9911796707
TMI Blog2008 (1) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... first grievance of the assessee. The reopening of the assessment is upheld in both the years. Disallowance of depreciation on SAPT building as well as maintenance - Incurred lift expenditure - survey u/s 133A - building not used for the purpose of the business - HELD THAT:- If we weigh the material produce by the assessee viz-a-viz the solitary statement of the Estate Manager elicited by the authority during the course of survey, then scale would tilt in favour of the assessee because the statement was recorded under sub-section (3)( iii ) of section 133A without administering the oath to the Estate Manager. This is just an information which required corroboration for deciding an issue against the assessee. AO has not brought any corroborative piece of evidence in support of this information. In the past depreciation was granted to the assessee. Orders for assessment years 1993-94 to 1995-96 have been brought to our notice exhibiting this fact. AO failed to establish that building was not used for the purpose of business. Apart from all these things, even if we take the statement of the Estate Manager as a Gospel Truth then also the assessee had demonstrated that it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome on 27-11-1996 and 1-12-1997 declaring total income of Rs. 16,74,081 and Rs. 21,04,918 in the assessment years 1996-97 and 1997-98 respectively. The ld. Assessing Officer framed assessment under section 143(3) on 8-1-1999 and 17-12-1999 in assessment years 1996-97 and 1997-98 respectively. On 24-8-2000 a survey under section 133A was carried at the business premises of the assessee. During the survey statements of Shri D.R. Barucha one of the Director and Estate Manager Shri S.R. Krishnan were recorded. According to the Assessing Officer they have disclosed that SAPT building was in bad condition and therefore in 1994 building was vacated for major structural reconstruction which included strengthening of columns and ceiling. This structural renovation work continued from March 1994 to March 1997 and thereafter part of the building was let out to German Express Shipping Agency (I.) (P.) Ltd. This letting out happened in April 1997. On the basis of such revelation, the ld. Assessing Officer formed an opinion that this building was not used by the assessee for the purpose of its business during this period and hence depreciation claimed by the assessee and allowed to it deserves t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not used for the purpose of business. On the basis of such report the ld. Assessing Officer arrived at a conclusion that income has escaped assessment therefore the information which has come to his possession is the basis for forming a prima facie belief about escapement of income. The assessments have not been reopened merely on the basis of change of opinion i.e., merely on the basis of re-appreciation of the material already possessed by the Assessing Officer. In view of the above discussion we do not find any merit in the first grievance of the assessee. The reopening of the assessment is upheld in both the years. 8. The next two issues are interlinked with each other in both the assessment years. They relate to disallowance of depreciation on SAPT building as well as maintenance and lift expenditure incurred on this. The basic reason for disallowance is that building was not used for the purpose of the business. 9. The brief facts are, as observed earlier a survey under section 133A was carried out at the business premises of the assessee wherein statement of Shri S.R. Krishnan, Estate Manager and Director Shri D.R. Barucha were recorded. The Estate Manager in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s available and for this telephone assessee had incurred Rs. 18,197 during this year. Similarly, demonstrating the electricity expenses he pointed out that a sum of Rs. 5,37,444 was incurred for Bombay. This sum include repair of Rs. 3,28,603 and payment of Rs. 15,907 and Rs. 1,85,748.66 to BEST. The specific details are available on page 14 of the paper book. Further taking us through the statement reflecting sales and purchases at Bombay during 1995-96 and 1996-97 he submitted that substantial business activities have been carried out by the assessee. In this connection he drew our attention towards page Nos. 12-13 where sales and purchase statement are available. He further contended that address of the registered office of the assessee is in SAPT building. All correspondence were made on that address. Even in the assessment order address of SAPT building is appearing. He pointed out that demand notice was also served on this address. Thus it do indicates that business activities were carried out from this building. The ld. Counsel for the assessee did not deny the fact that building was under renovation, but according to him it is not that assessee has totally abandoned the bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n even on passive user he submitted that Hon ble Jurisdictional High Court in the case of Dinesh Kumar Gulabchand Agarwal v. CIT [2004] 267 ITR 768 (Bom.) has held that expression "used" as employed in section 32 of the Income-tax Act denotes actual user of the asset. If the assets are actually used depreciation would be admissible to the assessee otherwise not. 14. We have duly considered the rival contention and gone through the record carefully. Interpretation of expression "used" employed in section 32 had come up on a number of occasions before the Hon ble Supreme Court, Hon ble High Court and the Tribunal. Recently the Hon ble Presi-dent of the Tribunal while sitting as a 3rd Member in the case of Sanghvi Movers (P.) Ltd. v. Dy. CIT [2008] 110 ITD 1 (Pune) has made a lucid enunciation of law on this point. We cannot do better than to extract some of the findings recorded in para 15 of his order which reads as under :- "15. I have given careful thought to the rival submissions of the parties. There is no dispute first condition for getting depreciation, i.e., ownership of the asset has been fully established in this case. The controversy relates to the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually worked, and the depreciation allowance granted by section 10(2)( vi ) could be given in respect of such machinery. No doubt, that was said in connection with clause ( vi ) of section 10(2), but the Supreme Court has pointed out that all these clauses are in pari materia and the expression used in either of them would apply to the other : see the Liquidators of Pursa Ltd. v. CIT [1954] 25 ITR 265; [1954] SCR 767 (SC). In Vishwanath Bhaskar Sathe s case, the facts were similar to the present case. The assessee owned a ginning factory and was a member of a pool with the owners of other ginning factories. During the assessment year in question in that case the assessee s factory had not been actually employed in the work of ginning in accordance with the pooling agreement, though he had received a share of the profits. That was because the assessee was under the agreement bound at his own expense to keep the gins and other working plant and machinery in good repair and condition and working order even when his factory was not working, so that it may be ready for actual use at any moment. It was held that, under these circumstances, the assessee was entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be said as a matter of law that unless the buses are registered in the name of the assessee, the assessee cannot be regarded as the owner of the buses. On the contrary, the essential pre-requisite for registration under section 22(1) of the Motor Vehicles Act is ownership of the motor vehicle. Unless a person is the owner of a motor vehicle he is not entitled to get it registered in his name under section 22(1) of the Motor Vehicle Act. The Tribunal in this case has come to the conclusion on a review of the facts and also of the agreement that the assessee was the owner of the five new buses and as such was entitled to claim depreciation allowance on these buses. The Tribunal has not committed any error of law in coming to this conclusion. The requirement of section 32 of the Income-tax Act is that the vehicles must be "owned by the assessee". This section does not require that the assessee must be a registered owner of the vehicles in order to claim depreciation allowance in respect of them. We are of the view that, in the facts of this case, the new buses were owned by the assessee within the meaning of section 32 of the Income-tax Act and the assessee was entitled to claim d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly put to use in the relevant accounting year by the assessee for its business purposes. Alternatively the assessee was entitled for depreciation on these two oil tankers as they were purchased during the relevant accounting year for business purposes and were ready to use, road tax was deposited and the oil tankers were got registered with the registering authority on the last date of the accounting year. Failure of the assessee to produce the hire contract with the parties is in respect of the two oil tankers is of little significance in view of exposition of law that the word "used" under section 32 of the Act has to be given wider meaning and it will include assets ready for use. 15.6 The Punjab and Haryana High Court in CIT v. Pepsu Road Transport Corpn. [2002] 253 ITR 303 has held that the assessee who was the transporter had to keep spare engines in the store, was entitled to depreciation on the spare engines in the store, as the engines were meant to be used in the case of need. There is a normal depreciation of value even when machines or equipment is merely kept in the store. Looking to the nature of business of that assessee, who was a transporter it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t section 32 confers the benefit on the assessee and it is required to be construed liberally and in a manner which is favourable to the assessee. I find force in assessee s submission that decision of Hon ble Bombay High Court in the case of Dineshkumar Gulabchand Agrawal ( supra ) has to be read in the light of other decisions of Bombay High Court and of the Supreme Court and when so read, it does not lay any different law. Expression used is to be construed in the context of facts and circumstances of the case and would include not only active use of asset but also passive use of asset for purposes of business. This is what has been consistently held by the Supreme Court and the Bombay High Court in the decisions cited supra. Permanent registration under the Motor Vehicles Act is not sine qua non for claim of depreciation. Temporary registration for a limited period pending permanent registration is good enough to claim depreciation on asset owned by the assessee and used in business, as noted in the decisions of different High Courts. No decision taking a contrary view was cited before me. Hiring of asset is one way of establishing user of the asset in business. But user ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, there is much force in the argument of learned counsel for the appellant that the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this." 16. Contrary to these facts possessed by the Assessing Officer assessee has demonstrated that the building though was under renovation, it was not totally abandoned. It has been using this building for business purposes. It has incurred electricity expenses, telephone expenses made sales and purchases from this office. The details of these expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block of assets has to be considered. It has to be seen whether the particular block of assets is owned by the assessee and used for the purpose of business. If a block of assets is owned by the assessee and used for the purpose of business, depreciation will be allowed. Therefore, the test of user had to be applied upon the block as a whole instead of upon an individual asset. Now applying this test to the facts of the case under consideration, we hold that when the two trucks out of the three in the said block were admittedly used for the purpose of business, the said block of assets was used for the purpose of business and the depreciation has to be allowed on the WDV of the said block of assets, as per the percentage of depreciation prescribed in respect of the said block of assets. We direct the Assessing Officer to allow depreciation as per our above direction." 18. This order of the Tribunal was subsequently followed in the case of Natco Exports ( supra ), etc. According to these decisions once the asset was part of block of asset and depreciation was granted on that block it cannot be denied in the subsequent year on the ground that one of the asset was not used ..... X X X X Extracts X X X X X X X X Extracts X X X X
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