At, Income Tax Appellate Tribunal Chennai
By, THE HONOURABLE DR. O.K. NARAYANAN
By, VICE-PRESIDENT & THE HONOURABLE MR. S.S. GODARA
By, JUDICIAL MEMBER
For the Appellant: Dr. S. Moharana, CIT (DR). For the Respondent: T.N. Seetharaman, Advocate.
S.S. Godara, Judicial Member
This Revenue's appeal arises from the order of the Commissioner of Income Tax (Appeals)-V, Chennai dated 31-01- 2013 passed in ITA No.534/2008-2009, for assessment year 2006- 2007, in proceedings under section 143(3) of the Income Tax Act 1961 [in short the "Act"].
2. The substantive grounds raised in the appeal read as follows:-
"2.1 The ld. CIT(A) erred in directing the Assessing Officer to allow depreciation claimed by the assessee after due adjustment of the value of the computer systems purchased during the year and reduce the same by the value realized by the assessee on the sale of destroyed computers.
2.2. The ld. CIT(A) failed to note that for the purpose of claiming depreciation, the asset must be put to use during the year. 2.3. The ld. CIT(A) ought to have noted that in the assessee company's case, the computers were lying in the godown at the time of damage which clearly shows that the asset was not put to use during the year to claim depreciation''.
3. In the course of hearing, the Revenue vehemently argues that the CIT(A) has wrongly allowed the assessee's claim of depreciation qua computers which were not put to use in the impugned assessment year. Accordingly, it reiterates the pleadings and prays for acceptance of appeal.
4. In reply, the assessee strongly argues that CIT(A) has righty held the assessee entitled to benefit of depreciation in question. In support, it placed reliance on the case law of CIT vs. Bharat Aluminium Company Ltd (2010) 187 Taxmann 111 (Delhi), National Thermal Corporation Ltd vs. CIT (2012) 28 Taxmann.com 89 (Delhi) and ACIT vs. Chennai Petroleum Corpn Ltd (2010) 125 ITD 396 (Chennai) TM and prays for rejection of the appeal.
5. Facts apropos are that the assessee is a "domestic company'' dealing in lottery business. On 30.11.2006, it had filed its 'return' declaring total income of 40,38,97,750/-.
6. In the course of 'scrutiny', the assessee had claimed loss in extraordinary items of 87,33,400/-. In support thereof, it pleaded that new computer systems lying at godown were destroyed in heavy downpour in July, 2005 at Mumbai, which was substantiated by producing copy of the FIR and also photographs showing destroyed inventory site. The assessment order dated 30.12.2008 suggests that the Assessing Officer did not agree with the assessee's claim and held that the assessee's contention did not prove quantum of loss. Further, he also observed that since the computers were lying in the godown without being put to use, no depreciation would be admissible. Accordingly, he added said amount of 87,33,400/- in assessee's taxable income.
7. Aggrieved, the assessee preferred appeal. It is seen from the case file that in the lower appellate proceedings, it raised additional plea of depreciation allowance under section 2(11) read with sections 32(1)(ii) and 43(6)(c) of the Act. In the order under challenge, CIT(A) has upheld the findings of the Assessing Officer qua plea of loss above said. At the same time, he has upheld the assessee's additional plea and directed the Assessing Officer to allow deprecation to the assessee after due adjustment of the value of the computer systems purchased during the year and reducing the same by the value realized on the sale of destroyed computers.
This makes the Revenue aggrieved.
8. We have heard both parties and gone through the relevant findings of the assessment order, CIT(A)'s order as well as the case law stated herein above. The question sought raised by the Revenue is that since the assets in question were not put to use in the impugned assessment year, benefit of depreciation is not allowable. The assessee contests this argument of the Revenue. Having given our tho
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ughtful consideration, we are of the view that admittedly, computer systems in question was for back up use of the assessee. That being the case, in our opinion, it formed part of the ready to use "block of assets''. Accordingly, drawing support from the case law cited by the assessee, we affirm the order of the CIT(A) and dismiss the appeal of the Revenue. 9. In the result, the appeal of the Revenue is dismissed.