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TMI Blog2013 (1) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... nue. Disallowance of depreciation and other expenses - CIT(A)deleted the addition - Held that:- As decided in assessee's own case [2010 (11) TMI 841 - ITAT AHMEDABAD] in regard to ownership of the vehicle it is purchased by the assessee-company in the name of Director and it is not in dispute that fund for purchase of the vehicle was from the assessee-company as assessee filed complete funds flow statement which proves that the vehicle was purchased from the assessee-company’s funds. As decided in CIT v. Mohd. Bux Shokat Ali [2001 (2) TMI 26 - RAJASTHAN HIGH COURT] assessee company-firm was entitled to depreciation on vehicle purchased by it for its business purpose but registered in the name of one of the partners- car expenses cannot be disallowed in the hands of a company as there cannot be any personal expenses in case of a company as decided in Sayaji Iron & Engineering Co. case [2001 (7) TMI 70 - GUJARAT HIGH COURT] - against revenue. Disallowance by capitalizing Repairs and Maintenance expenses - CIT(A) deleted the addition - Held that:- The reasons pointed out by the assessee for treating the payments for purchase of various items as revenue expenditure has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No.604 of 2010. The Hon ble High Court while admitting the appeal had framed the following question: Whether the Appellate Tribunal is right in law and on facts in dismissing the appeals of the revenue on the ground of low tax effect, though notional tax effect exceeded the monetary limit prescribed by the board? The Hon ble High Court following their judgment dated 09-05-2011 in group of tax appeals being Tax Appeal No.1601 of 2009 and connected appeals answered the question in favour of the revenue and directed the Tribunal to adjudicate the appeal on merits. 3. Now, as per the aforesaid direction of the Hon ble Gujarat High Court the case is placed before us for consideration on merits. The revenue has in its appeal raised ten elaborate grounds wherein grounds No.1, 3, 5, 7, 9 and 10 are general in nature and do not survive for adjudication. Surviving grounds No.2, 4, 6 and 8 of the appeal are reproduced hereunder for reference: "2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,68,000/- in respect of interest on borrowed capital. 4. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,95,458 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges. The ratio of new assets i.e. Building and machinery to secured and unsecured loans comes to 1.83 / 36.22 i.e. 0.05. Interest attributable to building and machineries could be Rs.16,08,916/-. The assessee had not given any details of exact date of purchase of machineries and date of putting the same to use. The learned AO on perusal of depreciation chart found that most of the depreciation on new additions had been claimed after 1-10-2005. Accordingly, the learned AO in view of the above facts considered two months interest as interest cost incurred on new assets which were to be capitalized and worked out the total interest at Rs.2,68,000/- and disallowed the same. 6. The assessee carried the matter before the learned CIT(A). The learned CIT(A), considering the facts of the case and the submission of the assessee directed the learned AO to delete the addition by observing in Para 2.3 of his order as under: "2.3 I have considered the facts of the case and the submission of the A. R. It is seen from the details furnished that the appellant has not availed any specific loan which has been used for addition to capital assets and there were no bank borrowings specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of an asset till put for its intended use is capitalized as part of the cost of that asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing cost is charged to revenue. From the above facts, it is apparent that the assessee has not charged any interest expense attributable to purchase of fixed asset to the profit and loss account of the assessee. Therefore, we hereby confirm the order of the learned CIT(A) on this issue. Thus, ground No.2 raised by the revenue against deleting of addition of Rs.2,68,000/- in respect of interest on borrowed capital is decided against the revenue and, therefore, dismissed. 10. Ground No.4: Deleting the disallowance of Rs.1,95,458/- in respect of depreciation and other expenses. During the course of assessment proceedings, the learned AO disallowed the claim of depreciation on the ground that the motor cars have been purchased in the name of two directors viz Shri Mahabir S. Chowdhary and Shri Gautam C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the vehicle was from the assessee-company. Before us also assessee filed complete funds flow statement which proves that the vehicle was purchased from the assessee-company s funds. We find that Hon ble Rajasthan High Court in the case of CIT v. Mohd. Bux Shokat Ali (No.2) (2002) 256 ITR 357 (Raj) held that assessee company- firm was entitled to depreciation on vehicle purchased by it for its business purpose but registered in the name of one of the partners. Further, the Hon ble Delhi High Court in the case of CIT v. Basti Sugar Mills Ltd. (2002) 257 ITR 88 (Del) held that assessee was entitled to depreciation on vehicle though the vehicle was not registered in its name. The assessee-company also submitted that Hon ble Supreme Court in the case of Mysore Minerals Ltd. v. CIT (1999) 239 ITR 775 (SC) and CIT v. Podar Cement Pvt. Ltd. Others (1997) 226 ITR 625 (SC) has held that meaning of owned by assessee should be given in wider sense. The person who enjoys the property is the owner eligible for depreciation even though he may not be owner legally. Accordingly, the assessee was held entitled to depreciation in respect of properties of which the assessee had not obtained a deed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to repairs is only 1.12% of total turnover and by replying on the judicial decision as relied upon, I am of ht e opinion that the same represents repairs and I hold the same as revenue expenditure and delete the disallowance of Rs.12,38,533/- and direct the A. O. to withdraw depreciation allowed on the same. Now, the revenue is in appeal before us against this finding of the learned CIT(A). 16. The learned DR relied on the order of the learned AO and on the other hand, the learned AR supported the order of the learned CIT(A). 17. We have heard the rival submissions and perused the materials on record. Before us the assessee submitted details of repairs and maintenance (paper book pages 19 to 30) along with explanation and copies of invoices. On perusing the assessment order, we do not find any specific reason adopted by the learned AO in treating the amount of Rs.12,38,533/- as capital expenditure. The learned AO has simply stated as under: On perusal of the bills in respect of above mentioned expenses, it is noticed that these have been purchased either for new construction or fabrication. It is noticed that the electric goods have been purchased to do electrificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was sold at the prevailing market rate. Further, the A. O. has simply stated that the sales were made on an average profit of Rs.500/- per MT by the associate concern which is not sufficient to make addition u/s 40A(2) (b), however, he has not pointed out any instance to support that the appellant has not effected the sales at prevalent market rate. Therefore, I hold that the addition made on this count is without any logic and hence the same is directed to be deleted. Aggrieved, by the finding of the learned CIT(A), the revenue is in appeal before us. 20. The learned DR supported the order of the learned AO and the learned AR relied upon the order of the learned CIT(A). 21. We have heard the rival submissions and perused the materials on record. The learned CIT(A) has deleted the meager addition of Rs.18,000/- made by the learned AO u/s 40A (2) (b) of the Act for the following reasons: (i) The appellant had sold the bulk stock of 36,000 MT of Topioca powder to its sister concern Santosh Starch Product Ltd. while as M/s. Santosh Starch Products Pvt. Ltd. had sold the same to various parties on retail basis. (ii) The AO has not brought out any sufficient materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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