TaxTMI 
TaxTMI 
2003 (6) TMI 465
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....that the investment has not been properly proved by the assessee company as no supporting evidence was enclosed to prove the genuineness of this investment. 2.2 Before us the learned counsel for the assessee submitted that it was the first year of the commencement of the business of the assessee. It was also pointed out that confirmation by Shri Arun Arora on behalf of Shri Vinay Arora, stating that the sum of Rs. 20,000 was paid by him towards share application money of the assessee company during the year ending 31-3-1990, was filed. 2.3 It was further submitted by the learned counsel for the assessee that before the DCIT Spl. Rane-2, Ghaziabad vide letter dated 29-1-1993 it was pointed out that Shri Vinay Arora was son of Shri Arun Kumar, Managing Director, who had left the company and despite reminders he was not submitting any reply regarding the source of income, hence a request was made to the Assessing Officer to summon Mr. Arun Kumar directly to give that information. This reply of the assessee is available at pages 41 to 43 of the paper book. In support of this submission, reliance was also placed by the learned counsel on the decision in the case of Munnalal Murlid....
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....rt of the return. It was also observed that since the Assessing Officer conceded to the request of the Assessing Officer to summon the party concerned for examination, the assessee was materially prejudice on account of the failure on the part of the Assessing Officer to call for and examine the depositor. Relevant part of the observation of the Hon'ble Court is quoted as under: "In our opinion, the assessee had been materially prejudiced on account of the failure on the part of the Income-tax Officer to call for and examine the evidence which was offered by the assessee to explain the nature and the source of the sum of Rs. 17,000. The assessee has also been prejudiced on account of the fact that, if the assessment files relating to the firm, M/s. Habib Moosa and M/s. Abdul Sattar Abdul Ghani had at all been produced before the Tribunal, there was no examination of these files to the knowledge of the assessee. There was, in this case, a denial to the assessee of an opportunity to produce evidence in support of its case. As we have already pointed out, the assessee was entitled to produce such evidence and the Income-tax Officer was bound to give the assessee reas....
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.... depositor. For providing the source it also requested the ITO concerned to summon the party directly. Accordingly, orders of the authorities below on the issue in question are set aside and the addition of Rs. 20,000 made by the Assessing Officer and sustained by the CIT(A), is deleted. Ground is allowed. Ground No. 2 raised by the assessee reads as under: "That the learned CIT(A) has erred in law as well as on merits of the case in treating the electric installations for Rs. 5,51,983 as part of factory building instead of plant and machinery and in allowing the depreciation in respect of it at the rates as applicable in the case of Factory Building instead of plant and machinery." The assessee had claimed depreciation on plant & machinery valued at Rs. 86,96,044. The Assessing Officer allowed depreciation on the plant & machinery at Rs. 25,41,030 excluding Rs. 11,55,014, which was on account of the following items: 1. D.G. Set 3,21,837.70 2. Electric Installations 5,51,983.57 3. Weight & Scales 5,076.55 4. Pump Sets 11,017.55 5. Tables 38,032.10 6. Dies & moulds 58,448.50 7. Pre-operative expenses 1,68,....
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....sing Officer nor the learned CIT(A) has examined the issue from that point of view and no enquiry was made from the assessee regarding the actual user of the electric installations. Since the assessee had submitted the details and further since the assessee company was manufacturing shoes, there could be no other use of the electric installations but only a business use. 3.8 In the case of India Turpentine & Rosin Co. Ltd. (supra ), the Hon'ble Allahabad High Court has taken the view that the electric installations installed by the assessee as a result of change from DC to AC system in that case constituted plant & machinery within the meaning of section 10(2)(vii-b) of the Indian Income-tax Act, 1922. 3.9 In the case of Jagdeeshchandran & Co. (supra ) the Hon'ble Madras High Court has quoted the observation of Lindley L.J. in Yarmouth v. France at page 658, to the following effect: "There is no definition of plant in the Act; but, in its ordinary sense it includes whatever apparatus is used by a businessman for carrying on his business not his stock-in-trade which he buys or makes for sale, but all goods and chattels, fixed or movable, live or dead, which he keeps f....
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....ied is: does it fulfil the function of plant in the assessee's trading activity? Is it the tool of the taxpayer's trade? It is, then it is plant, no matter that it is not very long lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purpose." 3.14 There are several other authroities on the issue. In view of these decisions it can be held that the electric installations worth Rs. 5,51,983 were covered under the definition of plant & machinery and therefore, the learned CIT(A) was not justified in not allowing depreciation on the electric installations of the assessee company at the rate allowable for plant & machinery. Thus, we reverse the finding of CIT(A) and direct that the claim of assessee for depreciation on electric installations at Rs. 5,51,883 was to be allowed by allowing depreciation at the rate applicable for plant & machinery. Ground No. 2 is allowed accordingly. 4. Ground No. 3: This ground is directed against disallowing the claim of assessee for depreciation on preoperative expenses at Rs. 1,68,619 and Rs. 83,052 respectively. 4.1 The learned CIT(A) has held that the pre-operat....
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....be allowed in respect of these items, the Assessing Officer should therefore, allow normal depreciation in respect of these items." 5.2 Before us it was submitted by the learned counsel for the assessee that each equipment being less than Rs. 5,000 the depreciation @ 100% could be allowed. In this regard our attention was also invited to the bills of such items, which are available at pages 128 to 131. It was pointed out that as per these bills the cost of one item of mould or dies was less than Rs. 5,000. 5.3 We have gone through pages 128, 129, 130 and 131 of the paper book. These are details of certain bills. Learned CIT(A) has not looked into these bills for coming to the conclusion as to whether each item/equipment's cost is less than Rs. 5,000 or not. The Assessing Officer has also not considered the matter properly. Hence, we consider it proper to set aside the finding of the learned CIT(A) and restore the matter to the file of Assessing Officer to examine the bills and to ascertain the cost of each item and to decide the claim of the assessee in view of the provisions contained in section 32(1) of the I.T. Act. In accordance with law. For statistical purposes this gro....
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.... were challenged by the assessee before the learned CIT(A). The learned CIT(A) has considered the issue including the total sales of the assessee and held that there was no justification in disallowing the loss claimed by the assessee. The learned CIT(A) has thus directed the Assessing Officer to compute the taxable income after taking the loss declared at Rs. 58,123, which included the claim of assessee in respect of depreciation. Relevant observations of the learned CIT(A) are as under: "4. I have considered the submissions to the Ld. Counsel. The assessee has commenced production with effect from 23-3-1990 and declared total sales of Rs. 8,918 upto 31-3-1990. The accounts have been maintained and no discrepancy has been pointed out therein except that the closing stock has been under valued. Even for this finding, the Assessing Officer has given no basis except that the rates are much less than the selling price when the assessee has valued it on cost basis. In view of these facts, there is no justification for rejecting the books of account and disallowing the loss claimed by the assesee. The Assessing Officer is, therefore, directed to compute the taxable income after....
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....rden by proving the identity of the depositors and the genuineness of the transactions. It was submitted that the investment of Rs. 12,000 was made by Rajiv Chitranshi and Rs. 20,000 by Smt. Sheela Chitranshi and both of them were doctors. It was also submitted that confirmation letters were also filed in respect of these depositors/investors. Regarding the investment made of Rs. 1,40,000 by M/s. J.B. Cold Storage Ice & Gen. Mills, it was submitted that it was having GIR number and was being assessed regularly. The learned CIT(A), after considering the evidence filed by the assessee to prove the identity of the depositor and genuineness of the transactions etc., deleted these addition to the extent of Rs. 2,97,000 by observing as under: "7. I have carefully considered the submissions of the Ld. Counsel. I have also looked into the various supporting evidences filed before the Assessing Officer by the assessee to prove the genuineness of these investments. The investments made by Sh. Rajiv Chitranshi & Smt. Sheela Chitranshi who are husband and wife, it is evident that due confirmations were filed from them and they were assessed to tax in Salary ward, Kanpur. Both were wor....