TMI Blog2016 (11) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... r report or in the tax audit report. In view of the aforesaid facts, we are of the view that Assessing Officer was not justified in making an ad-hoc disallowance of shortage. We thus direct the deletion of disallowance.- Decided in favour of assessee Cash payment for purchase of fruits - Held that:- It is an undisputed fact that the assessee has purchased fruits for which the payment was made in cash. We find that the sellers of goods have confirmed about the supply of goods to the assessee and the payments for sale being received by them in cash. The Assessing Officer has not brought out any instance of purchase transactions which were not verifiable and had merely proceeded to disallow the expenses on ad-hoc basis. Further, we are of the view that the payment in cash for purchase of agricultural commodities is covered by Rule 6DD(e) of the Rules and in such a situation merely because the cash payments have been made, no disallowance could be made. We are of the view that in the aforesaid facts and without bringing any material on record of the purchases being not verifiable, the Assessing Officer could not have resorted to make an ad-hoc disallowance. We therefore set-aside di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 14.11.2011 and the total income was determined at ₹ 2,42,20,910/-. Aggrieved by the order of the Assessing Officer, assessee carried the matter before ld. CIT(A), who vide order dated 08.05.2013 in Appeal No.SLI/251/11-12 dismissed the appeal of assessee. Aggrieved further by the order of ld. CIT(A), assessee is now in appeal before us and has raised following grounds :- The following grounds of appeal are without prejudice to each other: 1. The learned Commissioner of Income Tax (Appeals) (I), Kolhapur erred in confirming the disallowance of depreciation of ₹ 16,21,886/- on the cost of foundation of a Wind Turbine and on the cost of installation and commissioning of the Wind Turbine without properly appreciating the explanation filed. 2. While confirming the disallowance of depreciation amounting to ₹ 16,21,886/-, the learned CIT(A) conveniently ignored the copies of the appellate order passed by the CIT (A) in similar type of case and also purposefully ignored the decisions of the ITAT, Pune and of the Bombay High Court when copies of those decisions were filed before him on 19th of March, 2013 and when the said decisions were dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not at 80% as claimed by assessee. The Assessing Officer thereafter worked out the excess depreciation at ₹ 16,21,886/- and disallowed the same. Aggrieved by the order of Assessing Officer, assessee carried the matter before ld. CIT(A), who upheld the order of Assessing Officer by holding as under :- 4. The issue of disallowance of depreciation had come up in appeal before me in the appellant s own case for assessment year 2008-09. I hereby confirm the disallowance made during the year under consideration based on the reasons recorded in my appellate order bearing No.SLI/280/10-11 dated 08/05/2013. 4. Aggrieved by the order of ld. CIT(A), assessee is now in appeal before us. 4.1 Before us, at the outset, ld. AR submitted that the issue of depreciation is covered in assessee s favour by the decision of Co-ordinate Bench of Tribunal in assessee s own case for assessment year 2008-09. He pointed to the relevant portion of the order of the Tribunal dated 31.03.2016 in ITA No.1293/PN/2013. He therefore submitted that since the facts of the case in the year under appeal are identical to that of earlier year, as has also been noted by the ld. CIT(A), the issue in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection commissioning, civil work, etc. being necessary adjunct to the windmill and is not meant for any other purposes other than for operational functioning of wind turbine and therefore cannot be treated differently. Therefore, impugned capital expenditure towards civil work commissioning etc. also will qualify for the same rate of depreciation as applicable to wind turbine itself. The issue is no longer res-integra and is covered by the decision of Co-ordinate Bench of the Tribunal in the case of Poonawala Finvest Agro (P.) Ltd. vs. ACIT, (2008) 118 TTJ 68 (Pune) wherein it has been clearly held that the capital expenditure incidental to the windmill has to be tested on the touchstone of the functional test and the assessee will be entitled to higher rate of depreciation on such incidental expenditure, if it has no other use except for power generation done by the windmill. Our view is also supported by another decision of the Co-ordinate Bench of Pune Tribunal in the case of M/s D.J. Malpani vs. ACIT in ITA Nos.1148 to 1154/PN/2013, order dated 30.10.2015. Accordingly, we hold that the Revenue is misdirected itself in law in making the impugned disallowance of depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tower and Transformer. The other expenses which were capitalized as a part of the Windmill consisted of the following:- (a) Power Evacuation Infrastructure (b) Erection and commissioning charges. (c) Line work (d) Electrical items (e) MEDA charges (f) Application charges (g) Professional charges and (h) Bank charges (i) Civil Works were held not entitled to depreciation @80% as they are not a part of the Windmill. Thus, allowing depreciation @10% with regard to the cost of civil work foundation for the Windmill listed at (i) above and depreciation of 15% on all the other items listed at (a) to (h). Thus, the Assessing Officer disallowed the claim of ₹ 92.58/- lakhs and restricted the depreciation to only ₹ 4.20 Crores as against ₹ 5.12 Crores claimed by the Respondent-assessee. 4 .. 5 .. 6 .. 7 Regarding Question (1) (a) We find both the CIT(A) as well as the Tribunal have recorded a finding of fact that the items listed at (a) to (d) in paragraph(3) above form an integral part of the Windmill. Thus, entitled to 80% depreciation being a part of a Windmill. Admittedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.1 and 2 of assessee s appeal are allowed. 8. The third ground with respect to addition of ₹ 15,01,088/- on account of shortage. 8.1 On perusing the tax audit report, the Assessing Officer noticed that the assessee had shown shortage of 1,01,678 Kgs. in respect of various fruits, the details of which are listed at page 3 of the assessment order. The assessee was asked as to show as to why the shortage claimed not be disallowed to which, assessee inter-alia submitted that assessee deals in fruits which are highly perishable in nature. It was submitted that assessee also exports vegetables. Due to the quarantine laws, there is strict check on all the shipments on the goods and because of which assessee has to remove the goods which are not upto the standards before the shipment and these goods are destroyed. It was further submitted that the price of goods are dependent on the quality and the freshness of produce and that the damages to the fruits occur inter-alia due to evaporation of water content, improper pre-harvest and post-harvest handling and damage during the transportation of the goods. Due to the aforesaid factors, the damage takes place and the same h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The assessing officer has duly allowed 50% of the shortage claimed by the appellant. Therefore, the disallowance of balance 50% is confirmed and the ground taken by the appellant is rejected. 9. Aggrieved by the order of ld. CIT(A), the assessee is now in appeal before us. 9.1 Before us, ld. AR reiterated the submissions made before Assessing Officer and ld. CIT(A) and further in the Paper Book submitted the photographs of the entire process from harvesting to the final uploading of the container for exports, copy of the chart revealing water content of fruits and vegetables. He pointed to the various processes and submitted that assessee records the purchase of the grapes which are purchased at the farm but subsequently on grading the fruits many times the fruits which are not upto the mark or damaged, have to be considered as wastes and have to be destroyed. He further submitted that assessee has been following similar method of accounting of shortage in earlier years and subsequent years and the method of accounting has been accepted by the Revenue even in the scrutiny assessment proceedings. He placed on record the copy of assessment orders framed for assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Ground No.4 is with respect to ad-hoc addition of ₹ 5,00,000/-. 11.1 During the course of assessment proceedings, Assessing Officer noticed that assessee had made payment in cash to crop growers. To verify the purchases, the assessee was asked to produce three major parties for verification. The assessee produced (i) Shri Ramesh Pandurang Bangale, (ii) Shri Sharad Vasudeo Haveli and (iii) Shri Vishnu Namdeo Nalawade. The Assessing Officer recorded their statements. He noted that though these persons were stated to be supplying the crops to the assessee since last 18 to 20 years and even though they were maintaining bank accounts, the assessee had made payments to them in cash. The Assessing Officer thereafter concluded that since the assessee was making cash payments inspite of fact that these persons were maintaining bank accounts, the purchases shown by the assessee were not verifiable as the sellers were not maintaining any record in respect of sale of crops to the assessee. He accordingly made ad-hoc addition of ₹ 5,00,000/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before the ld. CIT(A), who upheld the order of Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Aggrieved by the order of ld. CIT(A), assessee is now in appeal before us. Before us, ld. AR reiterated the submissions made before Assessing Officer and CIT(A). He further submitted that the purchase of goods have not been doubted by the Assessing Officer. He submitted that to verify the purchase, the Assessing Officer had recorded the statement of 3 suppliers and in their statements they have accepted the fact of sale of goods to the assessee and receipt of sale proceeds in cash. He submitted that only basis for disallowance by Assessing Officer was nonmaintenance of records by the sellers. He submitted that when the sellers of goods have accepted the sale of goods to the assessee and receipt of the sale proceeds, the mere fact of non-maintenance of records at the sellers end cannot be a ground for disallowing the expenses in the hands of the assessee. He further submitted that the payments of cash by the assessee is permitted in view of Rule 6DD(e) of the Income Tax Rules, 1962 (in short the Rules ) as the purchases are of agricultural goods. He further submitted that even though ld. CIT(A) has noted that the Assessing Officer s observation of purchase price being non-verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the same is rejected due to the reason that appellant has supported these expenses by self-made vouchers. 15. Aggrieved by the order of CIT(A), assessee is now in appeal before us. Before us, the ld. AR reiterated the submissions made before Assessing Officer and ld. CIT(A). The ld. DR, on the other hand, supported the orders of lower authorities. 16. We have heard the rival submissions and perused the material on record. We find that out of the total expenses ₹ 18.95 lakhs on account of loading and unloading expenses, the Assessing Officer had disallowed only ₹ 75,000/-. Before us, assessee has not placed any material to controvert the findings of Assessing Officer. Considering the totality of facts and in the absence of any material placed by the assessee to controvert the findings of Assessing Officer, we are of the view that the Assessing Officer was justified in disallowing ₹ 75,000/- and therefore we are of the view that no interference to the order of Assessing Officer is called for. Thus, the ground No.5 of assessee s appeal is dismissed. 17. Ground No.6 is with respect to disallowance on account of expenditure being of personal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of assessee relates to disallowance of ₹ 1,03,815/- on account of element of personal user towards vehicle repairs and maintenance, telephone expenses and travelling expenses, etc. on estimated basis. 11. It is the case of the assessee that in the case of a company element of personal user out of expenses cannot be inferred. We find merit in the plea of the assessee. The company being juristic person, it is difficult to accept the basis for disallowance of the Revenue. A company is incapable of having any personal user of the facilities. The directors are separate from the company. Even assuming that facilities were occasionally used for personal purposes, it is a business expenditure in so far as company is concerned. Such usage of facilities at any rate can be possibly taxed in the hands of the user as perquisite alone. Therefore, no estimated disallowance on account of personal user is called for. In the result, Ground No.3 is also allowed. 20. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case in the year under appeal and that of assessment year 2008-09. In view of the aforesaid facts and foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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