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TMI Blog2008 (3) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... income from the following two properties:- (i) 52 Okhla Industrial Area; and (ii) 217A Okhla Industrial Area, New Delhi. It showed rental income from both the properties. The assessee also claimed expenses besides claiming separate expenses towards repairs and maintenance @ 30% of the net rental income. During the course of assessment proceedings, the Assessing Officer noticed that the assessee claimed depreciation on buildings which were let out on rent. He rejected the claim of the assessee amounting to ₹ 4,45,045/- by holding that no depreciation is allowable while computing income under the head Income from house property . Thus he made addition of ₹ 4,45,045/- by disallowing the claim of depreciation. Similarly he also disallowed the claim relating to repair amounting to ₹ 97,762/-. 5. The assessee challenged the addition of ₹ 4,45,045/- by submitting that the buildings were clubbed as a whole under the block of assets. It was pointed out that out of total depreciation claimed at ₹ 4,45,045/-, an amount of ₹ 2,32,358/- pertains to the building which was vacant throughout the year on which depreciation is to be allowed as per Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer under these heads are confirmed. 6. The learned counsel for the assessee fairly argued that the assessee had furnished complete details before the Assessing Officer but he ignored the same. It was contended that according to the calculations about the total depreciation claimed at ₹ 4,45,045/- an amount of ₹ 2,32,358/- pertains to building which was vacant throughout the year in respect of which depreciation has to be allowed. 7. The learned DR on the other hand, supported the order of the Assessing Officer. 8. During the course of hearing we require the learned counsel for the assessee to show as to whether in any assessment year depreciation was allowed to the assessee in respect of while building or not. The learned counsel could not show that the depreciation was allowed on the entire area of the two buildings. He also could not prove that the vacant portion of the building was utilized for business purposes in earlier or subsequent period. 9. On going through the order of the learned CIT(A) it is found that he himself has considered the factual aspect and has allowed depreciation on that part of the building which was used for business purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned it is held that there is no justification for increase in the Directors' remuneration from ₹ 3 lakhs to 6 lakhs. The disallowance of ₹ 3 lacs made by the A.O. is accordingly confirmed. 12. For challenging the order of the learned CIT(A) the learned counsel for the assessee Shri Kapil Goel submitted that firstly the Assessing Officer made the disallowance without affording any reasonable opportunity to the assessee before making the impugned disallowance. He further contended that the Assessing Officer could not bring anything positive on the record to justify this disallowance. It was pointed out by him that the assessee made detailed submissions before the learned CIT(A) to point out that the assessee was mainly running a business on the strength of only two directors and the increase became necessary to meet out the inflation effect. According to the learned counsel, on similar facts in assessment year 20-04-05 the Assessing Officer found increase in the directors' remuneration allowable under the Act and therefore, since the department itself has accepted the increase as justified in assessment year 2004-05, in the year under consideration also, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re incurred on the remuneration of the directors was fully justified, it is also to be noted that in subsequent year i.e. in assessment year 2004-05 the department itself accepted the expenditure to be genuine and allowed the same. On record there is no material to hold that the expenditure was bogus or that the remuneration was increased for avoiding tax. 16. In view of the above facts the arguments advanced by the learned counsel for the assessee for justifying the expenditure have sufficient force and therefore, the same are accepted. Consequentially we delete the disallowance and allow the ground in favour of the assessee. Ground No. 4: 17. This ground is directed against sustenance of disallowance of ₹ 7,56,168/- relating to expenditure on foreign travelling of the directors. The assessee had shown expenditure of ₹ 7,56,168/- on foreign travelling of directors. The Assessing Officer examined the activity of the assessee and found that no manufacturing took place by the company during the year under consideration. He, therefore, held that the expenditure incurred on foreign travelling of the directors amounting to ₹ 7,56,168/- was not relatable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as incurred for personal or non-business purposes. The submission of the assessee was that it was engaged in the business of dealing in the items of Refrigeration and air-conditioning equipments and for having upto date knowledge regarding these equipments, the directors made visit to Florida in USA which is international hub for refrigeration and air-conditioning equipments. It was thereafter submitted that the foreign visits were undertaken to have survey of markets and thus to explore the new areas. We find force in the submissions of the assessee. The Assessing Officer has rejected the claim of the assessee by observing that no immediate benefit accrued to the assessee. In view of Circular No.4 of 1950, immediate benefit cannot be viewed as a condition precedent for allowing expenditure on foreign visits. In the case of Cascade Enterprises (supra), Delhi Bench of ITAT has field that foreign travel expenses cannot be disallowed merely on conjectures and surmises and that business crystallized out of the small visits etc. 21. The learned CIT(A) has observed that if the expenditure was incurred for initiation of new business, then the same cannot be said to be the expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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