M/S. SVIL MINES LTD.,NEW DELHI vs. DCIT, NEW DELHI

At the outset, we may like to mention that on the date of hearing, an application was filed by Sh. Ajit Kumar Jha, claiming to be counsel for the assessee. In the said application, he has submitted that no instruction has been given by the assessee and the person responsible for the assessee was not in touch with him even after so many calls made to him. In the said application addresses of the two persons have been provided for further communication, if any. On perusal of the record, it is also observed that similar application was filed by Sh. Ajit Kumar Jha on 31/10/2018 expressing inability in arguing the appeal in absence of any instructions from the assessee company and sought adjournment. We note that this appeal was first fixed on 14/06/2012 and, thereafter, it has been adjourned on the request of the Ld. counsel from time to time. Thus, till the date of hearing approximately 7 years have elapsed. In view of the above facts, the Ld. Counsel appearing for the assessee was asked to argue the case, but he declined to argue the case and thus case was heard on the basis of the arguments of the Ld. DR.

Briefly stated facts of the case are that the assessee e-filed original return of income on 28/10/2007 declaring Nil income 26/08/2008 under section 143(1) of the Income-tax Act, 1961 (in short ‘the Act’) at income of Rs.70,536/- as per the provisions of section 115JB of the Act. The Assessing Officer noticed that a search and seizure action under section 132 of the Act was carried out on 21/03/2007 in the cases of Surya Vinayak Industries Limited Group. The assessee company also has been claimed by the Assessing Officer to be one of the associated company of the group. The case was selected for scrutiny and statutory notices were issued and complied with. The assessment was completed on 24/12/2009 under section 143(3) of the Act after making certain additions/disallowances. Aggrieved, the assessee filed appeal before the Ld. CIT(A) who partly allowed the appeal. Aggrieved with the addition sustained by the Ld. CIT(A), the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 4. The Ld. DR relied on the order of the Ld. CIT(A) and also supported the grounds by way of the decisions relied upon by the Ld. CIT(A). 5. The ground No. 1 of the appeal is related to disallowance of Rs.29,411/- under section 35D of the Act. According to the Assessing Officer, the assessee was engaged in the sale and purchase of the securities and no industrial unit was set-up and, therefore, it was not eligible for deduction under section 35D of the Act. Before the Ld. CIT(A), the assessee stated that said amount has been paid to the Registrar of Companies (ROC) to increase the authorised share capital and thus the assessee has claimed 1/5th of expenses under section 35D of the Act. The Ld. CIT(A) sustained the disallowance observing as under:

The ground No. 2 of the appeal relate to disallowance of claim of depreciation amounting to Rs.5,57,172/-. The Assessing Officer has observed that the assessee company acquired M/s AM Enterprises on 31/01/2007 and claimed depreciation at the rate of 50% of the entitled amount of the depreciation, however according to the Assessing Officer, the assessee was eligible for depreciation on pro-rata basis only for 60 days. Before the Ld. CIT(A), the assessee claimed that assets were used by the assessee for less than 180 days and therefore it was entitled for depreciation at the rate of 50% of the total depreciation on the assets. The Ld. CIT(A) after referring the relevant proviso of the section 32 of the Act, sustained the disallowance observing as under: 6.3 I have considered the submission given by the appellant and am of the opinion that the assessee has ignored the proviso as mentioned in section 32 in the case of succession or take-over of a business. The said proviso reads as “provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licenses, franchises or any other business - or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in [clause (x Hi), clause (xiiib) and clause (xiv)] of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them.”

We find that the assessee has failed to justify its claim of 50% of the depreciation. As per the proviso to section 32 of the Act, the depreciation has to be apportioned between the predecessor and the successor or amalgamating company and amalgamated company as the case may be, in the ratio of number of days for which the assets are used by them. In our opinion, The Ld. CIT(A) has correctly sustained the disallowance of depreciation and restricted it to 60 days. Accordingly, we uphold the same. The ground No. 2 of the appeal is accordingly dismissed.

In the result, the appeal of the assessee is dismissed.