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Apex Court in the decision reported in CIT v. D.P. Sandu Bros. Chembur (P.) Ltd. [2005] 273 ITR 1 that the surrender of tenancy rights amounted to transfer and hence, being a capital receipt, on the facts thus placed before this Court that the amount paid on account of surrender of tenancy rights being given by the assessee to the builder, there is no exchange of one property for the other. Higher depreciation on plastic mould to be allowed only if asset used in a business constituting a separate unit
In view of Explanation 5 to section 32(1), the Assessing Officer was duty-bound to grant depreciation allowance, whether the same is claimed by the assessee or not, provided the conditions mentioned under section 32 are satisfied.
CIT(A) followed the earlier order of the Tribunal in assessee’s own case in part and not in toto. He was of the view that interest and salary to the partners be allowed but not interest to third parties and the depreciation was to be allowed as claimed in the original return because the claim made in the revised return could not be substantiated. However, he has brought nothing on record as to how and in what manner the claim in the revised return was not substantiated particularly when the then learned CIT(A) vide order dt. 30th March, 2007 accepted the filing of revised return and the said order on the issue of acceptance of revised return
While making assessment of any returns any deduction is sought for it is the duty of the revenue official to examine not only the account but also substantive right of claiming deduction under the Act on the facts and circumstances of this case. It is not a case that the said assets and properties do not belong to the appellant, therefore depreciation in any assets and properties is a regular phenomenon and deduction on this account is allowable under Section 32 automatically.
The Ld DR argued that the Assessing Officer had rightly disallowed the exemption u/s 10B of the Act as the assessee had not filed prescribed audit report and had got software developed from outside. He further argued that assessee had not filed certified copies of invoices.
Where the assessee has written off the value of assets in the books of assessee as obsolete, can it still be include the value of said machinery in the block of assets and claim depreciation thereon. In the decision of the Hon’ble Delhi High Court in the case of M/s Bharat Aluminium Co., Ltd., the Court held that in order to be entitled to claim depreciation asset has to be owned by the assessee and it has to be used for the purpose of business or profession, but the expression used for the purpose of business, would apply for block of assets and not any specific building, machinery, plant or furniture in the said block of assets, as the individual assets loose identity after becoming inseparable part of block of assets.
Section 32 of the Act indeed entitles an assessee, who is the owner of a property, to depreciation. As we have already held, the arrangement between the lessor and the assessee was, in effect, an agreement of sale of the property by the lessor to the assessee. The assessee is, therefore, the owner of the property having acquired the same on 29th March, 1982, itself and, in any event, by 30th March, 1982.
According to Explanation 10 and proviso to sub-section (1) of section 43, the subsidy amount shall be deducted in the actual cost of the asset of the assessee. Thus, the contention of the assessee that the subsidy received towards the power generation plant would not be reduced from the actual cost of the assets was not correct.
Supreme Court in the case of CIT v. Mir Mohammed Ali [1964] 53 ITR 165 had considered the meaning of the word ‘machinery’ and pointed out that the word is not a technical term and in the absence of any definition under the Act, ordinary meaning would prevail. Indeed rule 8 of the Income-tax Rules treats aero-engines separately from aircraft, but this cannot be used to interpret the clauses in the Act that what was purchased and installed was machinery and after installation, a wider meaning has to be given to the said term.
The only other issue in this appeal is against the deletion of addition of foreign travel expenses. The facts of this ground are that the assessee incurred foreign travelling expenses to the tune of Rs. 23.50 lakh. The A.O. disallowed a sum of Rs. 3 lakh for the reason that the journeys undertaken were not in connection with the business. The learned CIT(A) deleted the addition by observing that all the places visited by the assessee were in connection with the business. No material has been brought on record to controvert this finding of the learned CIT(A). We, therefore, uphold the impugned order to this extent. This ground is not allowed.
