1983 (4) TMI 96 - AT - Income Tax

Tribunal upholds assessee's appeal, allows depreciation on cold storage facility under IT Act

The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decisions. The assessee firm successfully proved the genuineness of the Rs. 3 lakhs ... - Issues Involved:1. Deletion of Rs. 3 lakhs added by the ITO under Section 68 of the IT Act.2. Entitlement of the assessee firm to depreciation on its entire assets.Detailed Analysis:1. Deletion of Rs. 3 Lakhs Added by the ITO under Section 68 of the IT Act:The Revenue appealed against the deletion of Rs. 3 lakhs added by the ITO, Bulandshahr to the assessable income of the firm on account of a loan raised from Shri R. A. Goel under Section 68 of the IT Act. The assessee firm, newly organized on 25th Sept., 1977, purchased a cold storage for Rs. 7,50,000 in November 1977 and raised various loans, including Rs. 3 lakhs from Shri R. A. Goel. The loan was raised through account payee cheques, and repayments were also made through account payee cheques.The assessee produced several pieces of documentary evidence to prove the genuineness of the loan, including a confirmatory letter, affidavits, and bank certificates. The ITO, however, held that while the identity of Shri R. A. Goel was proven, the assessee firm could not prove his creditworthiness or the genuineness of the transaction, suggesting it was a hawala transaction.The CIT (A) deleted the addition, noting that the ITO ignored the affidavit of Shri Raj Kumar Jain and the evidence of repayments made through account payee cheques. The CIT (A) emphasized that the loan was arranged by Shri Raj Kumar Jain, who had a credible background and connections in the Sarrafa Market of Delhi.The CIT (A) also pointed out that the Departmental Authorities at Bombay issued a notice under Section 226(3) to recover Rs. 3 lakhs from the assessee firm towards an outstanding demand against Shri R. A. Goel, proving the loan's genuineness. The CIT (A) concluded that the assessee firm had proven the identity, creditworthiness, and genuineness of the transaction, thus deleting the addition.The Tribunal upheld the CIT (A)'s decision, noting that the Departmental Representative could not produce any evidence to show that Shri R. A. Goel was involved in hawala business. The Tribunal agreed that the assessee firm had discharged its onus of proving the genuineness of the loan through substantial evidence.2. Entitlement of the Assessee Firm to Depreciation on its Entire Assets:The Revenue also appealed against the CIT (A)'s direction to allow admissible depreciation to the firm. The ITO had declined to allow any depreciation, arguing that the cold storage was purchased in November 1977 and the accounts were made till 31st Dec., 1977, with the session of cold storage not having started.The CIT (A) held that the trial run of the cold storage had been made, making the firm eligible for depreciation. The CIT (A) relied on the Delhi High Court judgment in Capital Bus Service (P) Ltd. vs. CIT. The assessee's counsel provided evidence, including an electricity bill for December 1977 and salary debits for mechanics and operators, to prove that the cold storage was operational.The Tribunal agreed with the CIT (A) that the assessee was entitled to depreciation, noting that the cold storage was already a running concern when purchased and had incurred operational expenses.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decisions on both issues. The assessee firm successfully proved the genuineness of the Rs. 3 lakhs loan and was entitled to depreciation on its assets.