9911796707
TMI Blog2014 (12) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessitated use of DMT of at least 3000 tons per month. M/s Bombay Dyeing & Mfg. Co. Ltd (BD) is the company producing Dimethyl Terephthalate (DMT) feed stock. Accordingly the assessee herein approached 'BD' seeking assistance to carry out its plans. Accordingly an agreement was entered on 09-06-2000 between the assessee and 'BD', as per which the terms of assistance was settled. According to the said agreement, 'BD', inter alia, agreed to purchase certain equipments and lease out the same to the assessee herein. In turn the assessee agreed to purchase 9000 tons + 5% per quarter of DMT from M/s BD. Accordingly, M/s BD purchased machineries, as per the requirement of the assessee and leased out them to the assessee and in this regard, both the parties also entered into a lease agreement. 3. We shall first take up the appeal filed by the revenue for assessment year 2002-03. The only issue contested in this appeal is with regard to the disallowance of lease rentals claimed by the assessee. The AO noticed that the assessee has claimed lease rentals paid by it as revenue expenditure. The AO, however, disallowed the said claim by holding that the lease agreement was not an operating lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO was justified in treating the arrangement as financial transaction. 7. On the contrary, the Ld A.R submitted that the genuineness of lease agreement has been accepted in the hands of M/s BD. He submitted that the present case was not a case of sale and lease back transaction, but a case of purchase of machinery as per the requirement of the assessee and leasing out the same to the assessee. M/s BD agreed to purchase and lease out the machinery, since the assessee had also agreed to purchase DMT produced by M/s BD. Hence, it was a mutually beneficial business arrangement. He submitted that the intention of the parties was to lease out the machinery on monthly payment of lease rentals. Accordingly, the Ld A.R submitted that the Ld CIT(A) was justified in reversing the decision of the AO on this issue. In the alternative, the Ld A.R submitted that the assessee should be allowed depreciation, if the Tribunal takes the view that it was a financing transaction. 8. On assimilation of the facts prevailing in the instant case, we are inclined to support the view taken by the assessing officer. As stated earlier, there was a business arrangement between the assessee and M/s BD. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the above, the assessee is also contending that the ld CIT(A) has passed the order after expiry of 90 days from the date of hearing, which is against Rule 34 of the Appellate Tribunal Rules. In this regard, the Ld A.R also placed reliance on the decision of Hon'ble Delhi high Court in the case of CIT Vs. Chetan Das Lachman Das (2012)(211 Taxman 61). First of all, the Ld A.R could not convincingly explain to us as to how the Appellate Tribunal Rules are applicable to the Ld CIT(A). Secondly, he could not explain as to how the assessee was aggrieved by the order of Ld CIT(A) on this issue. Hence, we do not find any merit in this legal issued urged by the assessee and accordingly dismiss the same. 13. The first issue relates to the claim for deduction of unabsorbed business loss of Rs. 9,93,985/-, while computing book profit u/s 115JB. According to Ld A.R, the AO disallowed the said claim without assigning any reason. Before Ld CIT(A), the assessee furnished break-up details of unabsorbed depreciation and business loss as per books of account. The Ld CIT(A), however, took the view that the unabsorbed depreciation of Rs. 8.25 crores should be taken as NIL, since it was a negati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld CIT(A) held that the assessee should have paid the interest either by paying cash or by depositing cheque, i.e., according to Ld CIT(A) the recovery of interest by enhancing Cash credit limit was not to be considered as payment. 17. We find merit in the alternative submission of Ld A.R. Even, if the loan account is categorised as "Non-Performing Asset", nothing prevented the assessee to make provision for payment of interest. However, the said provision for interest was liable to disallowed u/s 43B of the Act, since it was not paid. However, the same is allowable in the year in which the interest was actually paid in terms of sec. 43B of the Act. Though the assessee has not paid the interest amount either by way of cash or cheque, yet the fact remains that the bank has recovered the interest by enhancing the Cash credit limit. There should not be any dispute that the enhancement of Cash Credit limit places funds at the disposal of the assessee. Hence recovery of interest from out of the enhanced limit is nothing but payment of interest by the assessee. It is pertinent to note that the provisions of sec. 43B do not provide anything about the source from which the payment shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67 (Delhi) (High Court) iv) Sonic Biochem Extractions P.Ltd V/s ITO (2013) 23 ITR 447 22. On the other hand, the ld. DR strongly defended the order of the ld. CIT(A). 23. On consideration of the rival contentions, we do not find any merit in the contention of the ld. AR. The various case laws relied upon by him have been rendered on different context and the same, in our view, could not be taken support by the assessee. The facts remain that the assessee had let out its building to its sister concerns and others and has received rent aggregating to Rs. 18 lakhs. We notice that the AO has followed the decision rendered by the Hon'ble Supreme Court in the case of CIT vs. Shambu Investment (2003) 263 ITR 143 (SC) to hold that the rental income is assessable as income from house property. 24. Before us, the ld. AR could not submit any material to contend that the decision of the Hon'ble Supreme Court referred above is not applicable to it. More particularly, it was not a case of letting of premises due to temporary lull in the business activity of the assessee. It was also not shown that the letting out was in connection with the commercial exploitation of the assets. Hence, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries Ltd V/s ITO (2010) 43 DTR 23 (Ahd), wherein it was held that the electrical installation consisting of electrical wires, switches, plugs, cables, MCB box and other electrical items shall form part of plant and machinery since they do not function independently. He submitted that the Ahmedabad bench of Tribunal has held that these kind of electrical items cannot be classified as furniture and fixture. Accordingly, the ld. AR submitted that the assessee should be grated depreciation at the rate of 25% on the electrical fittings by considering the same as plant and machinery. 28. On the contrary, the ld. DR defended the order of the ld. CIT(A) on this issue. 29. We notice the Note No.5 given under the Depreciation Schedule applicable to the assessment year 2005-06 (which is available in the Income tax Rules) defines the expression "electrical fitting". According to the said definition electrical fittings includes electrical wires, switches, clutches, other fittings and fans etc. Under the Depreciation Schedule "electrical fittings" is clubbed along with "Furniture & fixures. Hence, the expression "Electrical fittings" should mean only those items which can be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had used the internal cash accruals for funding the above said projects and the availability of its own funds could be proved to the AO by showing the balance sheet of the assessee. Accordingly, he requested that this matter may be set aside to the file of the AO so that the assessee would be able to demonstrate about the availability of its own funds, to which the ld. DR also did not object. Accordingly, we set aside the order of ld. CIT(A) and restore this issue to the file of AO with a direction to examine this issue afresh by considering the information and explanation that may be furnished by the assessee and take appropriate decision in accordance with law. 32. The next issue relates to disallowance made u/s 40A(2)(b) of the Act. The AO noticed that the assessee had purchased paper tubes from a related concern named M/s Arya Industries and the aggregate amount of purchase made during the year relevant to AY 2005-06 was Rs. 4.78 crores. The AO noticed that the Chairman of the assessee company is a Partner in the above said concern. Hence, the AO compared the purchase rate of the products purchased from the above said concern and the purchase rates of purchases made from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aggregate purchase value of purchases made from M/s Arya Industries. The order of the CIT(A) on this issue stands modified accordingly. 36. The next issue relates to enhancement of book profit computed u/s 115JB by the assessee by Rs. 275 lakhs. The assessee had booked a sum of Rs. 398.48 lakhs as "Impairment loss" in the Profit and Loss account. However, the assessee transferred a sum of Rs. 275 lakhs from General Reserve account and reduced the same from the "Impairment loss" stated above and accordingly a sum of Rs. 123.48 lakhs was shown in the debit side of the Profit and Loss account. While computing the Book Profit u/s 115JB of the Act, the assessee reduced the above said amount of Rs. 275 lakhs from the net profit. The assessee submitted before the assessing officer that the amount transferred from General Reserve is required to be deducted from the Net Profit as per Clause (i) of Explanation 1 to Section 115JB of the Act. However, the AO noticed that the assessee has accounted for "Impairment to Assets" of Rs. 398.48 lakhs for the first time during the year, out of which a sum of Rs. 275 lakhs represented the impairment to assets pertaining to earlier years. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
