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TMI Blog2017 (3) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... of improvement in the market condition, the machinery was kept ready for use. Since, the depreciation is statutory allowance and the manufacturing activity was temporarily stopped, therefore, it has to be allowed. Thus, this ground of the assessee is allowed. Ad-hoc addition to the gross profit and further making enhancement in the gross profit percentage to 1.89% by rejecting the books of account of the assessee - Held that:- We find that the assessee duly produced the party-wise details of purchase and sales with the help of register maintained for this purpose and also confirmation from the concerned parties. Ld. Assessing Officer issued notices u/s 133(6) of the Act to all the creditors to which all the parties attended/submitted their replies as is evident from para 5.3 of the impugned order. As is evident from the assessment order itself (para-7) that certain discrepancies were noticed in the audit report, meaning thereby, the audit report was duly filed by the assessee. In the assessment order itself (para-7-II), there is a mention that during assessment proceedings itself, the assessee filed audit report on 13/10/2009. It means the audit report was filed by the assessee, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power at the manufacturing unit and further there was adverse market conditions for such manufacturing activities. It is not the case that the assessee completely abundant/closed the business rather the assessee continued in trading activities in the same line of business and due to reasons, beyond the control of the assessee, the manufacturing activity was stopped for a temporary period. It can be said that the business of the assessee was not completely shut down. It is an admitted fact that in earlier Assessment Year, the depreciation was allowed to the assessee as the machinery were put to use and manufacturing activity was carried out. 2.2. Before adverting further, we are expected to analyse the meaning of the word depreciation, which means "a decrease in the value of property through wear and tear, deterioration or obsolescence, meaning thereby, it is inherent decline in the value of the asset. Before coming to any conclusion, we are reproducing hereunder the relevant provision of section 32of the Act for ready reference and analysis:- 32. (1) In respect of depreciation of- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset: Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation.-For the purposes of this proviso,- (2) the expression "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not include "maxi-cab", "motor-cab", "tractor" and "road-roller"; (b) the expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "trac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in clause* © of sub-section† (6) of section 43. Explanation 3.-For the purposes of this sub-section, the expression "assets" shall mean- (2) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. Explanation 4.-For the purposes of this sub-section, the expression "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). Explanation 5.-For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income; (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Explanation.-For the purposes of this clause,- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso; (2) "sold" includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of the assessee, the assessee was held to be entitled for depreciation. Identical ratio was laid down by Hon'ble jurisdictional High Court in CIT vs Dilip Singh S. Bagga (1993) 201 ITR 995 (Bom.), CIT vs Mirza Ataulla Baig 202 ITR 291 (Bom.), CIT vs Nabdurga Transport Company 235 ITR 158, 160 (All.), Basti Sugar Mills Ltd. (2002) 257 ITR 88, 89,91 (Del.), Hotels Skylark & Restaurant Pvt. Ltd. 221 ITR 283 (Punjab), CIT vs A.P. Paper Mills 225 ITR 262 (A.P.), CIT vs Orient Longman Pvt. Ltd. 227 ITR 68 (A.P.), CIT vs Himachal Pradesh Mineral and Industrial Development Corporation 234 ITR 509 (HP), Mysore Minerals Ltd. 239 ITR 775 (SC), relying on CIT vs Poddar Cements Pvt. Ltd. 226 ITR 625 (SC) held that the assessee is entitled to depreciation. The ratio laid down in CIT vs Revathi 245 ITR 686 (Mad.), CIT vs Thanthai PT Corporation 248 ITR 632 (Mad.), CIT vs WEP Perferals Ltd. (2014) 362 ITR 508 (Karn.) and CIT vs Jawhar Kala Kendra (2014) 362 ITR 515 (Raj.) supports the case of the assessee. 2.5. The ratio laid down in ICDS Ltd. Vs CIT (2013) 350 ITR 527 (SC), Prkash Leasing Ltd. Vs DCIT (2013) 356 ITR 179 (Karn.), CIT vs Biad Leasing and Finance Company Ltd. (2013) 359 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material available on record. The facts, in brief, are that the ld. Assessing Officer rejected the books of accounts of the assessee invoking section 145(2) of the Act and estimated the gross profit at 1.89% on the turnover of the assessee amounting to ₹ 8,22,63,831/-. During the relevant period, the assessee broadly traded in plastic beeds, plastic powder and other related articles. The Assessing Officer while estimating the addition of ₹ 15,54,786/- at the rate of 1.89% of ₹ 8,22,63,831/- observed that the assessee did not got its accounts audited u/s 44AB of the Act. The ld. Assessing Officer did not find the books of accounts of the assessee to be reliable because the primary books and vouchers were not produced before him. However, we find that the assessee duly produced the party-wise details of purchase and sales with the help of register maintained for this purpose and also confirmation from the concerned parties. Ld. Assessing Officer issued notices u/s 133(6) of the Act to all the creditors to which all the parties attended/submitted their replies as is evident from para 5.3 of the impugned order. As is evident from the assessment order itself (para-7) t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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