TaxTMI 
TaxTMI 
1985 (6) TMI 74
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.... - 11,361 1983-84 1,04,836 15,725 The assessee went in appeal and before the CIT(A) it was pleaded that the interest was paid mainly to the directors and shareholders on their current accounts and, therefore, no disallowance of interest under s. 40A(8) of the Act is called for. In this connection of the ITAT, Bombay Bench, dt. 2nd Feb., 1980 in I.T.A. No. 691/Bom in the case of M.E. Pvt. Ltd. vs. ITO. The CIT(A), after considering the assessee's contentions, reduced the amount of disallowance under s. 40A(8) of the Act for each of the years. As per details furnished by the ld. counsel at the time of hearing, the disallowance, when was upheld by the CIT(A), was in respect of the interest paid to the following persons: S. No. Name of Party Category Amt. Paid Disallowed under s. 40A(8) . Asst. yr. 1980-81 . . . 1. P.S. Kalani Director 26,493 - 2. B.N. Kalani Director 23,573 - 3. Smt. Asha Maheshwari Share Holder 28,329 4,249.00 4. M/s B.N. Kalani & Sons (do) HUF 414 62.00 5. M/s Saurabh Potteries & Ceramics Partner 795 119.00 . . Total : 79,604 4,430.0....
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....lders of the company and interest was paid to them on their current accounts. The ld. Representative of the Department has placed reliance on the orders of the authorities below. 3. We have carefully considered the contentions of the parties and, in our opinion, there is force in the contention of the ld. counsel. We have persued the decision of the Madras Bench of the Tribunal in the case of Shivraj Motors vs. ITO, a copy of which has been furnished by the ld. counsel at pages 71 and 72 of the paper book, wherein the ld. Members, placing reliance on the provisions of s. 58A of the Companies Act, 1956 and the press note issued by Ministry of Law, Justice and Company Affairs, Department of Company Affairs, have held that the amount received from the directors and shareholders of a private limited company does not represent "deposits", but such moneys are kept with the company only in the nature of running current account allowing the directors and shareholders to withdraw moneys as and when required and to repay as and when they required. In view of the above decision of the Madras Bench of the Tribunal, we direct that except for a disallowance of Rs. 119 in respect of asst. yr. ....
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.... income. 8. The assessee went in appeal. The ld. counsel for the assessee, placing reliance on certain decisions, submitted that the expenditure incurred on digging of tube wells was for the purpose of business i.e. running of cold storage. It was also submitted that in the case said expenditure is held to be of a capital nature, depreciation should be allowed. The CIT(A) accepted the alternative contention of the assessee and directed the ITO to treat the cost of the two unsuccessful tube wells amounting to Rs. 41,900 as part and parcel of the cost of plant and machinery and allow depreciation as per rules. The assessee is aggrieved by the above findings. 9. Before us, the ld. counsel for the assessee has submitted that the expenditure of Rs. 41,900 was incurred by the assessee-company for the smooth running of the business. It was also submitted that the tube wells were dug to augment water supply for the purpose of cold storage business and, hence, the expenditure should have been allowed as of a revenue nature. The ld. Departmental Representative has opposed the above contentions. 10. After considering the rival contentions, we do not find any merit in this ground. A s....
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....facts of the case, came, to the conclusion that the capital subsidy granted by the government formed part of the cost of the fixed assets of the industrial unit and, hence, the IAC (Asstt.) having regard to the provisions of s. 43(1) of the IT Act, was justified in deducting the amount of central investment subsidy received by the assessee from the cost of fixed assets for the purpose of allowing depreciation and investment allowance. Accordingly, the upheld the action of the IAC (Asstt.). 14. Before, us, the ld. counsel for the assessee, referring to the Special Bench decision in the Tribunal in the case of Pioneer Match Work vs. ITO (1983) 15 TTJ (Mad) 88 (SB) : (1983) 3 ITD 714 (Mad)(SB), submitted that the amount of capital subsidy received by the assessee has not met any portion of the asset nor was it utilised for the purchase of any particular fixed asset and, hence, it should not have been reduced from the cost of the assets for the purposes of allowing depreciation, development rebate or investment allowance admissible to the company. He, submitted that in respect of the capital subsidy received by the assessee, the requirements of s. 43(1) of the IT Act are not satisfi....