2006 (2) TMI 122 - HC - Income Tax

High Court affirms commission deduction, grants 100% depreciation on temporary erections

The High Court upheld the Tribunal's decision to delete the addition of the disallowed commission paid to a sister concern under section 40A(2) of the ... Commission paid to sister concern - depreciation on addition of temporary erections - '1. Whether, Tribunal was right in law in deleting the addition in respect of commission paid to sister concern under section 40A(2) of the Income-tax Act, even though it is unreasonable and excessive? 2. Whether Tribunal was right in law in granting 100 per cent, depreciation on addition of temporary erections, even though the property was acquired by the assessee and not taken on lease, the temporary erection to be treated as capital expenditure in computing the income of the assessee?' - we do not find any error or infirmity in the order of the Tribunal and hence the same does not warrant any interference and no substantial questions of law arise for consideration of this court. Issues:1. Disallowance of commission paid to sister concern under section 40A(2) of the Income-tax Act.2. Granting 100% depreciation on addition of temporary erections.Analysis:1. The case involves an appeal against the order of the Income-tax Appellate Tribunal regarding the disallowance of commission paid to a sister concern under section 40A(2) of the Income-tax Act. The Assessing Officer disallowed the commission amount paid to the sister concern as unreasonable and excessive. The Appellate Tribunal, after considering the records and evidence, found that the commission payment was not unreasonable and excessive. It was noted that the commission paid by the assessee was comparable to that offered by other assesses in similar businesses at 5%. The Tribunal's decision was based on the lack of evidence presented by the Revenue to prove the unreasonableness of the commission payment. As a result, the Tribunal's decision to delete the addition made by the Assessing Officer was upheld by the High Court.2. The second issue pertains to the granting of 100% depreciation on the addition of temporary erections. The Revenue contended that the temporary erections should be treated as revenue expenditure since the property was acquired by the assessee and not taken on lease. However, the Tribunal found that the ownership or lease status of the property was irrelevant in determining the entitlement to depreciation on temporary erections. The Tribunal concluded that the assessee was entitled to 100% depreciation on the temporary erections, considering the relevant evidence and materials. This decision was consistent with the Tribunal's approach in earlier assessment orders. The High Court concurred with the Tribunal's reasoning, stating that no error or infirmity was found in the Tribunal's order. Consequently, the High Court dismissed the tax case, ruling in favor of the assessee and denying any substantial questions of law for consideration.