9911796707
TMI Blog2014 (10) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation on the Mumbai Premises purchased, possessed and owned by the company, was put to use during the year, hence the appellant company was entitled to depreciation of Rs. 7,80,826/- as buildings as per the provisions of section 32 of the I.T. Act, 1961. The appellant contends that the appellant has rightly claimed depreciation on the Mumbai Premises put to use / ready during the accounting year. 4. The Ld. Commissioner of Income-tax (Appeals) erred in confirming disallowance of depreciation of Mumbai Premises - Building on considering that business assets of Mumbai Display Unit were not ready to put to use by end of the year. 5. The appellant claims that the deduction of Rs. 24,30,554/- being liability provided / amortized of Employee Stock Option Scheme was an allowable deduction U/s.28 read with Section 37 of the Act. 6. The appellant contends that the liability under Employees Stock Option Scheme was remuneration / Staff Welfare Scheme for the employees being an incentive to employees entitling deduction u/s.28 r/w 37 of the Act. 7. The Ld. CIT (Appeals) has erred in not deleting the Interest charged U/s. 234B of Rs. 11,43,780/- and U/s.234C of Rs. 5,25,159/- of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders passed by the authorities below. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The undisputed facts are that the assessee had purchased the premises on 05/03/2007 and for the purpose of "Bath Studio" the furnishing and other work were carried out from March-07 to 31st May-2007. The contention of the assessee is that the premises were put to use for business purpose as the furnishing of the premises for the purpose of establishing "Bath Studio" commenced in the month of March-2007, hence the assessee is entitled for claimed depreciation. The AO in his order has observed that the asset has not been put to use during the year rather after acquisition, the "Bath Studio" was being built on it. Under these facts, we have to examine whether the assessee would be entitled for the depreciation as claimed despite the undisputed fact that the assessee had only purchased the building during the year under consideration and carried out certain furnishing work for the purpose of establishing the "Bath Studio". The contention of the assessee is that the premises were put to use for business purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced and the machinery itself has become functional later on." 4.2. The Hon'ble Gujarat High Court in the case of Suhrid Geigy Ltd.(supra) held as under:- 3. The view taken by the Tribunal is that the date on which the machinery installed in the building became functional is irrelevant. What is relevant is the date on which the machinery was installed in the building. Now, provisions on which reliance is placed for claiming depreciation allowance, namely s. 32(1) r/w r. 5 as they stood at the relevant time (relevant for the assessment in question, i.e., 1965-66) may be quoted. Sec. 32(1), so far as it is material for our purposes, reads as under: "32(1) In respect of depreciation of building, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of s. 34, be allowed....... (ii) in the case of building, machinery, plant or furniture, other than ships covered by cl. (i), such percentage on the written down value thereof, as may in any case or class of cases be prescribed......." (Emphasis supplied) Rule 5 of the rules, so far as it is material for our purposes read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of production of dyestuffs only after the machines became operative w.e.f. 7th March, 1965. Counsel for the assessee has argued that the machines had first to be installed before these machines could be operated. The user had, therefore, it is so argued, commenced on the date on which the installation was completed. In fact, if this arguments were valid, it can be said that the user had begun as soon as the work of installation had commenced regardless of when it was completed. In our opinion, there is a built-in fallacy in this argument. The fallacy will become evident if the argument is tested by envisioning an hypothetical situation. Take the case of a building which was completed, say in 1970, and the installation of the machinery was commenced in 1971, but could not be completed, for say five years thereafter, till 1974. Could it then be contended that the building was "used" for the purposes of the "business" of the assessee and could the assessee have claimed depreciation for these five years? Five years even before the machinery became functional and the plant was commissioned? In other words, even before it could have commenced trial production let alone actual producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , answer the question referred to us, as under: Question : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the "Azo" building was used for the purposes of business for more than one month in the relevant accounting year for the assessment year 1965-66 and was entitled to depreciation in the said assessment year?" Answer : In the negative, i.e., in favour of the Revenue and against the assessee. There will be no order regarding costs." 4.3. In the case in hand also, although the appellant had purchased the building for business purpose and furnishing of the same was being carried out for actual use. Therefore, in view of the binding precedent of the Hon'ble Jurisdictional High Court in the case of CIT vs. Suhrid Geigy Ltd., we are not inclined to accept the arguments advanced by the ld.Sr.counsel for the assessee, same are hereby rejected on this issue. Thus, Ground Nos.1 to 4 of assessee's appeal are rejected. 5. Now, we take up Ground Nos.5 & 6 of assessee's appeal which are inter-connected and, therefore, the same are decided together. 5.1. The ld.Sr.counsel for the assessee submitted that the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for tax, therefore any reduction in shares premium cannot result in loss which can be claimed in P&L account. 3-Disclosure norms for limited companies can be there as per Sebi or ICAI guidelines but the accounting will not make the claim as allowable expense or loss. For being an allowable expense or loss, the first condition is that expense cannot be capital in nature. Share premium or loss on premium is undoubtedly capital in nature and therefore clearly outside the purview of section 37 and 28 which deals with revenue expenses or losses. Therefore making such claim just on the basis of accounting entries for certain disclosure purposes and completely ignoring the provisions of IT act is nothing but furnishing inaccurate particulars of income. Considering the above and the discussion in assessment order, I find this claim frivolous, unsustainable and not as per the provisions of law. Accordingly the addition made by the assessing officer is confirmed." 6.1. It is not disputed that the assessee has claimed business expenditure on ESPO. The similar issue was before the Hon'ble Special Bench of ITAT Bangalore rendered in the case of Biocon Ltd. Vs. Dy.CIT(supra), wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
