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TMI Blog2013 (8) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... quired permission from RBI to revive its business activity in the light of additional evidence filed by the assessee and decide the issue relating to the assessee's claim for depreciation in accordance with law. Disallowance of Rs. 29,65,122/- on account of prior period expenses - Said expenditure was mainly comprising of Customs and Excise Duty pertaining to the earlier period which was paid during the year under consideration and claimed as deduction on payment basis – Held that:- The assessee has filed a copy of letter filed before the ld. CIT(A) along with the documents annexed thereto - The assessee was registered as 100% export oriented unit under STPI and accordingly it was allowed to import and buy indigenous machinery without payment of customs and excise duty respectively. The assessee was required to be used the said machinery for export turnover only and it had to fulfill certain export obligation. As further submitted in the said letter, the assessee, however, could not fulfill the export obligation and hence intended to de-bond the same for utilization of the same for local turnover purpose. For this purpose, the assessee was required to pay customs and excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The expenses so claimed by the assessee were inclusive of depreciation amounting to Rs. 48,71,812/- and during the course of assessment proceedings, the said claim of the assessee for depreciation was examined by the A.O. On such examination, he found that the assessee company was basically formed for developing and selling software for the banking business and as a result of withdrawal of permission by RBI for its activity, the business of the assessee company was stopped. He also found that the business of the assessee company, however, was subsequently revived as a result of grant of permission by the RBI and the business so revived was continued by the assessee in the subsequent years. According to the A.O., there was thus no business activity of the assessee company during the year under consideration and in the absence of the same, the assessee was not entitled to claim depreciation. When this position was confronted by the A.O. to the assessee, the later cited certain case laws wherein depreciation was held to be allowable where the assessee could not continue the business due to unavoidable circumstances or where the assessee could not use the assets as the same were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed forward from the earlier years. The A.0 also relied upon several judicial pronouncements which have not been distinguished by the appellant Further, the case Laws relied upon by the appellant are based on different set of facts as compared to the facts in appellant's case. In view of the facts and legal position as discussed above, I am of the considered opinion that the A0 has rightly disallowed the depreciation claimed by the appellant which is upheld." Aggrieved by the order of the ld. CIT(A), the assessee has preferred this appeal before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. In support of the assessee's case on the issue, the ld. counsel for the assessee has relied on the decision of ITAT Delhi Bench in the case of Pepperi + Fuchs (India) Ltd. vs. DCIT, 6 SOT 10 (Del) wherein it was held that the assessee's claim for depreciation on assets having been allowed immediately in the preceding year and succeeding assessment years, it could be safely presumed that in the interregnum, assets were kept ready for use and hence eligible for depreciation. He has also cited the decision of ITAT Jodhp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the assessee also no objection in this regard, we restore this issue to the file of the A.O. with a direction to verify the stand of the assessee of having received the required permission from RBI to revive its business activity in the light of additional evidence filed by the assessee and decide the issue relating to the assessee's claim for depreciation in accordance with law. The appeal of the assessee for A.Y. 2006-07 is accordingly treated as allowed for statistical purpose. 6. In its appeal for A.Y. 2007-08, the only issue raised by the assessee relates to the disallowance of Rs. 29,65,122/- made by the A.O. and confirmed by the ld. CIT(A) on account of prior period expenses. 7. In the return of income filed for A.Y. 2007-08, deduction of Rs. 29,65,122/- was claimed by the assessee on account of prior period expenses. Before the A.O., it was submitted on behalf of the assessee that the said expenditure was mainly comprising of Customs and Excise Duty pertaining to the earlier period which was paid during the year under consideration and claimed as deduction on payment basis. Since no disallowance was made on account of Customs and Excise Duty in the earlier ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damages by Secretary, Ministry of Information Technology in case of non fulfillment of export obligations. No such order could be produced by appellant to justify its claim. Further, the appellant admitted that the demand raised by customs and excise authorities relate to the earlier years. Thus, liability to pay arose in A.Y. 2006-2007 i.e. the period when appellant failed to discharge its export obligation. In view of these facts, agree with the A.O. that the amounts which had not been disallowed earlier cannot be claimed as deduction u/s 43B now. Further since the expenditure are doesn't relate to the year under consideration as per matching concept same could not he allowable as deduction in the current year. In view of these facts and legal position, I am of the considered opinion t the A.O. was justified in making the disallowance which is upheld". 9. The ld. counsel for the assessee submitted that the impugned liability on account of Customs and Excise Duty had arisen during the year under consideration and the same therefore was rightly claimed by the assessee as deduction. He invited our attention to the copy of application dtd. 2nd September 2005 seeking permission for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the said machinery for export turnover only and it had to fulfill certain export obligation. As further submitted in the said letter, the assessee, however, could not fulfill the export obligation and hence intended to de-bond the same for utilization of the same for local turnover purpose. For this purpose, the assessee was required to pay customs and excise duty for the machinery and although the assessee initiated the process of de-bonding in the earlier year, the first demand for custom and excise duty was raised by the excise authorities only on 19-4-2006. As per the said demand, the custom and excise duty aggregating to Rs. 29,65,122/- was paid by the assessee under two challans dtd. 28-4-2006. It appears from these submissions made by the assessee before the ld. CIT(A) which have been reiterated before us that the customs and excise duty was not pertaining to the earlier year and the liability for the same having arisen and also paid in the year under consideration, the claim of the assessee for deduction was liable to be considered in that year. A perusal of the impugned order of the ld. CIT(A), however, shows that this important submission made by the assessee as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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