TMI Blog2013 (9) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Disallowance of Depreciation - business premises known as "DD Milestone". - The depreciation with regard to "DD Milestone" building has already been remitted back to the file of the Assessing Officer - In respect of the other two flats in Link Horizon, Marine Drive, Ernakulam and in Uni-Housing at Ernakulam the claim of the taxpayer is that the flats were given to the directors for the purpose of the taxpayer's business. Therefore, it has to be examined whether the flats were in fact given to the directors for the business purpose of the taxpayer or not. For the sake of consistency, this Tribunal is of the considered opinion that this issue also needs to be re-examined by the Assessing Officer. Accordingly, the orders of the lower authorities on this issue are set aside and the issue is remitted back to the file of the Assessing Officer for re-consideration. The Assessing Officer shall re-examine the issue afresh and find out whether the flats in question were used by the directors for the business needs of the taxpayer and thereafter will decide the issue in accordance with law after giving opportunity of hearing to the taxpayer. Exemption u/s 10A - whether, blending and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the firm could not pick up and finally it had to close down the business. According to the learned representative there was a commercial expediency in advancing funds to the sister-concern. On the contrary, Shri M. Anil Kumar, the learned Departmental representative submitted that the partnership firm AG Info Solutions is also occupying the premises of the taxpayer's building as a tenant. The partnership firm started its computer business. However, it could not pick up the business. Subsequently it was closed down. Since the business of the partnership firm was closed down, according to the learned Departmental representative there was no commercial expediency. According to the learned Departmental representative, the business of the taxpayer is blending and packing of tea for export. Development of software is not the business of the taxpayer company. Therefore, the partnership firm which was said to be established for development of software has no business connection with the taxpayer. Since there was no business connection, according to the learned representative, the advance of money by the taxpayer company to the partnership firm is not for commercial expediency. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was advanced for earning profits. We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister concern. It all depends on the facts and circumstances of the respective case. For instance, if the directors of the sister concern utilise the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister-concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans." In view of the above, it needs to be examined whether the funds advanced to the partnership firm were used by the partnership firm for the business or it was used for the personal needs of the partners. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll portion of the building was let out and the other major portion was used for the business of the taxpayer. According to learned counsel, if at all any disallowance is called for, then only the proportionate depreciation pertaining to the let out portion can only be disallowed and not the entire claim of depreciation. On the contrary, Shri M. Anil Kumar, the learned Departmental representative submitted that admittedly, the property was let out to earn rental income. As per section 24 of the Income-tax Act, when a property is let out, the taxpayer is not entitled for depreciation. The depreciation cannot be allowed as a deduction while computing the rental income. On a query from the Bench, whether the entire building was let out or part of the building was let out, the learned Departmental representative submitted that this fact was not examined by the lower authorities and if part of the building was let out then the taxpayer may not be entitled for depreciation of that part of the building which was let out to the third parties. The learned Departmental representative has submitted that the matter may be set aside for verification. We have considered the rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal is of the considered opinion that this issue also needs to be re-examined by the Assessing Officer. Accordingly, the orders of the lower authorities on this issue are set aside and the issue is remitted back to the file of the Assessing Officer for re-consideration. The Assessing Officer shall re-examine the issue afresh and find out whether the flats in question were used by the directors for the business needs of the taxpayer and thereafter will decide the issue in accordance with law after giving opportunity of hearing to the taxpayer. Now coming to the Departmental appeal, the only issue arises for consideration is exemption under section 10A of the Act. Shri. M Anil Kumar, the learned Departmental representative submitted that the taxpayer is admittedly blending and packing tea for export. According to the learned Departmental representative, blending and packing of tea cannot be construed as "manufacture" so as to be eligible for deduction under section 10A of the Act. Referring to the judgment of the Kerala High Court in the case of Girnar Industries v. CIT [2011] 338 ITR 277 (Ker), the learned Departmental representative submitted that the Kerala High Court has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. CIT [2011] 338 ITR 285 (Ker) found that blending and packing of tea amounts to "manufacture", therefore, the taxpayer is eligible for deduction under section 10A of the Act. We have also carefully gone through the judgment of the Kerala High Court in the case of Tata Tea Ltd. [2011] 338 ITR 285 (Ker). The Kerala High Court, after considering its earlier judgment in Girnar Industries [2011] 338 ITR 277 (Ker) and the judgment of the apex court in Tara Agencies [2007] 292 ITR 444 (SC) found that the judgment of the apex court in the case of Tara Agencies [2007] 292 ITR 444 (SC) is not applicable for the purpose of considering exemption for industries in the export processing zone, free trade zone, and to 100 per cent. export oriented unit covered under sections 10A, 10AA and 10B of the Act. In fact, the Kerala High Court has observed as follows at page 290 of the ITR : "Further, industrial units engaged in the very same activity ; i.e., blending, packing and export of tea in the special economic zones and free trade zones, will continue to enjoy tax exemption under section 10A and section 10AA respectively. The still worse position is that the appellant would be denied of expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is remanded back to the file of the Assessing Officer. Since the issue is identical, this Tribunal is of the considered opinion that the issue should be re-examined by the Assessing Officer for the year under consideration also. Accordingly, the orders of the lower authorities are set aside and the same is restored to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh in the light of the direction issued for the assessment year 2004-05 in this order and thereafter decide the issue in accordance with law after giving opportunity of hearing to the taxpayer. In respect of flats at Link Horizon and Uni-Housing, this issue has also been remitted back to the file of the Assessing Officer. Therefore, for the very same reasonings this Tribunal is of the opinion that for the assessment years 2005-06 and 2006-07 also this issue needs to be re-examined by the Assessing Officer. Accordingly the orders of the lower authorities are set aside and the same is restored to the file of the Assessing Officer. The assessing officer shall re-examine the issue afresh in the light of the direc- tion issued for the assessment year 2004-05 in this order and thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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