Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (9) TMI 276 - AT - Income TaxDisallowance of depreciation relatable to scrap discarded machinery - Assessing Officer has made disallowance out of depreciation on the basis that out of repairs to plant & machinery, 10% of material cost of spares is to be considered as scrap value and the same should be reduced from the WDV of the plant & machinery and consequently, the depreciation is to be reduced to that extent - CIT(A) deleted disallowance - Held that:- Unless this is brought on record by the Revenue that there is any scrap value realized or is relalizable on account of sale of scrap, no such adjustment can be made in WDV because as per explanation 2 below clause (ii) of section 32(1), written down value of the block of assets shall have the same meaning as in clause (c) of sub section (6) of section 43 of the Act. As per clause (c) of sub section (6) of section 43, deduction has to be made from opening WDV on account of sums payable in respect of any asset falling within that block which is sold or discarded or demolished or disturbed, during that previous year together with the amount of scrap value, if any, subject to this that such deduction is not exceeding the WDV. In the present case, the scrap value sought to be reduced by the Assessing Officer is not on account of assets being sold or discarded or demolished or disturbed. In the present case, the asset is put to repair and the material used for repair of plant & machinery cannot be said to be the scrap value on account of sale or discarding or demolishing or disturbing of the asset in question. Hence, in our considered opinion, there is no infirmity in the order of CIT(A) on this issue and therefore, we decline to interfere in the order of CIT(A) on this issue - Decided against revenue. Addition on account of liabilities of more than 3 years - CIT(A) deleted addition - Held that:- CIT(A) has deleted this addition by following the judgment of Hon’ble Apex Court rendered in the case of CIT vs. Sugauli Sugar Works (P) Ltd. [1999 (2) TMI 5 - SUPREME Court] . This is not the case of the Revenue that the liability is not appearing in the balance sheet. The only objection of the Assessing Officer is that the liability is more than three years old. Hence, under these facts, the disputed issue is covered in favour of the assessee - Decided against revenue. Disallowance of sales promotion incentive - CIT(A) deleted addition - Held that:- The decision of CIT(A) is on the basis that the liability to pay sales promotion incentive accrues when it is acknowledged upon attainment of the sales target set for each distributor or sub-distributor or selling agent. He has given a finding that the liability in respect of incentive was acknowledged by the assessee in the year in question and as such the expenditure is allowable in the present year. This finding of CIT(A) could not be controverted by Learned D.R. of the Revenue and therefore, we do not find any infirmity in the order of CIT(A) on this issue - Decided against revenue. Addition of of telephone expenses - CIT(A) deleted addition - Held that:- This issue is covered in favour of the assessee by the judgment of Hon’ble Gujarat High Court rendered in the case of Sayaji Iron and Engg. Co. vs. CIT [2001 (7) TMI 70 - GUJARAT High Court] where it is held that even if there is personal use of telephone and vehicles etc. by the Directors / employees of the company, the same can be included in the perquisites value of the concerned Director/ employee but the disallowance cannot be made in the hands of the assessee company. We decline to interfere in the order of CIT(A). - Decided against revenue. Disallowance of under valuation of stock in trade - CIT(A) deleted addition - Held that:- CIT(A) in his order that the assessee company was compelled to change its method of valuation of stock with a view to comply with the requirement of the AS-2 issued by the Institute of Chartered Accountants of India. He has also observed that as per various judgments, the issue is covered in favour of the assessee because in these judgments, it was held that if there is change in the method of valuation of closing stock due to mandatory requirement and that change has been consistently followed by the assessee, no addition is called for. This is not the case of the Revenue that the change in method of valuation of closing stock has not been consistently followed by the assessee after this year and therefore, in our considered opinion, no interference is called for in the order of CIT(A). - Decided against revenue. Disallowance of of expenses on Architect award - CIT(A) deleted addition - Held that:- This is the only objection of the Assessing Officer that the assessee company is not in actual construction business except for the manufacture of one item i.e. cement and therefore, it is not perceptible as to how this item will benefit the business of the assessee. The issue in dispute is regarding expenses incurred by the assessee company in respect of architect award of the year. In our considered opinion, even if the assessee is in the business of manufacturing of only one time of construction material i.e. cement, such an expense on account of architect award, can be very much for business purposes because it will help the assessee company to promote its cement business. This is also noted by learned CIT(A) that the similar claim was allowed in earlier assessment year i.e. 94-95 and also in later year i.e. assessment year 2004-05. Hence, we decline to interfere in the order of CIT(A) on this issue. - Decided against revenue.
|