The Term ‘Used for the Purposes of Business’ Include Asset Which Kept Ready for Use but Actually not Put to Use: ITAT Allows Depreciation u/s 32 of Income Tax Act [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed depreciation claims under Section 32 of the Income Tax Act, 1961 holding that the term used for the Purpose of business would include assets which had been kept ready for use but actually had not been put to use.

The Assessee,Span Air Pvt. Ltd. was a company stated to be engaged in the business of providing non-scheduled flights to organisations, professionals worldwide. Assessee electronically filed its return of income for A.Y. 2015-1 on 28.11.2015 declaring loss under the normal provision of Income Tax Act and some amount under Section 115JB of the Income Tax Act. Therefore, the case was selected for scrutiny and the total loss was determined.

During the course of assessment proceedings, AO noticed that the assessee had claimed depreciation on the vehicle. He noticed that the vehicle was purchased during the year and registration of the vehicle was done on 22.11.2014 and according to AO, since the registration was done on 22.11.2014, it was eligible for the depreciation of 50% on the normal rate of 7.5% in A.Y. 2015-16. He accordingly disallowed 50% of the depreciation on the new vehicle.

M. R. Sahu, on behalf of the assessee submitted that, the assessee had purchased the vehicle on 22.09.2014, the vehicle was insured also on 22.09.2014 and the assessee had paid the entire purchase price including the insurance before 30.09.2014 but the vehicle got registered on 22.11.2014 only.

He further submitted that, as the vehicle was ready for use on the date of purchase on 22.09.2014, it had satisfied the concept of ‘Passive User’ and also as the vehicle was ready for use during the first half of F.Y. 2014-15, the assessee was entitled to claim 100% depreciation under Section 32 of the Income Tax Act for full year.

B. M. Singh, who appeared on behalf of the revenue supported the order of lower authorities. 

The two-member Bench of Anil Chaturvedi, (Accountant Member) and Anubhav Sharma, (Judicial Member) observed that the reason for disallowing the 50% of was for the reason that the vehicle was registered in the second half of the relevant previous year.

The Bench further relying upon the decision in National Thermal Power Corporation Ltd. vs. Commissioner of Income-tax which held that ‘used for the purposes of the business’ would include the asset which is kept ready for use but actually not put to use, allowing the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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