Unreported Decisions – December 2021
By Ajay R. Singh, Advocate and CA Rohit Shah
1. Depreciation on Asset forming Part of Block of Assets but not utilized during the relevant Assessment Year
The assessee claimed the depreciation of ` 57,60,034/- on Westland Helicopters which are the part of block of assets. These assets had been acquired in 1986-87, however, the same were not used during the relevant assessment year. The AO alleged that the depreciation claimed by the assessee is not allowable since the asset was not used in the current year. The ld. CIT (A) confirmed the disallowance.
It was submitted before ITAT that, the helicopters were acquired in 1986-87 and the assessee has been claiming the depreciation since then has not been in dispute. The AO has allowed the depreciation on helicopters in the earlier assessment years. This fact is also not disputed by the AO as well as CIT(A). Further, the assessee is following the concept of block of assets which were also not in qualm by the revenue.
‘Block of Assets’ as defined by section 2(11) means, group of assets falling within a class of assets, comprising—
(a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licenses, franchises or any other business or commercial rights of similar nature, [not being goodwill of a business or profession, in respect of which the same percentage of depreciation is prescribed.
Thus, once an asset is part of the block of assets and depreciation is granted on that block, it cannot be denied in its subsequent year on the ground that one of the assets is not used by the assessee in some of the years. The concept "user" of assets has to apply upon block as a whole instead of an individual asset. Hon’ble ITAT allowed the appeal and relied on the Hon’ble Jurisdictional High Court in the case of Sony India (P.) Ltd. v. CIT [2017] 88 taxmann.com 580 (Delhi) held that the assessee would be entitled to depreciation in respect of assets which were part of block of assets even if said assets had not been put to use during relevant assessment year and had been sold prior to end of accounting year.
Pawan Hans Helicopters Ltd. vs. DCIT Special Range-20, New Delhi [ITA No. 319/ DEL/2001 A.Y. 1995-96]
Pawan Hans Helicopters Ltd.2. S. 12A: Taxability of Income of a Trust During Pendency of 12A Application
Assessee, a trust, engaged in social and religious activities filed its return of income for the A.Y. 2008-09 declaring NIL income. The return was processed under section 143(1). Subsequently, the assessment was reopened under section 147. The AO during the reassessment noted that assessee-trust is registered with Registrar Sub-Divisional, Bhatpara (CG) vide registration No. 2/001, dated 9-10-2001, however, the assessee has no registration under section 12A. The AO in absence of registration under section 12A treated the receipt of building fund of ` 321,351/- as income of the assessee.
On appeal before CIT(A), the action of the AO was upheld. During the pendency of appeal before ld CIT(A), the assessee applied for registration under section 12AA and the assessee was granted registration vide order dated 9-5-2016 with effect from 1-4-2015. Before, ld CIT(A) the assessee pleaded that the assessee as per the Proviso to section 12AA (2), when the application of the trust is pending registration, the registration will apply to the pending assessment. The plea of the assessee was not accepted by the ld CIT(A) by taking view that before granting the registration under section 12AA, the assessment for AY 2008-09 was completed on 31-3-2015 and for AY 2011-12 assessment completed on 27-3-2015. Before Hon’ble ITAT, it was submitted that initially Assessee submitted the application us 12AA on 31-03-2004 and outcome of the application of assessee us 12AA was never communicated to the assessee. It was also submitted that the assessee’s case is covered under "deemed registration" as per the decision of Hon’ble Supreme Court in case of Promotion of Education Adventure Sport & Conservation of Environment dated 16-2-2016. The learned AR for the assessee further submitted the assessee is granted registration during the pendency before CIT(A), therefore the assessee is entitled for the benefit of first Proviso to section 12A (2). It is admitted position under the
law that the appeal is continuation of original proceedings. Even otherwise the ld CIT(A) has co-terminus power with that of the assessing officer. In view of the above and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be ‘assessment proceedings pending before the assessing officer’ within the meaning of that term as envisaged under the proviso. It follows there-from that the assessee who obtained registration under section 12AA of the Act during the pendency of appeal was entitled for exemption claimed under section 11 of the Act. Hon’ble ITAT allowed the appeal and held that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1-10-2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under sections 11 & 12 as mentioned in section 12A provided for registration u/s. 12AA as a pre-condition for applicability of section 12A."
Prem Prakash Mandal Seva Trust vs. ITO, Exemption, Raipur [ITA No.262/Raipur/2016]