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2015 (11) TMI 1122 - ITAT MUMBAI

2015 (11) TMI 1122 - ITAT MUMBAI - TMI - Rate of depreciation on Electric Installation used in factory premises to operate various Machinery & Equipments in manufacturing of POY and polyester chips - Held that:- As decided in favour of assessee's own case [2014 (12) TMI 677 - ITAT MUMBAI] held that the electrical fittings in the instant case should be considered as plant and machinery and hence the depreciation should be allowed at the rate of 25% to plant and machinery - Decided in favour of as .....

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lablility of its own funds, to which the Ld DR also did not object. Accordingly, we set aside the order of the Ld CIT (A) and restore this issue to the file of AO with a direction to examine this issue afresh by considering the information and explanation that may be furnished by the assessee and take appropriate decision in accordance with law

Disallowance u/s 40A(2)(b) - Held that:- We direct the AO to compute the disallowance @ 6% of the aggregate purchase value of the purchases ma .....

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Disallowance of alternate claim of depreciation when the rentals were not allowed - Held that:- As relying on assessee's own case [2014 (12) TMI 677 - ITAT MUMBAI] We notice it is held that the AO has denied the benefit of depreciation also on the ground that the assessee is not the owner of the asset as per the lease agreement. There is a fallacy in the said decision. Once the AO has held that this was a case of finance transaction by ignoring the lease agreement, in our view, he should n .....

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ed 12.1.2011 for the assessment year 2006-2007. In this appeal, assessee raised the following grounds which read as under: "1. DISALLOWANCE OF DEPRECIATION OF ₹ 2,34,437/- 1.1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in confirming the disallowance of depreciation on Electric Installation used in factory premises to operate various Machinery & Equipments in manufacturing of POY and polyester chips, by saying that with effect from assessmen .....

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9/- 2.1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in confirming disallowance of interest by stating that similar addition had been confirmed by CIT (A) in assessment year 2005-2006. 2.2. The Ld CIT (A) failed to prove any direct nexus between the amount invested and interest expenditure attributed towards purchases of land at Athal, Silvassa, without appreciating the facts the appellant company had not borrowed any funds for acquiring land and other asse .....

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CIT (A) erred in confirming disallowance of ₹ 4,77,918/- u/s 40A(2)(b) in respect of plastic adaptors from Arya Industries, without appreciating the facts that payment made to specified persons are well within the prevailing market rates in competitive atmosphere and are comparable iwth other manufacturers. 3.2. The Ld CIT (A) failed to appreciate the facts that while comparing the rates with third parties, though the lower quotations were also available, the then AO has purposefully taken .....

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travelling, bank charges, other pro. fee not specified in section 35D actuarial valuation charges, advisory service charges, out of pocket charges, listing fee and offering circular for issue of the FCCB and also charges for opinion, certification charges filing fee, for increase in authorized capital and professional fee and private placement which are not specifically allowed by section 35D. 4.2. The Ld CIT (A) failed to appreciate the facts that there was direct nexus between these expenditu .....

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st the Lease Rental disallowed in assessment year 2004-2005 by saying that AO has not made any discussion in this regards. 5.2. The Ld CIT (A) failed to appreciate the facts that copy of the submission given before the AO was also submitted to the CIT (A) during the course of appeal proceedings which states that in assessment year 2004-05 and 2005-06 alternate claim was allowed by the then AO in respective year. 5.3. On similar issue in AY 2007-2008, CIT (A) has allowed the relief of alternate c .....

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and ITA Nos. 1623 & 1624/M/2009 vide the order dated 17.12.2014 copy of which is placed on record. Considering the same, ground wise adjudication is given in the following paragraphs of this order. 3. Ground No.1 relates to the disallowance of depreciation of certain assets and the rate of depreciation is the subject matter of dispute. While the assessee claimed rate of depreciation @15% on the assets mentioned in the above grounds, the AO restricted the same to 10%. On similar facts, the Tr .....

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ion of the Ahmedabad Bench of the Tribunal referred above, we hold that the electrical fittings in the instant case should be considered as plant and machinery and hence the depreciation should be allowed at the rate of 25% to plant and machinery." 4. Considering the above Tribunal"s decision on the identical issue as well as in the absence of any contrary decision before us from the side of the Revenue, we, respectfully following above decision of the Tribunal, hold that the "ele .....

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wall constructed thereon. In this regard, concerned Government Authorities not permitted the assessee for manufacturing of Polyester Polymer at Athal, Silvassa and therefore, the assessee-company decided to shift the said project to Sarigam, Gujarat. The land at Athal, Silvassa was sold in AY 2007-2008. During the year under consideration, assessee company incurred ₹ 17,98,46,190/- as "interest" expenditure. Out of the said amount, ₹ 7,78,34,944/- was capitalized to fixed a .....

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Counsel for the assessee brought our attention to the said order of the Tribunal (supra) dated 17.12.2014 and mentioned that an identical issue was decided by the by the Tribunal vide para 31 of this order and therefore, the present ground should also be decided in the same lines. 7. On the other hand, Ld DR dutifully relied on the orders of the Revenue Authorities. 8. After hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the cited decision of the Tri .....

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e AO by showing the balance sheet of the assessee. Accordingly, he requested that this matter may be set aside to the file of the AO so that the assessee would be able to demonstrate about the availablility of its own funds, to which the Ld DR also did not object. Accordingly, we set aside the order of the Ld CIT (A) and restore this issue to the file of AO with a direction to examine this issue afresh by considering the information and explanation that may be furnished by the assessee and take .....

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u/s 40A(2)(b). Brief facts in this regard are that the assessee made purchases POY to the tune of ₹ 3,54,44,578/- and plastic adapter to the tune of ₹ 67,53,401/- from Arya Industries in which the chairman of the company is the partner. In the assessment, AO observed that similar purchases were made from other parties and compared the rates. AO accepted the rates for purchase of paper tubes. However, he was of the view that purchase of plastic adapter, there were some variations with .....

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e of the purchases made from M/s. Arya Industries, and therefore, considering the commonality of the issue, the present ground should also be decided in the same lines. 12. On the other hand, Ld DR dutifully relied on the orders of the Revenue Authorities. 13. After hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the cited decision of the Tribunal (supra), we find the said para 35 of the Tribunal"s order dated 17.12.2014 is relevant in this regard .....

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one decided by the Tribunal (supra) vide above extracted para 35 of its order and respectfully following the same, we direct the AO to compute the disallowance @ 6% of the aggregate purchase value of the purchases made from Arya Industries. Accordingly, this ground 3 with its sub-grounds is partly allowed. 15. Ground No.4 relates to the allowablility of the claim u/s 35D of the Act. In this regard, Ld Counsel for the assessee brought our attention to the additional ground filed before us for the .....

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priate and it requires to be sustained. Accordingly, the additional ground along with the ground no.4 raised by the assessee is remanded to the file of the AO for fresh adjudication. It is needless to mentioned that the AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, additional ground as well as ground no.4 with its sub-grounds are allowed for statistical purposes. 17. Ground No.5 relates to the disallowance of alt .....

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