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TMI Blog2014 (8) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses and if such direction is followed the income determined after the appeal effect will be less than the income offered by the assessee? 3. Whether on the facts and in the circumstances of the case the Tribunal was right in deleting interest disallowance without noting that the assessee has not produced any evidence for the advances given were out of interest free funds? (Except for Assessment Years 2003-2004 and 2008-2009) 4. Whether on the facts and in the circumstances of the case the Tribunal was right in allowing the depreciation claimed by the assessee as per old provisions, without noting that the Assessing Officer has correctly allowed depreciation as per the depreciation chart applicable to the relevant assessment years? (For Assessment Year 2009-2010) 5. Whether on the facts and in the circumstances of the case the Tribunal was right in deleting the addition on account of drawings of directors without noting that the assessee has debited the amount under the head 'sales promotion and travelling expenses'? 2.1. The brief facts of the case are as under: A search and seizure operation was conducted in VGP Group on 3.3.2009. Consequent to such search operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer was the claim of the assessee for depreciation on roads and electrical fittings at the rate of 20%. The Assessing Officer held that the assessee had claimed excess depreciation at the rate of 20% as against the eligible rate of 10% and 15% respectively for all assessment years except 2003-2004 and 2008-2009. The Assessing Officer disallowed the claim of the assessee for depreciation at 20%. 2.6. Apropos of drawings by the Directors debited under the head sales promotion and travelling expenses during the assessment year 2009-2010, the Assessing Officer held that the expenses debited under the said head are purely personal expenditure of the individual directors and the same cannot be debited in the company's accounts. Thus, the Assessing Officer disallowed the claim of the assessee under this head. 2.7. The assessee appealed against the said order to the Commissioner of Income Tax (Appeals), who by order dated 22.12.2011 made in I.T.A.Nos.200 to 20610-11, restricted the disallowance on land development expenses to 5%, as against 20% disallowance ordered by the Assessing Officer. 2.8. The claim of the assessee for interest payment, which was disallowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is justified. The relevant portion of the said order reads as under: 30. During the course of appeal proceedings, it was shown that the moneys drawn from the appellant company were debited to the partnership firm in which the directors were partners. The said entries in the ledger account of the directors were basically posted for keeping track of the transactions. While finalising the accounts, the moneys drawn from the company were debited to the account of the partnership firms and these money due to the appellant company from the partnership firms were either recovered or shown as recoverable for the subsequent assessment years. 31. In short, the moneys drawn from the appellant are transferred to the firms. The appellant shows it as due from the firms. The firms take it to the individual account of the partners. This is the accounting procedure followed. I have examined the entries and I find that the explanation offered by the appellant is correct. 2.11. Assailing the said order passed by the Commissioner of Income Tax (Appeals), the assessee as well as the Revenue preferred appeals before the Tribunal, which partly allowed the appeals filed by either side. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance, including the offer made by the assessee should not exceed 10% of the land development expenses incurred in cash by the assessee. 5.2. The plea of the Revenue before us is that the Tribunal, while directing the Assessing Officer to restrict the disallowance to 10%, ought not to have stated that including the offer made by the assessee, the disallowance should not exceed 10% of the land development charges incurred by the assessee. 5.3. However, this issue appears to have been clarified by the Tribunal by order dated 7.6.2013 made in M.P.Nos.61 to 68/Mds/2013. In paragraph (5) of the said order, the Tribunal held as under: 5. Considering the submissions of both the parties and on going through the order of this Tribunal, we notice that there is a mistake apparent on record in the above said portion of the order which should be modified and shall be read as under:- 11. xxxx Taking into consideration the nature of business, the totality of the facts and circumstances of the case, we direct the Assessing Officer to restrict the disallowance of expenses towards land development incurred in cash to 10% after taking into consideration the offer made by the assessee. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. That apart, the Department has not produced before this Court any iota of material rebutting the finding arrived at by the Tribunal in this case. The Department has also not pointed out any specific error of law committed by the Tribunal on this issue. 6.4. In such view of the matter, this substantial question of law is answered against the Revenue. Substantial Question of Law (4) (For All Assessment Years, except 2003-2004 and 2008-2009) 7.1. This issue relates to depreciation on roads and electrical fittings. The Assessing Officer rejected the claim of the assessee for depreciation at the rate of 20% and held that the assessee is eligible for depreciation only at the rate of 10% and 15%. On appeal, the Commissioner of Income Tax (Appeals) modified the same and allowed depreciation at 20% by placing reliance on a decision of the Supreme Court in Indore Municipal Corporation v. Commissioner of Income Tax, [2001] 247 ITR 803 and a decision of the Bombay High Court in Commissioner of Income Tax v. Chemaux Ltd., [1994] 74 Taxman 201. The Tribunal, on appeal, confirmed the order passed by the Commissioner of Income Tax (Appeals). 7.2. In the case of Indore Municipal Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years 2003-04 to 2005-06). 7.6. In such view of the matter, this substantial question of law is answered in favour of the Revenue and against the assessee. Substantial Question of Law (5) (For Assessment Year 2009-2010) 8.1. This issue pertains to drawings by the Directors debited under the head sales promotion and travelling expenses during the assessment year 2009-2010. 8.2. We find that the Commissioner of Income Tax (Appeals) as well as the Tribunal has accepted the contention of the assessee that the said amount was debited to the partnership firm, in which the directors were partners, and these moneys are due to the assessee from the partnership firm and are shown as either recovered or recoverable during the subsequent assessment years and held that the claim made by the assessee is justified. 8.3. To controvert the above said view taken by the Commissioner of Income Tax (Appeals) and the Tribunal, the learned Standing Counsel for the Department relied upon the statement made by one of the Directors and we extract the same hereunder for better clarity on this issue: Whenever any personal expenses (not incidental to the business) is incurred by any Director, the expens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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