TMI Blog2015 (2) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. Respectfully following the ratio laid in the judgement of the Hon'ble Jurisdictional High Court in the case of CIT vs. Raghuvir Synthetics Ltd. (2013 (7) TMI 806 - GUJARAT HIGH COURT), we cannot uphold the action of the authorities below. - Decided in favour of assessee Disallowance of depreciation - Held that:- In the present case, the assessee has produced the evidence of electricity power consumption that goes to show that the Plant was running and this fact is not rebutted by placing any contrary evidence on record by the Revenue that the electricity so consumed for any other purpose. Therefore, respectfully following the ratio laid down by the Hon'ble Jurisdictional High Court in the case of ACIT vs. Ashima Syntex Ltd.(2000 (8) TMI 22 - GUJARAT High Court), we hereby delete the dis-allowance and direct the AO to allow the depreciation amounting to ₹ 28,77,600/- as claimed by the assessee. - Decided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide question (B), we recorded the following reasons: 3. On question (A), discussion by the Tribunal is from paragraphs 10, 11 and 11.1, which is reproduced herein below:- 10. Ground No.5 is against the dis-allowance of the expenses for scientific research u/s.35(2AB) of the Act amounting to ₹ 3,59,500/-. The ld.counsel for the assessee submitted that the AO disallowed the expenditure on the basis that the clinical trial expenses was not within the In-house Research and Development Facility as approved by the prescribed Authority. The ld.CIT(A) confirmed the dis-allowance made by the AO on the basis that the condition allowing of weighted expenditure is that the In-house research should have been made. The ld.counsel for the assessee relied on the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Cadila Healthcare Ltd. reported at (2013) 31 taxmann.com 300 (Guj.). The ld.counsel for the assessee submitted that the issue is squarely covered by the judgement of Hon'ble High Court of Gujarat in the case of CIT vs. Cadila Healthcare Ltd.(supra). 11. We have heard the rival submissions, perused the material available on record and gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding. On appeal, the ld.CIT(A) restricted the dis-allowance to the extent of 4% of the average cost of fund. The ld.counsel for the assessee submitted that the assessee was having sufficient interest-free funds. The ld.counsel for the assessee placed reliance on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT-I vs. UTI Bank Ltd. reported at (2013) 32 taxmann.com 370 (Gujarat). He also placed reliance on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT vs. Raghuvir Synthetics Ltd. reported at (2013) 354 ITR 222(Guj.) 12.1. On the contrary, ld.Sr.DR supported the order of the AO and submitted that the advances were given to sister-concern for commercial purposes, therefore, there is no applicability of section 36(1)(iii) of the Act. 13. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld.counsel for the assessee. The AO has made addition on the basis that the outstanding balances in respect of the sister concern, namely, M/s. Casil Health Products Ltd.(CHPL in short) has been continuing over ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made for business purpose, then dis-allowance is not called for. The Hon'ble Supreme Court in that case has approved the judgement of Hon'ble Delhi High Court rendered in the case of CIT vs. Dalmia Cement (B.) Ltd. reported at (2002) 254 ITR 377 (Delhi), wherein the Hon'ble Delhi High Court has held that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The income-tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery and installed the same. The authorities below have also not disputed the fact that the assessee has furnished the electricity bill, etc. and also the salary paid to the staff. The Hon'ble Gujarat High Court in the case of ACIT vs. Ashima Syntex Ltd. (supra) has held as under:- 39. We are, therefore, of the opinion that when there is commencement of business by way of production of the articles, it can be said that the assessee is entitled to depreciation. 40. It is required to be noted that when an entrepreneur undertakes to invest huge amount for the manufacture of the product, he has to plan it properly. Installation of machinery or plant and machinery in the building itself is not sufficient to attract provisions contained in s. 32 of the Act. There must be use of plant and machinery for the purpose of business as contemplated in s. 32 of the Act. There is thus a thin line between the trial run and actual production, or many a times, the word used as commercial production . If the machines are installed properly and it gives good result, then one need not wait for any rectification in the system. There may be some cases wherein after commencement of the productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of s. 32 of the Act. 17.1. In the present case, the assessee has produced the evidence of electricity power consumption that goes to show that the Plant was running and this fact is not rebutted by placing any contrary evidence on record by the Revenue that the electricity so consumed for any other purpose. Therefore, respectfully following the ratio laid down by the Hon'ble Jurisdictional High Court in the case of ACIT vs. Ashima Syntex Ltd.(supra), we hereby delete the dis-allowance and direct the AO to allow the depreciation amounting to ₹ 28,77,600/- as claimed by the assessee. 8. On the aforesaid question also, as the question is already covered by the decision of this Court in the case of ACIT vs. Ashima Syntex Limited, reported in 251 ITR 133 , we do not find that such question can be considered as substantial question of law, which may arise in the present appeal, as canvassed. 9. In our view questions (D), (E), (F) as well as question (G) would arise for consideration in the present appeal being substantial questions of law. 10. Hence, the present appeal is not admitted on Questions (A), (B) and (C), but the appeal is admitted only on Questions (D), ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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