Expression ‘Used for Purposes of Business’ in Sec. 32(1) Had to Be Construed Liberally to Include Even Passive Use | HC

Case Details: Principal Commissioner of Income-tax vs. Indus Towers Ltd. - [2023] 157 taxmann.com 593 (Delhi)

Judiciary and Counsel Details

• • Rajiv Shakdher & Girish Kathpalia, JJ.
  • Zoheb Hossain, Sr. Standing Counsel and Sanjeev Menon, Standing Counsel for the Appellant.
  • Rohit Jain, Aniket D. Agrawal and Saksham Singhal, Advs. for the Respondent.

Facts of the Case

The assessee-company was engaged in the business of sharing telecom infrastructure amongst various telecom service providers. During the year, the assessee took a loan for the construction of the tower. It claimed depreciation on the tower. It also claimed interest paid on the loan and upfront processing charges on the loan.

The Assessing Officer (AO) disallowed interest paid on the loan and depreciation primarily on the grounds that not all the towers might have been put to use as the tower-wise details had not been furnished.

On appeal, the CIT(A) and Tribunal ruled in favour of assessee. The matter reached the Delhi High Court.

High Court Held

The Court held that the expression ‘used for the purposes of business or profession’ in the provision under section 32 had to be construed widely. This includes not only those cases where the buildings, machinery, plant, etc., are actively employed but also those cases where there is what may be described as a passive user of the same in the business because of various reasons, including that machinery, may well depreciate even where it is not used in the business and even due to non-user and being kept idle.

The towers which were constructed subsequent to the commencement of business of the assessee were so constructed admittedly during the year relevant to the subject assessment year. The expression ‘used for the purposes of the business’ in section 32(1) has to be construed liberally so as to include even passive users of the subject machinery (towers in the instant case). It was nobody’s case that the profits earned by the assessee had no nexus with the towers in question.

Therefore, there was no infirmity in allowing the amount of depreciation concerning the said towers to be deducted.

List of Cases Reviewed

• • Dy. CIT v. Indus Towers Ltd. [2019] 110 taxmann.com 176 (Delhi – Trib.) affirmed

List of Cases Referred to

• • Dy. CIT v. Indus Towers Ltd. [2019] 110 taxmann.com 176 (Delhi – Trib.) (para 1)
  • Capital Bus Service (P.) Ltd. v. CIT [1980] 4 Taxman 309/123 ITR 404 (Delhi) (para 4.4.1)
  • CIT v. Gujarat Guardian Ltd. [2009] 177 Taxman 434 (Delhi) (para 6.2)
  • CIT v. Bharti Telenet Ltd. [ITA No. 1110 of 2011, dated 3-2-2015] (para 6.2)
  • Taparia Tools Ltd. v. Jt. CIT [2015] 55 taxmann.com 361/231 Taxman 5/372 ITR 605 (SC) (para 6.2)
  • Pr. CIT v. Param Dairy Ltd. [2022] 139 taxmann.com 546 (Delhi) (para 6.2)
  • Pr. CIT v. Bhadani Financiers (P.) Ltd. [2022] 447 ITR 305 (para 6.2)
  • CIT v. Insilco Ltd. [2009] 179 Taxman 55/320 ITR 322 (Delhi) (para 6.2).