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TMI Blog2017 (4) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... roup of appeals is Appeals Nos. 43 of 2001 and 55 of 2000 and Cross Objection No. 87 of 2003 and the last group of appeals is Appeal Nos. 124 of 2003 and 165 of 2003 where only one question is framed where the Tribunal has held against the assessee and confirmed the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). 3. Counsel for the appellant Mr. Jain, while appearing for the Department, contended that the three questions which are raised for consideration are as under : "1. Whether in the facts and circumstances of the case, the Income- tax Appellate Tribunal was justified in holding that the assessee is entitled for the benefit of deduction under section 80-I of the Act on the machinery which was an old asset and was put to use by the assessee in its old unit has also claimed depreciation on same in the earlier assessment year ? 2. Whether in the facts and circumstances of the case, the Income- tax Appellate Tribunal has erred in law and acted perversely in holding that the forklift truck was on trial run in the old unit and which was ready for use in the new unit should be treated as a new asset without properly interpreting the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax (Appeals) and the Tribunal is just and proper and no interference is called for. 7. Regarding forklift and others, he has contended that in view of Explanation 2 to section 80-I of the Income-tax Act, forklift is not a plant and machinery as old machinery is entitled for the benefit under section 80-I of the Act, which reads as under : "80-I. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent. thereof : Provided that in the case of an assessee, being a company, the pro visions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words "twenty per cent.", the words "twenty- five per cent." had been substituted. (1A) Notwithstanding anything co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking as is referred to in section 33B, in the circumstances and within the period specified in that section : Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the words 'not being any article or thing specified in the list in the Eleventh Schedule' had been omitted. Explanation 1.-For the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India ; (b) such machinery or plant is imported into India from any country outside India ; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the pro visions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng vessels or other powered craft has been commenced by such company after the 31st day of March, 1983, but before the 1st day of April, 1988 ; and (iv) it is for the time being approved for the purposes of this sub- section by the Central Government. (5) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year : Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words "seven assessment years", the words "nine assessment years" had been substituted : Provided further that in the case of an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial under taking or the hotel or the operation of the ship or the business of repairs to oceangoing vessels or other powered craft and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to oceangoing vessels or other powered craft does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders passed by the Assessing Officer, the Commissioner of Income-tax (Appeals) and the Tribunal in as much as for the previous year, the expenses were allowed fully and in lump sum and the respondent has committed serious error and contended that in view of section 40 which reads as under and the circular of the Department at page 1 para. 74 of the Finance Act which reads as under : "74. It may be noted that the new provision is applicable to all categories of expenditure incurred in business and professions, including expenditure on purchase of raw materials, stores or goods, salaries to employees and also other expenditure on professional services, or by way of brokerage, commission, interest, etc. Where payment for any expenditure is found to have been made to a relative or associate concern falling within the specified categories, it will be necessary for the Income-tax Officer to scrutinise the reasonableness of the expenditure with reference to the criteria mentioned in the section. The Income-tax Officer is expected to exercise his judgment in a reasonable and fair manner. It should be borne in mind that the pro vision is meant to check evasion of tax through excessive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and, therefore, the question is answered in favour of the Department and against the assessee. 13. Regarding issue No. 3 regarding lump sum amount taken by the Commissioner of Income-tax (Appeals), the contention of Mr. Jain is required to be accepted. The Assessing Officer by adopting 35 per cent., in our view which is at higher side, even if we accept the profit which has been shown by the assessee from the year 1991-92 to 1996-97, the average of which comes to 31. 4, for that we put the estimate at 32 per cent. instead of 35 per cent. by the Assessing Officer. In that view of the matter, the issue No. 3 is answered in favour of the Department and against the assessee and we estimate profit at 32 per cent. and calculation may be done on that basis by the Assessing Officer. 14. Regarding cross-objection which is for our consideration is whether the Tribunal was right in holding that the forklift is plant and machinery for purposes of section 80-I(2) of the Act in view of our answer in issue No. 2. This is required to be rejected, therefore, the cross-objections are required to be rejected. 15. Regarding other appeals of the assessee, particularly para. 7 of the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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