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TMI Blog2016 (2) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... d this Appeal against the Order dated 09.5.2013 passed by the Ld. CIT(A)-IX, New Delhi relevant for the assessment year 2009-10. 2. The grounds of appeal read as under:- The DCIT/ACIT Circle-6(1), New Delhi is hereby directed to file an appeal in the above mentioned case before the Income Tax Appellate Tribunal, New Delhi on the following ground (s) ofappeal.- 1. Whether in the facts and circumstances of the case, the Ld. CIT (A) erred in deleting the disallowance of 50% of Salary Expenses amounting to ₹ 67,67,156/- on the ground that once the business was set up all related expenditure will have to be allowed completely ignoring the fact, mentioned by the Assessing Officer in the assessment order, that the assessee failed to substantiate that the services of the three employees were utilized wholly and exclusively for the purpose of trading as the manufacturing activity was yet to start. 2. Whether in the facts and circumstances of the case, the Ld. CIT (A) deleted the above disallowance of 50% of depreciation of office equipments amounting to ₹ 12,81,810/- on the ground that there cannot be any partial disallowance of depreciation once the asset is put to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the issues in dispute by considering the submissions of the Ld. Counsel of the assessee and adjudicated the issue no. 1 vide para no. 5 to 5.6 at pages 3 to 7 of the impugned order which are reproduced hereunder:- 5. Ground relating to disallowance of personnel expenditure of ₹ 67,67,156/-. The appellant had incurred personnel expenditure on salaries on three of its employees as under:- S.No. Name Designation Amount Rs. (Salaries) 1 Yasuo Watanabe General Manager- Sales Marketing 1,27,81,456/- 2 Roopesh Saxena Executive Sales Marketing 1,34,317/- 3 Arun Mishra Manager- Sales Marketing 6,18,538/- Total 1,35,34,312 5.1 The appellant has declared sales of ₹ 19758359/- against purchases of ₹ 20465302/-, all related to the automotive industry. 5.2 The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring had not commenced. It is not necessary for the sales team to effect sales only of its own manufactured goods. As stated, developing the market for the products is also its core activity. These personnel have devoted their energies for the jobs assigned to them by the Appellant Company, and that to successfully. The ad-hoc disallowance does not hold any merit once it is clear that the personnel have carried out activities for the appellant. It is not relevant whether the manufacturing activity has started or not once it is established that the trading activity has been started and the business has been set up for the purpose of Section 3. 5.5.1 In the case of Commissioner of Income-tax vs. Piem Hotel Pvt. Ltd. (Bombay High Court), [1994] 209 ITR 0616, it was observed: It follows, therefore, that the unit must be ready to start functioning for the purpose for which it is being set up. If the unit is ready to start functioning, it does not matter that it has not actually started its business on the relevant date. Once the business is set up, expenditure incurred concerning such business can be claimed as business expenditure subject to other a liable conditions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal merely relied on the explicit language of the section to come to the conclusion that the view of the Assessing Officer was incorrect. This being the clear position, we do not find any infirmity in the impugned order. 5.5.3 The similar view has been reiterated in the following cases:- Commissioner of Income-tax v. Franco Tosi Ingegneria 241 ITR 368 (Mad) Hotel Alankar vs. Commissioner of Income-tax (Gujarat High Court) [1982] 133 ITR 0866 5.6 In view of the judicial pronouncement given above and the facts of the case, once it is established that the business was set up all related expenditures will have to be allowed as deduction. Ground of appeal no. 2 is upheld. The addition of RS.6767156/- is deleted. 8.1 In view of the above, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has decided the issue in dispute in favor of the assessee after appreciating the evidence filed by the assessee as well as various decisions rendered by the Hon'ble Jurisdictional High Court and the decisions of the other High Court decisions. In view of the judicial procurements given above, we are of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a condition for allowing deduction as investment allowance or depreciation. What is needed is that the machines must be used for the assessee's business. Whether the assessee is able to successfully commence commercial production or commercial production is delayed on account of defect in trial production does not affect the allowability of deduction on account of depreciation and investment allowance if from the material on record, it can reasonably be inferred that machines were used for the assessee's business during the relevant previous year. The Hon'ble Gujarat HC in the case of Asstt. CIT v. Ashima Syntex Ltd. [2002] 122 Taxman 230/251 ITR 133, laid that, Magnitude of production is not determinative of 'use' - Law does not require that there must be fptimum production for granting the benefit of depreciation. Law only requires 'that there must be use of plant and machinery for the purpose of business. Use of such words that plant and machinery was run more extensively or was required to be used for larger production' is not to be found in the Act or Rules. Whether the plant and machinery is used to the extent of its efficiency is irre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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