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TMI Blog2014 (9) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... f additional evidence – Held that:- Penalty was imposed upon the applicant, almost as a consequence of disallowing depreciation - Section 271 of the Act confers power upon the Income Tax Officer to levy penalty, if it is found that any claim made by the assessee is found to be wrong - No one can claim that his understanding of a provision of law, that too, of a complicated and ever-changing enactment like the Income Tax Act, is the ultimate or free from flaw - A genuine effort made by the applicant to claim depreciation on the imported machinery, must not result in double disadvantage, on denial of depreciation and imposition of penalty – Decided in favour of assessee. - Reference Case Nos.153 of 1986 & 74 of 1997 - - - Dated:- 10-6-2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in further appeal numbered as Appeal Nos. 896/Hyd/1991 and 1016/Hyd/1995, to the Income Tax Appellate Tribunal, Hyderabad Bench B (for short the Tribunal). The appeals were dismissed on 29.04.1994 and 03.09.1996, respectively. The applicant filed two applications, being R.A.Nos.346/Hyd/1994 and 813/Hyd/1996 in the appeals, under Section 256(1) of the Income Tax Act (for short the Act), with a prayer to frame questions and refer the same to this Court. After hearing both the parties, the Appellate Tribunal framed the following questions in I.T.A.No.896/Hyd/1991 and referred the same to this Court for opinion, and it is taken up as R.C.No.153 of 1996: 1) Whether on the facts and circumstances of the case, could it be said that the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record, the Appellate Tribunal was justified in holding that the assessee was liable for imposition of penalty under Sec.271(1)(c) of the Act for claiming depreciation on its plant and machinery? 3) Whether the appellate tribunal is justified in upholding the order of the Appellate Commissioner of Income Tax confirming the imposition of penalty under Sec.271(1)(c) of the Act when the assessee had made bona fide disclosure of all material facts in relation to the computation of its income as provided in Explanation-I to Section 271(1)(c) of the Income Tax Act, 1961? Sri Y. Ratnakar, learned counsel for the applicant, submits that the machinery imported by his client was full-fledged in all respects, and except that certain elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions, it is not entitled to claim the benefit. Learned Senior Counsel further submits that mere installation of machinery is not sufficient and what entitles an assessee, to claim depreciation, is the factum of the machinery having been put to use. He contends that even what is stated by the applicant cannot be treated as an act of use. As regards the penalty, the learned counsel submits that once the claim is found to be untenable, the imposition of penalty, under Section 271(1)(c) of the Act, becomes almost a matter of course, and that the questions referred to it deserve to be answered against the applicant. The applicant made an effort to claim depreciation, under Section 32 of the Act, on an item of machinery, imported from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to The Liquidators of Pursa Limited Vs. Commissioner of Income Tax, Bihar. It was held that not only the machinery or plant must have been installed, but also it must have been used for the purpose of business, meaning thereby, much more than mere trial run. This view was adopted by the Karnataka High Court in Deputy Commissioner of Income Tax Vs. Yellamma Dasappa Hospital and the Bombay High Court in Dineshkumar Gulabchand Agrawal Vs. Commissioner of Income Tax and another. Viewed from that angle, it can be said that though the applicant might have installed the machinery before 31.03.1987, it was not capable of being put to use, much less, it was, in fact, put to use. Therefore, the questions framed in R.C.No.153 of 1996 are answered agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ever-changing enactment like the Income Tax Act, is the ultimate or free from flaw. Even the view taken by Courts of law, after so much of hearing and deliberation, turns out to be incorrect by a superior forum. A genuine effort made by the applicant to claim depreciation on the imported machinery, must not result in double disadvantage, namely, denial of depreciation and imposition of penalty. Things would have been different altogether, in case any depreciation was claimed, on the machinery that was not imported at all. Therefore, the questions framed in R.C.No.74 of 1997 are answered in favour of the assessee and against the Income Tax Department. Accordingly, R.C.No.153 of 1996 is dismissed and R.C.No.74 of 1997 is allowed. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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