2003 (7) TMI 20

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....ined closed during the relevant accounting year? 2. Whether, on the facts and in the circumstances of this case, the Tribunal was justified in deleting the disallowance of claim of expenditure of Rs. 1,51,190 incurred on medical treatment of Shri R. K. Golecha, M. D., in the USA, despite the fact that the expenditure was in the nature of 'personal expenditure' of Shri Golecha?" The assessee-company is engaged in the business of mining of gypsum. The relevant assessment year is 1984-85. During the course of assessment, the Assessing Officer, noticed that the assessee has claimed depreciation, power charges and engine-hire charges and also claimed expenditure of Rs. 1,51,190 reimbursed to the managing director, Shri R. K. Golecha, the a....

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....1,51,190. Considering the submissions, when the similar expenditure on power charges and engine-hire charges are allowed by the Commissioner of Income-tax (Appeals) in the preceding year and that has become final, no interference is called for to that extent. However, depreciation is permissible only in cases where the machinery has been actually used for production. When the machinery in question was not put to use in the year under consideration even for a day and the business remained closed, there is no justification to allow the depreciation on such machinery which has not been used even for a day in the whole year. The Tribunal has committed an error in allowing the depreciation on machinery which has not been used even for a da....

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.... that this particular expenditure is for the purpose of the business, the burden to establish it prima facie lies on the assessee to place on record the material in support of this claim. No such material has been placed on record in this case except the resolution of the board of directors. We cannot forget in this case the fact that Mr. Golecha is the managing director of the company. In such cases when there is a question of payment to the managing director by the company, the board of directors may allow the payments to the managing director without considering the fact whether the payment is for the purpose of the business or not. In such cases, the Assessing Officer has every right to look into the nature of expenses and, if they a....