TaxTMI 
TaxTMI 
2010 (8) TMI 993
X X X X Extracts X X X X
X X X X Extracts X X X X
....in law in deleting the addition of Rs. 7,87,389/- on account of selling commission? 3. Whether the ITAT was correct in law in deleting the disallowance of Rs. 18,01,136 made by the IO on account of provision made for contribution towards approved gratuity fund u/s 40A (7) of the Income Tax Act? 4. Whether the ITAT was correct in law in allowing depreciation on assets in excess of 100% due to amalgamation despite provisions of 4th proviso to Section 32(1) which is clarificatory in nature having retrospective effect? 5. Whether the order of ITAT was perverse as it has ignored the relevant facts on records and provision of law? 3. In so far as question no.3 is concerned, learned counsel for the assessee has drawn our attention to the judgment dated 7th November, 2007 passed by this Court in ITA 423/2007 titled CIT Vs. Be chtel India (P) Ltd. In that case, while dealing with the interpretation of Section 40A (7) and Section 43A of the Act, the court was of the opinion that no substantial question of law arises as is clear from the following discussion: "Further, we are in agreement with the Tribunal that Section 40A (7) (b) of the Act will have an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the result of the scheme amalgamation propounded and approved by the Company Judge of this Court. Erstwhile Ms/ Triveni Engineering Works Ltd. claimed depreciation on plant and machinery for the use of it from 1st April, 1994 to 30th September, 1994. Since the period was more than 180 days, the deprecation was claimed at 100% of the rate prescribed. Same very machinery came to be used by the assessee from 1st October, 1994 to 31st March, 1995. Since this period also exceeds 180 days, the assessee company also laid a claim for entire 100% . The question in these circumstances which fell for consideration was as to whether the total depreciation claimed by both the companies for the same financial year could exceed 100%. The assessee submitted that since it was fulfilling the twin conditions i.e. ownership of the machinery and its use for more than 180 days, it was entitled to depreciation at the said rate irrespective of the fact that the erstwhile owner which has used the same plant and machinery upto 30th September, 1994 had made the claim in similar manner. The Assessing Officer, however, did not accept this plea of the assessee as he was of the opinion that total depreciation in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....existing provisions provide for depreciation allowance on assets acquired by an assessee during the previous year and which are put to use for the purposes of business or profession for a period of less than one hundred and eighty days in a previous year. It is provided that the depreciation allowance in such cases will be restricted to fifty per cent of the amount calculated at the prescribed rates. In the cases of succession in business and amalgamation of companies, the predecessor in business and the successor or amalgamating company and amalgamated company, as the case may be, are entitled to depreciation allowance on the same assets, which in aggregate exceeds the depreciation allowance admissible for a previous year at the prescribed rates. It is proposed to restrict the aggregate deduction for this allowance in a year to the deduction computed at the prescribed rates and apportion the allowance in the ratio of the number of days for which the assets were used by them." The aforesaid explanation is a complete answer to the argument raised by the learned counsel for the revenue and negates the submission that the proviso was introduced only as a clarificatory measure. 7....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at. Further, the enactment read with the abovesaid rule 5, as it existed at the relevant point of time, goes to the extent of granting such allowance even where the asset in question is used for the purpose of the business at any time "during the previous year". In other words, at the relevant point of time, even if the asset has been used for a single day, in the business of the assessee, depreciation allowance, in full, was given under Section 32(1) of the Act. When such is the case, it cannot be said that the assessee cannot be granted the said depreciation allowance if he is not the owner for the entire period of the previous year or if he is not the owner on the last day of the previous year in question. There is no such stipulation in the Act. In CIT V. S.K. Sahana and Sons {1946} 14 ITR 106 (Pat), also, full depreciation was allowed even though the assessee was the owner during the previous year only for 5 ½ months. In the said decision Fazl Ali C.J. and Manohar Lall J. made the following significant observation (page 108). "it is not disputed that the assessee was the owner of the building, machinery, etc. during the accounting year. I do not see an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 1859647.06. This amount was offered by the assessee itself for taxation. It appears that the mistake which was added by the Assessing Officer was to make further deduction of Rs. 1111147.07. This is clear from the following statement:- "However A.O. has disallowed further in the following manner: Total Expenses Debited to P & L A/c Hospitality 3033633.00 Sales Promotion 535471.06 3569104.13 (Note: Amount of hospitality wrongly taken as above instead of Rs. 3566178) Less: Hospitality & States promotion considered for disallowance by us 1859647.06 Balance also considered as Entertainment by A.O. 1709457.07 Less: 35% attributable towards employee participation Allowed by A.O. 598310.00 Additional Expenses Considered for disallowance 1111147.07 Note: As would be observed, the expenses not considered by us are Rs. 1231764 and not Rs. 170945/- as computed by the AO on erroneous calculations. As against Rs. 1231764 not considered by us, except for Rs. 130153, the details of which are presently not available for the rest details and reasons are given as above." 11. The Income Tax Tribunal found ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the argument of the assessee that the payment of commission to these agents was made by account payee cheques. On this basis, the Tribunal was of the view that the assessee was able to substantiate the payment from relevant documents and merely because confirmatory letters could not be filed by the assessee was not a valid ground to reject the claim. We may reproduce the relevant discussion in the order of the Tribunal on this aspect:- "After considering the rival submissions and perusing the relevant material on record, it is observed that all the relevant details such as names and addresses of the concerned five agents as well as their GIR numbers were furnished by the assessee before the authorities below and even the documentary evidence in the form of copies of agreements as well as invoices issued by the said agents was also filed by the assessee. It was also pointed out on behalf of the assessee company before the authorities below that all the payments on account of commission were paid to the said agents by account payee cheques and the practice of availing series of such agents on commission basis to procure the business prevalent in the trade was also brought to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the Assessing Officer. In the absence of said exercise and also the satisfaction about the fact as to whether circumstances were rendered by these agents or not, claim could not have been allowed straightway. We are, therefore, of the opinion that in so far as this issue is concerned, matter needs to be remitted back to the Assessing Officer for verification of the details of names and addresses of the agents furnished by the assessee including their GIR numbers and also to verify as to whether payments were made by account payee cheques and the services were availed of. We make it clear that the Assessing Officer was not right in rejecting the claim merely because confirmatory letters were not filed. We also make it clear that if the assessee is able to prove the genuineness of the aforesaid documents, the Assessing Officer shall allow the claim. ITA 236/2008 (Assessment Year 1996-97) 18. Three substantial questions of law are raised in this appeal which are as under:- "(i) Whether the ITAT was correct in deleting the addition of Rs. 4,71,109/- by the Assessing Officer and disallowing expenditure allegedly incurred by the Assessee company on gifts and presents? ....