TaxTMI 
TaxTMI 
2018 (11) TMI 545
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..... 143(3) of the Act, passed by ACIT Range- 5, Ahmedabad. 2. In law and in the facts and circumstances of the appellant's case the Ld. CIT(A) has grossly erred in confirming disallowance of late payment of provident fund amounting to Rs. 28,816/- when no such disallowance is called for. It may be deleted. 3. In law and in the facts and circumstances of the appellant's case the Ld. CIT(A) has erred in confirming notional interest of Rs. 57,949, treating it as interest capitalized on work-in-progress, when no such disallowance is called for. It may be deleted. 4. In law and in the facts and circumstances of the appellant's case the Ld. CIT(A) has erred in confirming disallowance purchase of Stores amounting to Rs. 9,34,104/- considering the same to be capital expenditure and allowing deprecation on it, when no such disallowance is called for. It may be deleted. 4.1 In law and in the facts and circumstances of the appellant's case the Ld. CIT(A) ought to have appreciated that expenditure incurred by appellant has not resulted into any enduring benefit and are of recurring in nature hence such expenditure need to be allowed as revenue ....
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....990/- only. It was also observed that the assessee at the same time had incurred interest expenses on the borrowed fund. Accordingly, the AO was of the view that the borrowed fund must have been utilized in the capital workin- progress and accordingly, the amount of proportionate interest expenses requires to be disallowed. The AO also observed that the accumulated loss exceeds the own capital of the assessee. Therefore, the borrowed fund has been used in the capital work-in-progress. Thus, the AO worked out the amount of proportionate interest expenses at Rs. 57,949/- and added to the total income of the assessee u/s 36(i)(iii) of the Act. 8. Aggrieved, assessee preferred an appeal to ld. CIT(A) who confirmed the order of AO by observing as under: "7. Decision I have perused the detailed observations made by the A.O. I find that the A.O. has given a factual finding with regard to disallowance of depreciation. The appellant apparently has not offered any rebuttal to the AOs finding. Accordingly, the disallowance amounting to Rs. 57,949/- is sustained. Since this ground is dismissed the A.O. is directed to allow depreciation on such capital work-in-progres....
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....chine and ultrasonic generator total amounting to Rs. 7,14,000/- from International Mach dies. These parts are used in Foil separator machine in the factory by replacing the old one therefore these are not of capital nature as it requires frequent replacement and is just an integral part of a machine. (ii) Amee power Drives: The assessee company had purchased Siemens make DIGITAL AC DC Drive amounting to Rs. 2,75,640/- (Including tax & duties) from Amee power Drives which was installed in Rolling Mill. The same new Digital AC DC Drive was installed in rolling mill which was replaced with old one and is the integral pan for functioning of rolling mill therefore this is not of capital nature. (iii) Alfa Therm Limited: The assessee company had purchased 2 Heat exchanger for Air Heater amounting to Rs. 217070/- (Including tax & duties) from Alfa Therm Limited. This was installed in hot air generator of coating machine which was replaced with old one and is the integral pan for functioning of air heater therefore this is not of capital nature. (iv) Alteem Instruments; The Assessee company had purchased Line Guide System Model No. ALG8224 with Stroboscope and H....
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....ur attention on the bills of stores purchases which are placed on Pages 76 to 81 of the paper book. On the other hand, ld DR vehemently supported the order of authorities below. 13. We have heard the rival contentions and perused the materials available on record. The assessee during the year has incurred expenses on the purchase of material for Rs. 13,35,612/- which were treated by the AO as capital in nature. Accordingly, the same was disallowed after allowing depreciation thereon. The view taken by the AO was subsequently confirmed by the ld CIT(A). On perusal of the balance sheet, it was noted that the assessee had shown a gross value of fixed Assets amounting to Rs. 22,79,63,523/- which appears quite substantial. Besides, we also note that the assessee is engaged in manufacturing activity. Thus, it is purchasing and using the spare parts in the machinery on a regular basis. Comparing the value of the machinery shown by the assessee in its balance sheet with the purchase of stores during the year the amount of stores purchase is insignificant. We also note that the assessee before the ld CIT(A) has claimed that all the materials purchases are representing the part o....