TMI Blog2012 (10) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... pkeep of the vehicles, were otherwise business expenses, the depreciation, therefore, was directly relatable to business rather than the use of foreign or luxury cars by executives of the assessee - in favour of the assessee. Rental income from the flats - assessable as "income from other sources" OR ' house property ' - Held that:- As the assessee-company was not the "legal owner" of the property in the flats & relying on judgment of the Supreme Court in CIT Versus Podar Cement Pvt. Ltd. [1997 (5) TMI 2 - SUPREME COURT] " owner " is a person who is entitled to receive income from the property in his own right, the rental income from the flats was assessable as "income from other sources" u/s 56 - in favour of assessee. Provisions for completed expenses and expenses incurred on completed project - ITAT allowed the claim - Held that:- As decided in CIT Vs. Triveni Engineering and Industries Limited [2010 (11) TMI 90 - DELHI HIGH COURT] Tribunal has allowed the provision made by the assessee for losses on the ground that the assessee was following completed contract method and provision had been made on account of losses and on the precedent judgement - in favour of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not been gone into in the IBM‟s case. It was submitted that the second proviso is an exception to the provisions of Section 37(4) and consequently to Section 37(5) and Section 37(4) as it stood at the time before its omission w. e. f. 01.04.1998 by the Finance Act, 1997 that no allowance could be made on the expenses incurred by the assessee after 28th February, 1970 (as stated in sub-clause (i)) on the maintenance of any residential accommodation in the nature of guest house or for the year commencing 01.04.1971 or subsequent year also depreciation of any building guest house or depreciation in a guest house were allowed. Section 37(5) followed the tenure and evading of sub-section (4) of Section 37 by highlighting that any accommodation by whatever name called, maintained hired, or reserved or otherwise arranged by the assessee for the purpose of providing, lodging or boarding and lodging to any person (including any employee or, where the assessee is a company, also any director of, or the holder of any other office in the company), on tour or visit to the place at which such accommodation is situated is accommodation in the nature of a guest house within the mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its business and commercial activities and project construction in Iraq. These were disallowed; the Income Tax Appellate Tribunal ("Tribunal", for short) directed the disallowance to be withdrawn. The Revenue is aggrieved. The Revenue relied upon the second proviso to Section 32(1)(ii) of the Income Tax Act, 1961 ("Act", for short) and contended that the parliamentary intention was to specifically deny the depreciation of the cars used outside India and that depreciation can be allowed only for one class of category of cases. 6. The assessee, on the other hand, contends that the parliamentary intention is to the contrary and relied upon the Finance Minister's speech as well as the Circular no. 621 dated 19th December, 1991. The relevant part of the Circular reads as follows :- Rationalisation of the provisions relating to depreciation: 17. Under the existing provisions of section 32 of the Income Tax Act, depreciation of foreign motor cars is not allowed. Only one exception has been made, i.e, where foreign cars are used in a business of running them on hire for tourists, depreciation is allowed on them. It has been pointed out that Indian concerns, which are ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the statute in this case ought to be given primacy. There is and can be no dispute that the expenses incurred for the upkeep of the vehicles, were otherwise business expenses; the depreciation, therefore, was directly relatable to business rather than the use of foreign or luxury cars by executives of the assessee. 9. Having regard to the circumstances, the Court is of the opinion that the claim for depreciation was correctly upheld by the Tribunal. This question is accordingly answered against the Revenue and in favour of the assessee. 10. Regarding question no. 3, this Court is of the opinion that the above substantial question which has to be answered is covered by the judgment of the Supreme Court in CIT Versus Podar Cement Pvt. Ltd. reported in (1997) 226 ITR 625. The reference is therefore answered in favour of the assessee and against the Revenue. 11. The 4th question of law referred to as follows:- Whether on the facts and in the circumstances of the case, the Learned ITAT is correct in holding that the expenses claimed by the assessee under the heads provisions for completed expenses and expenses incurred on completed project is allowable even though the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the actual costs further incurred in the later years exceed the provision so made, the excess expenditure is debited in the profit and loss account under the head "Expenses on completed Projects" and in case such expenditure is less than the provision, the excess is written back as income in the profit and loss account. The reasons for which the above two items have been disallowed by the AO, could be summarised as under:- a) That after the sale is accounted for at 10% and the provision for estimated expenditure is also made, there nothing remains to be further added towards these projects and the further expenditure was not the liability of the company. After the projects had been completed and handed over, the liability of the company was over. b) That such further expenditure should have been recovered from the parties to whom the project was handed over. c) That the company thus voluntarily incurred certain expenditure which was not really warranted since it was not its liability. No prudent businessman would met such heavy expenditure from its own pocket. d) That the provision made is against a contingent liability by virtue of uncertainty of the quantum involved ..... X X X X Extracts X X X X X X X X Extracts X X X X
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