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2016 (10) TMI 634 - AT - Income TaxDepreciation on plastic mould - higher rate of depreciation on moulds in case of two wheeler manufacturer - use of moulds at vendor's premises - Held that:- We are inclined to hold that the conclusion arrived by the ld. CIT(A) in para 5.2 of the impugned order is quite correct and justified and we are unable to see any valid reason to interfere with the impugned order on this issue as admittedly and undisputedly the assessee is owner of the plastic mould which were used in the premises of various vendors for manufacturing of plastic and rubber goods for use of assessee. In our considered opinion, it is immaterial whether the plastic /rubber moulds were used in the factory premises of the assessee or vendors. Prime requirement is that moulds should be owned by the assessee, the same should be part of block assets shown by the assessee and these were put to use for the purpose of business of the assessee and the three requisite conditions have been fulfilled by the assessee in the present case and thus it is entitled to claim depreciation @ 30% which was rightly allowed by the ld. CIT(A) - Decided against revenue. Payment in the nature of reimbursement of expenses - AO made disallowance on the allegation that the assessee has not made tax deduction at source on the payments made to non resident outside India whereas the CIT(A) granted part relief to the assessee by observing that since payments have been made outside India in the form of reimbursement of expenses, thus they are not chargeable to tax in India and the AO should not have made disallowance in this regard - Held that:- CIT(A) was quite justified and passed a balanced order while upholding the addition under three heads and granting relief to the assessee by following the order of the DRP for A.Y 2006-07. It is well accepted proposition that the Rule of Consistency should be followed by the revenue authorities unless there is substantial change in the facts and circumstances. In the present case, the CIT(A) followed the order of DRP for earlier A.Y 2006-07 wherein claim of the assessee regarding payment in the nature of reimbursement of expenses was allowed. We are unable to see any valid reason to interfere with the conclusion of the CIT(A) especially when the AO could not establish that the impugned payments made by the assessee to non residents outside India were chargeable to tax in India and in this situation, TDS provisions are not applicable to the payments made by the assessee and hence we are unable to see any ambiguity or perversity in the order of the CIT(A) and thus we uphold the same. Accordingly, Ground No. 2 of the Revenue being devoid of merits stands dismissed. Allowability of expenses - liability regarding Excise duty and additional Excise duty - Held that:- When a company is out outsourcing manufacturing activity to the various vendors, contract manufacturers, then any liability regarding Excise duty and additional Excise duty has to be borne by the contractee as per excise laws and the same has to be held for the purpose of business of the assessee, because excise duty or additional excise duty was paid as per mandatory taxation legislation which cannot be avoided. In the present case, payment of sales tools expenses was not under legal obligation or liability and same has been incurred without any agreement. At the risk of repetition, we may point out that as per clause 11.2 of agreement between the assessee and the dealer, all expenses have to be borne by the dealers in regard to advertisement support services, which includes sales tools expenses also. Thus we are unable to accept the reasons recorded by the CIT(A) for granting relief to the assessee on this count and we set aside the same and order of the AO is restored. Allowability of trial run expenses - Held that:- In the present case, we find that the expenses were essential expenses incurred on purchase of spare parts for their trial and indigenisation in India. The assessee has neither set up a new plant nor purchased any capital asset. Accordingly, in view of the above decision of the Hon'ble Supreme Courtin the case of Empire Jute Company Limited [1980 (5) TMI 1 - SUPREME Court ]we find no merit in the order of the AO nor in the impugned order of the CIT(A) holding the above expenses to be capital in nature
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