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2008 (1) TMI 3 - HC - Income TaxClaim of depreciation is not dependent on the actual use or the asset put to use. It is sufficient if it is used for business. In case AO did not agree with the Assessee, it does not mean that the Assessee had furnished inaccurate particulars. Penalty u/s 271(1)(c) is not imposable.
Issues:
- Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for claiming depreciation on a biogas plant. - Interpretation of the expression 'used for the purposes of the business' in Section 32 of the Act. Deletion of Penalty Issue: The Revenue challenged the deletion of penalty by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal regarding the claim of depreciation on a biogas plant for the assessment year 1990-91. The Assessing Officer imposed the penalty under Section 271(1)(c) of the Act, alleging inaccurate particulars furnished by the Assessee to reduce tax liability. However, the Commissioner and the Tribunal held that it was not a case of inaccurate particulars but a rejection of the Assessee's explanation for the depreciation claim. The Tribunal found that the Assessee, a distillery unit, used Swiss technology for effluent treatment, which incidentally produced biogas. The Assessee started the biological process in March 1990, leading to biogas production in the subsequent year. The Tribunal accepted the Assessee's view, emphasizing that the claim was not inaccurate but a plausible interpretation of the law. Interpretation of 'Used for the Purposes of the Business' Issue: The Court analyzed the expression 'used for the purposes of the business' in Section 32 of the Act concerning depreciation claims. Referring to legal precedents, the Court highlighted that the asset should be owned and used for the business to claim depreciation. The Court noted a liberal interpretation trend favoring a wider meaning of 'used for the purposes of the business.' Previous cases emphasized that passive usage, like keeping machinery in working condition for future use, also qualifies as 'used for the business.' The Court concluded that the Assessee's interpretation of using the biogas plant for effluent treatment, even if biogas production was delayed, was reasonable. The Assessing Officer's disagreement did not amount to furnishing inaccurate particulars. The Court upheld the decisions of the Commissioner and the Tribunal, dismissing the Revenue's appeal and emphasizing the need for a strict construction of penal provisions. In summary, the judgment upheld the deletion of penalty for the depreciation claim on the biogas plant, emphasizing a liberal interpretation of 'used for the purposes of the business' and the importance of strict construction of penal provisions under the Income Tax Act.
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