TaxTMI 
TaxTMI 
2011 (8) TMI 749
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....oring the evidence produced by the assessee on assumption that the facts cannot be the same despite the facts and issues being identical. 4. That the ld. CIT-III has further erred in concluding that the A.O. while framing the assessment u/s 143(3) has not asked for the details regarding depreciation and failed to investigate the issue. 5. That the ld. CIT-III has further erred in concluding that Aeroplanes and Aircrafts are different machineries. 6. Any other ground at the time of hearing. 3.1 Grounds of cross appeals for assessment year 2007-08 read as under:- ITA No.2215/Del/2010 "1. That the learned CIT (A) has misunderstood the facts of the case. 2. That the learned CIT(A) has erred in interpreting the law and confirmed the disallowance of Rs.1,75,009.00 u/s 14A ignoring the facts, circumstances and evidence on records. 3. That the learned CIT(A) has further erred in directing the A.O. to allow the payment of commission to Directors as per last year by ignoring the facts of the case and business necessities. 4. Any other ground at the time of he....
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....by the air. Referring to the definition of 'aeroplane' given on that site, it is defined as: (i) an aircraft that has a fixed wings and is powered by propellers or jets; (ii) a fixed wings aircraft usually called an aeroplane or airplane, is a heavier-than-aircraft capable of flight; (iii) a powered heavier than aircraft with fixed wings. He further observed that the word 'aircraft' gives an impression of a thing that can travel in the air which can be a balloon, glider, helicopter or even a paper made toy which covers a little distance when thrown into the air. The 'aeroplane' is a machine, much bigger, heavier and powerful that aircraft which travels in the air more than an aircraft. Thus, though an aeroplane can be called an aircraft, but every aircraft cannot be called an 'aeroplane.' He observed that aircraft owned by the assessee cannot be an 'aeroplane' since it is much smaller, lighter and less powerful than an aeroplane. 6. Ld. CIT also referred to the Appendix-I of Income-tax Rules, 1962 which are applicable for assessment years 1984-85 to 1987-88 which describe the term 'aeroplane-aircrafts' and which are included in the block of 'Machinery and plant' being eligible for....
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....ilar to the aircraft owned by the assessee) @ 40% by treating them 'aeroplane-aeroengines.' Therefore, on merits also, the opinion formed by the ld. CIT is not tenable. For this purpose, the learned AR of the assessee has placed before us the information obtained from the department in respect of various assessees in which it has been clearly stated that the aircrafts owned by the respective assessees have been granted depreciation @ 40%. For the sake of convenience the details of such information obtained by the assessee from the Income-tax Department in respect of various assessees are given below:- Sl. No. Letter dated Name of the assessee Assessment Year/s Information given by 1. 22nd July, '10 Jindal Steel & Power Ltd. 2005-06 & 2006-07 Dy. Commissioner, Income-tax, Hisar. 2. 4th June, 2010 Alchemist Airways Pvt. Ltd. NIL ACIT, Cir.1(1), Chandigarh. 3. 3rd June, 2010 M/s Universal Airways Pvt. Ltd. NIL ITO, Ward 18(1), New Delhi. 4. 4th June, 2010 SKB Infractions Pvt. Ltd. NIL ITO, Ward 8(4), New Delhi. 5 5th Feb., 2010 Air India NIL ACIT, Circle 2, Mumbai. 8. To further support the contention that during the course of original assessment proceed....
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....vely or as a class; airplanes, airships, helicopters or balloons. The 'airplane' has been defined as flying machine that has one or more plains or wings and is driven by one or more propellers or jet engines or a rocket engine. An airplane is an aircraft heavier than air, supported in flight by the action of the air flowing past or thrusting upward on its fixed wings. Relying on these definitions, it is the case of the assessee that the aircrafts owned by the assessee having qualities of aeroplane is actually aeroplane and, therefore, eligible for depreciation @ 40%. The learned AR of the assessee has also placed before us the literature showing the pictures and specifications of the aircraft owned by the assessee to show that the aircraft owned by the assessee has fixed wings and it was informed that the aircraft owned by the assessee is a nine-seater. Therefore, it is the case of the learned AR of the assessee otherwise is eligible for depreciation @ 40% and powers u/s 263 have wrongly been exercised by ld. CIT. The order passed by him u/s 263 should be quashed. 10. On the other hand, relying upon the findings recorded by ld. CIT, which have been described in the above part of t....
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....ere is no such classification under the head 'aeroplanes' as it was applicable in the case of the Kirlosker Oil Engines (supra). During the year under consideration, only one description is there which is in Item 3 which read as under:- "Aeroplane-aeroengines" 13. No other separate head has been given for claiming of depreciation under the head 'aeroplanes' which was distinctively described in the old Appendix as applicable in the case of the Kirlosker Oil Engines (supra). 14. From the above position, it will be clear that in a case where the word 'aeroplane' as described in Appendix-I is only one and aeroplanes consisted of aircrafts having specific specifications, then, it cannot be said that aeroplane or species thereof will fall under the general head, namely, 'Machinery and plant' which has described the rate of depreciation of 25% for assessment year 2005-06 and 15% for Assessment Year 2006-07. It may be mentioned here that Item 3 under the head 'Machinery and Plant' of Appendix-I read as under:- "Machinery and plant other than those covered by sub-items (ii), (iii) and (viii) below." 15. Therefore, the general rate as described in the relevant Appendix-I create exceptio....
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.... does not describe the aircraft therein. The definition of 'aircraft' has already been given in the above part of this order. Apart from that, Aircraft Act, 1934 describe the 'aircraft' as under:- "Aircraft" means any machine which can derive support in the atmosphere from reactions of the air (other than reactions of the air against the earth's surface) and includes balloons, whether fixed or free, airships, kites, gliders and flying machines." 16.1. Further, Encyclopedia Britannica (Macropaedia) Vol. I describe the 'aircraft' in broad two categories which are defined as under:- " All aircraft fall into two general categories - lighter-than- air or heavier-than-air. Several distinct types are recognized within each group. Each may perform a variety of missions calling for modifications for special usage. Lighter-than-air craft rise and float because they displace a volume of air the weight of which is equal to or greater than the total weight of the aircraft. Such aircraft include balloons and airships. Heavier-than-air craft derive their flight capability (lift) from the dynamic reaction of air flowing around suitably shaped surfaces (wings or airfoils). Such craft include g....
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....epreciation under the head 'Machinery and plant.' Not going into the controversy whether or not the issue regarding the claim of depreciation was deliberated during the course of original assessment proceedings, we are of the opinion that the Assessing Officer had granted the depreciation to the assessee @ 40% in accordance with the provisions of the Rule, therefore, such grant of depreciation cannot be considered to be a claim not supported by law, as the department cannot straightaway show that such claim of depreciation was not in accordance with the law and, in such, circumstances, the powers u/s 263 could not be invoked. 19. In view of the above discussion, we are of the opinion that powers u/s 263 have been wrongly exercised by the ld. CIT to hold that the assessee is eligible for depreciation on its aircraft @ 25% in place of 40% claimed by it. Therefore, we set aside the order passed by the ld. CIT for both the years and allow the appeals filed by the assessee. ITA No.2215/Del/2010 20. The effective grounds in this appeal are ground Nos.2 and 3. 21. Apropos ground No.2, it was noticed by the Assessing Officer that the assessee had declared exempted income of Rs. 14,75,2....
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....A after considering all the facts and circumstances of the case as observed by Hon'ble Bombay High Court in the aforementioned case of Godrej & Boyce Mfg. (P.) Ltd. (supra). Therefore, keeping in view the facts and circumstances of the case, we consider it just and proper to restore this issue to the file of Assessing Officer to consider the issue raised in the present appeal de novo as per the provisions of law after giving the assessee a reasonable opportunity of hearing. Therefore, we restore this issue to the file of Assessing Officer to reconsider and re-adjudicate the same after giving the assessee a reasonable opportunity of hearing. We direct accordingly. 24. Apropos ground No.3, the facts as noted by the Assessing Officer are that the assessee during the year had paid excessive remuneration, bonus and commission to the directors which was representing unprecedented increase in percentage of 1460% as compared to the immediate preceding year and as compared to the percentage of increase in the receipts. The Assessing Officer has worked out such calculation in the shape of charts in the assessment order which, for the sake of convenience, are reproduced below:- Receipts A.....
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....sment order and the order of the CIT(A), it was submitted by the learned DR that the assessee could not submit any justification for making huge payments to its directors. He submitted that in earlier years the assessee had made low payments which are increased to 1460% as compared to the increase in the receipts only of 46.5%. Therefore, he submitted that the disallowance has rightly been upheld by the CIT (A) and his order should be confirmed. 28. We have carefully considered the rival submissions in the light of the material placed before us. Though it is the submission of the assessee that the directors have been paid commission @ 2.3% of the turnover (each director), but no supporting evidence has been placed on record by the assessee to substantiate that such payment was supported by the resolution. It is also the case of the assessee that such payments made by the assessee to the directors are in accordance with the market rates. However, to support such contention, no documentary evidence has been placed on record to show that the payments made by the assessee to its directors were neither excessive nor unreasonable. For the applicability of the provisions of section 40A(2....
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.... made out of the buffer with IOC, but the duty was to be paid in cash before the flight could take off. It was submitted that there are several reasons for making such cash payments as these are the payments made in respect of non-scheduled aircrafts or airlines which, as per rules of Government of India, Ministry of Civil Aviation must be paid in cash because before hand the exact amount of payment cannot be known. The amount is dependent on several factors such as rout as per air traffic control briefing, the deviation that may occur due to weather, VIP movement, Defense Service sorties, etc. It was submitted that flight take off at odd hours and no flight can take off without clearing the dues of AAI. It was also claimed that these payments are made on behalf of operators of the non-scheduled aircraft/airlines and are reimbursed to the assessee through billing. However, the Assessing Officer rejected such submissions of the assessee and has held that there is no specific exception in section 40A(3) read with Rule 6DD to exempt such payments from disallowance. He disallowed 20% of this amount which has been calculated at Rs. 14,40,228. The submissions made before the Assessing Of....