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TMI Blog2003 (6) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company as no supporting evidence was enclosed to prove the genuineness of this investment. 2.2 Before us the learned counsel for the assessee submitted that it was the first year of the commencement of the business of the assessee. It was also pointed out that confirmation by Shri Arun Arora on behalf of Shri Vinay Arora, stating that the sum of ₹ 20,000 was paid by him towards share application money of the assessee company during the year ending 31-3-1990, was filed. 2.3 It was further submitted by the learned counsel for the assessee that before the DCIT Spl. Rane-2, Ghaziabad vide letter dated 29-1-1993 it was pointed out that Shri Vinay Arora was son of Shri Arun Kumar, Managing Director, who had left the company and despite reminders he was not submitting any reply regarding the source of income, hence a request was made to the Assessing Officer to summon Mr. Arun Kumar directly to give that information. This reply of the assessee is available at pages 41 to 43 of the paper book. In support of this submission, reliance was also placed by the learned counsel on the decision in the case of Munnalal Murlidhar v. CIT [1971] 79 ITR 540 (All.); and on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer conceded to the request of the Assessing Officer to summon the party concerned for examination, the assessee was materially prejudice on account of the failure on the part of the Assessing Officer to call for and examine the depositor. Relevant part of the observation of the Hon ble Court is quoted as under: In our opinion, the assessee had been materially prejudiced on account of the failure on the part of the Income-tax Officer to call for and examine the evidence which was offered by the assessee to explain the nature and the source of the sum of ₹ 17,000. The assessee has also been prejudiced on account of the fact that, if the assessment files relating to the firm, M/s. Habib Moosa and M/s. Abdul Sattar Abdul Ghani had at all been produced before the Tribunal, there was no examination of these files to the knowledge of the assessee. There was, in this case, a denial to the assessee of an opportunity to produce evidence in support of its case. As we have already pointed out, the assessee was entitled to produce such evidence and the Income-tax Officer was bound to give the assessee reasonable opportunity to do so. In the circumstances, the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the ITO concerned to summon the party directly. Accordingly, orders of the authorities below on the issue in question are set aside and the addition of ₹ 20,000 made by the Assessing Officer and sustained by the CIT(A), is deleted. Ground is allowed. Ground No. 2 raised by the assessee reads as under: That the learned CIT(A) has erred in law as well as on merits of the case in treating the electric installations for ₹ 5,51,983 as part of factory building instead of plant and machinery and in allowing the depreciation in respect of it at the rates as applicable in the case of Factory Building instead of plant and machinery. The assessee had claimed depreciation on plant machinery valued at ₹ 86,96,044. The Assessing Officer allowed depreciation on the plant machinery at ₹ 25,41,030 excluding ₹ 11,55,014, which was on account of the following items: 1. D.G. Set 3,21,837.70 2. Electric Installations 5,51,983.57 3. Weight Scales 5,076.55 4. Pum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also placed on CBDT Circular No. 372. 3.7 We have carefully considered the material on record and the rival submissions of the parties. The Department has not disputed the fact that the electric installations were not fixed or were not used for the business activity of the assessee. In fact, neither the Assessing Officer nor the learned CIT(A) has examined the issue from that point of view and no enquiry was made from the assessee regarding the actual user of the electric installations. Since the assessee had submitted the details and further since the assessee company was manufacturing shoes, there could be no other use of the electric installations but only a business use. 3.8 In the case of India Turpentine Rosin Co. Ltd. (supra ), the Hon ble Allahabad High Court has taken the view that the electric installations installed by the assessee as a result of change from DC to AC system in that case constituted plant machinery within the meaning of section 10(2)(vii-b) of the Indian Income-tax Act, 1922. 3.9 In the case of Jagdeeshchandran Co. (supra ) the Hon ble Madras High Court has quoted the observation of Lindley L.J. in Yarmouth v. France at page 658, to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the less plant because it is small in size or cheap in value or a large quantity thereof is consumed while being employed in carrying on business. In the ultimate analysis the inquiry which must be made is as to what operation the apparatus performs, in the assessee s business. The relevant test to be applied is: does it fulfil the function of plant in the assessee s trading activity? Is it the tool of the taxpayer s trade? It is, then it is plant, no matter that it is not very long lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purpose. 3.14 There are several other authroities on the issue. In view of these decisions it can be held that the electric installations worth ₹ 5,51,983 were covered under the definition of plant machinery and therefore, the learned CIT(A) was not justified in not allowing depreciation on the electric installations of the assessee company at the rate allowable for plant machinery. Thus, we reverse the finding of CIT(A) and direct that the claim of assessee for depreciation on electric installations at ₹ 5,51,883 was to be allowed by allowing depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el has submitted that the Assessing Officer has not allowed 100% depreciation in respect of certain items whose cost was below ₹ 5,000. I have looked into the list and it is seen that it consists of dies and moulds valued at ₹ 59,448. Since in the preceding para, it has already been held that depreciation at a normal rate should be allowed in respect of these items, the Assessing Officer should therefore, allow normal depreciation in respect of these items. 5.2 Before us it was submitted by the learned counsel for the assessee that each equipment being less than ₹ 5,000 the depreciation @ 100% could be allowed. In this regard our attention was also invited to the bills of such items, which are available at pages 128 to 131. It was pointed out that as per these bills the cost of one item of mould or dies was less than ₹ 5,000. 5.3 We have gone through pages 128, 129, 130 and 131 of the paper book. These are details of certain bills. Learned CIT(A) has not looked into these bills for coming to the conclusion as to whether each item/equipment s cost is less than ₹ 5,000 or not. The Assessing Officer has also not considered the matter properly. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded depreciation amounting to ₹ 14,315. Thus, total addition on account of disallowance of claim of loss and addition on account of depreciation aggregated to ₹ 58,123. The contention of the assessee was that since sales were only at ₹ 8,913, the assessee could not be expected to make profit of ₹ 43,808. Thus, the reasons adopted by the Assessing Officer were challenged by the assessee before the learned CIT(A). The learned CIT(A) has considered the issue including the total sales of the assessee and held that there was no justification in disallowing the loss claimed by the assessee. The learned CIT(A) has thus directed the Assessing Officer to compute the taxable income after taking the loss declared at ₹ 58,123, which included the claim of assessee in respect of depreciation. Relevant observations of the learned CIT(A) are as under: 4. I have considered the submissions to the Ld. Counsel. The assessee has commenced production with effect from 23-3-1990 and declared total sales of ₹ 8,918 upto 31-3-1990. The accounts have been maintained and no discrepancy has been pointed out therein except that the closing stock has been under valued. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of J.B. Cold Storage Ice Gen. Mills. 4. ₹ 10,000 in the case of Smt. Kesri Devi 5. ₹ 20,000 in the case of Rajiv Chitranshi 6. ₹ 25,000 in the case of Smt. Sheela Chitranshi. 10.2 The Assessing Officer thus made addition of ₹ 3,17,000 on account of unexplained investment in share capital. 10.3 Before the learned CIT(A) it was submitted that the assessee had discharged his burden by proving the identity of the depositors and the genuineness of the transactions. It was submitted that the investment of ₹ 12,000 was made by Rajiv Chitranshi and ₹ 20,000 by Smt. Sheela Chitranshi and both of them were doctors. It was also submitted that confirmation letters were also filed in respect of these depositors/investors. Regarding the investment made of ₹ 1,40,000 by M/s. J.B. Cold Storage Ice Gen. Mills, it was submitted that it was having GIR number and was being assessed regularly. The learned CIT(A), after considering the evidence filed by the assessee to prove the identity of the depositor and genuineness of the transactions etc., deleted these addition to the extent of ₹ 2,97,000 by observing as under: 7. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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