2007 (11) TMI 455 - AT - Income Tax

Addition made in the income by the Depreciation amount on wind farm plant - Disallowance of expenses on foreign travel - vehicle expenses. Depreciation on wind farm plant - Absence of details regarding installation and commercial operation of the wind mill generators - HELD THAT - We find that the WTGS was commissioned and trial run was also undertaken which is evident from the certificate of Gujarat Energy Development Agency for the share of power certifying that 11.9 KW were supplied to the Gujarat Electricity Board in the month of March 1995. Sales-tax exemption certificate with effective date as 27-3-1995 the eligibility certificate issued by the Commr. commissioning certificate by GEDA quick test report issued by the GEDA letter of NEPC-MICON for successful commissioning and all certifying that the WTGS was commissioned on 27-3-1995. Thus there remains no doubt that the WTGS was commissioned only on 27-3-1995 and therefore the assessee is entitled to depreciation in respect thereof in accordance with law. The AO is directed to allow the claim of the assessee. Disallowance of expenses on foreign travel - HELD THAT - In our opinion if the expenditure is incurred for exploring the possibility of exports and attending exhibition in France the expenditure would be for the purpose of assessee s business and the entire expenditure is to be allowed irrespective of whether the assessee was able to get export orders or make any export in this year or in the subsequent year. Therefore the CIT(A) was not justified in restricting 50 per cent of the expenditure incurred for travelling. We direct travelling expenses incurred by the assessee in full. Disallowance of vehicle expenses - HELD THAT - We find that the issue stands covered by the decision of the Gujarat High Court in the case of Sayaji Iron Engg. Co. 2001 (7) TMI 70 - GUJARAT HIGH COURT referred to by the CIT(A) and therefore the CIT(A) was right in allowing the claim of the assessee. In the result assessee s appeal stands partly allowed and Revenue s appeal stands dismissed.

Summary

Issues:
1. Disallowance of depreciation on Wind Turbine Generating Sets (WTGS).
2. Disallowance of foreign travel expenses.
3. Deletion of addition made on account of disallowance of vehicle expenses.

Analysis:
1. The first issue pertains to the disallowance of depreciation on WTGS. The Assessing Officer disallowed the claim due to lack of details on installation and commercial operation. The CIT(A) upheld the disallowance as the WTGS was not connected to the grid during the relevant year. However, the Tribunal found evidence of commissioning on 27-3-1995 through various certificates and reports. Consequently, the Tribunal directed the Assessing Officer to allow the depreciation claim as the WTGS was commissioned within the assessment year.

2. The second issue involves disallowance of foreign travel expenses. The Assessing Officer requested specific details which were not provided by the assessee. Consequently, the expenses were deemed unrelated to the business. The CIT(A) upheld the disallowance partially, citing lack of commercial benefit from the trips. However, the Tribunal disagreed, stating that if expenses were incurred for business purposes, they should be allowed in full. The Tribunal directed the full allowance of the travelling expenses.

3. The final issue concerns the deletion of addition made on account of disallowance of vehicle expenses. The Assessing Officer disallowed the claim due to lack of specific details. The CIT(A) relied on a Gujarat High Court decision and allowed the claim as the directors were authorized to use the company's vehicles. The Tribunal upheld the CIT(A)'s decision, stating that it was in line with the precedent. As a result, the assessee's appeal was partly allowed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal ruled in favor of the assessee regarding the depreciation on WTGS and foreign travel expenses, while also upholding the allowance of vehicle expenses based on established legal precedent.