TMI Blog1989 (3) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... d. was incorporated on9th April, 1981. The said company had purchased a plot of land for a sum of Rs. 4,31,000 No.2/22, East Punjabi Bagh,New Delhi. Subsequently the directorship and share holding was charged and on 17th June, 1983 it was M/s Taxmann Allied Services (P) Ltd., the present assessee, which after getting approval for change of name from Registrar of Companies on 26th Decision., 1983, took up the publication of its first book in Jan., 1984. M/s Taxmann Allied Services (P) Ltd. started constructing a building on the said plot right from23rd June, 1981. Apparently the said transfer did not face any registration hassle or charges, as the ownership of the company was itself taken over. The area of plot in question i.e. 2/22 East Punjabi Bagh was 659.72 sq. yds. on which the house came to be completed in Feb., 1985. Shri U.K. Bhargava was unanimously elected as Chairman of the said Company meeting on4th Dec., 1984. He was authorised to deal with the said property for purposes, such as, dealing with the appropriate authority for house-tax and getting the formalities completed for house-tax levy. He was also authorised to handle the application for completion certificate and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive spouses. For example, with Smt. Hem Bhargava, as per contention of the assessee, her husband Shri U.K. Bhargava Chairman was living. With Smt. Abha Bhargava, her husband Shri Raju Bhargava was living. With Smt Mittu Bhargava her husband Shri Rakesh Bhargava was living and so on Looking to the facts that a palatial building in a posh locality like Punjabi Bagh in New Delhi, built at a cost of about Rs. 14 lacs or so by the assessee company as observed by the Revenue was not giving any return to the assessee and on the top of that the assessee was claiming 40 per cent depreciation on the said building the IAC smelled a rat and resorted to investigate whether this was a device adopted by the assessee to dodge the Revenue. The IAC (Assessment) also noted that there was no other immovable property with the assessee company and besides this property the other fixed assets amounted to Rs. 40,000 only. He placed his reliance on Supreme Court decision in the case of Workmen of Associated Rubber Industry Ltd. vs. Associated Rubber Industry Ltd. Anr. (1985) 48 CTR (SC) 355 (1986) 157 ITR 77 (SC) and observing that wife and son of the Chairman were residing alongwith two menials in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for residence of employees and welfare of the employees. In the basement, he submitted, there is an entertainment centre for all the employees. He drew our attention to extract from the minutes of the meeting dt. 4th Dec., 1984, also the list of the employees during relevant period for which he submitted that only Smt. Hem Bhargava Amit Bhargava were respectively wife and son, but other employees were not connected with Shri U.K. Bhargava. He drew our attention to pages 4 to 9 of assessee s compilation i.e. the appointment letters of employees who were occupying the house during relevant accounting year. He drew our attention to ration cards of peon chowkidar and Smt Gayatri Singhania and Mr. Anil Kumar Jain. He however agreed that there were only two directors of the said company i.e. Shri U.K. Bhargava, and Shri M.K. Bhargava who were earlier staying at 59/32 New Rohtak Road New Delhi earlier and on query from the Bench he submitted that their ration cards are there of that old address i.e. of New Rohtak Road, New Delhi. He submitted at last that salaries paid to a employees have been accepted as genuine and allowed as deduction. 5. The learned Departmental Representative sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pure and simple device to enjoy the benefit of higher rate of depreciation on costly and palatial building but when we go through the resolution dt.4th Dec., 1984, we find, it is indicated therein that Shri U.K. Bhargava will do all about completion certificate and property tax matters etc. It is also mentioned therein that for the benefit of employees of the company there is a recreation room, rest room and a library have been provided at the company premises at 2/22 East Punjabi Bagh, New Delhi. A perusal of the ration cards though shows that they are consecutive having numbers, 1123, 1124, 1125 and 1126 and they are issued on 26th Feb., 1985 and 266/27th Feb., 1985 but the same exist and are in respect of peon and chowkidar and Mrs. Gayatri Singhania and Shri Anil Kumar Jain Though there are none in names of any of the Bhargava family employees i.e. Smt. Hem Bhargava Mr. Amit Bhargava or others In course of hearing to a query of the Bench it was mentioned by Shri U.K. Bhargava that the ration cards of his wife and son are still joint with him as head of the house, which bears the address of old residence, with which we do not find anything wrong. Though it was most unnatural an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orkmen would otherwise have been entitled. Subsequently, in 1971, Aril was wound up and amalgamated with the respondent company. The workmen raised an industrial dispute claiming bonus at 16 per cent for 1969. The Industrial Tribunal and the High Court on a writ petition rejected the claim on the ground that the respondent and Aril were two independent companies with separate legal existence and the profit made by Aril could not be treated as the profit of the respondent company. On appeal to the Supreme Court: Held , reversing the decision of the High Court, that a new company was created wholly owned by the principal company, with no assets of its own except those transferred to it by the principal company, with no business or income of its own except receiving dividends from shares transferred to it by the principal company and serving no purpose whatsoever except to reduce the gross profits of the principal company. These facts spoke for themselves. There could not be direct evidence that the second company was formed as a device to reduce the gross profit of the principal company for whatever purpose. An obvious purpose that was served and which started one in the face was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now to reject assessee's claim regarding 40 per cent depreciation. All the employees are otherwise rich and whatever salaries have been paid to them have been accepted by Revenue and allowed as deduction. Under these circumstances it is too late in day to say that it is a device. Revenue cannot play hot and cold at the same time. The finding of CIT(A) is, therefore, reversed. 10. Coming to alternative plea we do not find any alternative plea of that type having been raised. However, the assessee has made a mention for the same in the written explanation filed before the CIT(A). But it becomes academic once we accept assessee's contention for higher depreciation. 11. Regarding dispute pertaining to interest under s. 216 the CIT(A) has not given any finding and he has mentioned in the last para of his order, "no objections have been made before me either orally or in writing". When we peruse the grounds of appeal on the other hand, there is a specific ground raised to that effect by the assessee. On ground regarding charge of interest under s.216 we restore back the matter to the file of CIT(A) who is directed to re-do the same after giving an opportunity of being heard to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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