WHETHER PHRASE “USED FOR BUSINESS” IN SECTION 32 MEAN THAT USE SHOULD BE BY WAY OF GENERATING REVENUE?
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Short note of today's case law for quick reference:
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[2024] 119 ITR (Trib) 121 (ITAT[Del])
[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — DELHI "C" BENCH]
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INDIA FLYSAFE AVIATION LTD.
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DEPUTY COMMISSIONER OF INCOME-TAX
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1. The assessee was engaged in the business of providing aircraft on a charter basis to VVIPs, state Government, corporate house and travel agents.
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2. The assessee company acquired an aircraft in July 2012, which was brought to its base in New Delhi after obtaining due clearances.
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3. A ferry flight was arranged, with insurance cover taken from New India Assurance Company Ltd. on August 6, 2012.??
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4. The assessee submitted that an invoice dated 04.08.2012 was raised for 6650 USD for pilot fees, SIC fees, and professional service charges for providing ferry pilot support services from 5th to 7th Aug, 2012.
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5. The A.O. taking into consideration the certificate of airworthiness, issued by the Director General of Civil Aviation, concluded that the aircraft was put to use for a period of less than 180 days and, thus, instead of depreciation at 40%, allowed the assessee depreciation at 20% only.
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On appeal Tribunal held that:
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6. That even before the certificate of airworthiness was issued by the Director General of Civil Aviation on 21.09.2012 for a period from 18.10.2012 to 17.10.2015, the assessee was de facto and de jure owner of the aircraft.
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7. The aircraft certainly was not allowed to fly to carry passengers or cargo in the absence of this certification by the competent authority, but that did not stop the assessee from holding it in its own name for the purpose of its business.
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8. The phrase, “used for the purpose of business” in section 32 of the Act did not mean that the use should be by way of generating revenue only.
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9. The use here was in the context of the direct connection of the asset with the purpose of business which was initiated in the relevant year.
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10. The expenses which were incurred for making the aircraft functional and ready to use during the year from India, when allowed, also established that the certificate of airworthiness issued by the Director General of Civil Aviation was only for the statutory compliances and to avoid legal liability, which was part of the business activity.
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11. Thus, the findings of tax authorities were set aside.
Tax Accountant at Amul Paints India
3 个月This is exactly similar to a scenario where a new machine is purchased and installed by the manufacturer for more than 180 days,but the order for producing the goods comes during last quarter. Technically the machinery is available for use , but was not used for generating revenue until last quarter. But I don't think the complete year depreciation shall be disallowed The basic crux of depreciation is that the capital expense is to be distributed over the useful work life. But it is not mandatory that the asset should be generating revenue also. Have I got it right? Does anyone have anything to say in this? All inputs welcome