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2016 (8) TMI 256 - ITAT DELHI

2016 (8) TMI 256 - ITAT DELHI - TMI - Additional depreciation u/s 32(1) (iia) on items of electric installation, tools, dyes and moulds - Held that:- The finding of the ld Assessing Officer that they are not installed is a contradictory statement as normal depreciation of such assets is already allowed. The normal depreciation is allowable when the assets are put to use, we failed to understand that while allowing the normal depreciation the assets have been accepted as being used and in allowin .....

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- Disallowance of wages payment - revenue or capital expenditure - Held that:- CIT (A) correctly deleted the disallowance relying on the order of the ld CIT (A) for AY 2009-10 wherein held that the payment was made for supplying the unskilled and semiskilled labour, which was used for lodging, un-lodging, cleaning of factory and in production process of the appellant. Hence, the amount has to be allowed as revenue expenditure to the appellant and same cannot be capitalized - Allowance of d .....

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of goods is amount which bears to the profit of the business of the undertaking in the same proportion as the export turnover bears to the total turnover. Therefore if the amount of processing charges is the business income of the assessee same is eligible for deduction in ratio of export turnover to total turnover. As ld Assessing Officer himself has taxed the processing charges under the head business income of the assessee the amount of deduction is allowable to the assessee - Allowabilit .....

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converted into Rupee loan and for this transaction the assessee has incurred financial charges which are in the nature of interest expenditure which are in the nature of interest in view of the provision of section 2(28A) of the Income Tax Act. Such expenditure is allowable in terms of section 36(1) (iii) of the Income Tax Act. It is not the case of the revenue that the assets for which the loan was taken is not put to use. In view of this we find no infirmity in the order of the ld CIT (A) in a .....

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isallowance. - Revenue appeal dismissed. - ITA No.3158/Del/2013, ITA No.225/Del/2013 - Dated:- 27-6-2016 - SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Ravinder Mani, Sr. DR For The Revenue : Sh. V. K. Subharwal, Adv ORDER PER PRASHANT MAHARISHI, A. M. 1. These are the appeals filed by the revenue against the order of the ld CIT (A)-XV, New Delhi dated 28.02.2013 for the Assessment Year 2008-09 and ld CIT (A)-XIII, New Delhi for the A .....

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7; 1,24,26,484/- paid to M/s. Ganpati Enterprises Holding the same as revenue expenditure. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing deduction u/s 10B on the amount of other processing charges of ₹ 2,81,827/- claimed to be received from customers. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing deduction u/s 10B insurance claim of ₹ 7927/- and discount received from supp .....

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8/- paid to M/s Ganpati Enterprises holding the same as revenue expenditure. 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleted the disallowance of ₹ 36,37,151/- made in respect of Swap Charges and Loan Processing Charges by holding the same as revenue expenditure by admitting additional evidence without providing opportunity to the A.O. to verify the factual position. 4. First we take up the appeal for the AY 2008-09 of the revenue. 5. The first g .....

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e additional depreciation holding that moulds, dies and electrical items are part and parcel of plant and machinery. 6. On appeal before us ld DR submitted that as plant and machinery is not installed the additional depreciation cannot be allowed. He further stated that the items are also not related to manufacturing of goods. 7. Against this ld AR submitted that the claim of the assessee is in accordance with the provision of the law and the additional depreciation is allowable on plant and mac .....

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32(1)(iia) of the Act. The finding of the ld Assessing Officer that they are not installed is a contradictory statement as normal depreciation of such assets is already allowed. The normal depreciation is allowable when the assets are put to use, we failed to understand that while allowing the normal depreciation the assets have been accepted as being used and in allowing additional depreciation it is stated that they are not installed. Further, the plant itself exists for the manufacturing of .....

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deletion of disallowance of wages payment of ₹ 12426484/- as revenue expenditure. The ld Assessing Officer has noted that wages of ₹ 21907287/- has been paid during the year and there is no substantial increase in the turnover of the assessee. The wages payments have been made to one M/s. Ganpati Enterprise, the assessee did not provide any agreement of wages payments of those parties. As assessee has failed to provide the reasonable reasons of the payment of wages and hence, it was .....

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te order for AY 2008-09, ld CIT (A) has deleted the disallowance relying on the order of the ld CIT (A) for AY 2009-10. In assessment year 2009-10 the ld CIT(A) has deleted the disallowance holding as under:- (iv) Disallowance out of Wages payments of ₹ 78,27,098/-:-During the year under consideration, the appellant has debited under the head wages ₹ 2,34,81,2937-which was paid to Ganpati Enterprises and Other employees working in the factory. The Assessing Officer observed that appe .....

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/-was disallowed and added to the total income. During the course of appellate proceedings, the AR of the appellant submitted that the Assessing Officer has not properly reconciled the increase in production viz-a-viz wage. The appellant has submitted a chart as page 139 of the paper book which shows that the production of the appellant has gone up from ₹ 366.73 lacs in F.Y. 2007-08 to ₹ 447.65 lacs in F.Y. 2008-09. Similarly, the wages has gone up from ₹ 219/-lacs in F.Y. 2007 .....

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03.01.2005 with Ganpati Enterprises. As per this agreement, the Ganpati Enterprises was to supply labours for lodging, un-lodging, unpacking, shifting, stacking of material and semi-skilled manpower for production and cleaning work. As per this agreement the appellant was to pay ₹ 2,300/-per month to the laborer alongwith 4.75% ESI Charges, 13.61% PF and EPS and 6% service charges and ₹ 2/-per employee welfare fund. The agreement with Ganpati Enterprises was renewed on 02.11.2006, 2 .....

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n and clinic work of the plant. It claims that payment to Ganpati Enterprises was made for hiring labour which was utilized in the business of appellant. The appellant has also filed confirmation from Ganpati Enterprises wherein it has mentioned that it has supplied labour to the appellant for its manufacturing activity in the factory. The labour supplied to the appellant are subject to deduction of PF, ESI, EPS, therefore, it cannot be said that labours were not supplied to the appellant. The p .....

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onstruction of building the appellant has got separate contractor name Raja Singh and payment made to Sh. Raja Singh are subject to deduction of TDS. In support of its contention the appellant has filed copy of the TDS certificates issued in Form No. 16A to Sh. Raja Singh which is filed at page 162 and 163. As per these TDS certificates the payment was made to Sh. Raja Singh and TDS was deducted. The appellant has also filed copies of ledger account of Sh. Raja Singh. As per this Raja Singh had .....

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tual and legal position discussed above it is held that the payment to M/s Ganpati Enterprises was made for supplying the unskilled and semiskilled labour, which was used for lodging, un-lodging, cleaning of factory and in production process of the appellant. Hence, the amount of ₹ 78,27,098/-has to be allowed as revenue expenditure to the appellant and same cannot be capitalized. Therefore, disallowance of ₹ 78,27,098/-is deleted. 12. On the perusal of the order of the ld CIT(A) we .....

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rt oriented unit claiming deduction u/s 10B of the Act. During the year it has received order processing charges from its customers amounting to ₹ 281827/- on which deduction was not allowed as it was found that the profit is not derived from export of articles or things. The assessee carried the matter before the ld CIT(A) who in turn held that these charges were received from the customers due to variation in their non standardization items and therefore, it was part of total export turn .....

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is no dispute on the amount of total turnover as well as the export turnover. However the only dispute is with respect to profit eligible for deduction shall include the processing charges of ₹ 281827/- or not. According to the provisions of section 10B (4) the profit derived from export of goods is amount which bears to the profit of the business of the undertaking in the same proportion as the export turnover bears to the total turnover. Therefore if the amount of processing charges is .....

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ers of ₹ 22459/- . According to the ld Assessing Officer deduction on these two receipts are not allowable whereas the ld CIT (A) has held in favour of the assessee. As we have already held in ground No. 3 of the appeal that there is no dispute on the export turnover and total turnover amounts and when both these receipts are taxed with business income the ld CIT (A) has correctly allowed deduction on these two sums u/s 10B of the Act. We confirm the finding of the ld CIT(A) on this count .....

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. We have also perused the ground No. 1 of the appeal and also are of the view that it is on similar facts. We have already dismissed ground No. 1 of revenue appeal for AY 2008-09 holding that when normal depreciation has been allowed there is no reason that additional depreciation should be disallowed for the reason that assets are not installed and used for manufacturing. In view of this we dismiss ground No. 1 of the appeal of the revenue. 22. Ground No. 2 of the appeal of the revenue is agai .....

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have already deleted the disallowance as AY 2008-09 on identical issue, for similar reasons the disallowance of ₹ 7827098/- made during the year is also not sustainable. Hence, we confirm the finding of the ld CIT(A) and dismiss ground No. 2 of the appeal. 24. Ground No. 3 of the appeal is against the deletion of disallowance of ₹ 3637151/- of swap charges, by holding the same as revenue expenditure. Ld AO has noted that during the year assessee has claimed swap charges of ₹ 2 .....

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Charges and Loan processing charges of ₹ 36,37,151/-:-During the year the appellant has claimed Swap Charges FCNRB and Loan Processing Charges of ₹ 29,67,11 l/-and ₹ 6,70,040/-respectively for Swapping the loan from one bank to the another bank and processing charges for sanction of loan. These expenses have been disallowed by the Assessing Officer on the ground that same are capital in nature. The appellant claims that the loans for which expenditure is claimed were not utiliz .....

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upport of this the appellant has filed all supporting documents before Assessing Officer as well as before me. The papers relating to conversion of loan are filed from page 174 to 181 of the paper book. Therefore, these expenses are revenue expenditure incurred wholly and exclusively for business purposes of the appellant and same are fully allowable. As regards the loan processing charges of ₹ 6,70,040/-the same pertains to payment to Oriental Bank of Commerce for shifting of the loan fro .....

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re filed at 182 to 185 of the paper book. The appellant has also filed sanctioned copy of credit facility of Axis Bank to the appellant. In view of the above it is established that Swap Charges paid to OBC for converting loan from Euro to Indian Rupees and processing charges paid to OBC for shifting of loan from OBC to Axis Bank Ltd. are revenue expenditure incurred wholly and exclusively for business purposes of the appellant. Hence, same are fully allowable. The Assessing Officer was not justi .....

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