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TMI Blog2011 (12) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... payment for these equipments remained by and large unpaid and the assessee itself in its financial statements reflected the equipments as capital work in progress. 2.3 Before the ld.CIT(A), following submissions were made It was submitted that the addition made by the AO by disallowing the depreciation was based on assumption, presumption and surmises, without conducting any independent inquiry. It was further urged that the AO did not adduce any evidence in support of his contention of non usability of the equipments. It was the contention of the counsel of the assessee that in fact the payments of such equipments were made at the end of the financial year but the delivery of the same was received quite earlier than the fag end of the financial year, although the invoices bear the date falling in the last week of March. It was submitted that the computer hardware and software, on which the depreciation was claimed, were put to the commercial use by the assessee in the financial year and all the tests of usability and the claim of depreciation stand fully satisfied. As for as the utility of the equipments and the reflection of the purchases made under the head capital w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the allowability of depreciation it was urged that first and foremost criteria is the usability of the asset. The condition precedent for the claim of depreciation is the use of assets for the purpose of business. The extent of use and its utility and contribution for the purpose of business is immaterial for the purpose of the section. It was contended that the payment for asset is not an issue in giving the claim of depreciation. Even if, the payment for asset has remained totally outstanding, then also depreciation on such asset can be provided. The assets taken on the instalment basis qualify for the depreciation. While applying the ratio of the aforesaid discussion it was submitted that in the instant case of the assessee the supplier of ERP system has got the long term project therefore the supplies were made continuously but the invoices were raised upon implementation of a particular segment / module. The invoices raised by the suppliers were regarded as testimony to the fact that the module became operational. Apart from this the correspondence received from supplier manifest about the usability of equipments. The certification by an independent third party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould prevail over any form of transaction and mode of entry. The usability of asset is sole criteria for the allow ability of depreciation. The timing of payment in it self is not a sole parameter for judging the allowability of depreciation. The contention as regards the modular implementation of ERP system entailing both installation and operationalisation of asset for the purpose of business merits consideration. Therefore I hereby delete the addition of ₹ 392805/- which was made by disallowing the depreciation. The appellant succeeds on this ground. 2.5 Before us, the ld. DR submitted that the assessee himself in the books of account has shown the expenditure under the head capital work in progress. Before the AO, the assessee contended that the payments were made in advance but the delivery of the items were received quite earlier than the fag end of the financial year. It is true that the invoices bear the date of falling in the last week of March. According to the ld. DR, the AO has pointed out that the assessee has not submitted any evidence to show that equipments were received earlier before close of the financial year. The ld. DR further submitted that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull and attempt must be sincere of ascertain the true intention of the parties that is material and shall determine the nature of the transaction. (5) That ERP installation is such which is like plug play. The ERP installation in respect of sales module was operative in march and as such the assessee has rightly claimed depreciation at the rate of 50% of the normal rate of depreciation. (6) The Hon ble Rajasthan High Court in the case of CIT v/s Udaipur Distillery Company Ltd. Reported in 135 Taxman 487 held that it is not the requirement of section 32 that depreciation claim in respect of any assets has to be allowed only if it continues to be used for all purposes for which it was being used earlier. The similar view was also taken by the Hon ble Gujarat High Court in the case of ACIT v/s Ashima Syntex Ltd. Reported in 122 Taxman 230 (Guj) In this case it was held that trial production of mach would fall within ambit of used for purpose of business and there is no requirement of optimum production for claiming depreciation u/s 32 of the Act. In light of above the ld CIT (A) has rightly allowed the claim of depreciation in respect of sales modules of ERP system and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly adding the disallowable component of ₹ 62500/- U/s 80G of IT Act, towards the total income is uncalled for and the said addition needs and deserves to be deleted. The appellant succeeds in this ground. 3.3 We have heard both the parties. The assessee has added back the donations of ₹ 75,000/- to the net profit in the computation of total income. The total income before allowng deduction u/s 80G is ₹ 1,69,45,139/- . It means that a sum of ₹ 75,000/- debited as donation stands added. The AO while computing the income in the assessment order has taken gross total income as per return of income at ₹ 1,69,45,140/-. From this the AO allowed deduction u/s 80G to the extent of ₹ 12,500/-.Thus a sum of ₹ 62,500/- stands added in the figure of ₹ 1,69,45,139/-. Hence, the ld.CIT(A) was justified in holding that the amount cannot be separately added because it stands include in the computation of income determined by the AO. 4.1 The third ground of Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 22,74,134/- made by the AO on account of sale of plots treated as business income by holding that income from sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company in order to get better utilization converted the land into 9 plots on different dates and the remaining 04 plots were sold on agreement basis on a fixed price of ₹ 50,000/- each. Mere conversion of agricultural land into residential one does not change the character of income. Before the ld.CIT(A), the assessee relied on the following cases laws. (a) it was held in the case of CIT v. Goyal (MP) 209 CTR 410 that isolated activity of sale of plots after converting agricultural land into non agricultural land and developing the same with the view to secure better price cannot come within the purview of adventure in the nature of trade and therefore the surplus on the sale of land was in the nature of capital gain. (b) It was held in Eclat construction (P) Ltd. V. CIT(1988) 172 ITR 84 (Pat.) that generally single transaction is not treated as business the expression business in ordinary parlance means any trading activity accompanies by regularity of transaction intended for the purpose of making profit. In general a single transaction is not taken as business. (c) It was held in CIT v. Distributors (baroda) (P) Ltd. (1972) 83 ITR 377 (SC)/ narain swadeshi Wv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legal title of assessee Co. was deficiency and the possession was in jeopardy. It was the view point of the AO that nothing was placed on the record to substantiate the fact that bad elements had occupied the land. In this connection it was stated that the AO has tried to turn blind eye towards all the circumstantial evidence. The land pertaining to these four plots remained agricultural as against residential in case of other plots and the UIT had not deposited any conversion charges. The sale by the assessee of the mere defective title of plots on as is and where is basis was reported to be testimony to stress sale condition through which four plots were sold were not even registered. The assessee sold the four plots through sale agreement executed on the stamp papers. The valuation was not done/ determined of these plots by any authority. The sales consideration for these four plots were received through cheque and sale agreement was duly notarized. The pro. Of 50C is not applicable because no valuation was done by stamping authority and precondition remained unfulfilled. The case of the assessee is fully and squarely covered by the ratio of decision pronounced in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation also authorize the company to deal in various other line of business but it does not mean that the company did any business in real estate. The profit of assessee come other than capital gain was ₹ 1,60,28,248/- as against capital gain of ₹ 9,16,891/-. (vi) The solitary sales of land purchased a part of which was also under adverse possession can not brand the transaction as that of trading of land. This view is supported from the decision of Hon ble ITAT Mumbai Bench in the case of Momaya Investment (P) Ltd. v/s ITO reported in 63 DTR 192 (Mum). (vii) The ld CIT (A) rightly held that it was a capital gain and not a business income as the balance sheet of company always disclosed the cost of land in the fixed asset and this point is not disputed by AO at any place. b] As regards application of sec 50C in respect of plots sold by agreement to sale. (i) At the one breath the AO treat the transaction as that of business income and at the same time applying the provisions of section 50C. The provisions of section 50C are ment for computation of capital gain and not for the business income. (ii) Further the ld CIT (A) who is duty bound to foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter keeping the land for sufficient long period and noticing that factory building cannot be situated in this land, the assessee thought it to sell the land. The sale of such land cannot be considered as business income. The Hon'ble Karnataka High Court in the case of CIT vs S. Rajamannar, 329 ITR 626 had an occasion to consider the similar issue. The assessee developed the land and got a portion of it as consideration. The assessee was not engaged in the development of real estate. The gain on sale of land is capital gain. The Hon'ble Madras High Court in the case of CIT vs S Palanichamy, 2011-TIOL-576-HC-Mad-IT held that single transaction of the property to wriggle out of the financial hardship will not make the activity , an adventure in the nature of trade. In the instant case, the assessee company is having turnover of more than crores in the business of Bhujia Namkin was not indulging in the business of real estate. The Jurisdctional High Court in the case of CIT vs Sohan Khan ,304 ITR 194 had an occasion to consider as to whether the disposal of large extent of land under site plan will result into an adventure in the nature of trade or profit is to be taxed under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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