2016 (11) TMI 1244 - AT - Income Tax

Disallowance of depreciation on the cost of Wind Turbine - Held that - We direct the Assessing Officer to grant depreciation @ 80% and thus decide the issue in favour of the assessee - Decided in favour of assessee Addition on account of shortage - Held that - The entire purchases of the fruits and vegetables are not exported but only the good quality of fruits which are acceptable to the customers are exported. It is also a fact that during the process of collection of fruits and the final export, damages takes place and the fact that similar shortage and damages have been accepted by the Department in earlier years i.e. assessment years 2006-07 to 2008-09 in the assessment framed under section 143(3) of the Act is not in dispute. Before us, Revenue has not placed any material on record to demonstrate that the shortage shown by the assessee has been sold without recording it in the books of accounts. It is also a fact that books of the assessee are audited and no adverse comments on account of shortage has been made by the statutory auditors in their report or in the tax audit report. In view of the aforesaid facts, we are of the view that Assessing Officer was not justified in making an ad-hoc disallowance of shortage. We thus direct the deletion of disallowance.- Decided in favour of assessee Cash payment for purchase of fruits - Held that - It is an undisputed fact that the assessee has purchased fruits for which the payment was made in cash. We find that the sellers of goods have confirmed about the supply of goods to the assessee and the payments for sale being received by them in cash. The Assessing Officer has not brought out any instance of purchase transactions which were not verifiable and had merely proceeded to disallow the expenses on ad-hoc basis. Further, we are of the view that the payment in cash for purchase of agricultural commodities is covered by Rule 6DD(e) of the Rules and in such a situation merely because the cash payments have been made, no disallowance could be made. We are of the view that in the aforesaid facts and without bringing any material on record of the purchases being not verifiable, the Assessing Officer could not have resorted to make an ad-hoc disallowance. We therefore set-aside disallowance made by Assessing Officer - Decided in favour of assessee Disallowance of loading and unloading charges - Held that - We find that out of the total expenses ₹ 18.95 lakhs on account of loading and unloading expenses, the Assessing Officer had disallowed only ₹ 75,000/-. Before us, assessee has not placed any material to controvert the findings of Assessing Officer. Considering the totality of facts and in the absence of any material placed by the assessee to controvert the findings of Assessing Officer, we are of the view that the Assessing Officer was justified in disallowing ₹ 75,000/- and therefore we are of the view that no interference to the order of Assessing Officer is called for. - Decided against assessee Disallowance on account of expenditure being of personal in nature - Held that - We find merit in the plea of the assessee. The company being juristic person, it is difficult to accept the basis for disallowance of the Revenue. A company is incapable of having any personal user of the facilities. The directors are separate from the company. Even assuming that facilities were occasionally used for personal purposes, it is a business expenditure in so far as company is concerned. Such usage of facilities at any rate can be possibly taxed in the hands of the user as perquisite alone. Therefore, no estimated disallowance on account of personal user is called for. - Decided in favour of assessee

Issues Involved:
1. Disallowance of depreciation on the cost of foundation and installation of a Wind Turbine.
2. Addition on account of shortage in fruits and vegetables.
3. Ad-hoc addition for cash purchases from agriculturists.
4. Ad-hoc disallowance of loading and unloading charges.
5. Disallowance of expenses on account of alleged personal use.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Wind Turbine:
The assessee claimed depreciation at 80% on the windmill project, including civil work and installation costs. The Assessing Officer (AO) allowed depreciation at lower rates (10% for civil work and 15% for installation), disallowing ?16,21,886/-. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this disallowance. However, the Tribunal found that the issue was covered in the assessee’s favor by the decision of the Co-ordinate Bench for the previous assessment year (2008-09). The Tribunal, relying on similar cases, held that the civil work and installation costs are integral to the windmill and should attract the same depreciation rate of 80%. The Tribunal directed the AO to grant depreciation at 80%, allowing the assessee’s grounds.

2. Addition on Account of Shortage in Fruits and Vegetables:
The AO noted a shortage of 1,01,678 kgs of fruits and vegetables, disallowing 50% of the claimed shortage (?15,01,088/-) due to lack of documentary evidence. The CIT(A) upheld this decision. The Tribunal, however, observed that the assessee’s business involves perishable goods, and similar shortages had been accepted in previous years. The Tribunal found no evidence that the shortage was sold without being recorded in the books. It directed the deletion of the disallowance, allowing the assessee’s ground.

3. Ad-hoc Addition for Cash Purchases from Agriculturists:
The AO made an ad-hoc addition of ?5,00,000/- due to cash payments to crop growers, despite their bank accounts. The CIT(A) upheld this addition. The Tribunal noted that the suppliers confirmed the sales and receipt of cash payments. It found the disallowance unjustified, especially since cash payments for agricultural commodities are permissible under Rule 6DD(e) of the Income Tax Rules. The Tribunal set aside the disallowance, allowing the assessee’s ground.

4. Ad-hoc Disallowance of Loading and Unloading Charges:
The AO disallowed ?75,000/- out of ?18,95,356/- claimed as loading and unloading charges, citing unverifiable self-made vouchers. The CIT(A) upheld this disallowance. The Tribunal found no material to controvert the AO’s findings and upheld the disallowance, dismissing the assessee’s ground.

5. Disallowance of Expenses on Account of Alleged Personal Use:
The AO disallowed 10% (?1,09,804/-) of administrative expenses, suspecting personal use by directors and family members. The CIT(A) upheld this disallowance. The Tribunal, referencing its decision for the previous year (2008-09), noted that a company, being a juristic person, cannot have personal expenses. It directed the deletion of the disallowance, allowing the assessee’s ground.

Conclusion:
The appeal was partly allowed, with the Tribunal directing the deletion of disallowances related to depreciation on the wind turbine, shortage in fruits and vegetables, and cash purchases from agriculturists, while upholding the disallowance of loading and unloading charges.

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