9911796707
TMI Blog2016 (11) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... the first ground of appeal of the Revenue in favour of assessee by observing that the impugned machineries were entitled for the depreciation in the year under consideration. As the said equipment was undoubtedly put to use on and from 14.03.2005. The suspicion of the AO that the machines were under trial is unfounded and in contradiction to the documentary evidence in respect of the said installation. The acceptance report and the confirmation on behalf of the seller speaks unequivocally that the machine was in workable condition from 14.3.2005 and under no circumstances, it may be said that it was under trial. This is because of the simple reason that no customer would accept the report from under trial machine at reasonably high cost. Such report may be faulty and unacceptable. So, whatever the AO concluded was not based on fact but was on the basis of his surmise and conjecture Following the same analogy we do not find any reason to interfere in the order of ld. CIT(A) and accordingly, the inter-connected issues raised by Revenue is dismissed.- Decided in favour of assessee Expenditure incurred in repair on rented property - Held that:- We find that assessee was admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the delay is occurred due to unavoidable circumstances. Ld. AR for the assessee raised no objection for the condonation of delay. This, in our considered opinion after considering the facts and circumstances of the case, condonation petition deserves to be considered and same is condoned and the hearing proceeded with. 3. First inter-connected issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the disallowance made by Assessing Officer for ₹ 32,38,637 on account of depreciation. For this, Revenue has raised the following grounds of appeal:- That the CIT(A) has erred in law as well as in fact in deleting the disallowance of claim of the assessee for depreciation to the tune of ₹ 32,38,637/- for F.Y 2004-05 without considering the fact that the machinery was first put to use by the assessee in the month of May, 2005 i.e. beyond the F.Y 2004-05. That the CIT(A) has erred in law as well as in fact in deleting the disallowance of claim of the assessee for depreciation to the tune of ₹ 32,38,637/- for F.Y 2004-05 without considering the fact that the assessee constantly tried to establish its false claim by furnishing differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elay in not hand over of Camera for patient trials. . This remark was not given cognizance. Again, in the same report, it has been written that installation started on 26-02-05 and the date of installation of machine was 14-03-05. We also enclosed herewith the copy of the said installation report for your kind perusal. Again, a letter from Wipro GE Health Care dt. 17-12-07 is also enclosed herewith which mentioned that the unit was completely installed in all respects on 14-03-05. During the course of assessment the assessee also filed a letter dt. 17-12-07 explaining why depreciation on the Gamma camera should be allowed. The copy of the letter is enclosed. The AO also did not make any comment on the bills received as payment for customers and made a remark that no test can be carried out for commercial purpose by accepting fees from customers, with an equipment under trial. Such comment is uncalled for and reveals the biased of the AO in disallowing the claim of depreciation. Considering the facts and circumstances, Ld. CIT(A) deleted the addition made by AO by observing as under:- 2.3 I have carefully considered the observation of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book comprising pages from 1 to 21 and submitted the trial process of the machines started with effect from 15.03.2004. The assessee in support of its claim has submitted the test report for using machine which is placed on page 7 of the paper book. Ld. AR further submitted the machine was ready to use for commercial production after the aforesaid trial run. He also relied on the order of Ld. CIT(A). 7. We have heard the rival contentions of both the parties and perused the materials available on record. From the aforesaid facts, we find that AO has disallowed the depreciation claimed by assessee on the ground that machine has not been put to use in the year under consideration. However from the submission, we find that machine was ready to use in the year under consideration on 15.03.2004 as evident from the testing report which is placed on page 7 of the paper book. In similar facts and circumstances, several courts have decided this issue in favour of assessee. In holding so we find support from the judgment of Hon ble High Court of Calcutta in the case of CIT Vs. Union Carbide (I) Ltd. 254 ITR 0488. The relevant extract of the judgment is reproduced below. Depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was borrowed for acquiring asset till the date on which such asset was first put to use. The assessee purchased machineries out of borrowed fund and claimed interest expense for ₹ 2,89,436/- on the borrowed capital by debiting the profit and loss a/c. Similarly, assessee has incurred a sum of ₹ 30,375/- as management consultation fees in the connection of aforesaid machine by debiting profit and loss a/c. The Assessing Officer during the course of assessment proceeding observed that the installation process for the machine was completed on 14.03.2005 but it functionally started on 03.05.2005. Such observation of the AO was based on the handing/ taking over report given by the machine supplier. The AO further observed that warranty period of the said machines started with effect from 03.05.2005. On question by the AO for disallowing the aforesaid sum on the ground of not putting the machine into use in the year under consideration, the assessee could not make any satisfactory reply. Accordingly, the AO opined that the assessee is not entitled to claim the interest and management consultation fees in the year under consideration and accordingly disallowed the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the order of ld. CIT(A) and accordingly, the inter-connected issues raised by Revenue is dismissed. 11. Next issue raised by Revenue in its appeal is that Ld. CIT(A) erred in deleting the addition made by AO for ₹ 5,56,950/- on account of expense incurred on repair and maintenance. For this, Revenue has raised following grounds:- That the CIT(A) had erred in law as well as in fact in deleting the disallowance of claim of the assessee for repair and maintenance to the tune of ₹ 5,56,950/- without considering the fact that such expenses was in relation to installation of a capital asset and would fetch long term enduring benefit to the assessee, hence should be treated as capital expenses. 12. The assessee has incurred repair expense on the building for ₹ 5,56,950/- which was debited in the profit and loss account of assessee. The AO during the course of assessment proceedings found that the repair expense has been incurred in this connection building / room where the new machinery has to be installed. Therefore, the AO treated the same as capital expenditure and disallowed the same and added to the total income of the assessee. 13. Aggrieved, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid facts and respectfully following the various judicial precedents relied upon hereinabove, we find no infirmity in the order passed by the Ld. CIT(A) in this regard and accordingly, the issue raised by Revenue is dismissed. 15. The last issue raised by Revenue in this appeal is that ld. CIT(A) erred in directing the AO to allow the unabsorbed depreciation for the AY 1996-97 to be carried forward though it was lawfully allowed till AY 2004-05. For this, Revenue has raised following grounds:- That the CIT(A) had erred in law as well as in fact in directing to allow the unabsorbed depreciation loss for the AY 1996-97 without considering the fact that the same was supposed to be carried forward for eight years immediately succeeding the AY 3004-05. So the claim to set off loss for A.Y 1996-97 in A.Y 2005-06 was not tenable. The AO did not allow the unabsorbed depreciation pertaining to the AY 1996-97 to be carried forward in the year under consideration on the ground that the unabsorbed depreciation can be carried forward only upto 8 AYs which have been lapsed in the assessment year 2004-05. 16. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied that restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with-Unabsorbed depreciation from A.Y.1997-98 can be carried forward and set off against income of A.Y. 2006-07-Assessee s appeal allowed. Any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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