TaxTMI 
TaxTMI 
2017 (12) TMI 925
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 2011-12 vide order dated 13-11-2014 under section 143(3) of the Income Tax Act, 1961(hereinafter 'the Act'). 2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance of depreciation of Gallus machine. For this assessee has raised following ground No.1: - "DISALLOWANCE OF DEPRECIATION of Rs. 73129,629 ON GALWS MACHINE On the facts and the circumstances of the case and in law the learned CIT (A) erred in sustaining the disallowance of Rs. 73,29,629/- being additional depreciation u/s 32 (1) (iia) on the aforesaid machine." 3. At the outset, the learned Counsel for the assessee stated that he has instructions from the assessee not to press this ground and accordingly, he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0% on the same. The assessee subsequently made additions of Rs. 64,000 and Rs. 20,39,684/- to the said machine and claimed depreciation of Rs. 22,400/- (at rate of 35%) and Rs. 3,56,945 (at rate of 17.5%). Respectively, in respect of these subsequent additions which include additional depreciation claimed on these additions as well. During the assessment proceeding, information u/s. 133(6) of the Act was obtained from Primark Labels Pvt. Ltd. that the assessee purchased the Gallus Machine from Primark Labels Pvt. Ltd. for Rs. 2,22,18,801/- and it was put to use on 25.01.2010. Thereafter, for 2 years depreciation was claimed, hence W.D.V of this machine was of Rs. 1,55,50,934/- whereas assessee has shown to have purchased this machine for Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red for lease on 18.03.2011. Thus, the MOU for lease was entered by the assessee even before it became the owner of the asset. So, the transaction to lease was a pre decided arrangement. The asset never came out from the possession of the seller: i.e. the sister concern Primark Label Pvt. Ltd. to say, it remained with the lessee as it was decided to get it leased back even before the sale was affected. The AO as well as CIT(A) disbelieved the claim of the assessee and also disallowed the depreciation now, which is conceded by the learned Counsel for the assessee before us. As regards to holding the transaction as Sham transaction, the CIT(A) has given categorical finding in para 3.7 as under: - "3.7. As regards contention that ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....U on 18.03.2011 and purchase machine at enhanced price. Obviously, by doing that assessee has claimed higher depreciation including additional depreciation and hereby has reduced the taxable income in this year. Therefore, the finding of the A.O. that entire arrangement was made only with the view to avoid tax, is approved. The appellant company is a profit making company, hence by this colorable device, it has reduced the income and on other hand the associate entity namely, M/s. Primark Labels Pvt. Ltd. has got the benefit of unabsorbed depreciation and business loss to be set-off against the Short-term capital gain. Thus, the findings of the A.O in Para 5.6.7. is sustainable. As regards, disallowance of depreciation on machinery claimed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er Label Printing business for which it has made such a huge investment. If a business decision was taken to enter a new business, the same would have been definitely mentioned in the annual report. The entire arrangement was made to avoid tax and both the companies are sister concerns. The Managing Director is 99.86% shareholder of the assessee company and is also 97% shareholder and Director in Primark Label Pvt. Ltd as well. One business entity is profit making and the other is into losses. Primark Labels Pvt. Ltd. has unabsorbed depreciation of Rs,51,04,348/- and business loss of Rs. 45,04,854/- in A.Y. 2012-13. It has brought forward losses from A.Y. 2008-09 onwards. In case, any tax is paid under MAT, the same will be allowable for ca....