1993 (5) TMI 65 - AT - Income Tax

Summary

Issues:
1. Disallowance of depreciation on factory building.
2. Deduction of capital subsidy from actual cost/WDV of plant and machinery for depreciation.
3. Disallowance of penalty under Madhya Pradesh General Sales-tax Act.
4. Addition of unexplained cash credit under section 68.
5. Disallowance of depreciation on factory building (repeated).

Issue 1: Disallowance of Depreciation on Factory Building

The assessee claimed depreciation on an industrial shed acquired under an agreement with Gujarat Industrial Development Corporation (GIDC). The AO disallowed the claim as the full price was not paid, and the property deed was not registered. The CIT(A) directed the AO to allow depreciation based on CBDT instructions. The ITAT observed that the agreement did not confer ownership or rights to the assessee until full payment and conveyance. The instalments paid were considered capital payments, not hire charges, and the assessee was not entitled to claim revenue until ownership was transferred. The ITAT reversed the CIT(A) order, disallowing depreciation.

Issue 2: Deduction of Capital Subsidy for Depreciation

The revenue challenged the CIT(A) direction to deduct capital subsidy from the actual cost/WDV of plant and machinery for depreciation. The ITAT noted a precedent set by the jurisdictional High Court in CIT v. Bhandari Capacitors (P.) Ltd., where such deduction was disallowed. The ITAT upheld the revenue's grievance based on the High Court judgment.

Issue 3: Disallowance of Penalty under MP General Sales-tax Act

The assessee contested the disallowance of Rs. 1,376, treated as penalty under the Madhya Pradesh General Sales-tax Act. The ITAT found that only Rs. 260 constituted penalty and interest, making the rest allowable as sales tax and entry tax. The assessee received relief of Rs. 1,116, as per the ITAT's analysis.

Issue 4: Addition of Unexplained Cash Credit under Section 68

The assessee disputed the addition of Rs. 6,500 as unexplained cash credit under section 68, claiming it was share application money. The ITAT disagreed, stating that the amount remained unexplained cash credit, as it was cash received and not exempt under section 68. The ITAT affirmed the CIT(A)'s decision on this issue.

Issue 5: Disallowance of Depreciation on Factory Building (Repeated)

The ITAT noted that the last ground regarding the disallowance of depreciation on the factory building was not pressed by the assessee, as discussed and decided in earlier paragraphs. The ITAT reiterated its decision against the assessee on this issue.

In conclusion, the ITAT partially allowed both the revenue and assessee's appeals, addressing each issue raised in the judgment with detailed analysis and legal reasoning.