TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 572
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....IT(A) erred in law and facts by not treating the date of setup as the date on which the previous year commences for a new business or profession. 2.2 The learned CIT(A) erred in law and facts in not considering the date of setup as the date from which all expenditures would be claimable newly setup business. 2.3 The learned CIT(A) erred in law in not appreciating the difference between the date of setup and date of commencement for determining the allowability of expense for assessee's newly setup business. 2.4 The learned CIT(A) has erred in law and facts in considering the date of commencement of commercial production as the date of set up of Powertrain / Engine Manufacturing business. 25 The learned CIT(A) erred in law and facts by not treating the assessee to have setup business post completion of trial run as a result of which power trains were subsequently manufactured and exported. 2.6 The learned CIT(A) has erred in law and facts by merely relying on the audit report's disclosure of date of commencement of business in order to determine the allowability of expenses instead of applying the concept of date of set up as envisaged under the Incometax Act, 1961....
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....d facts by stating that the assessee had not submitted the bills evidencing claim of additional depreciation on plant and machinery while the same was submitted during the course of the hearing before the learned CIT(A). 3.2 The learned CIT(A) has erred in law and facts in not considering the assessee's submission on I the fact that the assets purchased during the year have been put to use for more than 180 days and therefore, is eligible for 100% of the rate of depreciation as applicable. 3.3 The learned CIT(A) in law and facts in not considering that certain assets purchased during the year pertain to the infrastructure support services carried on by the assessee from 01 April 2009 and is therefore eligible for 100% of the rate of depreciation as applicable. 3.4 It is humbly submitted that the depreciation disallowed be deleted and returned depreciation, including additional depreciation amount be permitted. 4. Disallowance under section 43B INR 2,77,83,000 4.1 The learned CIT(A) has erred in law and facts in treating the payment as bonus while the same is only a payment made by the assessee to its employees being in the nature of variable pay forming part of the CT....
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.... have commenced only from the day from which the assessee begins commercial production. Therefore, the expenses incurred up to the date of commercial production were to be disallowed. 3.2 The assessee bolstered its claim by submitting that set-up date for manufacturing segment was taken as 01-10-2009 though commercial production started later on. The assessee commenced trial run in September, 2009. The first engine was produced on 14-09-2009. The powertrain produced products which were exported to Japan. While the expenses of powertrain pertaining to period post set-up and up to the date of commencement of commercial production were capitalized in the books of accounts, the same was treated as tax deductible expenses in accordance with various judicial pronouncements. The depreciation was also claimed on reduced amount. However, Ld. AO rejected the submissions of the assessee, inter-alia, by observing that the assessee imported certain trial parts, assembled them and exported one of few of them for testing purposes. The same do not amount to commencement of production. The transaction did not have any commercial value and the assessee himself termed the same as trial production on....
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.... in respect of this segment is concerned, there should be no dispute as to the allowability of the same. The expenditure incurred, at whatever point of time during the year, under this segment should have been allowed to the assessee. It appears that the expenditure of Rs. 46.06 Crores as incurred by the assessee from 01-04- 2009 to 04-02-2010 was revenue in nature and the same was claimed in the Profit & Loss Account as such. All these expenses were with respect to assessee's existing business of rendering of services and therefore, the same could not have been disallowed by Ld. AO. The Ld. AO is directed to verify the same and if the expenses relate to service segment, allow the impugned expenditure to the assessee. Similarly, there should be no dispute on the expenses incurred after 04- 02-2010 since whatever expenditure incurred under any of the two segments would be allowable provided the same was revenue in nature. It is the conclusion of Ld. AO that the business was setup on 05-02- 2010. Therefore, Ld. AO is directed to verify and allow the expenditure, under both the segments, post 05-02-2010. So far as the expenditure of Rs. 871.14 Lacs is concerned, the same pertain to ....
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....he business but all expenses incurred during interregnum would be permissible deductions. The relevant observations of Hon'ble Bombay High Court in Western India Vegetable Products Ltd. (supra) were as under: - It seems to us, that the expression "setting up" means, as is defined in the Oxford English Dictionary, "to place on foot" or "to establish," and in contradistinction to "commence". The distinction is this that when a business is established and is ready to commence business then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. But there may be an interregnum, there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under Section 10(2). On the basis of the above decision, it could be said that when a business is established and is ready to start business it can be said to have been set-up. The business must be put into such a shape that it can start functioning as a business or a manufacturing organ....
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....irected to furnish requisite details. The corresponding grounds stands allowed for statistical purposes. 8. Depreciation Disallowance 8.1 The assessee claimed depreciation of Rs. 40.68 Crores for full year though it started commercial production only from 05-02-2010. Accordingly, Ld. AO proceeded to disallow a portion of the same. The assessee submitted that depreciation was claimed on the basis of assets put to use. Rejecting the same, Ld. AO worked out excess depreciation of Rs. 949.58 Lacs. The Ld. AO also disallowed additional depreciation on Plant & machinery for Rs. 5844.25 Lacs for want of bills / other details etc. The aggregate depreciation thus disallowed by Ld. AO aggregated to Rs. 67.93 Crores. 8.2 During appellate proceedings, the assessee sought time to furnish requisite bills / vouchers. The Ld. CIT(A) confirmed the disallowance since the assessee failed to do so. Aggrieved, the assessee is in further appeal before us. 8.3 Since we have already concurred with the stand of the assessee that the date of setup of business was to be considered as 01-10-2009, the depreciation claimed by the assessee would be allowable on the basis of assets put to use. The additional ....