9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (3) TMI 804 - AT - Income TaxInterest on Borrowed Capital u/s 36(1)(iii) - Assessee Company is in the business of manufacturing of transformer. The AO s objection was that the assessee had shown capital WIP including capital advances but no interest expense had been capitalised. The assessee s answer was that the capital advance was made from own funds and not from borrowed funds. A.O. disallowed proportionate interest u/s.36(1)(iii). - HELD THAT - As Assessee demonstrated that there were non-interest bearing own funds and those funds were claimed to have been utilized for the purpose of capital WIP. A.O. cannot presume that the interest-bearing funds could have been used as a capital WIP. Decision in the case of - THE COMMISSIONER OF INCOME TAX VERSUS RELIANCE UTILITIES POWER LTD. 2009 (1) TMI 4 - BOMBAY HIGH COURT relied upon. Calculation Of Value Of Inventories Taxation u/s 145 A - A.O. that the assessee had shown an amount receivable on account of unutilized MODVAT and also a closing balance of CENVAT credit. Admittedly those amounts were not included in the value of the closing stock. The A.O. has observed that as per the provisions of section 145A the taxes/duty/cess related to stock are required to be included in the value of the closing stock. - HELD THAT - A.O. is directed to verify the accounting policy adopted by the assessee in respect of Modvat/Cenvat incentives and if it is according to the law then not to disturb the method of accounting of the assessee in this regard. Decision in the cases of - ASSISTANT COMMISSIONER OF INCOME-TAX VERSUS. NARMADA CHEMATUR PETROCHEMICALS LTD. 2010 (8) TMI 263 - GUJARAT HIGH COURT and COMMISSIONER OF INCOME-TAX VERSUS UNIQUE INDUSTRIES 2008 (5) TMI 238 - GUJARAT HIGH COURT relied upon. Depreciation on New Commercial Vehicle under Clause VI-A of the Appendix - Assessee has claimed excess depreciation on the new commercial vehicle purchased. The AO s objection was that those vehicles were not registered by the RTO Commercial Vehicle also vehicle used by the appellant is a private vehicle not used for the purpose of hire. HELD THAT - The vehicle purchased by the appellant fulfills all the conditions prescribed in the Income Tax Act and the related Motor Vehicle Act and falls within the definition of Commercial Vehicle. The Act has nowhere prescribed that a commercial vehicle should be a vehicle which is used for the purpose of hire . It only prescribes that the vehicle should be used for the purpose of business or profession. Depreciation on Computer Software - IT Act overwrites Accounting Standards - Assessee has claimed depreciation on computer software. The AO disallowed the depreciation holding that it was an application software and should be treated as intangible asset. Also AS 26 specify computer software as intangible asset. HELD THAT - The Income Tax Act does not make any difference between the system software and the application software. The schedule only provides the depreciation @ 60% on the computer software and the term computer software has also been defined in the Appendix I. The classification made by the Accounting Standards cannot overwrite the definition given in the Income Tax Act.
Issues Involved:
1. Deletion of disallowance of Rs. 14,843 made under Section 36(1)(iii) of the Income Tax Act. 2. Deletion of addition made under Section 145A of the Income Tax Act. 3. Restriction of disallowance of commission expenses to Rs. 1,12,500 against Rs. 3,93,379 made by the Assessing Officer. 4. Deletion of disallowance of depreciation amounting to Rs. 3,69,604 on vehicles. 5. Deletion of disallowance of depreciation amounting to Rs. 8,93,192 on software. Issue-wise Detailed Analysis: 1. Deletion of disallowance of Rs. 14,843 made under Section 36(1)(iii) of the Income Tax Act: The Assessing Officer (AO) disallowed Rs. 14,843 as interest related to Capital Work in Progress (WIP), invoking Section 36(1)(iii) of the Income Tax Act. The AO noted that the assessee had not capitalized interest expenses despite having capital advances of Rs. 14.38 crores. The assessee argued that the capital advance was made from its own funds, not borrowed funds. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed the AO's findings, citing that the assessee had sufficient interest-free funds. Reliance was placed on the case of Reliance Utilities & Power Ltd. 313 ITR 340. The Tribunal upheld the CIT(A)'s decision, confirming that there was no occasion for the AO to presume the use of interest-bearing funds for capital WIP. 2. Deletion of addition made under Section 145A of the Income Tax Act: The AO observed that the assessee did not include unutilized MODVAT and CENVAT credit in the value of the closing stock, as required by Section 145A. The AO treated the unutilized credit as a kind of subsidy or incentive and added Rs. 2,47,30,143 to the closing stock. The CIT(A) reversed this addition, referencing the case of Narmada Chematur Petrochemicals Ltd. 327 ITR 369 (Guj.), which held that duty not entered as an item of cost cannot be included in the closing stock. The Tribunal restored this ground back to the AO to verify the facts and accounting policy adopted by the assessee, directing the AO to follow the legal precedents. 3. Restriction of disallowance of commission expenses to Rs. 1,12,500 against Rs. 3,93,379 made by the Assessing Officer: The AO disallowed Rs. 3,93,379 of commission expenses due to lack of substantiation. The CIT(A) upheld the disallowance of Rs. 1,12,500 paid to Sangita Hruday Patil due to insufficient evidence but allowed Rs. 3,00,000 paid to Oriental Containers Ltd. as it was a reimbursement of expenses, not commission. The Tribunal confirmed the CIT(A)'s findings, agreeing that the payment to Oriental Containers Ltd. was substantiated and the disallowance of Rs. 1,12,500 was justified. 4. Deletion of disallowance of depreciation amounting to Rs. 3,69,604 on vehicles: The AO disallowed excess depreciation on new commercial vehicles, arguing they were not registered as "Commercial Vehicles" by the RTO. The CIT(A) allowed the claim, interpreting the Motor Vehicle Act to include Light Motor Vehicles under "Commercial Vehicles" and noting the vehicles met the conditions for higher depreciation. The Tribunal upheld the CIT(A)'s interpretation, confirming that the vehicles qualified for the higher depreciation rate. 5. Deletion of disallowance of depreciation amounting to Rs. 8,93,192 on software: The AO allowed only normal depreciation on computer software, treating it as an intangible asset. The CIT(A) allowed higher depreciation, citing the Income Tax Act's definition of "computer software" which does not distinguish between system and application software. The Tribunal agreed with the CIT(A), confirming the higher depreciation rate was applicable as per the Income Tax Act. Conclusion: The Tribunal upheld the CIT(A)'s decisions on most grounds, confirming the deletion of disallowances and additions made by the AO, except for the issue under Section 145A, which was remanded back to the AO for further verification. The appeal of the Revenue was partly allowed for statistical purposes only.
|
