TMI Blog2011 (4) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... s, therefore, rejected Depreciation -plant and machinery - Plant and machinery were put to use before 30.9.1995 -no production had actually taken place till 26.9.1995 and that production was yet to commence - there was absence of evidence of installation and use of machinery before 30.9.1995 - The AO thus restricted the claim of the assessee for depreciation @ 25% on the additions of Rs.5,28,39,089/- to 12.5% - Thus, a sum of Rs.66,04,886/- was disallowed out of depreciation claimed on additions to plant and machinery before 30.9.1995. Allowance -Interest - The Tribunal has specifically recorded that the amount was invested by the assessee as share application money with the sister concern, i.e., M/s Mark Exhaust Systems Ltd. and the department had failed to produce any evidence that there was diversion of borrowed funds on which interest had been paid by the assessee - Decided in favour of assessee. - ITA No. 537 of 2006 - - - Dated:- 5-4-2011 - MR. JUSTICE ADARSH KUMAR GOEL.MR. JUSTICE AJAY KUMAR MITTAL, JJ. Ms. Urvashi Dhugga, Senior Standing Counsel, for the appellant. Mr. Rupesh Jain, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions made to the factory buildings to the tune of Rs.4,98,68,854/- instead of 10% claimed by the assessee on the ground that the building was not complete and fit for use before 30.9.1995; (c) depreciation on Rs.5,28,39,089/- on the plant and machinery was restricted to 12.5% only as against claim of the assessee at 25% as the assessee had failed to produce any cogent evidence of start of production prior to 30.9.1995 and, thus, enhancing the income by Rs.66,04,880/-; (d) Rs.43,52,604/- out of interest claimed as expenses on account of interest paid on money advanced to its sister concern free of interest. 4. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short the CIT(A) ] who vide order dated 23.5.2000 deleted the aforesaid additions. Against the order of the CIT (A), the revenue approached the Tribunal who vide order dated 30.12.2005 dismissed the appeal. Hence, the present appeal by the revenue. 5. We have heard learned counsel for the parties. 6. The issues to be adjudicated in these appeals relate to the following:- (A) Whether an addition on account of rent undercharged by the assessee from its si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the second issue, the CIT(A) on appreciation of evidence had come to the conclusion that the assessee was entitled to depreciation on the building for the full year as it was ready and put to use prior to 30.9.1995. The findings recorded by the Tribunal while affirming the order of the CIT(A) in this regard are as under:- 39. Apropos Plant II, the assessee submitted before the learned Commissioner (A) that it had constructed two different building, a new building at 39 Milestone, Village Begumpur Khatola Delhi Jaipur Highway, Gurgaon and an extension to the existing building at Plant II (Maruti Joint Venture Gurgaon). The assessee, in support of its claim, filed two certificates from Architects, M/s Abhijit Ray Associates. The first certificate dated 20.9.1995 gave proof that a substantial part of the factory and office building was completed on the total cost of Rs.4,90,22,897/-. The second certificate dated 25.3.96 stated that the remaining part of the factory and office building have been completed and that the total cost incurred thereon was Rs.83,72,158/-. The assessee submitted that these certificates were furnished to the AO during the assessment proceedings, but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the certificates were furnished before the AO, the AO did not taken into consideration both of them. The AO took into consideration only the second one. This clearly amounted to non-appreciation and non ITA No. 537 of 2006 -9- consideration of material evidence brought on record, resulting in the AO having treated the building as having been completed only in the second half of the year. The first certificate of the Architects has not been found to be false. It was just ignored by the AO. Here also, it is not controverted that till 31.3.1995, out of a total cost of building of Rs.4,90,22,897/-, the assessee company had incurred a sum of Rs.2,52,94,478/- which amount was reflected as Work-in-Progress in the balance sheet of the assessee as on 31.3.1995. The AO himself observed that the building was in existence, but it was put to use only in the latter half of the year. It was also not controverted, as stated by the assessee, that commercial production began at the new site at Gurgaon on 26.6.1995 and that raw material, machines, etc. were received and installed at the new building, much earlier than 30.9.1995. This was not possible if the building was not ready and put to use. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation claimed on additions to plant and machinery before 30.9.1995. 48. The learned CIT(A) observed in this regard, that new power connection would not be required for the existing Plant I, which fact had not been considered by the AO; and that the plant and machinery installed at Plant I were mainly a few presses spot welder machines, acquired in June/July 1995 and other small machines. Apropos Plant II, the assessee had submitted before the Ld. Commissioner (A) that it had imported plant and machinery from commas, Italy, vide their letter dated 25.9.1995 the said plant and machinery was cleared from Customs, Kandla, Port , Gandhidham, Kutch, on 17.8.1995 vide Bill of Entry No. 6401 dated and despatched from Kandla Port on 19.8.1995, vide Bill No. 28/95-96 dated 19.8.1995, of Veera Transport. The said plant and machinery was received on 23.8.1995 and unloaded by M/s Aneja Crane Service. It was contended that these documents clearly indicated that the plant and machinery was received before 30.9.1995; that the plant and machinery was installed, commissioned and commercial production begun on 26.9.1995, under the supervision of Engineers from M/s COMAS, Italy; that in su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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