TMI Blog2014 (12) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... ing pro-rata day product method and not by applying flat rate of interest on the closing balance of each day – Decided partly in favour of assessee. Depreciation on fixed assets installed at Baddi unit disallowed – Held that:- During the year, no manufacturing activity was carried out at the unit and part of the assets were transferred to the Dera Bassi unit by the assessee - However, balance assets were lying in Baddi unit and the assessee claimed depreciation on the same which was disallowed by the AO and CIT(A) - assessee had temporarily suspended the activities at Baddi unit and had re-started manufacturing activity in AY 2011-12 – relying upon COMMISSIONER OF INCOME TAX Versus YAMAHA MOTOR INDIA PVT. LTD. [2009 (8) TMI 27 - DELHI HIGH COURT] wherein it was held that as long as the machinery was available for use, though not actually used, it fill within the expression "used for the purpose of the business" and the assesses could claim the benefit of depreciation – thus, the AO is directed to allow depreciation on the fixed assets remaining at Baddi unit – Decided in favour of assessee. Interest on monthly balances of capital WIP - Held that:- The chargeability of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No. 2 which is purely on legal issue was not raised before the Commissioner of Income Tax (Appeals) but the same was taken in the original ground of appeal filed before the Tribunal and in the interest of natural justice, the said ground of appeal may be treated as additional ground of appeal. 7. The plea of the assesses before us was that the said ground of appeal being purely legal issue was to he admitted and adjudicated. We find merit in the plea of the assessee as the issue raised is purely legal issue and following the ratio laid down by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. 229 ITR 383 (S.C), we admit the said ground of appeal and proceed to dispose of the same. 8. In the facts of the present case, the assessee had furnished the return of income declaring total income of ₹ 3.46 Cr on 13.12.2006. The assessment in the case was completed under section 143(3) of the Act on total income of ₹ 4.22 Cr vide order dated 19.12.2008. Thereafter reasons were recorded for re-opening the assessment under section 147 of the Act and notice was issued to the assessee under section 148 of the Act and was served upon the assessee on 31.03.2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the interest bearing funds were utilized for making the said investment. The first aspect of the issue is that where the assessee has not raised the said issue before the Commissioner of Income Tax (Appeals), whether the same can be admitted for adjudication in the second round of appeal. We find that the issue of re-assessment under section 148 of the Act is purely a legal issue in view of the ratio laid down by the Hon'ble Supreme Court in National Thermal Power Co. Ltd (supra). We admit the said legal issue and proceed to decide the same. 12. We find no merit in the plea of the ld. DR for the revenue that the same is factual issue and not legal issue. However the re-opening of assessment under section 147/148 of the Act is valid because fact of diversion of funds was not properly disclosed by the assessee and therefore proviso to section 147 is not applicable. Hence, the proceedings initiated under section 147/148 of the Act have been validity initiated and completed. 13. Now coming to the issue raised on merits i.e. the disallowance worked out under section 36(1)(iii) of the Act on the capital work-in-progress. We find that similar issue arose before the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, circumstances and legal position of the case. Worthy CIT(A) has erred in confirming the action of Ld. AO wherein he had disallowed the depreciation of ₹ 43.248/- on fixed assets installed a; Baddi unit by alleging that if the unit did not function, the depreciation attributable to that unit is not allowable. 4. That on facts, circumstances and legal position of the case, the Worthy CIT (A) has erred in confirming the action of Ld. AO wherein he had made disallowance of ₹ 7,895/- u/s 14A of the Act r.w.r. 8D by assessing the notional interest on Investment of ₹ 1,50,000/- in equity shares of sister concern. 16. The ground of appeal Nos.1 5 raised by the assessee are general in nature and the same are dismissed. 17. The ground of appeal No.4 raised by the assessee is not pressed hence the same is dismissed. 18. Now coming to ground of appeal No. 2. the issue raised is disallowance of interest under section 36(1)(iii) of the Act on capital work-in-progress. Similar issue arose before the Tribunal in ITA No.1034/Chd/2012 and we have already decided the same in paras herein above. Following the same parity of reasoning, we decide the issue against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the assessee claimed depreciation on the same which was disallowed by the Assessing Officer and Commissioner of Income Tax (Appeals). We find no merit in the stand of the revenue authorities in view of the concept of block of assets where the assets cannot be individually identified after the same are merged in the block of assets. The assessee had temporarily suspended the activities at Baddi unit and had re-started manufacturing activity in assessment year 2011-12. We find support from the ratio laid down by the Hon'ble Delhi High Court in CIT Vs Yamaha Motor India Pvt. Ltd. (supra) wherein it was held that As long as the machinery was available for use. though not actually used, it fill within the expression used for the purpose of the business and the assesses could claim the benefit of depreciation. In the totality of the abovesaid facts and circumstances, we direct the Assessing Officer to allow depreciation on the fixed assets remaining at Baddi unit. The ground of appeal raised by the assessee is thus allowed. ITA 808/CHD/2013 :: Assessee's Appeal :: A.Y. 2010-11 24. The assessee has raised the following grounds of appeal: 1. That on the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and 5 are not pressed and hence the same are dismissed. 27. The issue in ground of appeal No. 4 is identical to the issue in ground of appeal No. 3 raised in assessment year 2009-10 in respect of depreciation on Fixed assets at Baddi unit. In line with our decision in paras herein above, the ground of appeal raised by the assessee is allowed. 28.. Now coming to ground of appeal No. 2 raised by the assessee which is against the addition of ₹ 456, 830/- on account of disallowance of interest on the monthly balances of capital work-in-progress. The Assessing Officer had made the said disallowance as the assessee had utilized interest bearing funds to make additions to the assets which were capitalized as work-in-progress. 29. The ld. AR for the assessee fairly admitted that principally the said issue was covered against the assessee by the order of the Tribunal in assessment year 2006-07. However, in the captioned assessment year, the work had completed and the amount was transferred to fixed assets and the balance which was left under the said head, was only interest part and there was no merit in adding the same. 30. We find merit in the plea of the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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