TaxTMI 
TaxTMI 
2006 (6) TMI 259
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....e appellant - Sooraj Automobiles Limited (hereinafter referred to as SAL). 3.1 Ld. counsel for the assessee, Shri Anil Jain explaining the fact submitted that the appellant is a public limited company engaged in the manufacturing of Diesel Two Wheelers and Three Wheeler Bikes operating from rented and leased premises at Ambala Road, Saharanpur. The company made public issue of shares in the year 1985 and from 1985 to assessment year 1992-93, preliminary expenses under section 35D has been claimed and allowed and in assessment years 1993-94 and 1994-95, preliminary expenses have not been claimed. Thereafter, it has again been claimed in the assessment year 1995-96. A group company of the appellant in the name of Sooraj Generators Ltd. (SGL) with the object of manufacturing of generators made public issue of shares in the year 1986. This company could build only factory building in own property at Delhi Road, Saharanpur for the purpose of installation of proposed project of manufacturing of generators. The appellant company was facing space problem due to increase in production and requirement for workshop, stores, administrative block, open space for stocking the ready vehicles a....
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....nbsp; (ii) Loss on sale of car Rs. 1,29,842 (iii) Loss on sale of shares Rs. 3,21,525 Rs. 5,41,367 Rs. 98,99,3 76 Less : Pre. Ex. Written off (on Rs. 9,98,941) Rs. 2,42,547 Rs. 96,56,829 In the assessment years 1993-94 and 1994-95, no preliminary expenses have been claimed and the balance of misc. expenses is same as on 31-3-1994 as no activity was carried out on in the premises of SGL after the amalgamation from 1991 to 1994-95, when the amalgamated company used the building and other premises. In assessment year 1995-96, the appellant-company claimed Rs. 9,65,693 under preliminary and preoperative expenses under section 35D i.e. 1/10th of Rs. 96,56,829. The details of Rs. 96,56,829 are as under : (a) Liquidation Expenses 90,000 Loss on sale of car 1,29,842 Loss on sale of share 3,21,525 Rs. 5,41,367 (b) Preliminary expenses of Amalgamating company under sectio....
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....s not a dispute that the above expenses are neither non-genuine or not proved i.e. the authenticity of these expenses have been accepted by the Assessing Officer. Further, it is also established that these expenses have nowhere been claimed as revenue expenses and these are expenses, which are to be capitalized on which no deduction is to be given under the preliminary expenses. So, keeping in view the nature of expenses, the depreciation on these expenses is to be allowed. 3.3 Ld. Departmental Representative, on the other hand, strongly relied upon the appellate order. He submitted that the claim of depreciation could be allowed under the provisions of section 32 of the Act. As per section 32, the depreciation is to be allowed on the written down value of assets. The written down value is defined in section 43(6) of the Act. As per Explanation 2 to section 43(6), where any block of asset is transferred by the amalgamating company to the amalgamated company in a scheme of amalgamation, the actual cost of block of assets in the case of amalgamated company shall be written down value of the block of asset as in the case of amalgamating company for the immediately preceding previou....
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....On verification of the balance sheet of SGL filed on 31-3-1990 before us by ld. counsel for the assessee which is appearing at pages 56 to 60 of the paper book, the cost of building is stated to be Rs. 31,85,729. The Assessing Officer has allowed depreciation on such cost. The accumulated losses to the extent of Rs. 12,28,583 are in the course of regular activities. The same were not in relation to the building of SGL. Similarly, the amount of goodwill is determined based on the value of SGL as compared with the value of SAL. The share of SGL was valued during the scheme of amalgamation at a sum of Rs. 7.92 whereas share of SAL (appellant) were valued at Rs. 5.55. Thus, against the 100 shares of SGL, 140 shares of SAL were issued to the shareholders of SAL. The assets of SGL acquired in the scheme of amalgamation relates not only to the fixed assets but also other current assets, investment and other misc. expenses to the extent not written off. Thus, as per the accounting principle, if any goodwill is debited having been paid the same cannot be treated as cost of building or written down value of building acquired on amalgamation. We accordingly hold that such amount of losses of ....
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....id to Mr. Surender by account payee cheque on 22-4-1994. Since the amount was for purchase of car, depreciation is allowable. 5.3 Ld. Departmental Representative, on the other hand, relied upon the order of CIT(A). He submitted that in absence of any evidence, which suggests that the amount was paid towards purchase of motor car, mere entry in books of account is not sufficient for entertaining claim of depreciation under section 32 of the Act. 5.4 We find sufficient force in the submission of the ld. Departmental Representative. It is settled that the primary responsibility to justify claim of depreciation lies on the assessee. Except the self-signed voucher, there is no evidence, which suggests that the assessee has purchased a motor car which has been used for the purpose of business. In absence of any such evidence, claim of assessee was rightly rejected. 6. The next ground of appeal for assessment year 1997-98 is against disallowance of a sum of Rs. 40,000 being interest paid to the bank. 6.1 The Assessing Officer found that large sums are paid to the Managing Director of the company. The same are reflected in imprest account in the name of Managing Director. The A....
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....ssment year 1998-99 is against rejection of application for adjournment and request for consolidation of pending appeal. At the time of hearing, the ground was not pressed before us. For want of prosecution, this ground is dismissed. 8. The next ground of appeal for assessment year 1998-99 is against levy of additional tax of Rs. 7,118. At the time of hearing, this ground was not pressed before us. For want of prosecution, this ground is dismissed. 9. An additional ground was raised for assessment year 1997-98 against charging of interest under section 234B while computing income under the provisions of section 115JA of the Income-tax Act. 9.1 Ld. counsel for the assessee submitted that interest was not levied in the assessment order by passing a speaking order but the same is charged only in the computation sheet. He submitted that since the income is computed under section 115JA, the assessee is not under obligation to pay advance tax. Hence, interest under section 234B is not chargeable. For this proposition, he relied on the decisions of Delhi High Court in the case of CIT v. Kishan Lal (HUF) reported in 258 ITR 359, Kwality Biscuits v. CIT reported in 243 ITR 519 (Kar....
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....ed very carefully. It is observed that the whole of such expenditure amortised by the assessee does not fulfil the conditions prescribed under section 35D. Assessee has claimed deduction under section 35D in the assessment years 1991-92 and 1992-93 and also in prior years, but not such deduction was claimed in the assessment years 1993-94 and 1994-95. Again in the year under assessment, assessee has made a claim of such deduction. Since section 35D clearly enumerates that such expenses are allowable for each of the 120 successive previous years, beginning with the previous year in which the business commences ....., but assessee has not made a claim of such deduction in assessment years 1993-94 and 1994-95, hence it has forfeited its right to claim deduction in the year under consideration. Further the financial year from which assessee has been claiming deduction under section 35D is not verifiable, since the deduction under section 35D is allowable for 10 successive years beginning with the previous year in which the business commences or the previous year in which the extension of the Industrial Undertaking is completed or new Industrial Undertaking commences production. The ass....