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2015 (7) TMI 833 - AT - Income TaxEligibility of claim under section 10A - AO disallowed assessee s claim since the assessee did not furnish details about new machinery purchased and used in 10A unit. - CIT() allowed claim - Held that - On going through the order of the Commissioner of Income Tax (Appeals) we find that assessee has purchased machines after approval of STPI. Computers and stentura machines were imported thereafter. The return of income for the assessment year 2001-02 was filed on 28.3.2002 duly accompanied by audit report and report in Form No.56F and deduction under section 10A was claimed as per law. The Assessing Officer in the remand proceedings except stating that assessee has not co-operated in the assessment proceedings has not offered any comments on the grounds preferred by the assessee before the Commissioner of Income Tax (Appeals). None of the findings of the Commissioner of Income Tax (Appeals) have been rebutted by the Revenue with evidences. In such circumstances we uphold the order of the Commissioner of Income Tax. - Decided in favour of assessee. Clim of depreciation - CIT(A) denied depreciation for the reason that assessee has not carried on any business during the year and the assets were not put to use - Held that - As relying on case of ACIT Vs. Chennai Petroleum Corporation Ltd. 2009 (8) TMI 970 - ITAT CHENNAI in order to claim depreciation under s. 32 it is not necessary that the machinery in question should have been actually used in the relevant previous year for the purpose of business and it is sufficient if the same is kept ready for use during the relevant previous year though not actually used due to circumstances beyond the assessee s control. See. 32 has received several amendments but there is no amendment which has clarified that depreciation would be allowed only if the asset in question was actually used during the relevant previous year and merely keeping ready for being used in the business was not sufficient. When the interpretation of s. 32 especially of the word used appearing in that section was the subject-matter of a judgment of the Bombay High Court as long back in 1937 in the old IT Act the same word which is used in s. 32 of the 1961 Act must receive the same construction. Therefore the assessee is entitled to the claim of depreciation on the gas sweetening plant which was kept ready for use during the entire previous year though not actually used due to lack of raw material - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Eligibility for exemption under section 10A of the Income Tax Act. 3. Entitlement to depreciation on plant and machinery. Condonation of Delay in Filing Appeals: The appeals filed by the assessee were delayed by 13 days. The assessee submitted a petition for condonation of delay along with an affidavit explaining the reasons for the delay. The Tribunal, after reviewing the petition, found that the assessee was prevented by reasonable cause from filing the appeals on time. In the interest of justice, the delay was condoned, and the appeals were admitted for hearing. Eligibility for Exemption under Section 10A: The primary issue in the Revenue's appeal was the Commissioner of Income Tax (Appeals) allowing the assessee's claim under section 10A of the Income Tax Act. The assessee, a private limited company engaged in software export, was subject to a search and seizure operation. During the assessment, the exemption under section 10A was denied by the Assessing Officer on the grounds that the necessary certificate in Form 10A was not filed with the return, and the plant and machinery were old, not new as required. The assessee appealed to the Commissioner of Income Tax (Appeals), providing various details to support their claim under section 10A. The Commissioner, after examining the details and the remand report from the Assessing Officer, allowed the claim. The Revenue contended that the assessee did not furnish details about new machinery used in the 10A unit and the value of old machinery exceeded the prescribed percentage. The Tribunal reviewed the order of the Commissioner of Income Tax (Appeals) and found that the assessee had purchased machines after approval from the Software Technology Park of India (STPI) and imported computers and stentura machines thereafter. The return of income for the assessment year 2001-02 was filed on 28.03.2002, accompanied by the audit report and Form No. 56F. The Assessing Officer, during remand proceedings, did not provide any adverse comments on the evidences produced by the assessee. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals), confirming the assessee's eligibility for exemption under section 10A. Entitlement to Depreciation on Plant and Machinery: The assessee claimed depreciation for the assessment years 2002-03 and 2003-04, stating that the plant and machinery were ready for use but could not be used due to the lack of orders. The Commissioner of Income Tax (Appeals) denied the depreciation claim, stating that the assets were not put to use. The Tribunal considered the submission of the assessee that the plant and machinery were kept ready for use and referred to the Third Member decision of the Chennai Bench in the case of ACIT Vs. Chennai Petroleum Corporation Ltd. The Tribunal noted that under section 32, it is sufficient if the machinery is kept ready for use, even if not actually used due to circumstances beyond the assessee's control. Respectfully following the Third Member decision, the Tribunal allowed the assessee's claim for depreciation, concluding that the plant and machinery were kept ready for use. Conclusion: The appeal of the Revenue was dismissed, and the appeals of the assessee were allowed. The Tribunal pronounced the order in the open court on 22.05.2015.
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