Income Tax Appellate Tribunal - Ahmedabad
Omkar Textile Mills (P) Ltd. vs Income Tax Officer on 6 November, 2007
Equivalent citations: (2008)115TTJ(AHD)716
ORDER
R.P. Garg, Vice President
1. These cross-appeals by the assessee and Revenue, are against the orders of the CIT(A), for asst. yr. 1995-96. Since both these appeals have been heard together, these are being disposed of by this common order for the sake of convenience.
2. First we take up assessee's appeal in ITA No. 1085/Ahd/2007. In this case, the original assessment was completed determining total income of Rs. 38,31,380 by the AO. The assessee company carried the matter before the CIT(A), who disposed of the appeal after giving effect to the order of the CIT(A) and the total income of the assessee company was revised to (-) Rs. 19,83,219. Being aggrieved, the Revenue carried the matter in appeal before the Tribunal. The Tribunal, in turn, set aside the following issues to the file of AO for deciding the same afresh:
(i) Addition of Rs. 47,33,390 made on account of depreciation on wind farm plant; and
(ii) Disallowance of expenses of Rs. 7,82,967 on foreign travel.
3. The first dispute is with regard to disallowance of Rs. 47,33,390 on account of depreciation on Wind Turbine Generating Sets (WTGS).
4. The AO disallowed the claim of depreciation on the ground that the details regarding installation and commercial operation of the wind mill generators have not been furnished and, therefore, in the absence of required details, the claim was disallowed by him. The matter was carried in appeal before the CIT(A), before whom the assessee contended that the WTGS was installed and commissioned on 27th March, 1995 and the trial production was also made and some amount of energy was also generated. The trial run was also undertaken for the WTHS. In support of these contentions, the assessee had submitted the following documents before the AO:
(i) Certificate of the Gujarat Energy Development Agency (GEDA) in connection with share of power certificate wherein it is certified that 11.9 KWI1 were supplied to the GEB in the month of March, 1995.
(ii) Copy of sales-tax exemption certificate as and issued by Asstt. CST, Ahmedabad wherein effective date is 27th March, 1995.
(iii) Eligibility certificate as issued by the Commr. of Electricity, Gandhinagar, wherein it is stated that power from assessee's wind farm has been synchronized with DEB Grid on 27th March, 1995.
(iv) Commissioning certificate as issued by GEDA wherein commissioning date is certified to be 27th March, 1995.
(v) Quick test report as issued by the GEDA wherein the test undertaken on 27th March, 1995 is stated.
(vi) Copy of letter of NEPC-MICON addressed to the company wherein date of the successful commissioning stated as 27th March, 1995.
(vii) Copy of the certificate issued by the GEDA dt. 1st June, 1995 wherein it is certified that WTGS were commissioned on 27th March, 1995.
(viii) Copy of form for test report wherein date of the commencement is dated as 5th Feb., 1995 and completion of the same as 11th March, 1995. The form is signed by Hemendra Enterprise, Porbander, who was registered electric contractor and supervisor.
5. The CIT(A), considering the submissions made by the assessee and on perusal of the records available before him, held that the assessee, though installed the wind mill and the same was not connected to grid during the previous year relevant to assessment year under consideration, in the absence of the connection to grid, the assessee could not have generated any electricity. Therefore, the CIT(A) was inclined to confirm the addition made by the AO.
6. Being aggrieved, the assessee is in appeal before the Tribunal. On perusal of the facts, we find that the WTGS was commissioned on 27th March, 1995 and trial run was also undertaken which is evident from the certificate of Gujarat Energy Development Agency for the share of power certifying that 11.9 KW were supplied to the Gujarat Electricity Board in the month of March, 1995. Sales-tax exemption certificate with effective date as 27th March, 1995, the eligibility certificate issued by the Commr., commissioning certificate by GEDA, quick test report issued by the GEDA letter of NEPC-MICON for successful commissioning and all certifying that the WTGS was commissioned on 27th March, 1995. In view of these facts in our opinion, there remains no doubt that the WTGS was commissioned only on 27th March, 1995 and, therefore, the assessee is entitled to depreciation in respect thereof in accordance with law. The AO is directed to allow the claim of the assessee.
7. The next dispute, which is common in both the appeals, is with regard to foreign travel expenses of Rs. 7,82,967 on foreign travel.
8. The AO, vide his letter dt. 8th Nov., 2006, specifically requested the assessee to furnish following details in the light of the directions of the Tribunal Ahmedabad Benches:
(a) Place visited, (b) duration of each visit, mentioning specific dates, (c) persons travelling with their designation, (d) purpose of visit, (e) relevant facts and figures so as to enable the undersigned to work out the proportion as referred to in Clause (i) of Rule 6D of the Act.
9. The AO, however, rejected the submissions of the assessee on the above context because the specific details as called for which were required to be furnished as per the directions of the Tribunal, have not been furnished by the assessee company and, therefore, held that the expenditures incurred of Rs. 7,82,967 were not related to the business of the assessee and have not been incurred for the purpose of business.
10. The matter was carried in appeal before the CIT(A), who confirmed the disallowance out of foreign travel expenses to the extent of 50 percent of the total addition made of Rs. 7,82,967 by holding that though the assessee had spent substantial amount on foreign travel but had not gained any commercial benefit for the year under assessment or for later year. The claim is made for business purpose which only appears to be namesake. The assessee could not substantiate any gains derived due to foreign trips taken up by one of the directors and the official.
11. Being aggrieved, the assessee is in appeal before us. It was the claim of the assessee that the expenditures were incurred for exploring the possibility of exports and attending exhibition in France. The fact that export has not been effected in the year under consideration or in the subsequent year would be of no consequence in determining the allowability of the expenditure. In our opinion, if the expenditure is incurred for exploring the possibility of exports and attending exhibition in France, the expenditure would be for the purpose of assessee's business and the entire expenditure is to be allowed irrespective of whether the assessee was able to get export orders or make any export in this year or in the subsequent year. Therefore, the CIT(A) was not justified in restricting 50 per cent of the expenditure incurred for travelling. We direct travelling expenses incurred by the assessee in full.
12. Now the only dispute, which is left for our consideration in Revenue's appeal, is with regard to deletion of addition made of Rs. 2,98,246 on account of disallowance of vehicle expenses.
Here, the AO disallowed the claim of assessee stating that, as the specific details were not provided by the assessee, therefore, the expenses are considered to be not related to the business of the assessee and are not incurred for the purpose of business. The CIT(A), following the decision of the Gujarat High Court, in the case of Sayaji Iron & Engg. Co. v. CIT , held that the issue is squarely applicable to the facts of the assessee's case as the directors were authorized to use the vehicles of the company.
13. Being aggrieved, the Revenue is in appeal before the Tribunal. We find that the issue stands covered by the decision of the Gujarat High Court in the case of Sayaji Iron & Engg. Co. v. CIT (supra), referred to by the CIT(A) and, therefore, the CIT(A) was right in allowing the claim of the assessee.
14. In the result, assessee's appeal stands partly allowed and Revenue's appeal stands dismissed.