2015 (6) TMI 810 - HC - Income Tax

Claim for depreciation - AO disallowed this on the ground that 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 - ITAT allowed claim - Held that - It is a matter of record that for AY 2006-07 and 2007-08, the assessments were completed under Section 143(3) after due enquiries were conducted by the AO. There is nothing on the record to suggest that those were either erroneous or based on premises which did not disclose relevant details. The revenue s attempt in reopening the assessment of subsequent year 2009-10, by relying upon statement of one of the sub-distributors also failed because the said concern, M/s Best & Company, in fact confirmed the assessee s contention. Given the factual nature of these findings, the Court is of the opinion that no substantial question of law arises for consideration.

Summary

Issues:
1. Claim for depreciation for assessment year 2008-09.
2. Ownership and use of machinery by the assessee for online lottery services.
3. Disallowance of depreciation by the Assessing Officer.
4. Appeal against the order of the CIT(Appeals) and ITAT decision.
5. Justification for disallowing depreciation by the revenue.
6. Assessment for subsequent year 2009-10 and information provided by sub-distributors.
7. Reopening of assessment for the subsequent year and its implications.

Analysis:
1. The main issue in this case revolves around the claim for depreciation for the assessment year 2008-09. The revenue contested that the claim was wrongly permitted by the Income Tax Appellate Tribunal (ITAT) and that the order of the CIT(Appeals) rejecting the revenue's appeal was erroneous.

2. The assessee, engaged in providing online lottery services, claimed depreciation for machinery used in its business. The Assessing Officer (AO) disallowed the claim, questioning the ownership and acquisition of the machinery by the assessee. The assessee argued that the machinery was provided to sub-distributors for customer use, which was considered during the appeal to the CIT(Appeals).

3. The CIT(Appeals) allowed the assessee's appeal, considering past assessments where depreciation was permitted and the confirmation from a sub-distributor in the subsequent year regarding the machinery provided. The ITAT upheld this decision, emphasizing that the assets in question were part of the block of assets from previous years, making the ownership query irrelevant for the subsequent year.

4. The revenue contended that the order related to the subsequent year, 2009-10, was not accepted and raised concerns about the lack of information from other sub-distributors. However, the Court found that the assessments for previous years were conducted diligently, and the attempt to reopen the assessment for 2009-10 based on a sub-distributor's statement failed as it supported the assessee's position.

5. Ultimately, the Court dismissed the revenue's appeal, stating that no substantial question of law arose from the factual findings. The application was also dismissed as infructuous, concluding the legal proceedings in this matter.