2020 (5) TMI 572 - AT - Income Tax

Revision u/s 263 - depreciation u/s.32(1) on expenditure was incurred towards export product development expenditure - HELD THAT - If the AO allowed depreciation for the assessment year 2013-14 without due application of mind, the PCIT ought to have revised the order for the assessment year 2013-14. It may not be correct to say that the AO has not applied his mind for the assessment year 2013-14 in the proceeding for the assessment year 2014-15. The fact remains is that on identical expenditure the Assessing Officer disallowed the claim of the assessee u/s.37 and treated the same as capital expenditure and allowed depreciation. This order of AO attained finality. For the assessment year 2014-15 which is under consideration, the AO by following his own order allowed the claim of the assessee for depreciation at the rate of 25%. When the assessee incurred expenditure for creation of an intangible asset namely the brand name Pantherkid , this Tribunal is of the considered opinion that such expenditure has to be treated as capital in nature. Therefore the assessee is entitled for depreciation u/s.32(1). This is one of the possible views taken by the Assessing Officer. PCIT is not justified in revising the order of the Assessing Officer in exercise of his power u/s.263. Exemption claimed U/s.2(14) - evidence for consumption of electricity - HELD THAT - when the assessee establishes that land in question is agricultural land, electricity is obtained for agricultural purpose from TamilNadu Electricity Board, this Tribunal is of the considered opinion that there is no reason to doubt the nature of the land. Moreover under the SARFEASI Act, the property of the assessee was taken over by the bank and no useful purpose would be served in directing the Assessing Officer to re-examine the matter. Moreover, the Assessing Officer has made through enquiry through the Inspector of Income Tax. It is not a case of non-enquiry as observed by the PCIT. AO has made thorough enquiry and bring on record the entire material facts. AO has also taken into consideration the valuation report obtained by the Syndicate Bank. Therefore this Tribunal is of the considered opinion that the Assessing Officer has made a proper enquiry and has taken one of the possible views in the assessment order. Therefore, there is no justification in revising the order of the Assessing Officer by the PCIT. We are unable to uphold the impugned order of the PCIT. Accordingly the impugned order of the PCIT is set aside and the appeal of the assessee stands allowed.

Summary

Issues:
1. Condonation of delay in filing appeal before ITAT.
2. Claim of depreciation on intangible asset.
3. Exemption claimed under Section 2(14) of the Income Tax Act.

Issue 1: Condonation of Delay
The appeal was filed with a delay of 65 days, and the assessee sought condonation. After hearing both parties, the Tribunal found sufficient cause for the delay and condoned it, admitting the appeal.

Issue 2: Claim of Depreciation on Intangible Asset
The assessee claimed depreciation on an intangible asset for the assessment year 2014-15. The Assessing Officer allowed the claim based on the previous year's assessment, where the expenditure was classified as capital and depreciation was allowed. The Tribunal held that the expenditure for the intangible asset was capital in nature, justifying the depreciation claim under Section 32(1) of the Act. The Tribunal disagreed with the Principal Commissioner's revision of the order under Section 263, as it was based on a possible view taken by the Assessing Officer.

Issue 3: Exemption Claimed Under Section 2(14)
The assessee claimed exemption under Section 2(14) for 66.50 acres of agricultural land. The Assessing Officer conducted a thorough inquiry, including obtaining a report from the Inspector of Income Tax and considering electricity service connections for agriculture. The Tribunal noted that the electricity for agriculture in Tamil Nadu is supplied free of cost, making it unnecessary for the assessee to prove consumption. The Tribunal found that the Assessing Officer had made a proper inquiry, and there was no need to revise the order under Section 263. The Tribunal set aside the Principal Commissioner's order and allowed the appeal.

The ITAT Chennai, in its judgment, addressed the issues of condonation of delay, claim of depreciation on an intangible asset, and exemption claimed under Section 2(14) of the Income Tax Act. The Tribunal allowed the appeal, condoning the delay in filing, justifying the depreciation claim on the intangible asset as capital in nature, and upholding the classification of agricultural land for exemption purposes.