TMI Blog2012 (12) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... not disposed of by the CBDT - assessee was unable to produce the notification renewing the exemption – Assessee made an alternate claim for deduction u/s 80G - Held that:- Nevertheless there is violation of Rule 46A, as the CIT(A) has admitted a Certificate dt. 26th October,2010 given by the Foundation, without giving the AO an opportunity to examine the same. Issue remand back to AO Addition on account of excess interest paid u/s 40A(2)(b) - Assessee was paying interest @ 10% to two parties - Whereas it was paying interest at 8% to the Directors of the Company - The difference of 2% was disallowed – Held that:- AO has failed to make out a case that funds at a lower rate of interest than 10% were available in the market. assessee company has paid interest to banks @ 13%, which is indicative of the fact that the funds were not available in the market at a rate lower than 10%. Issue decides in favour of assessee - ITA No: 758, 5371 & 5772/Del/2011 - - - Dated:- 31-10-2012 - UBS Bedi And J. Sudhakar Reddy, JJ. Appellant Rep by: Shri Aroop Kumar Singh, Sr.D R Respondent Rep by: Shri Anil Sharma, Adv. ORDER Per: Bench: ITA 758/Del/2011 is a revenue`s appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er argued that the machinery installed was given on lease to companies which were also engaged in the manufacture and production of article or things. Referring to the decision in the case of Bhagawathi Appliances vs ITO 337 ITR 286 in ITA no.100/2000 judgement dt. 4.1.2011 (supra) the Ld. Counsel for the assessee submitted that the facts are different for the reason that both Bhagawathi Appliances vs ITO (supra) and CIT-II vs Elcon Fin Lease and Industries P.Ltd. (supra)) were dealing with a case where higher rate of depreciation was claimed on the ground that the assessee was running the same on hire and where as in the case on hand the assessee claimed additional depreciation under Section 32(1)(ii a) of the Income Tax Act, 1961. He relied on the following case laws and submitted that the issue is squarely covered in his favour which is upheld by the Hon`ble Supreme Court. a. CIT vs. Shaan Finance P.Ltd. (1998) 231 ITR 308 (SC) b. First Leasing Company of India Ltd. vs. CIT, 244 ITR 234(Mad.) c. CIT vs. Maharashtra Apex Corporation Ltd. 234 ITR 484(Kar.) 8. After hearing rival contentions we hold as follows:- S.32 (1) : In respect of depreciation of - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. This is not a case of allowance u/s.32(1)(ii a) of the Income Tax Act, 1961 which deals with additional depreciation as compared to a Higher rate of depreciation. The issue was, which of the prescribed rates that has to be applied. Thus in our view the case laws do not support the case of the Revenue. 11. On the other hand the Hon`ble Madras High Court in the case of First Leasing Company of India Ltd. vs CIT, 244 ITR 234 Madras has held that the assessee would be entitled to additional depreciation under Section 32(1)(ii a) of the Income Tax Act, 1961 on the leased assets. 12. In the case of CIT vs. Hi Tech Arai Ltd. 321 ITR 477 (Madras) it has held that the provision of S.32(1)(ii a) of the Income Tax Act, 1961 does not state that the setting up of a new machinery or plant, which was acquired and installed up to March 31st,2002, should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Therefore, the contention that the setting up of a wind mill has nothing to do with the industry namely manufacture of oil seeds etc. is totally not germane to the specific provision contained in S.32(1)(ii a) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,527/- on account of excess interest paid u/s40A(2)(b) of the Income Tax Act, 1961. 19. After hearing both the parties, we find that the CIT(A) has dealt with the issue at para 19 of his order. The issue is the assessee was paying interest @ 10% to two parties i.e. M/s Givetake Trade Credits P.Ltd. and M/s Nipro Trexim P.Ltd. and whereas it was paying interest at 8% to the Directors of the Company Shri GL Didwania, Shri Hemant Didwania and Ms. Nandita Didwania. The difference of 2% was disallowed. The CIT(A) in his order at para 19 held as follows. I have considered the submissions made by the assessee and the reasoning given by the ld.AO for making the disallowance. The ld.AO has failed to make out a case that funds at a lower rate of interest than 10% were available in the market. In the light of the case laws relied upon by the assessee, I do not find any justification in the disallowance of interest @ 2%. The assessee company has paid interest to banks @ 13%, which is indicative of the fact that the funds were not available in the ;market at a rate lower than 10%. The Mumbai Bench of the Appellate Tribunal has held the rate of 15% to be reasonable in Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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