TMI Blog2011 (12) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CIT v. Oswal Agro Mills Ltd. [2012] 341 ITR 467 (Delhi) ; [2011] 238 CTR 113 . 3. That without prejudice to the above grounds of appeal, the order of the learned Commissioner of Income-tax (Appeals)-I, Kanpur, is bad in law and is liable to be modified accordingly. 4. That any other relief or reliefs as your honour may deem fit in the facts and circumstances of the case, be granted. I.T.A. No. 187/Lkw/11 (assessment year 2002-03) 1. That the learned Commissioner of Income-tax (Appeals) has erred in law on facts in deleting the addition made on account of suppressed sales without appreciating the view of the Assessing Officer that the assessee-company admitted that no corresponding separate expenditure in the production of the goods sold out of the books was involved. 2. That the learned Commissioner of Income-tax (Appeals) has erred in law on facts and circumstances of the case without appreciating the view of the Assessing Officer that the payment of interest at 18 per cent. is higher than the prevailing rate of interest in the relevant period. 3. That the order of the learned Commissioner of Income tax (Appeals)-l, Kanpur, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 ₹ 7,20,356 ₹ 14,40,712 3. The Assessing Officer found that for the aforesaid two machines the written down value as on April 1, 2011 appearing in the accounts of the assessee was ₹ 2,60,623 and thus the assessee is said to have claimed and allowed depreciation amounting to ₹ 1,80,189 thereon in the assessment year 2001-02. The said machines however, have not been put to use during the year under consideration. Accordingly, the claim of depreciation of ₹ 3,15,156 for the year under consideration stood disallowed as the machines were unoperational. 4. The learned Commissioner of Income-tax (Appeals) vide paragraph 14 of the impugned order recorded a finding that the Assessing Officer in the assessment year under consideration has noted that 2 in 1 pouch packing machines were purchased during the current year only and it is also on record that the same was not used for the purpose of business. He also considered the fact that the appellant has taken a legal ground that depreciation is allowable on the block of assets and as such the depreciation is allowable irrespective of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid two machines were forming part of block of assets and depreciation thereon also stood allowed in the assessment year 2001-02. Merely because the said machines were not actually used due to change in product requirement or that they were earlier used from different premises, would not give jurisdiction to the income-tax authority to take the same out of the block of assets. The learned Commissioner of Income-tax (Appeals) appears to have recorded perverse finding of fact that 2-in-1 pouch packing machines were purchased by the appellant during the current year only, i.e., assessment year under consideration whereas the Assessing Officer at internal page 5 of the assessment order has categorically stated the actual date of purchase to be October 4, 2000 and October 19, 2000. These dates fall during the financial year ended on March 31, 2001 relevant to the assessment year 2001-02 and thus cannot be taken as a purchase of the financial year 2001-02 relevant to the assessment year 2002-03, the year under consideration. The findings as such reached by the learned Commissioner of Income-tax (Appeals) are hereby set aside. The case of the learned Commissioner of Income-tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the Revenue that unless a particular asset is used for the purpose of business or provision, depreciation is not allowed. No doubt, as per section 32(1) of the Act, in order to be entitled to claim depreciation, the asset is to be owned by the assessee and it is also to be used for the purpose of business or profession. However, the expression 'used for the purpose of business', when applied to block asset would mean use of block asset and not any specific building, machinery, plant or furniture in the said block asset as individual assets have lost their identity after becoming inseparable part of the block asset. That is the only manner in which various provisions can be harmonised. 33. Once we look into the provisions of this angle, answer to the argument of learned counsel for the Revenue predicated on the second proviso to section 32 shall also be provided. It was her submission that if a particular asset is acquired after the 30th September during the previous year and is put to use for a period of less than 180 days in the previous year, the deduction under sub-section (1) of section 32 is restricted to 50 per cent. of the amount admissible. On that ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation in assessment year 2002-03. 10. Heard parties. There is no change in the facts or law and the peculiar fact that the learned Commissioner of Income-tax (Appeals) found that the machines under consideration are owned by the assessee and formed part of the block of assets and thus allowed depreciation thereon. For parity of reasons as are taken by us in allowing depreciation on the written down value of the block of assets in the assessee's appeal for the assessment year 2002-03, the decision taken by the learned Commissioner of Income-tax (Appeals) in the impugned year does not require any interference. We, therefore, find no merit in the ground raised in appeal by the Revenue and reject the same. 11. In I.T.A. No. 187/Lkw/11 in the Revenue's appeal for the assessment year 2002-03 briefly, the facts are that the assessee filed return declaring total income of ₹ 5,90,380 on October 31, 2002. This return was processed on December 9, 2002. Consequent to an action under section 132 of the Act on December 9, 2003, the Assessing Officer issued a notice under section 153A of the Act on May 27, 2005 requiring the assessee to furnish return of income within 15 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under consideration. 12. The learned Commissioner of Income-tax (Appeals), after considering elaborate submissions of the assessee and taking note of the basis of addition made by the Assessing Officer, took that the books of account have not been rejected by the assessing authority. On the admitted facts and considering the explanation that the alleged sale outside books could not be added as income in toto without allowing expenditure incurred thereon, considered it appropriate to apply the gross profit rate of 8.6 per cent. on the sales of ₹ 23,49,100. In the result he deleted the addition of ₹ 21,47,078 and sustained the addition on account of profit on such sales at ₹ 2,02,022. 13. The learned Departmental representative contends that the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of ₹ 21,47,078 without any reasonable basis and gave relief to the assessee by applying only the profit rate on the sales of ₹ 23,49,100, whereas the Assessing Officer has found that the cost incurred for production of these goods have been charged in the books of account and thus rightly added the entire amount of sales as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount prior to making sales of ₹ 23,49,000, it cannot be said that the assessee incurred the cost outside the books of account maintained in regular course. Since the sales only represented the price received by the seller of the goods, only the realisation of the excess over the cost so incurred formed part of the profit included in the sales consideration of ₹ 23,49,000. The learned Commissioner of Income-tax (Appeals) thus committed no error in bringing to tax the amount of profit only on such sales and deleted the addition of ₹ 21,47,070 for justifiable reasons. The conclusion reached by the learned Commissioner of Income-tax (Appeals), therefore, does not require any interference. Finding no merit in the ground in appeal raised by the Revenue, the same stands rejected. 16. Parties have admitted that in the Revenue's ground No. 3 in appeal in I.T. A. No. 188/Lkw/11 the facts are pari materia identical to the facts in I.T. A. No. 187/Lkw/11. The Revenue's case, however, is that no reasonable basis have been taken in allowing relief of ₹ 23,93,667 out of total sales of ₹ 26,19,178. 17. Heard parties. The admitted fact is that the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loans was not at 18 per cent. or more. In this view of the matter and under the peculiar facts and finding that payment of interest at 18 per cent. is neither unreasonable nor excessive and having regard to the decision by the Income-tax Appellate Tribunal, Delhi G Bench in the case of Som Dutt Goel Sons v. ITO [2009] 27 DTR 263 (Delhi) as relied by the appellant's counsel before us, we find no infirmity in the decision reached by the learned Commissioner of Income-tax (Appeals) in deleting the disallowance on account of difference in interest payment made by the assessee. Accordingly, ground in appeal raised by the Revenue stands rejected. 21. Ground No. 2 in I.T.A. No.188/Lkw/11 for the assessment year 2005-06 relates to the deletion of addition of ₹ 1,20,000 on account of salary paid to Shri Atul Kumar Jain which the Assessing Officer had added on the ground that no evidence of service rendered has been produced by the assessee and followed the earlier year's decision where such disallowance was also made for non-production of this person before him to prove any service rendered by him. 22. The learned Commissioner of Income-tax (Appeals) vide paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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