it, as was done in N. Narasimhaiah's case ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding for it. The fact that the Legislature specifically provided for periods covered by orders of stay or injunction clearly shows that no other period was intended to be excluded and that there is no scope for providing any other period of limitation. The maxim 'actus curia neminem gravibit' highlighted by the Full Bench of the Madras High Court has no application to the fact situation of this case. 14. The view expressed in N. Narasimhaiah's case (supra) and D.C. Nanjudaiah's case (supra), is not correct and is overruled while that expressed in A.S. Naidu's case (supra) and Oxford English School's case (supra) is affirmed. 15. There is, however, substance in the plea that those matters which have obtained finality should not be re-opened. The present judgment shall operate prospectively to the extent that cases where awards have been made and the compensations have been paid, shall not be reopened, by applying the ratio of the present judgment. The appeals are accordingly disposed of and the subsequent notifications containing declaration under section 6 are quashed. 9. The ld. DR has further relied on the judgment of the Hon ble Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that it is a very old case after a lapse of 16 years will also not help the case of the assessee. The assessee has also challenged that the CIT(A) has not given depreciation allowance on certain assets as per grounds of appeal whereas the AO has not disallowed depreciation and CIT(A) has also not given any enhancement notice is also not tenable. On going through the assessment order regarding disallowance of depreciation, the AO has disallowed depreciation on Computers and systems, software tools, vehicles and office equipment of Rs. 2,22,06,388. The total depreciation claimed by the assessee is Rs. 2,23,01,236, out of which the AO has allowed depreciation on purchase of two fixed assets viz., networking equipments, which are eligible for depreciation @ 60% of Rs. 93,600 and Rs. 64,480 which were purchased by the assessee on 26.8.2005 and 17.8.2005 and part of the computer s systems of Rs. 26,46,706 as evident from page 83 of PB. The CIT(A) has decided the issue only on the disallowance of depreciation on assets considered by the AO and therefore, there was no requirement of giving enhancement notice by the CIT(A) separately. 12. The argument of the assessee that depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser of the asset'. It was in the light of no contest. 10. In Jagatram Ahuja v. CGT [2000] 246 ITR 6091 is a judgment of the Supreme Court. The Supreme Court notices the object of Gift-tax Act visa-vis Estate Duty Act. The Supreme Court ruled that 'the words and expressions defined in one statute as judicially interpreted do not afford a guide to the construction of the same words or expressions in another statute unless both the statutes are pari materia Statute'. 11. Keshavji Ravji Co. v. CIT [1990] 183 ITR 12 (SC) is again a judgment of the Supreme Court in which the Court says that the Court could not resort to the so-called 'equitable construction' of a taxing statute is not to say that, where a strict literal construction leads to a result not intended to sub-serve the object of the legislation, another construction, permissible in the context, should not be adopted. 12. CST v. Jaswant Singh Charan Singh [1967] 19 STC 469 (SC) is also a judgment of the Supreme Court in which the Supreme Court has said that while interpreting items in Statutes like the Sales-tax Acts, resort should be had not to the scientific or technical meaning of such terms bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r challenge is untenable. Having regard to the fact that the said Act is a taxing statute, no Court is justified in imputing to the Legislature an intention that it has not clearly expressed in the language it has employed. 15. From these judgments, what is clear to us is that for the purpose of depreciation, machinery has to be actually used in terms of the Statute. A kept ready theory is not available in the light of the Apex Court rulings. 16. After noticing these judgments, the Madhya Pradesh High Court has ruled that the basic concept underlying the allowance of depreciation is that it should result, as consequence of the machinery being actually used or employed in the earning of income. 17. The Calcutta High Court in CIT v. Oriental Coal Co. Ltd. [1994] 206 ITR 6821 also noticed the Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265 (SC), and thereafter it ruled that under sub-section (1) of section 32 there should be actual user of plant and machinery for the purposes of business. 18. The Bombay High Court has ruled that the word 'used' in section 32 of the Income-tax Act, 1961, denotes that the asset has been actually used and not that it is merely rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to purchase of certain software tools from M/s Magma Design Automation Inc., the appellant had capitalized an amount of Rs. 1,47,79,575/- in its books of account on 23.06.2004. This has also been informed by the appellant that during FY 2004-05 it had made a payment of Rs. 39,31,019/- to M/s Magma and an amount of Rs. 1,08,48,556/- only was thus outstanding as on 01.04.2005. During AY 2005-06, while filing its return of income, the appellant had claimed a depreciation of Rs. 88,67,745 (@60%) and thus written down value (wdv) in relation to this asset as on 01.04.2005 was Rs. 59,11,830/-. During the year under consideration, the appellant came to a conclusion that the said tool was not of any help to it and it decided to return it and de-capitalized the same in its books of accounts. For this purpose, it worked out the allowable depreciation up to 31.12.2005 (as per Company Act) at Rs. 49,93,512/- and the depreciated value of the asset at Rs. 97,86,063/- {Rs. 1,47,79,575(-) Rs. 49,93,512} as on 31.12.2005. Since the amount payable to M/s Magma Design as on 31.12.2005 was Rs. 1,08,48,556/-, by extinguishing this liability it arrived at a gain of Rs. 10,62,493/- {Rs. 1,08,48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider any disallowance/addition that may be warranted under any other provision of the Income-tax Act, while giving relief to the assessee in the context of addition made under section 41 of the Act. We are fortified in this behalf by the decision of the Hon'ble Calcutta High Court in the case of Steel Containers Ltd. v. C1T [1978] 112 ITR 995, wherein it was held that when the Tribunal finds that disallowance of a particular expenditure by the authorities below is not proper, the Tribunal is competent to sustain the whole or part of the disputed disallowance under a different section under which it is properly so disallowable. In this view of the matter, the ground raised by the assessee on this issue is partly allowed: 5.8 Considering above the amount of Rs. 65,09,134/-, being the excess depreciation claimed in AY 2004-05, was required to be offered to tax by the appellant as per provisions of Section 28(iv) of the Act. The argument of the appellant that the above decision of the ITAT was no longer holds good in view of the decision of SC in the case of Mahindra and Mahindra Ltd (Supra), is misplaced as the facts of this case is entirely different from the case under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(i)(B) of the Act are applicable, the same is misplaced as the said provision relates to AY 1988-89 only. The relevant applicable provisions are that of Section 43(6)(c)(ii) of the Act. Further the appellant has sought to convey that the word `money payable' in Section 43(6)(c)(i)(B) of the Act [which is also relevant for Section 43(6)(c)(ii) of the Act] means the amount of Rs. 1,08,48,556/-, which was payable by it to M/s Magma Design but written off. This interpretation of the section is also misplaced. The meaning of word 'money payable' is given in Explanation 4 to clause (c) of Section 43(6) of the act and the same is stated to be as per Explanation below Section 41(4) of the Act. The same reads as follows: Explanation. For the purposes of sub-section (3), (1) moneys payable in respect of any building, machinery, plant or furniture includes (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, 5.12 As such the amount of Rs. 1,08,48,556/- is not the money payable which is required to be reduced from wdv. 5.13 Considering abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue that if disallowance of the depreciation on assets and liability written off is upheld, computation of revised profits as per the section 10A of the Act is to be allowed. However, this issue was not raised before the CIT(A). In this regard, the ld AR in the written submissions at para 7 has submitted in support of the claim that Circular No.37/2016 dated 2.11.2016 is applicable for the enhanced income disallowed under the business income of the assessee and the assessee is eligible for claiming deduction u/s. 10A of the Act. In this regard, he has also submitted documents which are placed at pages 106 to 127 of PB which are copies of STP certificates, customs bonded warehouse licence (customs certificate and Form 56F) etc. furnished before the AO on 14.11.2008. 19. During the course of hearing, the ld. AR of assessee relied on the judgment of Hon ble Karnataka High Court in the case of Course5 Intelligence P. Ltd. v. ITO in ITA No.389/2014 connected case dated 1.9.2021 and Hon ble Rajasthan High Court in the case of PCIT v. Ajmer Vidyut Vitran Nigam Ltd. in D.B. I.T.A. No.158/2019 and connected cases [2022] 447 ITR 186 (Raj). He submitted that the issue has not been examine ..... 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