TMI Blog2010 (8) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... mission? 3. Whether the ITAT was correct in law in deleting the disallowance of ₹ 18,01,136 made by the IO on account of provision made for contribution towards approved gratuity fund u/s 40A (7) of the Income Tax Act? 4. Whether the ITAT was correct in law in allowing depreciation on assets in excess of 100% due to amalgamation despite provisions of 4th proviso to Section 32(1) which is clarificatory in nature having retrospective effect? 5. Whether the order of ITAT was perverse as it has ignored the relevant facts on records and provision of law? 3. In so far as question no.3 is concerned, learned counsel for the assessee has drawn our attention to the judgment dated 7th November, 2007 passed by this Court in ITA 423/2007 titled CIT Vs. Be chtel India (P) Ltd. In that case, while dealing with the interpretation of Section 40A (7) and Section 43A of the Act, the court was of the opinion that no substantial question of law arises as is clear from the following discussion: Further, we are in agreement with the Tribunal that Section 40A (7) (b) of the Act will have an overriding effect over Section 43B of the Act. In the first place Section 40A (1) is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court. Erstwhile Ms/ Triveni Engineering Works Ltd. claimed depreciation on plant and machinery for the use of it from 1st April, 1994 to 30th September, 1994. Since the period was more than 180 days, the deprecation was claimed at 100% of the rate prescribed. Same very machinery came to be used by the assessee from 1st October, 1994 to 31st March, 1995. Since this period also exceeds 180 days, the assessee company also laid a claim for entire 100% . The question in these circumstances which fell for consideration was as to whether the total depreciation claimed by both the companies for the same financial year could exceed 100%. The assessee submitted that since it was fulfilling the twin conditions i.e. ownership of the machinery and its use for more than 180 days, it was entitled to depreciation at the said rate irrespective of the fact that the erstwhile owner which has used the same plant and machinery upto 30th September, 1994 had made the claim in similar manner. The Assessing Officer, however, did not accept this plea of the assessee as he was of the opinion that total depreciation in a financial year could not be in excess of 100 %. The Tribunal, however, has accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year and which are put to use for the purposes of business or profession for a period of less than one hundred and eighty days in a previous year. It is provided that the depreciation allowance in such cases will be restricted to fifty per cent of the amount calculated at the prescribed rates. In the cases of succession in business and amalgamation of companies, the predecessor in business and the successor or amalgamating company and amalgamated company, as the case may be, are entitled to depreciation allowance on the same assets, which in aggregate exceeds the depreciation allowance admissible for a previous year at the prescribed rates. It is proposed to restrict the aggregate deduction for this allowance in a year to the deduction computed at the prescribed rates and apportion the allowance in the ratio of the number of days for which the assets were used by them. The aforesaid explanation is a complete answer to the argument raised by the learned counsel for the revenue and negates the submission that the proviso was introduced only as a clarificatory measure. 7. It is clear from the reading of the aforesaid explanation that the legislature accepted the posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the extent of granting such allowance even where the asset in question is used for the purpose of the business at any time during the previous year . In other words, at the relevant point of time, even if the asset has been used for a single day, in the business of the assessee, depreciation allowance, in full, was given under Section 32(1) of the Act. When such is the case, it cannot be said that the assessee cannot be granted the said depreciation allowance if he is not the owner for the entire period of the previous year or if he is not the owner on the last day of the previous year in question. There is no such stipulation in the Act. In CIT V. S.K. Sahana and Sons {1946} 14 ITR 106 (Pat), also, full depreciation was allowed even though the assessee was the owner during the previous year only for 5 months. In the said decision Fazl Ali C.J. and Manohar Lall J. made the following significant observation (page 108). it is not disputed that the assessee was the owner of the building, machinery, etc. during the accounting year. I do not see any provision in the Act which authorizes an apportionment of depreciation on the assessee having sold the machinery or plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mistake which was added by the Assessing Officer was to make further deduction of ₹ 1111147.07. This is clear from the following statement:- However A.O. has disallowed further in the following manner: Total Expenses Debited to P L A/c Hospitality 3033633.00 Sales Promotion 535471.06 3569104.13 (Note: Amount of hospitality wrongly taken as above instead of ₹ 3566178) Less: Hospitality States promotion considered for disallowance by us 1859647.06 Balance also considered as Entertainment by A.O. 1709457.07 Less: 35% attributable towards employee participation Allowed by A.O. 598310.00 Additional Expenses Considered for disallowance 1111147.07 Note: As would be observed, the expenses not considered by us are ₹ 1231764 and not ₹ 170945/- as computed by the AO on erroneous calculations. As against & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in the absence of confirmation. The Income Tax Appellate Tribunal has allowed the balance commission also. A perusal of the order of the Income Tax Appellate Tribunal would show that the assessee had given all the relevant details such as names and addresses of the concerned five agents as well as their GIR numbers before the Assessing Officer and also the documentary evidence in the form of agreements as well as invoices issued by the said agents. The Tribunal also took note of the argument of the assessee that the payment of commission to these agents was made by account payee cheques. On this basis, the Tribunal was of the view that the assessee was able to substantiate the payment from relevant documents and merely because confirmatory letters could not be filed by the assessee was not a valid ground to reject the claim. We may reproduce the relevant discussion in the order of the Tribunal on this aspect:- After considering the rival submissions and perusing the relevant material on record, it is observed that all the relevant details such as names and addresses of the concerned five agents as well as their GIR numbers were furnished by the assessee before the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out above, the Assessing Officer did not go into the veracity of the aforesaid documents produced by the assessee as the Assessing Officer rejected the claim only on the ground that confirmation letters were not filed. If that approach of the Assessing Officer was incorrect, after stating that principle it was incumbent upon the Tribunal to remit back the matter to the Assessing Officer for proper verification of the details and the documents which were furnished by the assessee before the Assessing Officer. In the absence of said exercise and also the satisfaction about the fact as to whether circumstances were rendered by these agents or not, claim could not have been allowed straightway. We are, therefore, of the opinion that in so far as this issue is concerned, matter needs to be remitted back to the Assessing Officer for verification of the details of names and addresses of the agents furnished by the assessee including their GIR numbers and also to verify as to whether payments were made by account payee cheques and the services were availed of. We make it clear that the Assessing Officer was not right in rejecting the claim merely because confirmatory letters were not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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