DCIT, New Delhi V. M/s. CAIRS Computer Aided Information & Services Pvt. Ltd., New Delhi

ITA 562/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69560 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3); 133(6); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI J.S. REDDY ITA NOS. 562 & 1968/DEL/2013 ASSTT. YRS: 2009-10 & 2008-09 RESPECTIVELY DCIT CIR. 3(1)/ VS. M/S CAIRS COMPUTER AIDED INFOR MATION ITO WARD 3(2), & SERVICES P. LTD., D-36, LGF, SO UTH NEW DELHI. EXTN. II, NEW DELHI-110049. PAN: AAACC 1968 Q ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : MS. NIDHI SRIVASTAVA SR. DR RESPONDENT BY : SHRI SANJEEV KAPOOR CA O R D E R PER R.P. TOLANI, J.M : THESE ARE REVENUES APPEALS AGAINST SEPARATE ORDE RS OF CIT(A), CHALLENGING GRANTING OF DEPRECIATION RELATING TO A .Y. 2008-09 & 2009-10 AS UNDER: ASSTT. YR. AMOUNT 2008-09 RS. 84,90,098/- 2009-10 RS. 72,16,610/- 2. IT IS AGITATED THAT FOR CLAIMING DEPRECIATION U /S 32, THE ASSET MUST BE OWNED AND SHOULD HAVE BEEN PUT TO USE, WHICH HAS NO T BEEN PROVED BY THE ASSESSEE. 3. BRIEF FACTS ARE: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUYING AND SELLING OF SOFTWARE AND HARDWARE FOR COM PUTERS AND BUSINESS 2 MACHINES, COMPUTER PROGRAMMING & ALLIED SERVICES & PROVISION OF SERVICES & COMPLETE INFRASTRUCTURE INCLUDING TECHNICAL KNOW- HOW TO FACILITATE SMOOTH FUNCTIONING O ONLINE EVENTS GAMES, MULTIMEDIA, PROD UCTS & LOTTERIES, SUBJECT TO COMPLIANCE OF LAW OF CENTRAL & STATE GOVERNMENTS . 3.1. ASSESSEE REPORTED THE BUSINESS TURN OVER OF RS . 319.46 CRORES AND RS. 333.53 CRORES FOR A.Y. 2008-09 AND 2009-10 RESPECTI VELY. BESIDES, THIS TURN OVER, ASSESSEE DECLARED OTHER INCOME FOR RUNNING NA GALAND GOVT. LOTTERY AT RS. 31.34 LACS AND RS. 35.46 LACS RESPECTIVELY. ASS ESSING OFFICER FURTHER FOUND THAT FOR THE RUNNING OF THIS LOTTERY THE ASSE SSEE CLAIMED DEPRECIATION ON FIXED ASSETS I.E. PLANT AND MACHINERY AND COMPU TERS. 3.2. TO EXAMINE THE CLAIM OF DEPRECIATION, ASSESSIN G OFFICER RAISED QUERIES. IN REPLY THERETO ASSESSEE FILED DETAILED EXPLANATIO N AND FILED ITS AGREEMENT WITH M/S BEST & CO. ALONG WITH THE RIGHTS AND OBLIG ATIONS OF THIS CONCERN. ASSESSING OFFICER WAS OF THE VIEW THAT IN THE BUSIN ESS MODEL OF THE ASSESSEE USE OF TECHNICAL INFRASTRUCTURE COMPRISING OF HARDW ARE AND SOFTWARE WAS RESPONSIBILITY OF THE DISTRIBUTOR AND THE RATIONAL BEHIND ASSESSEES CLAIM OF DEPRECIATION ON THESE ASSETS WAS APPARENTLY NOT JUS TIFIED. ASSESSEE FURTHER SUBMITTED ITS REPLY DATED 19-11-2010 AS UNDER: 'THE FIXED ASSETS OF THE ASSESSEE COMPANY REPRESENTED BY THE POINT OF SALES (I.E. LOTTERY SALES T ERMINALS) ARE DEPLOYED IN THE STATES WHICH ARE PARTICIPATING IN THE LOTTERY CONDU CTED BY THE GOVERNMENT OF NAGALAND .... ' KEEPING IN VIEW THE OBLIGATIONS OF THE DISTRIBUTORS WITH REGARD TO TECHNICAL INFRASTRUCTURE SET-UP, THE CLAIM OF DE PRECIATION ON PLANT AND MACHINERY COMPRISING LOTTERY SALES TERMIN AL BY THE ASSESSEE DID NOT APPEARED TO BE SUSTAINABLE IN VIEW OF THE 3 PROVISIONS OF SECTION 32(1). THE PROVISIONS OF SECT ION 32(1) ARE REPRODUCED AS UNDER:- (I) 32. (1) [IN RESPECT OF DEPRECIATION OF- (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LI CENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1 ST DAY OF APRIL, 1998. OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. . THERE ARE TWO ELIGIBILITY CONDITIONS FOR CLAIMING D EPRECIATION. FIRSTLY, THE ASSET MUST BE OWNED BY THE ASSESSEE AN D SECONDLY, THE ASSET MUST BE USED FOR THE PURPOSE OF BUSINESS. IN THE INSTANT CASE. THE CONDITION UNDER REVIEW IS REGARDING 'USE OF THE ASSET FOR BUSINESS PURPOSES' 3.3. ASSESSING OFFICER ALSO ISSUED NOTICE U/S 133(6 ) TO ONE MR. SANTIAGO MARTIN PROP. OF M/S BEST & CO. REGARDING THE SERVIC ES AND UTILIZATION OF ASSETS, WHO REPLIED AS UNDER: 2. CAIRS ROLE IN THE WHOLE PROCESS IS TO FORMULAT E SCHEMES WHICH ARE IN LINE WITH THE CURRENT MARKET DYNAMICS. THEREAFTER IT SEEKS GOVERNMENT APPROVAL FOR THE SAID SCHEMES AND IMPLEMENTS THE SAME FOR ITS SUB-DISTRIBUTORS TO MAR KET THEM THROUGH THE CHANNEL AS EXPLAINED ABOVE THE POINT OF SALES OR THE SELLING TERMINALS WERE IN ITIALLY PROVIDED BY THE CAIF~S. WHICH HAD THE REQUISITE CON NECTIVITY TO THE CENTRAL SERVER FOR CONDUCTING THE ONLINE LOTTER IES. THEREAFTER THE SUBSEQUENT UPGRADATION, ADDITIONAL T ERMINALS, MAINTENANCE OF ALL THE INFRASTRUCTURE FACILITY IS T HE 4 RESPONSIBILITY OF OUR COMPANY. 3. AS EXPLAINED ABOVE THE HARDWARE, AND THE ALLIED SOFTWARE WERE INITIALLY PROVIDED BY CAIRS. HOWEVER, SUBSEQUE NT EXPANSION/ UPGRADATION HAVE BEEN UNDERTAKEN BY US INDEPENDENTLY. NO PORTION OF PROCURING, INSTALLATION, RUNNING & MAINTENANCE COSTS ARE REIMBURSED TO US BY CAIRS. ' 3.4. IN ASSESSING OFFICERS VIEW, CONSIDERING THE O VERALL FACTS AND CIRCUMSTANCES, THE ASSESSEE WAS NOT ELIGIBLE FOR DE PRECIATION AS CLAIMED BY FOLLOWING OBSERVATIONS: IN VIEW OF THE ABOVE DISCUSSION, IT IS REASONABLE T O INFER THAT THE PLANT AND MACHINERY COMPRISING POINT OF SALE MA CHINES THAT WERE USED DURING THE PREVIOUS YEAR UNDER CONSI DERATION DID NOT BELONG TO THE ASSESSEE. IF POINT OF SALES M ACHINES THAT WERE USED FOR OPERATING AN ON LINE LOTTERY BELONGED TO THE DISTRIBUTOR M/S BEST & CO. THEN IT IS BUT OBVIOUS T HAT MACHINES OF THE ASSESSEE WERE NOT IN USE WITH THE DISTRIBUTO RS FOR ONLINE LOTTERY BUSINESS. IN VIEW OF THE SAME, THERE IS NO APPARENT REASON AS TO WHY CLAIM OF DEPRECIATION ON MACHINES OWNED BUT NOT USED IN THE BUSINESS CONDUCTED BY THE ASSESSEE SHOULD BE ALLOWED AS A DEDUCTION U/S 32(1). NEVERTHELESS, TO OBVIATE ANY POSSIBILITY OF USE OF ASSETS OF THE ASSESSEE. THE AR WAS ASKED TO GIVE A LIST OF PLACES WHERE ALL ITS MACHINES, I.E., 'POINT OF SALES MACHINES' WERE DEPL OYED, VIDE NOTE SHEET ENTRY DATED 30/11/2010 . IN RESPONSE, THE AR IN HIS SUBMISSION DATED 14/12/10 SUBMITTED AS FOLLOWS :- 'THE POINTS OF SALES WERE DISTRIBUTED TO VARIOUS RETAILERS THROUGH THE REGIONAL DISTRIBUTORS OF THE COMPANY. THESE ARE CONTINUOUSLY SHIFTED AT THE INSTANCE OF THE REGIONAL DISTRIBUTOR DUE TO CLOSURE OF SOME RETAILERS AND THE OPENING OF THE OTHER ONES. ' AR IN HIS SUBMISSION FAILED TO GIVE ANY DETAILS WHA TSOEVER. EVEN IF MACHINES WERE GIVEN TO VARIOUS DISTRIBUTORS WHO IN TURN 5 INSTALLED THE SAME AT VARIOUS RETAIL OUTLETS, THE A R COULD HAVE MADE AVAILABLE THE NUMBER OF MACHINES THAT WERE GIV EN TO THE FEW REGIONAL DISTRIBUTORS APPOINTED BY THE ASSESSEE . SUCH INFORMATION OUGHT TO HAVE BEEN READILY AVAILABLE WI TH THE ASSESSEE, CONSIDERING THE FACT THAT MONITORING OF S ALES ON DAY- TO-DAY BASIS IS AN INTEGRAL PART OF MONITORING THE PERFORMANCE OF THE DISTRIBUTOR. MOREOVER, EACH OF SUCH MACHINES WAS GENERATING REVENUE FOR THE ASSESSEE AND, THEREFORE, INFORMATION ABOUT THE LOCATION OF EACH OF SUCH MACHINES IS CRIT ICAL TO SUCCESSFUL RUNNING OF SUCH BUSINESS. DESPITE THIS B EING SO ASSESSEE DID NOT MADE AVAILABLE SUCH INFORMATION SO THAT SAME COULD BE VERIFIED FOR THE PURPOSE OF ALLOWING CLAIM OF DEPRECIATION ON SUCH MACHINES. THE CONDITIONS FOR CLAIMING DEPRECIATION ARE PRECIS E AND CATEGORICAL IN STATING THAT ASSET MUST BE OWNER AND SHOULD HAVE BEEN PUT TO USE FOR CLAIMING DEPRECIATION UNDER THE I .T.ACT. I F EITHER OF THE CONDITION IS NOT FULFILLED THEN DEPRE CIATION CLAIM CANNOT BE ALLOWED. IN LIGHT OF THE ABOVE FINDINGS, IT IS HELD THAT THE AR WAS UNABLE TO PROVE THAT PLANT AND MACHINERY (POINT OF SALES TERMINALS) WERE ACTUALLY PUT TO USE DURING TH E YEAR UNDER CONSIDERATION. TO SUCH EXTENT, THE CONDITION REGARD ING PUTTING THE ASSETS TO US, REMAINED UNPROVED. ACCORDINGLY, C LAIM OF DEPRECIATION OF THE SAME IS HERBY DISALLOWED. 3.6. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL WHE RE IT WAS PLEADED THAT: (I) AO'S CONCLUSION BASED ON REPLY OF BEST & CO. THAT R OLE OF ASSESSEE WAS OF A FORMULATOR OF SCHEMES AND THEREBY DISALLOW ING DEPRECIATION ON INTERPRETING THE REPLY IN A PECULIA R WAY IS BASED ON WRONG PREMISE. LD. ASSESSING OFFICER FAILED TO UNDE RSTAND THE BASIC BUSINESS MODEL OF THE ASSESSEE. THE FORMULATION OF SCHEMES ARE REQUIRED TO BE INTRODUCED INTO THE MAIN SERVER WHIC H THEN FLOW INTO THE POS IN LINE WITH THE APPROVED LOTTERY SCHEME. T HE PLANT & MACHINERY HAS BEEN OWNED AND USED BY THE ASSESSEE S INCE PAST 6 YEARS WHICH IS REFLECTED IN THE INCOME TAX RECORD A ND FIXED ASSETS SCHEDULE. ONLY ON HYPOTHETICAL ASSUMPTIONS IT CANNO T BE DISCARDED. (II) THE REPLY OF BEST & CO. HAS BEEN USED BY ASSESSING OFFICER ON CHERRY PICKING BASIS AS THE ASSESSEES WORK IN CON JUNCTION WITH SUB-DISTRIBUTOR ITSELF DEMONSTRATES THE USE OF COMP UTERS AT THE ASSESSEES END. (III) ASSESSEE RELIED ON HONBLE DELHI HIGH COURT JUDGMEN T I THE CASE OF CIT VS. TURNER INTERNATIONAL INDIA P. LTD. 297 I TR 373. IN THE SAID CASE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING SATELLITE SIGNALS, DISTRIBUTION OF SATELLITE CHANNE LS AND WAS ALSO AN ADVERTISEMENT REPRESENTATIVE OF FOREIGN TELECASTING CHANNELS. ADMITTEDLY, THE ASSESSEE HAD BEEN SELLING SOME OF T HE DECODERS OWNED BY IT SOME OF THE DECODERS OWNED BY THE ASSES SEE WERE GIVEN ON LOAN TO CABLE OPERATORS. THESE LOANS TRANS ACTIONS FORM A PART OF THE BUSINESS OF THE ASSESSEE IN DISTRIBUTIO N OF SATELLITE CHANNELS AND SIGNALS RELATING TO SATELLITE CHANNELS . UNDER THE CIRCUMSTANCES, THE HIGH COURT HELD THAT WE ARE NOT IN AGREEMENT WITH LEARNED COUNSEL FOR THE REVENUE THAT THE PROVI SIONS OF SECTION 32 OF THE INCOME-TAX CT 1961 ARE NOT APPLICABLE TO THE FACTS OF THE CASE AND THAT THE DEPRECIATION WAS WRONGLY ALLOWED BY THE TRIBUNAL. 3.7. FURTHER RELIANCE WAS PLACED ON THE RATIO OF DE CISIONS IN FOLLOWING CASES: - CIT VS. PREMIER INDUSTRIES (INDIA ) LTD. 323 ITR 6 72 (MP); - CIT V. GEO TECH CONSTRUCTION CORPORATION 244 ITR 45 2 (KER.); 7 - CIT VS. REFRIGERATION & ALLIED INDUSTRIES LTD. 247 ITR 12 (DEL.); - SPEED SUTOMOBILES P. LTD. VS.ACIT 32 ITC 531 (TRIB. ) 3.8. THE ASSESSEE PLEADED THAT OWNERSHIP OF THE ASS ETS CANNOT BE DENIED AS IT EMANATES FORM THE BOOKS OF ACCOUNTS COMING FROM PAST YEAR, WHICH ARE NOT REJECTED. THE PLANT & MACHINERY PURCHASED IN EA RLIER YEARS ARE SUPPORTED BY VOUCHERS AND ARE PART OF THE SCHEDULE OF FIXED ASSETS. THE ASSESSEE HAD HUNDREDS OF CRORES OF TURN OVER AND HA S RECEIVED INCOME FROM LOTTERY AND IN ANY CASE IT IS TO BE HELD AS BENEFIC IAL OWNER OF THE PLANT AND MACHINERY AND THIS BEING SO RELIANCE IS PLACED ON C IT VS. SMT. SIVAKAMI 322 ITR 64 (MAD.), WHERIN IT WAS HELD THAT THE ASSE SSEE WAS THE BENEFICIAL OWNER AND WAS RECEIVING THE INCOME FROM EXPLOITATIO N OF BUSINESS AND INCURRED EXPENSES. CONSEQUENTLY, SHE WAS ENTITLED T O THE DEPRECIATION. 3.9. THE SAME PLANT AND MACHINERY IS NOT THE PURCHA SE OF THIS YEAR BUT IT IS COMING FROM EARLIER YEARS AND IS PART OF WDV OF THE FIXED ASSETS WHICH HAS BEEN DULY ASSESSED FOR A.Y. 2006-07 AND 2007-08 U/S 143(3). KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES, IT WAS SUMM ARIZED THAT THE CLAIM FOR DEPRECIATION MAY BE ALLOWED TO THE ASSESSEE COM PANY DUE TO THE FOLLOWING REASONS: I. THE ASSESSEE IS THE BENEFICIAL OWNER OF THE ASSE T; II. THE ASSET HAS BEEN PUT TO USE DURING THE YEAR AND H AS REALIZED SALES OF RS. 333.53 CRORES; III. THE USE OF THE ASSET HAS BEEN DULY CONFIRMED BY THE SUB- DISTRIBUTOR; 8 IV. THE ASSET IS APPEARING AS AN OPENING BALANCE IN THE FIXED ASSET SCHEDULE AND HAS BEEN ASSESSED U/S 143(3) FOR THE P RECEDING TWO ASSESSMENT YEARS I.E. A.Y. 2006-07 AND 2007-08. V. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON R ECORD THAT THE TRANSACTION RELATING TO THE ASSETS IS BOGUS. 3.10. CIT(A) HELD THAT ASSESSEE WAS ELIGIBLE FOR DE PRECIATION BY FOLLOWING OBSERVATIONS: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. IT I S OBSERVED THAT FOR THE CLAIM OF DEPRECIATION U/S 32(1) OF THE I.T. ACT, THE ASSESSEE MUST BE THE OWNER OF AN ASSET AND THE ASS ET MUST BE USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSE E. IN THE PRESENT CASE, THE APPELLANT COMPANY IS ENGAGED IN T HE BUSINESS OF DISTRIBUTION AND MARKETING OF ON-LINE LOTTERIES ORGANIZED BY THE GOVERNMENT OF NAGALAND. THE APPELLANT FURTHER A PPOINTED SUB-DISTRIBUTORS IN VARIOUS LOTTERY PLAYING STATES. THESE DISTRIBUTORS HAVE A CHAIN OF STOCKIEST AND RETAILER S THROUGH WHOM THE SALE OF LOTTERY TO THE FINAL CUSTOMER IS A FFECTED. IN THE ON-LINE GAMING SOLUTION, THE POINT OF SALES (POS) T HAT ARE INSTALLED WITH THE RETAILERS MUST BE ALWAYS BE CONN ECTED TO THE CENTRAL SERVER, IN ORDER TO ENABLE THE CUSTOMER TO PURCHASE THE LOTTERY PLAYING TICKET. THE ENTAILS UNINTERRUPTED S UPPLY OF POWER AND ON-LINE CONNECTIVITY FOR EACH POINT OF SALES. I T IS NOT RESTRICTED TO JUST THE INSTALLATION OF POS. INITIAL LY THE MACHINES FOR THE ONLINE SALE OF LOTTERY TICKETS WERE PROVIDE D BY THE APPELLANT COMPANY AND THE SAME WERE REFLECTED IN TH E ASSETS SIDE OF THE BALANCE SHEET UNDER THE HEAD PLANT & M ACHINERY. THE ASSET WERE SHOWN AS OPENING BALANCE IN THE FIXE D ASSET SCHEDULE AND WERE DULY ASSESSED U/S 143(3) FOR THE PRECEDING TWO ASSESSMENT YEARS FOR THE A.Y. 2006-07 & 2007-08 THERE IS NO FINDING OF THE ASSESSING OFFICER THAT THE ASSETS ARE NOT GENUINE OR THE APPELLANT IS NOT THE OWNER OF THE AS SETS. DURING THE COURSE OF ASSESSMENT THE AO MADE ENQUIRY ABOUT THE ASSETS OF THE APPELLANT COMPANY FROM ITS SUB-DISTRIBUTOR N AMELY M/S 9 BEST AND COMPANY U/S 133(6) OF THE IT ACT AND THE S AME WAS CONFIRMED TO BE PROVIDED BY THE APPELLANT COMPANY T O THE SUB DISTRIBUTOR. ONLY THE UP GRADATIONS WERE DONE BY TH E SUB DISTRIBUTORS IN THE MACHINE FROM TIME TO TIME. THE TURNOVER OF THE APPELLANT COMPANY HAS GRADUALLY INCREASED WHICH SHOWS THAT THE MACHINES WERE USED FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT COMPANY. UNDER THESE CIRCUMSTANCES, IN MY HUMBLE OPINION THE APPELLANT COMPANY IS ENTITLED FOR DEPRECIATION UNDER SECTION 32(1) OF THE IT ACT. THE AO HAS NOWHERE FOUND THAT THERE IS ANY INFIRMITY IN THE STAND OF THE APPELLANT COMPANY. IN FACT, HE HIM SELF HS ADMITTED THAT THE ASSETS WERE USED BY THE APPELLANT COMPANY FOR ITS BUSINESS IN HIS ASSESSMENT ORDER. UNDER THESE F ACTS AND CIRCUMSTANCES OF THE CASE, THE AO IS DIRECTED TO A LLOW THE CLAIM OF DEPRECIATION OF THE APPELLANT COMPANY OF RS. 72, 16,610/-. 3.11. A.Y. 2008-09 CAME THEREAFTER AND CIT(A) FOLLO WING HIS ORDER FOR A.Y. 2009-10 ALLOWED THE CLAIM OF THE ASSESSEE VIDE ORDER DATED 22-1-2013. AGGRIEVED, REVENUE IS BEFORE US. 4. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENDS THAT: (I) ASSESSEE FAILED TO PROVE THE ACTUAL USE OF THE PLAN T & MACHINERY AND COMPUTERS I.E. THE ASSETS QUA WHICH THE DEPRECI ATION WAS CLAIMED WHICH IS A SINE QUA NON FOR CLAIMING THE DE PRECIATION. (II) AS PER THE COMMUNICATION GIVEN BY M/S BEST & CO. IN RESPONSE TO NOTICE U/S 133(6) CLEARLY INDICATES THAT THE UPGRAD ATION/ MODERNIZATION WAS THE JOB OF THE SUB DISTRIBUTOR AN D NOT THE ASSESSEE AND AS THE ASSETS WERE NOT USED BY IT THE DEPRECIATION WAS RIGHTLY REFUSED. 10 5. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND REFERRED TO THE COPY OF ASSESSMENT ORDERS FOR A.Y. 2006-07 (DATED 2-12-2008 ) AND A.Y. 2007-08 (DATED 12-11-2009) WHICH ARE PLACED ON PAPER BOOK A ND CONTENDS THAT: (I) BOTH THE ORDERS ARE PASSED U/S 143(3). THE IMPUGNED ASSETS WERE PURCHASED IN EARLIER YEARS AND ARE PART OF THE FIXE D ASSETS. THE DEPRECIATION THEREON WAS CLAIMED AS ALLOWED BY ASSE SSING OFFICER AND OFFERED FOR ASSESSMENT YEARS 2006-07 & 2007-08. THIS HAS NOT BEEN DENIED BY THE LOWER AUTHORITIES. (II) ONCE THE ASSETS BECAME PART OF THE BLOCK OF ASSETS THEY BECOME ELIGIBLE FOR DEPRECIATION. SINE THE SAME BUSINESS C ONTINUED AND REQUISITE RATE OF DEPRECIATION IS TO BE ALLOWED AUT OMATICALLY ON THE WDV OF THESE ASSETS IN SUBSEQUENT YEARS I.E. 2008-0 9 & 2009-10. (III) SINCE THE PURCHASE OF THE EQUIPMENTS IS IN EARLIER YEARS, WHICH HAS NOT BEEN DISPUTED, IT CANNOT BE HELD NOW THAT THE A SSESSEE WAS NOT THE OWNER OF THE ASSETS. 5.1. ADVERTING TO THE QUESTION OF USER, LD. COUNSEL CONTENDS THAT M/S BEST & CO.S RESPONSE AND AGREEMENT HAS BEEN ARBITRARILY INTERPRETED. AS PER THE LOTTERY SCHEME, THE ASSESSEE AND SUB DISTRIBUTOR HA VE TO USE PLANT & MACHINERY AND COMPUTER AT THEIR END, WHICH WAS NECE SSARY FOR JOINT CARRY ON OF THE BUSINESS OF ONLINE LOTTERY. THEREFORE, IT IS FUTILE TO SAY THAT ASSETS AND MACHINERY WAS NOT USED. 5.2. IT IS PLEADED THAT EVEN IF IT IS ASSUMED THAT THE MACHINERY WAS NOT USED EVEN THEN THE DEPRECIATION IS ELIGIBLE AS THE MACHI NERY WAS KEPT READY FOR BUSINESS; ALREADY USED IN PRECEDING YEAR AND FORMIN G PART OF THE BLOCK OF ASSETS. IT IS EMPHATICALLY PLEADED THAT LOOKING FRO M ANY ANGLE THE FINDING AND 11 CONCLUSION OF ASSESSING OFFICER THAT SEC. 32 CONDIT IONS ARE NOT COMPLIED WITH IS WITHOUT ANY JUSTIFICATION, CONTRARY TO RECORD AN D LAW. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOLLOWING FACTS CLEARLY EMERGE: (I) THE ASSETS QUA WHICH THE DEPRECIATION IS CLAIME D WERE NOT PURCHASED DURING THIS YEAR, BUT IN EARLIER YEARS. P URCHASES AND DEPRECIATION THEREON HAVE BEEN ALLOWED IN EARLIER Y EARS. (II) IT IS UNDISPUTED THAT THEY WERE PURCHASED IN E ARLIER YEARS I.E. IN A.Y. 2006-07 AND 2007-08 BESIDES DEPRECIATION WAS ALLOWED AND THE ASSESSMENTS WERE FRAMED U/S 143(3). (III) THE IMPUGNED ASSETS BECAME PART OF THE BLOCK OF ASSETS AND ANY QUESTION IN SUBSEQUENT YEAR ABOUT THE OWNERSHIP IS MEANING LESS, THEREFORE, WE ARE UNABLE TO SUSTAIN THE FINDING OF THE ASSESSING OFFICER THAT ASSETS WERE NOT OWNED BY THE ASSESSEE. 6.1. ADVERTING TO THE ISSUE ABOUT USER OF IMPUGNED ASSETS TOWARDS THE ASSESSEE S BUSINESS OF ONLINE LOTTERY THE ASSESSEE HAS DEMONSTRATED THE USE OF THE ASSETS ALONG WITH THE SUB-DISTRIBUTOR. THE S UBSEQUENT UPGRADATION OF THE SOFTWARE AND MACHINERY ETC. THOUGH MAY BE WITH THE SUB DISTRIBUTOR THE FACT REMAINS THAT THE ASSESSEES ASSETS WERE ALSO U SED. IT IS NOT THE CASE OF THE REVENUE THAT THE UPGRADATION EXPENDITURE WAS NOT IN CURRED BY THE SUB- DISTRIBUTOR AND IT HAS BEEN CLAIMED BY THE ASSESSEE . THIS IS SO BECAUSE IN THAT CASE ASSESSING OFFICER OUGHT TO HAVE DISALLOWED IT. UNDER THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE IMPUGNED ASSETS WERE USED FOR THE PURPOSE OF THE ASSESSEES BUSINESS, THEREFORE, DEPR ECIATION IS TO BE ALLOWED. WE FIND FORCE IN THE ARGUMENT OF LD. COUNSEL FOR TH E ASSESSEE THAT ASSUMING 12 WORST AGAINST THE ASSESSEE THE ASSETS BEING THE PAR T OF THE EXISTING BLOCK OF ASSETS ON SUCH PRESUMPTION ALSO BECOME ASSETS ALREA DY PART OF THE BLOCK OF ASSETS KEPT IN READINESS FOR USE OF THE BUSINESS, T HE DEPRECIATION IS TO BE ALLOWED. IN VIEW OF ABOVE WE FIND NO MERIT IN REVEN UES APPEALS. 7. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 29-11-2013. SD/- SD/- ( J.S. REDDY ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29-11-2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 13