TMI Blog2012 (5) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... est cannot be disallowed. - Decided in favor of assessee. - ITA No.4662/Mum/2010, ITA No.3992/Mum/2010 - - - Dated:- 24-2-2012 - B Ramakotaiah, V Durga Rao, JJ. For Appellants: Mr Firoze B Andhyatujiwa Mr Viren Merchant For Respondent: Mr Jitendra Yadav ORDER Per: V Durga Rao: These are the cross appeals filed directed against the order of CIT(A)-33, Mumbai, passed on 19/03/2010 for the assessment year 2007-08. ITA No. 4662/Mum/10 - appeal by the assessee 2 Ground No. 1 is directed against the action of the CIT(A) in confirming the disallowance of sales consultancy charges of Rs. 7,50,000/-. 3. The facts relating to raise this ground are that the assessee had claimed consultancy charges of Rs. 7,50,000/- paid to i) Dilip K. Lilani (HUF), ii) Hemant K. Lilani (HUF) and iii) Rajesh Lilani (HUF) of Rs. 2,50,000/- each. On being asked by the AO to justify the payments made on account of consultancy charges to the said persons, it was submitted that the said sales consultancy charges were paid on account of efforts taken by members of concerned HUF s for the sale development, and the HUFs provide information about future sales opportunities and market exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the assessee submitted that the payments made on account of consultancy charges to three persons are HUFs and all the payments were made through account payee cheques. He further submitted that the details in respect of the payments made to HUFs were filed before the AO and it is not the case of the Revenue that the payments are not genuine. The learned counsel for the assessee relied upon the decision of the Hon ble Supreme Court in the case of UOI Vs. Martin Lottery Agencies Ltd., [2009] 20 STT 203 = 24VST 1 (SC) and Parasmal Bam Vs. CCE 2002 STT 368 = 7 STT 198 (CEGAT) and submitted that no particular qualification is required for Management Consultant as long as the consultancy service relating to production, marketing, finance etc. is provided, service tax is payable. He pointed out that the grievance of the AO is that the details of services were not provided by the assessee and not disputed that the services were not rendered by HUFs. 5. On the other hand, the learned DR submitted that payments were made to three HUFs, Rs. 2,50,000/- each on account of consultancy charges, but, what are the nature of services rendered by the said HUFs were not explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stock from and to the godown situated in the said plot by way of purchase bills, delivery challans, stock register etc which clearly show that there was a movement of stock form the said property. This would also put an end to the observation made by the AO that there was no building on the said plot to qualify for depreciation. In fact, the storing of stock in the plot proves the existence of a godown albeit with a AC sheet roofing. I also find that the appellant is right when he submits that the AO has picked and chosen statements from the purchase deed and has not considered it as a whole. The sale deed dated 20/09/2006 clearly speaks of the total plot area of 600 Mtrs with builtup area of 112.5 Mtrs which has been constructed by the MIDC authorities on or about 1991. He has simply taken into consideration the deed of assignment dated 18/04/2007 and from there picked up part of clauses at will, ignoring others. A reading of the said documents do prove this contention of the appellant and the fact that there was a building standing as a part of the property. In view of the above, I am not in agreement with the AO that the property did not qualify for depreciation as the secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders of the authorities below. We find that the before restricting the disallowance of depreciation, the CIT(A) gave a categorical finding that the assessee by way of documents produced during the appellate proceedings, has been able to establish that there was an asset available in his hand as fixed asset and as this asset was put to use in the year under consideration for business purpose, it would qualify for claiming depreciation u/s 32 of the Act. He further gave a finding that the AO has not disputed the purchases of the property at Plot No. 471 TTC Industrial Area, Pawani and off ice premises at 605, Mardholi Signate Plot No. 3914, Sector 30A, Vashi for business purpose but he has disallowed the depreciation claimed on the ground that i) no electricity bill, water bill etc. has been produced to evidence usage and ii) what the appellant purchased in Pawani was simply land with AC sheet roofing and as such depreciation will not be allowed on that property. Against the said objections, the CIT(A) held that the assessee had produced copy of electricity and water bills paid and it is true that these bills are raised in the name of the previous owner but the said payments are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apitalized as the assets were not put to use during the assessment year in question. However, as discussed earlier in this order, it is seen that the appellant has clearly proved that the assets were put to use in the year and qualified for depreciation. Therefore, in the year, interest paid on capital said to be borrowed for purchase of asset needs to be allowed as an expenditure. However, it is also seen that the details of purchases show that an amount of Rs. 12,83,750/- was used for acquiring capital asset and used in a pre-capitalization period. Therefore, interest on this amount @ 12% is not to be allowed as a deduction. To this extent, addition of Rs. 73,015/- under the issue is sustained. For the balance amount, it is seen that as the AO has not disputed the loan, its usage or quantum of interest paid, the same cannot be disallowed as done by the AO and the addition made is deleted. AO to take action accordingly. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal. 14. Before us, the learned DR submitted that borrowed funds have been utilized for purchase of fixed asset and as asset are not put to use, therefore, it is proved that amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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