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TMI Blog2020 (11) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... so accepts silently that the building in question is occupied by the assessee for business purpose and he states this objection only that it was not put to use in the present year because actual let out has happened subsequently AO should allow the claim of depreciation on this basis that the building was put to use for the purposes of the business on 24.09.2013 i.e. the date of completion and keeping this in mind that the assessee was already in the hunt for lessee and keeping this also in the mind that this is not the case of the AO or CIT (A) that income from this house property is taxable under the head income from house property and not under the head income from business because had it been the case of the AO or CIT (A), Annual Value would have been brought to tax and deduction would have been allowed of interest u/s 24 and only depreciation would have been disallowed. Disallowance of interest u/s 36 (1) (iii) in respect of funds borrowed for construction of the same building known as Business @ Mantri at Pune - disallowances alleging that the said building was not put to use by the assessee in the present year - HELD THAT:- Requirement of section 32 and proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36[1][iii] of the Act has no application to the capital borrowed by the appellant for the building Business @ Mantri at Pune as the said capital borrowed was not in connection with extension of business and hence, the interest ought to have been allowed. 4. The learned CIT[A] is not justified in upholding the A.O.'s refusal to deduct a sum of ₹ 6,73,97,716/- from out of the taxable income being the deemed dividend that was erroneously reported by the appellant in the return of income under the facts and in the circumstances of the appellant's case. 5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s 234-B, of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 3. In course of hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not brought to tax by the AO also when rent commencement date is 01.08.2013. In reply, learned AR of the assessee submitted that such detail is not readily available with him and he will file written submissions along with evidence in this regard within three days and accordingly, he filed Memo of Clarification on 11.09.2020 along with Deed of Cancellation of Lease Deed between the assessee company and HSBC Software Development (India) Private Limited dated 12.07.2013. For ready reference, we reproduce the contents of this Memo of Clarification for ready reference, it reads as under:- I, V. SRINIVASAN, Advocate and Authorised Representative of the above appellant, beg to submit that during the course of hearing, the Hon'ble Bench desired the undersigned to file a submission / clarification on the reasons as to why the appellant has not offered to tax the notional rent from M/s.HSBC Software Development [I] Pvt. Ltd., [hereinafter for short HSBC ] from August, 2013 to March, 2014 in terms of the lease deed dated 31/01/2013 and in this connection, and under instructions from the above appellant, I beg to submit the following for the kind consideration of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Paper Book] and electricity bills from October 2013 [Placed at pages 84 to 89 of Paper Book]. Hence, no notional rent or real rent arises in the appellant's case for the year under appeal based on the lease deed dated 31/01/2013 from 1St August 2013. 4. It may also be mentioned here that subsequently, the appellant has entered into a lease agreement with M/s.Vodofone India Services Pvt. Ltd., dated 12/02/2015 [See pages 170 to 238 of Paper Book] and the appellant has offered the rental income to tax during the assessment year 2015-16. 5. As against this, learned DR of the revenue supported the assessment order and the order of CIT (A). He pointed out that in para 4.4 of the assessment order, it is noted by the AO that the building was leased out to M/s HSBC Software Development India Pvt. Ltd. on 30.01.2013 on the condition that all the relevant statutory approvals and construction of the building is completed. He pointed out that the tenant could not occupy the building in the present year because the assessee could not get relevant approvals and the building was occupied by the lessee (a different Lessee) only in AY 2015 16. He submitted that under these facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The interpretation of used for the purpose of business by the hon'ble Supreme Court in the decision cited lays down that machinery should be installed. The observation of the hon'ble Supreme Court does not deal with a situation when the machinery installed becomes defective and does not function, in such case whether it could be said that machinery was not used for the purpose of business. The interpretation of used for the purpose of business by the hon'ble Supreme Court in the decision cited lays down that machinery should be installed. The observation of the hon'ble Supreme Court does not deal with a situation when the machinery installed becomes defective and does not function, in such case whether it could be said that machinery was not used for the purpose of business. The purport and object of law relating to depreciation as envisaged under section 32 of the Income-tax Act, 1961 has to be meaningfully interpreted, consistent with the object. When the assessee bona fide installs any machinery and to his misfortune, it become defective and non-functional, it cannot be said that it is not put into use for the purpose of business may be that install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of clauses (v), (vi) and (vii) the machinery and plant must be such as were used, in whatever sense that word is taken, at least for a part of the accounting year. If the machinery and plant have not at all been used at any time during the accounting year no allowance can be claimed under clause (vii) in respect of them and the second proviso also does not come into operation. 9. Hence, it is seen that as per this Judgment of Hon ble apex court, the words used for the purpose of business mean used for the purpose of enabling the owner to carry on business and earn profits in the business. If we apply this test in the present case, we find that when the building in question was certified to be ready for use as per Final Completion Certificate of the building dated 24.09.2013 issued by Pune Municipal Corporation available in the paper book, it should be accepted that this event i.e. issue of Final Completion Certificate of the building dated 24.09.2013 issued by Pune Municipal Corporation enabled the owner of the building i.e. the present assessee to carry on business and earn profits in the business and this fact that the Lease Deed dated 31.01.2013 was cancelled before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause ( b ) or clause ( c ) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. (2) Where the property consists of a house or part of a house which- ( a ) is in the occupation of the owner for the purposes of his own residence; or ( b ) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil . (3) The provisions of sub-section (2) shall not apply if- ( a ) the house or part of the house is actually let during the whole or any part of the previous year; or ( b ) any other benefit therefrom is derived by the owner. (4) Where the property referred to in sub-section (2) consists of more than 29 [ one house ] - ( a ) the provisions of that sub-section shall apply only in respect of 30 [ one ] of such houses, which the assessee may, at his option, specify in this behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed of interest u/s 24 and only depreciation would have been disallowed. 11. Now we decide the issue about allowability of interest u/s 36 (1) (iii). For disallowance of interest, the AO has invoked the provisions of the proviso to section 36 (1) (iii) and the argument of the learned AR of the assessee is this that if depreciation is allowable, interest is also allowable. As per learned CIT (A) also, for the same reasons due to which he has confirmed the disallowance of depreciation, he has confirmed the disallowance of interest also and no new or different reason is given by him for confirming the disallowance of interest. In our considered opinion also, the requirement of section 32 and proviso to section 36 (1) (iii) is similar and once, we hold that the building was put to use and depreciation is allowable, the conditions specified in this proviso to section 36 (1) (iii) also gets satisfied and interest is also allowable from the date of completion of the building i.e. 24.09.2013 in the present case. Accordingly, we delete the disallowance of interest also and Ground Nos. 2 and 3 are allowed. 12. As per Ground No. 4, the issue raised is about addition of ₹ 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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