2015 (5) TMI 271 - HC - Income Tax

Depreciation claim - AO disallowed claim as the assessee was unable to demonstrate that the machinery claimed to have been used by it was in fact owned or acquired by assessee for its business - assessee's contention was that the machinery was provided to sub-distributor at that site for use by the customers - Held that - As correctly held by ITAT the assets qua which the depreciation is claimed were not purchased during this year, but in earlier years. Purchases and depreciation thereon have been allowed in earlier years.It is undisputed that they were purchased in earlier years i.e. in A.Y. 2006-07 and 2007-08 besides depreciation was allowed and the assessments were framed u/s 143(3). The impugned assets became part of the block of assets and any question in subsequent year about the ownership is meaning less, therefore, we are unable to sustain the finding of the assessing officer that assets were not owned by the assessee. The subsequent upgradation of the software and machinery etc. though may be with the sub distributor the fact remains that the assessee's assets were also used. The impugned assets were used for the purpose of the assessee's business, therefore, depreciation is to be allowed. Also find force in the argument of ld. Counsel for the assessee that assuming worst against the assessee the assets being the part of the existing block of assets on such presumption also become assets already part of the block of assets kept in readiness for use of the business, the depreciation is to be allowed. No substantial question of law arises - Decided against revenue.

Summary

Issues:
1. Claim for depreciation for assessment year 2009-10 wrongly permitted.
2. Disallowance of depreciation by the Assessing Officer.
3. Appeal to CIT (Appeals) allowed, but revenue's appeal rejected by ITAT.
4. Reopening of assessment for 2009-10 based on sub-distributor's statement.
5. Substantial question of law for consideration.
6. Affirmation of ITAT order in previous years.

Analysis:

1. The revenue challenged the ITAT's order permitting depreciation for the assessment year 2009-10, arguing it was wrongly allowed. The assessee provided online lottery services and claimed depreciation for machinery. The AO disallowed it, questioning ownership, but the CIT (Appeals) allowed it based on past assessments and a sub-distributor's confirmation. The ITAT upheld the decision, emphasizing the assets were part of the block and used for business.

2. The Assessing Officer disallowed depreciation, stating the assessee failed to prove ownership of the machinery claimed. However, the CIT (Appeals) and ITAT found evidence of ownership through past assessments and the sub-distributor's confirmation. The ITAT highlighted that the assets were part of the block and used for business, justifying the depreciation claim.

3. The CIT (Appeals) allowed the assessee's appeal based on past depreciation allowances and the sub-distributor's confirmation. The ITAT rejected the revenue's appeal, emphasizing the assets were used for the business. The ITAT's decision was upheld, stating no substantial question of law arose for consideration.

4. The revenue's attempt to reopen the assessment for 2009-10 based on the sub-distributor's statement failed as the statement supported the assessee's claim. The Court found no substantial question of law due to the factual nature of the findings and upheld the ITAT's decision.

5. The Court dismissed the appeal and application, citing affirmation of the ITAT's order in previous years. No substantial question of law arose for determination based on the facts and findings of the case.

6. In a related case, the Court affirmed the ITAT's order, further supporting the decision in this case. The dismissal of the appeal and application was based on the consistent findings and lack of substantial legal questions.