TMI Blog2010 (11) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... n (Bhuj) visited the factory at Varsana, Taluka Anjar, Dist. Gandhidham on 30/03/2004 and has reported their observation to the Commissioner, Central Excise (Rajkot). It is specifically reported that, one plant for manufacturing of metalised and lacquered/laminated film has been installed and commercial production has been started. One plant for manufacturing of metallic yarn has also been installed and has started the trial production of metallic yarn also. (iv) Copies of Excise register showing raw material input has been submitted showing movement of goods. 3. The assessee has raised following grounds in this Asst. Year :- (1) The ld. CIT(A) erred in upholding, the decision of the AO making addition in returned income for following payments due to non-deduction of tax at source u/s 40(a)(ia), in spite of the fact that the said amount is paid as reimbursement to the agents for expenses incurred on behalf of the assessee company. a. Being the amount paid as reimbursement for making payment on behalf of the assessee company for clearance of import consignments of plant and machinery ₹ 10,35,838/-. Amount is capitalized and not debited to profit and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is metalised, lacquered and slitted and covered with other yarn which is finally called metallic yarn and jari kasab. This metalised plant which was so purchased and erected on which claim of depreciation is made could be put into production only if plain polyester film is produced and fed into it as raw material. Though plain film was produced on 26.3.2004 but the assessee waited to use it in metalising plant and machinery for want of acceptance of plain polyester film in the market. Only after acceptance of quality of plain polyester film the assessee started production of metalised polyester and metalised yarn. Most of the parts of the machine were purchased upto 18.03.2004, installed and erected. The assessee claimed that even depreciation is allowable on passive use of the machinery by relying on the decision in the case of CIT vs. India Tea and Timber Trading Co. 221 ITR 857 (Goa) and other decisions. The AO, however, did not agree with the above contentions on the ground that plant and machinery were not used during the year for the purpose of business even though the plant and machinery were installed and erected but they were not put to use not even any trial production wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nswer to question No.7, he stated No, we have not carried out any trial production . The starting of use of a new plant machinery is a major event which the Managing Director of the Company could not In any case believe to have forgotten. 2.3.2 During the entire assessment proceedings, the appellant kept on saying that no trial production was made, but the depreciation should be given because the plant machinery were in readiness to use. tt even cited two case laws to support its contention. However, during the appellant proceedings it has changed its stands when it could lay its hands on the report of the Assistant Commissioner of Central Excise. Under these circumstances, the statement of the Managing Director more to be believed and, therefore, I agree with the A.O. that the plant machinery was not to put to use and no trial production was done. He accordingly dismissed the appeal filed by the assessee. 6. Before us, the ld. AR drew our attention to the fact that purchase, installation and erection of the machinery is not in dispute and that it was done prior to 31.3.2004 but the only dispute is that it was not put to use prior to 31.3.2004. He drew our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster film is not commercially produced then metalised plant cannot be said to be in operation. In our considered view this distinction is superficial. There is no dispute that metalised plant and machinery was erected and installed and was ready for production. The assessee is already in this line of business and the assessee has erected this second unit. It is not a case that assessee is for the first time installing such plant and machinery and unless full fledged production is started it cannot be said that assessee has actually used the plant and machinery. Even the plant and machinery ready for use are entitled for depreciation. Similar issue has been decided by the Tribunal in the case Gujarat State Fertilizer Corporation Ltd. vs. DCIT in ITA No.3490/Ahd/2003 Asst. Year 2000-01 and DCIT vs. Gujarat State Fertilizer Corporation Ltd. in ITA No.3743/Ahd/2003 Asst. Year 2000-01 vide its order dated 17/9/2010 vide para No.10 as under :- 10. Ground No.4 relates to depreciation on plant and machinery. We have heard the parties. This issue is covered in favour of assessee by the decision of the Tribunal in ITA No.3228/Ahd/2003 for Asst. Year 1999- 2000 in assessee s own case, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t commenced its business at all, it might be that the use made by it of plant or machinery can be said to be use by it for the purposes of its business, because it has no business as yet. But so far as the present assessee is concerned, it has had its business long running, and thus trial production is quite sufficient, in our opinion, for the assessee to claim justly and properly depreciation. 7.2 Hon. High Court also observed in the aforesaid decision that unless there are words in the section indicating that not every kind of use for the purpose of the business will satisfy for attracting allowance, it is not open for the Revenue to read into the section any words of limitation so as to affect the interest of the assessee. It is with a view to the business of the assessee that the assessee used the machinery for the purposes of its business in causing those to go into trial production. If that is not using the machinery for the purposes of the business, then how else the above activity of the assessee can be described in that regard. 7.3 In view of the foregoing, we have no hesitation in setting aside the findings of the ld. CIT(A) in the matter of depreciation on pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 40(a)(ia) would be applicable. This provision is to disallow a claim of expenditure against the revenue receipt if tax is not deducted, if it is so required. Since tax is required to be deducted at source on commission payment, the AO and the ld. CIT(A) thought merely on this basis that provisions of section 40(a)(ia) can be invoked. However, the second condition is that a claim of such expenditure should have been made in profit and loss account. If no such claim is made, then whether TDS is made or not, no disallowance can be made. The question is if TDS would have been made whether AO could have allowed the expenditure from the profit and loss account even though assessee is not claiming the same. In our view not, and, therefore, the addition is misconceived and is, accordingly, deleted. 10. Similarly a sum of ₹ 83,589/- was paid to C F agent. But no such claim is made in the profit and loss account and also no TDS was made. For the reasons given by us in respect of addition made u/s 40(a)(ia), we hold that no addition can be made thereon, once no claim is made in profit and loss account, even if TDS is not made. 11. For the same reasoning anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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