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TMI Blog1986 (4) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... nd M/s. Western India Glass Works Ltd. under which the assessee agreed to install direct fire furnace for melting glass of 45 to 50 tons capacity per day in the premises of Western India Glass Works Ltd. at Bombay at its own cost in proper condition and all the expenses of maintaining and running it shall be met by the Western India Glass Works Ltd. only. The said Western India Glass Works Ltd. shall supply 3000 tons of glass products to the assessee. The Western India Glass Works Ltd. shall be bound to utilise upto 50% of the capacity of the said furnace for the manufacture of glass to be made available to the assessee and the price shall be determined by mutual consent. The period of the agreement was three years unless it is extended by mutual consent. 2. The assessee claimed depreciation at 100% on the glass melting furnace costing Rs. 36,94,735 installed in the factory premises of Western India Glass Works Ltd. The IAC who made the assessment held that the Western India Glass Works Ltd. is a separate assessee and the assets and liabilities of that company are not the assets and liabilities of the assessee company and that is of a subsidiary company of the assessee. It was bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lass Works Ltd. by utilising the glass fire furnace should be supplied to the assessee. Accordingly they have supplied the bottles. That would clearly show that the glass fire furnace has been used for the business of the assessee. It is a bona fide business arrangement. He strongly urged that the user contemplated it is not user by the assessee alone. It can be used by others for the benefit of the assessee. The assessee got a discount of 20% on the purchase of bottles and thereby the price was lower than the market rate. Thus he urged that the furnace is owned by the assessee and it is used for the assessee s business. Hence the assessee is entitled to the depreciation claimed. He placed reliance on few decisions. Alternatively he urged that the sum of Rs. 36,94,735 should be allowed as business expenses or loss. Learned Departmental Representative submitted that the furnace by itself is not usable and it can be used only in combination with other equipment owned by Western India Glass Works Ltd. The business of the assessee is not that the manufacture of bottles. The furnace itself is not used for the business of the assessee and so the assessee is not entitled for depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt that the glass fire furnace is owned by the assessee but it is not used for the business of the assessee. The user of the machinery must be by the assessee but not by someone else. It is not the business of the assessee to let out the machinery and earn lease rent. In such cases it can be said that the letting out of the machinery is business. In fact the assessee has not received any lease rent at all and no lease rent is contemplated under the agreement dt. 27th March, 1981. Even the discount of 20% of the market price is not under the agreement. since the glass fire furnace has not been used by the assessee for the purpose of its business, the assessee is not entitled to depreciation on it under s. 32 of the Act. 6. We may now refer to few decisions. In The Liquidators of Pursa Ltd. vs. CIT (1954) 25 ITR 265 (SC), the Supreme Court considered the meaning of the words "used for the purposes of the business". At page 272 it was observed as under: "Therefore it is clear that the tax is payable only in respect of the profits or gains of the business which is carried on by the assessee. Sub-s. (2) permits allowances to be made before the taxable profits are ascertained. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the same and it is the control which determines who is using it. The meaning of the word "user" was considered at page 895 where it was observed by the Delhi High Court as under: "Plant or machinery can be said to be used by somebody else if some other person has control over the same. If you derive your own motor car and have a passenger in it, then you are wholly using the motor car even if the passenger may also be using it. It is the control which determines who is using it. It seems to us that the question whether anybody else gets the benefit from the air-conditioning plant or lifts should not lead to the inference that such person is using the machinery or plant. "User" means not only getting benefits, but also controlling, running, stopping, repairing, replacing, etc." The above ratio applies to the instant case as M/s Western India Glass Works Ltd. had control over the glass fire furnace installed in its factory premises, the maintenance and repairing expenditure has to be borne by it, it has to maintain the machinery in good condition and the assessee did not have any control over it. Merely because the assessee has derived benefit by supply of glass bottles by West ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Associated Cement Co. Ltd. (1968) 68 ITR 478 (Bom) is also distinguishable. There the Associated Cement Co. Ltd. was the assessee. Its subsidiary Company was one Cement Marketing Co. Ltd. which was appointed as Sales Manager for the assessee. The assets of Cement Marketing Co. Ltd. were taken over by the Associated Cement Co. Ltd. and the entire assets appeared in its books. No remuneration or commission was paid to M/s Cement Marketing Co. Ltd. for acting as Sales Manager but the assessee-company only reimbursed its working expenses. On those facts the Tribunal found that the assets of Cement Marketing Co. Ltd. belonged to the assessee-company and if the property of the assessee has been used by the Sales Manager it is still the property of the assessee. Those findings were upheld by the Bombay High Court. Thus the above facts are entirely different and they have no application to the instant case. The decision of the Bombay High Court in CIT, Bombay vs. Viswanath Bhaskar Sathe (1937) 5 ITR 621 (Bom) is also distinguishable. This is a case where the assessee owned a ginning factory and was a member with the owners of other ginning factories of a pool. On these facts, it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure of Rs. 39,405 only Rs. 19,702 is disallowed as capital expenditure. We do not find any valid ground to interfere with the same. The decision relied on by the assessee s counsel Antifriction Bearings Corporation Ltd. vs. CIT, Bombay City-III, Bombay 1978 CTR (Bom) 589 : (1978) 114 ITR 335 (Bom) has no application to the facts of this case. That was a case where the visit was in respect of collaboration agreement and incidentally machinery has been selected. But in the instant case, the purpose of the visit itself was for the purchase of printing machinery which was ultimately to purchased. Thus the trip abroad was not for the purpose of the business but for the purpose of purchasing a capital asset. Thus we uphold the disallowance. 13. The next ground is with regard to the disallowance of Rs. 1,00,000 on account of building repairs. The assessee had incurred an expenditure of Rs. 7,12,568 on repairs and maintenance of buildings. The IAC disallowed Rs. 2,00,000. On appeal, the CIT (A) sustained the disallowance to the extent of Rs. 1,00,000. Learned counsel for the assessee submitted that no disallowance is warranted as there is not increase in space area and repairs were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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