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2018 (2) TMI 1277 - AT - Income TaxClaim of depreciation in respect of vehicles which were registered in the name of directors of the assessee company - Held that:- The assessee is entitled to claim of depreciation on cars which are registered in the name of directors, where the funds for purchase of the said vehicles has been paid by the assessee company and the same have been shown as asset of the assessee company and also the vehicles were used by the assessee company. In view thereof, we allow the claim of depreciation in the hands of assessee. Disallowance of remuneration paid to the directors - whether no commission is to be paid on the sales made by the assessee to its sister concern namely K.K. Cans & Allied Products Pvt. Ltd? - Held that:- Assessee before us has pointed out that the concern K.K. Cans & Allied Products Pvt. Ltd. is leader in the business which is partly being done by the assessee also and in view of the above said, we find no merit in the order of CIT(A) in restricting the claim of remuneration paid to the directors and disallowing the same which is relatable to sales to the sister concern. In any case, the directors are assessed at highest rates of tax and applying the ratio laid down in CIT Vs. Indo Saudi Services (Travel) Pvt. Ltd. (2008 (8) TMI 208 - BOMBAY HIGH COURT), we hold that no disallowance is to be made out of remuneration paid to directors under section 40A(2)(b) of the Act.- Decided in favour of assessee Disallowance of professional charges - as per assessee K.K. Cans & Allied Products Pvt. Ltd. was the main entity of the group and e-mail was in its name for ease of reference - Held that:- Assessing Officer cannot sit in the judgment with the decision of assessee to pay professional charges to various persons against which necessary evidence has been filed both before the Assessing Officer and CIT(A), even before us. Merely because the said communication is sent to K.K. Cans & Allied Products Pvt. Ld., who was the main entity of the group does not justify the disallowance in the hands of assessee. Disallowance of depreciation on building improvement - Held that:- Land and building belongs to the directors which has been given on rent free basis to the assessee company but the repairs undertaken by the assessee are held to be capital repairs. In case, they are held to be capital in nature, then depreciation is not allowable as the assessee company do not own the building on which repairs are undertaken. It does not fall within the definition of section 32(1) of the Act. Secondly, the said asset has not been put to use in the year under consideration and on this ground also, the assessee is not entitled to the claim of depreciation. Accordingly, we reverse the order of CIT(A) in this regard and hold that the assessee is not entitled to the claim of depreciation on such improvements to the land and building. - Decided against assessee Addition made on account of sales and commission charges - Held that:- No merit in the plea of learned Departmental Representative for the Revenue in view of the evidences filed before the Assessing Officer and the CIT(A). The CIT(A) has given a finding that the available evidences with respect to services rendered by such parties were filed before the Assessing Officer, who in turn, has ignored the same on the ground that the proof filed related to earlier years. Finding of CIT(A) is that not necessarily every services rendered must result into business in the same year since the assessee was dealing in items for which persistent efforts were required. We find merit in the reasoning of CIT(A) in this regard and accordingly, uphold the order of CIT(A) in allowing the claim of service commission - Decided against revenue Addition made on account of foreign trip expenses - visit was by the directors of the assessee company to China - Held that:- We find no merit in the plea of Revenue, wherein the foreign trip was undertaken by the directors to China for their business needs as referred by the CIT(A). - Decided against revenue Addition u/s 40A(3) - deduction on account of transport and freight charges - Held that:- No merit in the order of Assessing Officer where assessee had booked expenses only to the extent of amount not recovered from its customers i.e. ₹ 2,91,362/-. The assessee has explained that the cash expenditure made on behalf of customers has been recovered from the customers through sale invoices, etc. Accordingly, where the assessee had not claimed the aforesaid expenditure made in cash as deduction, in the Profit and Loss Account, then the same is not hit by provisions of section 40A(3) of the Act. - Decided against revenue Diversion of profits - addition u/s 40A - items which were sold by assessee to its sister concern were in turn, sold to third party and hence the assessee had diverted profits to its sister concern - Held that:- The provisions of section 40A(2)(a) of the Act are attracted where the assessee incurs expenditure in respect of which payment has been made to a person referred to in clause (b). The assessee in the present case has not incurred any expenditure nor claimed the same but has shown sale of its products to its sister concern. Hence the order of Assessing Officer in invoking provisions of section 40A(2)(a) of the Act is misplaced; even though the assessee had sale transactions with its sister concern - Decided against revenue
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