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TMI Blog2011 (12) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to ₹ 1,23,06,024/-. From perusal of the balance-sheet it was further noticed that assessee had also made investment in shares amounting to ₹ 11,44,53,279/- which mainly consisted of shares of sister concerns known as JBF Industries Limited. The assessee s partners capital was only ₹ 1,71,99,802/-. In reply to a query, it was mainly stated that no shares were purchased during the year and assessee was taking unsecured loans which were interest free. However, AO did not agree with this proposition and after discussing various case laws, disallowed the interest. 4. On appeal, action of the AO has been confirmed by the ld. CIT(A). 5. Before us, it was mainly contended that investment in shares was made in the year `1997-98 and no interest bearing funds have been used for business purpose only and assessee had some surplus funds and, therefore, it could have been assumed that only surplus funds have been used in giving interest free loans. In this regard, reliance was placed on the decision of the Hon'ble Bombay High Court CIT vs. Reliance Utilities Powers Ltd. [313 ITR 340]. 6. On the other hand, Ld. DR submitted that once investment was made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance. 10. The Ld. Counsel of the assessee submitted that this issue is covered in favour of the assessee by the decision of the Tribunal for A.Y 2003-04 in I.T.A.Nos.6199 6646/Mum/07 vide para-10. He pointed out that assessee had paid a sum of ₹ 10,52,400/- towards repairs and reconstruction etc., to the association and claimed the same as 1/10th of the expenditure. 11. On the other hand, Ld. DR relied on the order of the CIT(A). 12. After considering the rival submissions, we find that this issue was adjudicated in assessee s own case for A.Y 2003-04 in I.T.A.Nos.6199 6646/M/07 vide paras 10 to 12 which are as under: The learned counsel submitted that there is no dispute as far as payment of ₹ 10,52,400/- towards repairs and reconstruction cost expenses to the Association as member of the Daulat Bhayari Tenants Association is concerned. This part of the expenditure is to be borne by the assessee for occupying the premises. It was further submitted that similar amount of l/lOth claim is being allowed in earlier years and also allowed in later two years. The learned counsel relied on the order of the ITAT in the case of M/s. Crystal Audio Ltd. in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In response, assessee gave the following reply vide letter dated 6-11-2006: 1. The assessee had been getting this deduction u/s. 80-IA from A. Y 1998-99 onwards and was eligible for deduction @ 100% for first five year and @ 25% for remaining five years. 2. The investment in Plant Machinery was ₹ 514.50 lacs on 1/4/2003. 3. Explanation 2 to section 801A talks about total value of Plant Machinery used. The Act does not state about the WDV of Plant Machinery. 4. The conditions to be fulfilled in the initial year when new industrial undertaking is being set up. The assessee has been getting the deduction u/s. 80IA for six years and clause (2) of section 80IA (3) is not applicable. 5. Without prejudice to above, explanation (2) to section 80IA(3) does not apply, if we take the total value of Plant Machinery and not on the basis of WDV as on 1/4/2003, which is given as under: Total value of Plant Machinery as on 1/4/2003 Rs. 514.50 lacs Value of old Plant Machinery ( purchased) ₹ 88.61 lacs Total ₹ 603.11 lacs The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such condition requires to be complied only in the initial year. In any case, in the case of ITO vs. Laxmi Packers [supra], Mumbai Bench has already taken a view that the intention of the legislature was not that condition regarding purchase of old machinery needs to be applied even in later year. 19. We have considered the rival submissions carefully and find force in the submissions of the Ld. Counsel of the assessee. At that relevant point of time sec.80IA (II) read as under: (ii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Clearly the expression which has been used is formed and formation of an undertaking would have come only at the initial stage. The Hon'ble Karnataka High Court in the case of CIT vs. Nippon Electronics (India) Ltd. [supra] while dealing with the similar issue u/s.80J(4)(ii) has held that the word form suggests that such transfer has to be considered at the time of formation of new undertaking. Similar view has been taken by the Mumbai Bench of the Tribunal in the case of ITO vs. Laxmi Packers [supra]. The issue involved before the Kerala High Court in the case of CIT vs. Seeyan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant was in nature of interest on delayed realisations of sale proceeds from the clients and was clearly covered by he judgernent of Gujarat High Court in the case of Nirma Industries. Therefore, in my opinion, both the amounts received on account of sale or scrap and on account of late payment were eligible as profits of industrial undertaking for deduction u/s.80IA. Accordingly, this ground of appeal is allowed. 22. Before us, Ld. DR strongly supported the order of the AO. 23. On the other hand, Ld. Counsel of the assessee strongly supported the order of the CIT(A). 24. We have considered the rival submissions carefully and find that ld. CIT(A) has correctly noted that the decision of the Special Bench of the Tribunal in the case of Nirma Inds. [supra] was over ruled by the Hon'ble Gujarat High Court reported at 283 ITR 402 wherein it was held that interest received on late payment on sale consideration was to be construed as income derived from industrial business and was eligible for deduction. Similarly, the Hon'ble Gujarat High Court in the case of DCIT vs. Harjivandas Juthabhai Zaveri And Another [supra] has held that even payment received on account of em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of R .9,90,664/-, the same was rightly included into the cost of plant and machinery for the purposes of depreciation. In the circumstances, there was no justification for the AD to reduce the actual cost of plant and machinery for the purpose of allowance of depreciation. Accordingly, the disallowance of depreciation of ₹ 13,18,148/- is hereby deleted. Thus, this ground of appeal is hereby allowed. 27. Before us, Ld. DR supported the order of the AO. On the other hand, Ld. Counsel of the assessee supported the order of the CIT(A). 28. After considering the rival submissions, we find that ld. CIT(A) has correctly adjudicated the issue. The assessee has not inflated the cost but extra cost was due to component of excise duty and sales tax which are statutory levies and assessee cannot avoid them. In any case, assessee has not claimed depreciation on the total cost but had itself excluded the component of excise duty and sales tax for claim of depreciation. No material was brought before us to show that this finding of ld. CIT(A) is not correct. Therefore, we are of the opinion, that ld. CIT(A) s order needs to be confirmed and according we decline to interfere with the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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