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TMI Blog1999 (8) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ; s. 36(i)(iii) 1,61,69,397 (iv) Addition in respect of gain on cancellation of foreign exchange contracts. 36,41,856 (v) Disallowance of depreciation on Butachlor plant. (vi) Charging of interest under s. 234B. 3. The learned counsel for the assessee Shri H.P. Ranina referred to the relevant portions of the assessment order and the order of the CIT(A) and raised objections to the impugned order on the above points. The learned counsel submitted a paper book containing the detailed submissions in this regard along with the copies of the details submitted before the lower authorities in support of his contentions. On the other hand the learned Departmental Representative Shri Vatsiayan relied on the observations of the CIT(A) and submitted that the impugned order does not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on his decision for the asst. yr. 1992-93 in assessee's own case. 6.1. The learned counsel for the assessee points out that the assessee maintained transit house mainly for the use of the employees while on duty at its registered office where both its factory premises and head office are situated i.e. Narmada Nagar, Bharuch, at Bombay and New Delhi. The hostel building at Narmada Nagar is situated in a place which is in a remote corner and the employees of the assessee and the auditors stay there temporarily during the year. Bombay and New Delhi transit houses are exclusively used by the employees while on official duty. The break-up of expenses is as under: Rs. (a) Cost of providing meals 3,625,758 (b) Depreciation 1,26,982 (c) Repairs to equipments (only air-conditioner) 40,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1996) 56 TTJ (Bom) 598 : (1996) 58 ITD 555 (Bom); and For expenses on repairs of air-conditioners. CIT vs. Maharana Mills Ltd. (1994) 120 CTR (Guj) 271 : (1994) 208 ITR 972 (Guj) 6.2. The learned Departmental Representative on the other hand vigorously disputed the contentions of the assessee's counsel as the entire expenditure is covered by the provisions of s. 37(4) of the Act. 6.3. On considering the rival submissions, we find that the decisions of the Hon'ble Gujarat High Court in (1994) 120 CTR (Guj) 271 : (1994) 208 ITR 972 (Guj) and CIT vs. Patel Bros & Co. Ltd. (1977) 106 ITR 424 (Guj) would have to be applied to the facts of the case. No doubt sub-s. (5) of s. 37 introduced by Finance Act, 1983 with retrospective effect from 1st April, 1979, is crystal clear to the effect that even an accommodation maintained in respect of employees is a guest house coming within the meaning of sub-s. (4). However, the cost of providing meals would come: specifically within the mischief of sub-s. (2) of s. 37 and items relating to rent, repairs and depreciation would fall within the provisions of ss. 30 and 32. The Hon'ble Gujarat High Court has held that only such expenditure which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (Rs. in lakhs) (Rs. in lakhs.) --------------------------------------------------------------------- Gujarat (GNAL) Narmada Auto 4,073.66 137.77 Ltd. Gujarat Narmada Finance & 1.19 0.16 Investment Co. Ltd. (GNF & IC) Narmada Education & Scientific 173.01 23.76 Research Society (NE & SRS) Total 4,247.86 161.69 ------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, GNAL had been declared sick for winding up by the BIFR and honourable Gujarat High Court has by its order dt. 2nd Aug., 1995, directed that the GNAL be wound up in accordance with the law and official liquidator was appointed for the said purpose. (12) For purpose of allowing interest on the capital borrowed under s. 36(1)(iii), what is relevant is that money should be borrowed for the purpose of business and utilised for business purpose. GNFC has not made advances out of borrowed funds but from internal accruals. (13) The CIT(A), Baroda has deleted such disallowance in assessee's own case in asst. yr. 1990-91 and asst. yr. 1991-92 after considering the facts of each such loans and advances. (14) Judgments relied upon by CIT(A) in asst. yr. 1992-93 are distinguishable on facts and not applicable. Reliance in this connection is placed on the following case laws: (1) Shahibag Entrepreneurs vs. ITO (1994) 49 TTJ (And) 554 : (1994) 50 ITD 113 (Ahd); (2) Jyoti Ltd. ITA 334/Ahd/90; (3) Durametallic India Ltd. vs. IAC (1991) 38 ITD 211 (Mad); (4) EID Parry (India) Ltd. vs. Dy. CIT (1992) 42 TTJ (Mad) 209 : (1993) 46 ITD 389 (Mad); (5) Shri Digvijay Cement Ltd. vs. CIT (1982) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the AO considered it as a revenue receipt. The CIT(A), placing reliance upon his own order for the asst. yr. 1993-94, decided the issue against the assessee by upholding the addition in principle, though he has directed the AO to verify the correctness of the figures as computed in the assessment order as the amount of Rs. 36.41,856 does not appear in the computation portion of the assessment order. 8.1. The learned counsel for the assessee clarifies that the assessee has substantial liability in foreign currency on capital account being loan taken from SBI & IFC Washington to finance purchase of plant and machinery. It is a firm liability towards installments due in foreign currency in respect of plant and machinery purchased by the assessee. The banks, acting as authorised dealers, are permitted to enter into forward contracts for purchase and sale of permitted foreign currencies. The banks are required to ensure that the forward cover was not provided for anticipatory transactions but in a case of firm commitment only. The forward contracts could be cancelled as and when desired. The assessee had entered into such contracts in the past and also in the current year which resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue (WDV) of the plant and machinery to which the said receipt pertains and to make consequential adjustments to the depreciation granted. However, before doing so, the AO should give the assessee a reasonable opportunity of being heard in this connection. 9. In ground No. 5 the assessee challenges the decision of the CIT(A) in upholding the disallowance of depreciation claimed in respect of Butachlor Plant. According to the AO and CIT(A) the plant was not put to use during the relevant accounting year. However, according to the leaned counsel for the assessee the plant was installed in the financial year 1988-89 and the assessee-company produced Butachlor (Technical) and Butachlor Formulation upto the financial year 1992-93 relevant for the asst. yr. 1993-94. Depreciation claimed for those years was allowed by the AO. However, at the end of the financial year 1992-93, the assessee-company found that the product was not economical, due to unfavourable market conditions and, therefore, no production was made during the financial year 1993-94. However, the plant was kept in ready for use condition during the financial year 1993-94. The assessee-company continued to sell Butachlor dur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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