TaxTMI 
TaxTMI 
2013 (1) TMI 566
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....the order of the learned CIT(A) and the Tribunal vide its order dated 25-09-2009 decided the appeal against the revenue for the reasons that the tax effect involved in the departmental appeal is below the limit prescribed by the CBDT at the relevant time. The revenue being aggrieved by the aforesaid decision of the Tribunal carried the matter in appeal before the Hon'ble Gujarat High Court in Tax Appeal No.604 of 2010. The Hon'ble High Court while admitting the appeal had framed the following question: ""Whether the Appellate Tribunal is right in law and on facts in dismissing the appeals of the revenue on the ground of low tax effect, though notional tax effect exceeded the monetary limit prescribed by the board? The Hon'ble High Court following their judgment dated 09-05-2011 in group of tax appeals being Tax Appeal No.1601 of 2009 and connected appeals answered the question in favour of the revenue and directed the Tribunal to adjudicate the appeal on merits. 3. Now, as per the aforesaid direction of the Hon'ble Gujarat High Court the case is placed before us for consideration on merits. The revenue has in its appeal raised ten elaborate grounds wherein gro....
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....s on 31.03.2005 which stands at Rs.36.22 crores as at 31.03.2006. As against this, the assessee has 15.79 crores as inventory, debtors, loans/advances and bank & cash balances. The fixed assets also stand at Rs.30.60 crores. Considering all these factors, it is not just possible that the assessee has not used the loan funds for acquisition of new assets. 5. It was further observed by the learned AO that the assessee had debited interest amounting to Rs.3,21,78,324/- which included banking charges. The ratio of new assets i.e. Building and machinery to secured and unsecured loans comes to 1.83 / 36.22 i.e. 0.05. Interest attributable to building and machineries could be Rs.16,08,916/-. The assessee had not given any details of exact date of purchase of machineries and date of putting the same to use. The learned AO on perusal of depreciation chart found that most of the depreciation on new additions had been claimed after 1-10-2005. Accordingly, the learned AO in view of the above facts considered two months interest as interest cost incurred on new assets which were to be capitalized and worked out the total interest at Rs.2,68,000/- and disallowed the same. 6. The assessee carri....
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....pital assets. (ii) There was no bank borrowing in order to acquire fixed assets. (iii) Whatever banking loan was availed it was used for working capital. (iv) The assessee had sufficient interest-free funds for procuring fixed assets. 9. The revenue could not controvert the above findings of the learned CIT(A) with any cogent evidence. Moreover, on perusing the paper book at page No.10 wherein the Chartered Accountants of the assessee company had certified that "borrowing costs are recognized as expenses in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of an asset till put for its intended use is capitalized as part of the cost of that asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing cost is charged to revenue." From the above facts, it is apparent that the assessee has not charged any interest expense attributable to purchase of fixed asset to the profit and loss account of the assessee. Therefore, we hereby confirm the orde....
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...., the learned AR supported the order of the learned CIT(A). Learned AR further submitted that this issue had been decided in favour of the assessee by the ITAT Ahmedabad "B" Bench in assessee's own case for AY 2007-08 in ITA No.1884/Ahd/2010 dated 19-11-2010, wherein it was held as under: "4. We have heard the rival submissions and gone through the facts and circumstances of the case. We find that as regards ownership of the vehicle is concerned, it is purchased by the assessee-company in the name of Director and it is not in dispute that fund for purchase of the vehicle was from the assessee-company. Before us also assessee filed complete funds flow statement which proves that the vehicle was purchased from the assessee-company's funds. We find that Hon'ble Rajasthan High Court in the case of CIT v. Mohd. Bux Shokat Ali (No.2) (2002) 256 ITR 357 (Raj) held that assessee company- firm was entitled to depreciation on vehicle purchased by it for its business purpose but registered in the name of one of the partners. Further, the Hon'ble Delhi High Court in the case of CIT v. Basti Sugar Mills Ltd. (2002) 257 ITR 88 (Del) held that assessee was entitled to deprecia....
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....chased for electrification of staff quarters and overhauling of existing bore-wells. However, for the cost of new constructions and fabrications incurred by the assessee, the learned AO treated an amount of Rs.12,38,533/- as capital in nature and disallowed the same as revenue expenditure. 15. The assessee carried the matter before the learned CIT(A) who held as under: "4.3 I have considered the facts of the case and the submissions as advanced by the A. R. of the appellant. From the details furnished by the appellant, it is seen that the actual expenditure attributable to repairs is only 1.12% of total turnover and by replying on the judicial decision as relied upon, I am of ht e opinion that the same represents repairs and I hold the same as revenue expenditure and delete the disallowance of Rs.12,38,533/- and direct the A. O. to withdraw depreciation allowed on the same." Now, the revenue is in appeal before us against this finding of the learned CIT(A). 16. The learned DR relied on the order of the learned AO and on the other hand, the learned AR supported the order of the learned CIT(A). 17. We have heard the rival submissions and perused the materials ....
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.... sales were made at a profit of Rs.500/- per MT. Considering the total quantity of sales of 36 MT the learned AO made addition of Rs.18,000/- on account of suppressed sales made by the assessee. On appeal by the assessee, the learned CIT(A) deleted the addition made by the AO on this account by observing as under in Para 5.3 of his order: "5.3 I have considered the facts of the case and the submissions as advanced by the A. R. It is seen from the details furnished by the appellant that the tapioca powder purchased by the appellant has been sold by the sister concern on retail basis and the same was sold at the prevailing market rate. Further, the A. O. has simply stated that the sales were made on an average profit of Rs.500/- per MT by the associate concern which is not sufficient to make addition u/s 40A(2) (b), however, he has not pointed out any instance to support that the appellant has not effected the sales at prevalent market rate. Therefore, I hold that the addition made on this count is without any logic and hence the same is directed to be deleted." Aggrieved, by the finding of the learned CIT(A), the revenue is in appeal before us. 20. The learned ....