TMI Blog2014 (8) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for non-business purposes - Decided against Revenue. Depreciation on roads and electrical fittings – Held that:- The roads connect the various amusement rides within the park with one another – CIT(A) as well as the Tribunal proceeded on the basis that the roads are not adjunct to any buildings and it cannot be classified under buildings for depreciation purposes - A reading of the provision makes it clear that building includes roads, bridges, culverts, wells and tubewells - The provision is not restricted to only roads adjacent to buildings – CIT(A) as well as the Tribunal have not considered the aspect fell into error in accepting the assessee's plea that 20% depreciation on roads and electrical fittings should be allowed - the AO was justified in restricting depreciation to 10% and 15% - Decided in favour of Revenue. Drawings by the Directors debited under the head sales promotion and travelling expenses – Held that:- There is a clear admission by the Director that the personal expenses are met out of the bank accounts of the assessee only - credit card expenses, foreign travel expenses of directors, household expenses, etc. are debited under the head Sales P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;sales promotion and travelling expenses'? 2.1. The brief facts of the case are as under: A search and seizure operation was conducted in VGP Group on 3.3.2009. Consequent to such search operation, notice under Section 153A of the Income Tax Act (for brevity, the Act ) dated 17.3.2010 was duly served upon the assessee. Thereafter, notice under Sections 142(1) and 143(2) of the Act were duly served upon the assessee. In response to the notice under Section 153A of the Act, the assessee filed revised return of income on 29.7.2010 for all assessment years except 2009-2010. For the assessment year 2009-2010, the assessee filed its returns on 30.9.2009. 2.2. In the course of search, it was found by the Department that the assessee was suppressing its profits through claim of inflated land development expenditure. It is the case of the Revenue that the assessee purchased land at a nominal rate; developed the same and sold them in plots at a low rate and such sale price of each plot included land development charges, apart from the basic value of the plot and other expenses like stamp duty, registration expenses, etc. The assessee debited the expenditure incurred on developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20610-11, restricted the disallowance on land development expenses to 5%, as against 20% disallowance ordered by the Assessing Officer. 2.8. The claim of the assessee for interest payment, which was disallowed by the Assessing Officer, was deleted by the Commissioner of Income Tax (Appeals) holding as follows: 14. I have considered the facts and circumstances and the arguments of the ld.AR. As contended, there is no diversion of borrowed funds for non-business purposes. Moneys have not been advanced during this year. Moneys advanced in the earlier year were out of interest free funds. Even th moneys advanced have been used by the sister concerns only for the purpose of business. The decision of the Hon'ble Tribunal, in a sister concern of this group, on identical facts, is seen to apply to the case of the appellant. Therefore, the disallowances made for all the years is hereby directed to be deleted. 2.9. Anent the claim of depreciation on roads and electrical fittings for all assessment years except 2003-04 and 2008-09, the Commissioner of Income Tax (Appeals), noticing that it is an expenditure incurred towards maintenance of roads in the amusement park, came to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is correct. 2.11. Assailing the said order passed by the Commissioner of Income Tax (Appeals), the assessee as well as the Revenue preferred appeals before the Tribunal, which partly allowed the appeals filed by either side. The Tribunal, in effect, held as under: (i) directed the Assessing Officer to restrict the disallowance of expenses towards land development to 10%; (ii) confirmed the order of the Commissioner of Income Tax (Appeals) in respect of deleting the disallowance of interest payment; (iii) confirmed that 20% depreciation claimed by the assessee is perfectly in order; and (iv) the drawings of directors and debiting the amount under the head Sales promotion and travelling expenses is fully justified. 2.12. Aggrieved by the said order passed by the Tribunal, the Revenue has filed these appeals raising the substantial questions of law, referred supra. The assessee has not chosen to file any appeal. 3. We have heard the learned counsel on either side and perused the orders passed by the Tribunal and the authorities below. 4. The substantial questions of law raised are dealt with on the trot as under. Substantial Questions of Law (1) and (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business, the totality of the facts and circumstances of the case, we direct the Assessing Officer to restrict the disallowance of expenses towards land development incurred in cash to 10% after taking into consideration the offer made by the assessee. In other words, the total disallowance including the offer made by the assessee should not exceed 10% of the land development expenses incurred in cash by the assessee. We make it clear that in any of the these assessment years in case the offer made by the assessee is more than 10% of land development expenses incurred in cash, in such circumstances, the Assessing Officer should restrict the disallowance to the offer made by the assessee and not 10% of land development expenses incurred in cash. 5.4. In view of the subsequent order passed by the Tribunal on 7.6.2013 in M.P.Nos.61 to 68/Mds/2013, the Revenue is not aggrieved by the order impugned in these appeals on this issue. The assessee is also not aggrieved by the subsequent order passed by the Tribunal. 5.5. In view of the above, the substantial questions of law (1) and (2) does not require to be considered any further and accordingly, they are not answered. Substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax, [2001] 247 ITR 803 and a decision of the Bombay High Court in Commissioner of Income Tax v. Chemaux Ltd., [1994] 74 Taxman 201. The Tribunal, on appeal, confirmed the order passed by the Commissioner of Income Tax (Appeals). 7.2. In the case of Indore Municipal Corporation v. Commissioner of Income Tax, [2001] 247 ITR 803, the reason for granting higher depreciation was justified by stating that the road in question was not adjunct to any buildings and, therefore, cannot be classified under buildings for depreciation purposes. In Commissioner of Income Tax v. Chemaux Ltd., [1994] 74 Taxman 201, the Bombay High Court held that any expenditure incurred for repair or resurfacing of kutcha roads inside the factory is revenue expenditure. 7.3. The Tribunal, while confirming the order of the Commissioner of Income Tax (Appeals), held that since in the case on hand the roads are not adjunct to any building and there is no other construction except these roads, the decisions, referred supra, would squarely apply and granted depreciation as claimed by the assessee. 7.4. To shed light on this issue, it would be relevant to refer to the Table of Rates at which depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax (Appeals) and the Tribunal, the learned Standing Counsel for the Department relied upon the statement made by one of the Directors and we extract the same hereunder for better clarity on this issue: Whenever any personal expenses (not incidental to the business) is incurred by any Director, the expenses are recorded by debiting personal account of the director and the amounts are transferred as loan to the partnership firms (V.G.P. Co., VGP Investments) and subsequently booked as drawings in the partner's capital/current account. However, no actual transfer of funds to the Partnership firms and drawings from the firms takes place. Personal expenses are met out of the bank accounts of VGP Housing Pvt Ltd only. Apart from this, the personal expenses such as credit card expenses, foreign travel expenses of directors, household expenses etc are debited under the head 'Sales Promotion Travelling Expenses' in the VGP Housing (P) Ltd / VGP Co Pvt Ltd books of account. I admit that the extent of such personal expenses (consolidated for all group concerns) debited under these heads of account would be around ₹ 1 Crore for the period 2003-04 to 2008-09. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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