Search Results For: Depreciation


Plastiblends India Limited vs. ACIT (Supreme Court)

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DATE: October 9, 2017 (Date of pronouncement)
DATE: October 14, 2017 (Date of publication)
AY: 1997-98 to 2000-01
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CITATION:
S. 80-IA contains substantive and procedural provisions for computation of special deduction. Any device adopted to reduce or inflate the profits of eligible business has to be rejected. The claim for 100% deduction, without taking into consideration depreciation, is anathema to the scheme u/s 80-IA of the Act which is linked to profits. If the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided u/s 80-IA of the Act which cannot be permitted

It may be stated at the cost of the repetition that judgment in Mahendra Mills was rendered while construing the provisions of Section 32 of the Act, as it existed at the relevant time, whereas we are concerned with the provisions of Chapter VI-A of the Act. Marked distinction between the two Chapters, as already held by this Court in the judgments noted above, is that not only Section 80-IA is a code by itself, it contains the provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act, which allows depreciation under Section 32 of the Act is linked to investment. This Court has also made it clear that Section 80-IA of the Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted

Posted in All Judgements, Supreme Court

CIT vs. Equinox Solution Pvt. Ltd (Supreme Court)

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DATE: April 18, 2017 (Date of pronouncement)
DATE: April 21, 2017 (Date of publication)
AY: 1991-92
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CITATION:
S. 45/ 50(2): If an undertaking is sold as a running business with all assets and liabilities for a slump price, no part of the consideration can be attributed to depreciable assets and assessed as a short-term capital gain u/s 50(2). If the undertaking is held for more than three years, it constitutes a "long-term capital asset" and the gains are assessable as a long-term capital gain

In our considered opinion, the case of the respondent (assessee) does not fall within the four corners of Section 50 (2) of the Act. Section 50 (2) applies to a case where any block of assets are transferred by the assessee but where the entire running business with assets and liabilities is sold by the assessee in one go, such sale, in our view, cannot be considered as “short-term capital assets”. In other words, the provisions of Section 50 (2) of the Act would apply to a case where the assessee transfers one or more block of assets, which he was using in running of his business. Such is not the case here because in this case, the assessee sold the entire business as a running concern

Posted in All Judgements, Supreme Court

Mother Hospital Pvt. Ltd vs. CIT (Supreme Court)

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DATE: March 8, 2017 (Date of pronouncement)
DATE: March 22, 2017 (Date of publication)
AY: 1992-93
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CITATION:
S. 32: Title to immovable property cannot pass when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also duly registered with the sub-Registrar. Accordingly, a lessee cannot be said to be the "owner" for purposes of claiming depreciation. Under Explanation 1 to s. 32, the lessee is entitled to depreciation on the cost of construction incurred by him but not on the cost incurred by the owner and reimbursed by the lessee

We are in agreement with the view taken by the High Court. Building which was constructed by the firm belonged to the firm. Admittedly it is an immovable property. The title in the said immovable property cannot pass when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also duly registered with the sub-Registrar. Nothing of the sort took place. In the absence thereof, it could not be said that the assessee had become the owner of the property. As is clear from the plain language of the Explanation, it is only when the assessee holds a lease right or other right of occupancy and any capital expenditure is incurred by the assesee on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension of or improvement to the building and the expenditure on construction is incurred by the assessee, that assessee would be entitled to depreciation to the extent of any such expenditure incurred. In the instant case, records show that the construction was made by the firm. It is a different thing that the assessee had reimbursed the amount. The construction was not carried out by the assessee himself. Therefore, the explanation also would not come to the aid of the assessee

Posted in All Judgements, Supreme Court

UniDeritend Limited vs. ACIT (ITAT Mumbai)

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DATE: November 26, 2015 (Date of pronouncement)
DATE: January 29, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Subsidy granted to set up a wind project is a capital receipt. the subsidy cannot be reduced under Explanation 10 to s. 43(1) from the cost of the assets acquired though 100% depreciation is allowed on the cost of the assets. The subsidy is also not assessable either u/s 41(1) or u/s 50

So far as the contention of the AO that the subsidy is liable to be taxed under section 50 of the Act is concerned, we find that in this case neither there was a transfer of any asset from the block nor did the block has ceased to exist. It is not a case of capital gains by way of transfer but it is only a case of capital receipt as observed above as an incentive by the state government to promote the generation of electricity through non conventional sources. In view of the above, in our view, the subsidy received by the assessee is not taxable under section 41(1) neither under section 43(1) and nor under section 50 of the Act

Posted in All Judgements, Tribunal

CIT vs. Dharampal Satyapal (Delhi High Court)

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DATE: January 6, 2016 (Date of pronouncement)
DATE: January 25, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 50B/43(6)(c): In computing the net worth for computing capital gains from a slump sale, depreciation on assets have to be deducted even if not claimed by the assessee

Plainly, the purpose of clause (a) of Explanation 2 to Section 50B of the Act is to provide a methodology to compute the written down value of the block of assets transferred by an Assessee as a part of the undertaking or division sold by way of a slump sale. The reference to Clause C is clearly not for the purposes of computing the block of assets remaining with the Assessee after the slump sale. It is apparent from the above that the intended object and scope of Clause C as used in Section 50B of the Act is totally different than the purpose of the said provision when read as a part of Section 43 of the Act. In the circumstances, clause (a) of Explanation 2 to Section 50B of the Act must be read in a manner to expressly include the computation provisions of Clause C without reference to other the import of the said provisions of Section 43 of the Act. In our view, the ITAT fell into error in importing the interpretation of Clause C read as a part of Section 43 of the Act, to interpret the scope of clause (a) of Explanation 2 to Section 50B of the Act

Posted in All Judgements, High Court

CIT vs. Sonic Biochem Extractions Pvt. Ltd (Bombay High Court)

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DATE: November 17, 2015 (Date of pronouncement)
DATE: November 27, 2015 (Date of publication)
AY: 2005-06
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CITATION:
S. 32/ 43(6): Even assets installed in a discontinued business are eligible for depreciation as part of 'block of assets'

Once the concept of block of assets was brought into effect from assessment year 1989-90 onwards then the aggregate of written down value of all the assets in the block at the beginning of the previous year along with additions made to the assets in the subject Assessment Year depreciation is allowable. The individual asset loses its identity for purposes of depreciation and the user test is to be satisfied at the time the purchased Machinery becomes a part of the block of assets for the first time

Posted in All Judgements, High Court

ITO vs. Legal Heir of Shri Durgaprasad Agnihotri (ITAT Mumbai)

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DATE: October 14, 2015 (Date of pronouncement)
DATE: October 30, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Correctness of law laid down by Bombay High Court in Ace Builder 281 ITR 210 that deduction u/s 54EC is available to short-term capital gains computed u/s 50 doubted by Tribunal

By virtue of the deeming provision of section 50, cost of a long-term capital asset (LTCA), i.e., as per section 2(29A), where depreciable, forming part of a block assets on which depreciation stands claimed, the capital gain on its transfer would have to be computed in terms thereof, i.e. by treating the WDV of the relevant block of assets (or, as the case may be, the relevant asset) as its cost of acquisition. The second deeming per the provision of section 50 is qua the nature of such capital gains, i.e., as capital gains arising from the transfer of a STCA. Section 54EC is available on capital gain arising on the transfer of a LTCA, i.e., which is not a STCA by definition. The same shall, therefore, not apply to capital gains computed u/s.50

Posted in All Judgements, Tribunal

Mangalore Ganesh Beedi Works vs. CIT (Supreme Court)

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DATE: October 15, 2015 (Date of pronouncement)
DATE: October 19, 2015 (Date of publication)
AY: 1995-96
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CITATION:
S. 32: Even prior to the insertion of "intangible assets" in s. 32, intellectual property rights such as trademarks, copyrights and know-how constitute "plant" for purposes of depreciation. The department is not entitled to rewrite the terms of a commercial agreement

The question is, would intellectual property such as trademarks, copyrights and know-how come within the definition of ‘plant’ in the ‘sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it’? In our opinion, this must be answered in the affirmative for the reason that there can be no doubt that for the purposes of a large business, control over intellectual property rights such as brand name, trademark etc. are absolutely necessary. Moreover, the acquisition of such rights and know-how is acquisition of a capital nature, more particularly in the case of the Assessee. Therefore, it cannot be doubted that so far as the Assessee is concerned, the trademarks, copyrights and know-how acquired by it would come within the definition of ‘plant’ being commercially necessary and essential as understood by those dealing with direct taxes

Posted in All Judgements, Supreme Court

ACIT vs. Victory Aqua Farm Ltd (Supreme Court)

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DATE: September 4, 2015 (Date of pronouncement)
DATE: September 16, 2015 (Date of publication)
AY: -
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CITATION:
S. 32: The "functional" test has to be applied to determine whether an asset is "plant". Even a pond designed for rearing prawns can be "plant"

In Commissioner of Income Tax vs. Anand Theatres 224 ITR 192 it was held that except in exceptional cases, the building in which the plant is situated must be distinguished from the plant and that, therefore, the assessee’s generating station building was not to be treated as a plant for the purposes of investment allowance. It is difficult to read the judgment in the case of Anand Theatres so broadly. The question before the court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a “plant” and it was in relation to that question that the court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or cinema theatre could not be given depreciation on the basis that it was a plant

Posted in All Judgements, Supreme Court

CIT vs. Noida Medicare Centre Ltd (Delhi High Court)

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DATE: August 4, 2015 (Date of pronouncement)
DATE: August 27, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 32: Customs duty paid in a later year can be capitalized in the year the obligation to pay the duty arose. Question whether it can be capitalized in year of import of the goods left open

The central question is whether the obligation to pay customs duty related back to the actual date of payment of customs duty or the date of import of the equipment and whether the said customs duty paid in the previous year relevant to the AY in question can be capitalized with reference to an earlier year. In Funskool (India) Limited (2007) 294 ITR 642 (Mad) the question was whether depreciation could be claimed on the additional customs duty paid in the previous year relevant to the AY in question although such customs duty was in respect of machinery that was imported and installed in an earlier year. That question was answered in the affirmative by the Madras High Court by following the judgment of the Gujarat High Court in Atlas Radio and Electronics P. Limited v. Commissioner of Income Tax (1994) 207 ITR 329 (Guj) in which it was held that even though the sales tax was paid in a subsequent year, the liability to pay sales tax arose in the accounting period relevant to the assessment year in which the machinery was purchased.

Posted in All Judgements, High Court
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