TaxTMI 
TaxTMI 
2018 (11) TMI 1994
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....e is in cross appeals for the A. Ys 2010-11 & 2011-12, vide ITA Nos. 2170 & 2171/Kol/2017 respectively. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 2159/Kol/2017, for assessment Year 2010-11, have been taken into consideration for deciding the above appeals en masse. 3. In these cross appeals, the Revenue as well as the Assessee have raised multiple grounds of appeal. However, at the time of hearing we have carefully perused all the grounds raised by the Revenue as well as raised by the Assessee. To meet the end of justice, we confine ourselves to the core of the controversy and main grievances of Revenue and the Assessee as well. With this background, we summarize and concise the grounds raised by the Revenue as well as Assessee as follows: (i).Ground nos. 1 & 2 of ITA No. 2159/Kol/2017, of Revenue appeal, for the A.Y 2010-11 and ground nos. 1 & 2 of ITA No. 2160/Kol/2017, of Revenue appeal, for the A.Y 2011-12, relate to disallowance of excess depreciation o....
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.... block of assets of 'Furniture & Fixture' to allow 10% deprecation instead of 15% ( claimed by assessee, treating as Plant & Machinery). In response, the assessee submitted that all those items or equipment claimed under plant & machineries are really essential for running the business of the assessee through various offices and the said equipments and items have identical use like the machines which are basically used by a manufacturer. However, the ld AO rejected the contention of the assessee and held that the aforesaid items are essential for all kind of business peoples to keep the business area clean and make everything hygienic. Therefore, the ld AO regrouped these items to allow depreciation @10% instead of 15% subject to the period of acquisition and utilization. The assessee has claimed deprecation of Rs.26,02,230 @ 15% on written down value (WDV) of so called Plant & Machineries used for more than 180 days. Therefore, the ld AO disallowed depreciation to the tune of Rs. 8,67,410 (Rs. 26,02,230 - Rs.17,34,820). The assessee had claimed depreciation of Rs.8,98,694/- for the Plant & Machineries used for less than 180 days. To rectify the claim, excluding the disa....
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....% claimed by the assessee. Therefore, the AO disallowed of Rs.11,66,975/- being differential depreciation. We note that all the assets on which partial depreciation has been disallowed by the ld AO, were essential for running assessee's business smoothly and it served the purpose of plant and machinery. These assets had an identical use like machines and not of office equipment. These assets were wholly and exclusively used in the nature of plant & machinery and not in the nature of furniture & fixtures. We further note that there is no dispute that these assets have been used by the assessee company and are inextricably related to the business of the assessee. Therefore, we are unable to agree with the observation of the ld AO, that these are equipment used by normal business people to keep the business premises hygienic. We note that some of the equipments, such as drilling machines, switchgear, remote controls device hideaways are specific to the business of the assessee for installation and repair of the equipment supplied by it. We note that these assets in question are wholly and exclusively used in the nature of plant & machinery and would qualify as such. Therefore, as ....
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....d AO that no direct expenditure have been incurred for earning exempt income and the investments have been made out of own funds and not out of borrowed funds. Only dividend bearing securities should be considered in taking the total value of investment while computing average investments under Rule 8D(2)(ii) and 8D(2)(iii) of the IT Rules 1962 for computing disallowance u/s. 14A of the Act. Before the AO the assessee also contended that investments in foreign companies, which yielded taxable dividend income, would not attract the disallowance u/s. 14A/r.w.r 8D of the IT Rules, 1962. The assessee company also prayed before the AO that disallowance under Rule 8D if any should be made by excluding investments made in foreign companies while computing average investments, as the dividend received from the foreign companies are taxable dividend income. However, on scrutiny of accounts of the assessee company, it was noted by the AO that the assessee company has invested huge amount into shares of various subsidiary companies and in other quoted shares also. The assessee has received dividend income to the tune of Rs.5,56,55,497/- (exempted u/s. 10(34) during the year. Initially, the....
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.... Before the CIT(A), the assessee again submitted an analysis of amount of average investment (other than foreign and strategic investments), which are given below :- Particulars Opening- as on 01.04.2009 Closing- as on 31.03.2010 Long Term Investments-Trade Investments-Quoted (Sr.1 of Sh. F to Financials) (Strategic Investments in subsidiaries/group companies) 21,57,57,030 22,99,85,115 Long Term Investments-Other Investments-Quoted (Sr. 2 of Sh. F to Financials) 48,07,064 25,06,950 Long Term Investments-Other Investments-unquoted (Sr.2 of Sh. F to financials) 13,50,00,000 Current Investments-Other Investments-quoted (Sr. 4 of Sh. F to Financials) (Post diminution) 26,03,099 20,30,782 Total 35,81,67,193 23,45,22,847 Less: Strategic Investments (including foreign investment) (21,57,57,030) (22,99,85,115) Amount to be considered for the purpose of Rule 8D 14,24,10,163 45,37,732 Average Investments 7,34,73,948 Therefore, the disallowance under Rule 8D(2)(ii), had the correct figure of average investment were c....
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....he rival submissions and perused the material available on record. We note that assessee's free reserves and capital exceeds the investment made in shares. The assessee's capital, reserve and surplus is to the tune of Rs.105,57,30,882/- whereas investments in shares and securities is at Rs. 23,45,22,847/-, hence assessee's own funds exceeds the investments made in shares and securities, therefore, the presumption would arise that investments would be out of Interest-free funds generated or available with the company. Therefore, in the present case under consideration, undisputedly capital, reserve surplus are higher than the investment in shares and securities. Therefore, it would be presumed that the investment made by the assessee would be out of interest free funds available with the assessee. For that we rely on the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd, reported in (2009) 313 ITR 340 (Bom), wherein it was held that if there are funds available both, interest free and overdraft and/or loans are taken, then a presumption would arise that investment would be out of interest- free fund generated or available wit....
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....a debit note produced by the assessee company. 20. The brief facts qua the issue are that during the assessment proceedings the ld AO disallowed an amount of Rs.49,38,302/-, provision made by the assessee for consumption of materials/purchases of goods and spare against services of Annual Maintenance Contract (AMC) on the alleged ground that the income against the said provision would be booked in the next year, therefore, such expenditure ought to have been claimed in the next year. During the assessment proceedings, the assessee submitted before the AO that the said consumption of material actually pertains to the consumables of items, like the value of charcoal, spares and others etc to be required to provide the services against the Annual Maintenance Contract (AMC) where the bills are raised by the suppliers but payment had not been made as on 31-03-2010. It was also claimed by the assessee that the said amount of Rs.49,38,302/- was claimed as expenses following the mercantile system of accounting. However, the AO rejected the contention of the assessee. The AO noted that such provision for the goods, which may be used in the next year, for which no income during this year ....
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...., which led to certain confusion that the same was a provision. The balance amount of Rs. 7.69 lacs was also not provision, but cost of spares purchased. Therefore, both the amount i.e Rs. 41.68 lacs and sum of Rs.7.69 lacs representing the cost of purchase and such purchases were held in closing stock as on 31-03-2010. These facts and documents were submitted by the assessee during the appellate proceedings and requested for admission thereof as additional evidence. Accordingly, these additional evidences were remanded back to the AO the by the ld. CIT-(A) requesting him to examine the documents and the claims relating thereto and forward the remand report to him. The AO examined the matter and submitted the remand report to the ld. CIT(A). The ld. CIT(A) after considering the remand report of the AO came to the conclusion that out of total amount 49.38 lacs a sum of Rs.41.68 lacs was cost of conversion of lower version spares (Sure Boil) into higher version spares and the balance of Rs. 7.69 was cost of spares purchased. Therefore, the ld. CIT(A) rightly noted that the amounts relate to expenditure for the A. Y under consideration and it is not a provision. Therefore, we note tha....
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....the material on record. We note that the AO disallowed a portion of the claim of depreciation on the ground that the assessee was unable to submit adequate proof of the flats in question, which were used exclusively for the (guest house) business purpose. It was claimed by the assesses that the flats in question were used for the guest house of the assessee company and would be eligible for depreciation @ 10%. However, the AO restricted the depreciation on the above said flats at 5% as against 10% claimed by the assessee. We note that the assessee used the flats for the purpose of business and the assessee produced copy of guest house register in respect of guest houses. The ld. CIT(A) sent these documents to the AO to examine and submit his remand report. After going through the remand report, the ld. CIT(A) came to conclusion that the assessee was having occupancy record in respect of guest house, which contains lists of the visitors's name, the company represented, place from which arrived, the room number and the dates and time of arrival and departure etc. It was also noted that the respective entries also bear the signature of the visiting / occupant of the guest house. D....