Income Tax Appellate Tribunal - Madras
Assistant Commissioner Of Income Tax vs Investment Trust Of India Ltd. ... on 26 May, 1998
ORDER
P.K. Bansal, A.M.
1. These appeals, the former by the Revenue and the latter by the assessee, are consolidated and disposed of by this common order for the sake of convenience.
ITA No. 3247/Mad/19892. The first ground of appeal is general in nature. The second ground of appeal regarding the allowance by the CIT(A) of the assessee's claim for investment allowance stands dismissed as it is fully covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Shaan Finance (P) Ltd. (1998) 97 Taxman 435 (SC).
3. The third ground of appeal relates to the deletion of the disallowance of Rs. 3,13,582 by the CIT(A), which was incurred by the assessee for publication of statutory insertion for the purpose of inviting deposits from the public. The learned Departmental Representative relied on the order of the AO. After hearing both the sides we are inclined to agree with the CIT(A). Under law statutory insertions are required to be published in the newspapers for inviting public deposits. These insertions cannot be regarded by any stretch of imagination to be of the character of advertising and publicity. Therefore no question of invoking the provisions of s. 37(3A) arises. This ground of appeal is, therefore, dismissed.
4. The next ground of appeal relates to 100 per cent depreciation allowed on the bottles leased out. After hearing both the sides we are of the opinion that bottle is a plant as defined under s. 43(3) of the Act and the first appellate authority is right in allowing 100 per cent depreciation to the assessee under the first proviso to s. 32(1), according to which if the actual cost of any item of plant or machinery does not exceed Rs. 5,000, the assessee is entitled for 100 per cent depreciation. Therefore, we confirm the order of the CIT(A). This ground of appeal, therefore, stands dismissed.
5. The fifth ground of appeal is general in nature.
6. In the result the Revenue's appeal is dismissed.
ITA No. 3390/Mad/19897. The first ground of appeal is against the confirmation by the CIT(A) of the disallowance of expenditure on repossessed vehicles under s. 37(3A) amounting to Rs. 45,000. These expenses have been estimated by the AO being motor car expenses including the repossessed vehicle maintenance expenses. The CIT(A) confirmed the addition stating that s. 37(3A) does not make any distinction on the basis of the circumstances in which a motor car happened to be in the possession of an assessee by rejecting the plea of the assessee that s. 37(3A) does not apply in respect of running and maintenance expenses of motor car which the assessee had to take possession from defaulting parties to whom the assessee had provided finance for purchase. The assessee's authorised representative has taken an entirely new plea that these expenses are not incurred on the motor car maintenance but involved the expenditure for the maintenance of repossessed vehicles which does not include any car. He further argued that s. 37(3A) is not applicable to the expenditure which is otherwise allowable under s. 31 of the IT Act. In this regard he relied on the Calcutta High Court decisions in the case of Coates of India Ltd. vs. CIT (1994) 205 ITR 373 (Cal) and in the case of CIT vs. Price Water-house (1994) 207 ITR 564 (Cal) and in the case of CIT vs. Tungabhadra Industries Ltd. (1994) 207 ITR 553 (Cal). The learned Departmental Representative relied on the order of the AO and argued that the plea taken by the assessee's authorised representative is entirely a new one and there is no evidence before the authorities below that these expenses do not include any expenditure which has been incurred on motor car. The assessee cannot take this plea at this stage since it involved investigation into new facts. He also argued that s. 37(3A) has got entirely different scope of application. Sec. 37(3A) puts a restriction on the expenditure to be incurred which means it is a restricted section while s. 37(1) which consisted of a non obstante clause relates to the deduction of expenditure. Sec. 37(1) excludes expenses which are otherwise allowable under s. 30 to 36 only for the purpose of the deduction of balance expenditure under s. 37(1). The restrictive section is applicable to all the expenses allowable under ss. 30 to 37(1).
8. We have heard the rival submissions and we find that the arguments of the Departmental Representative have substantial force. The plea that these expenses do not include any expenditure incurred on car is entirely a new plea and cannot be entertained at this stage as it does not derive out of facts on record. We are also inclined to agree with the Departmental Representative that s. 37(3A) is a restrictive section which restricts the limit of the expenditure to be allowed to an assessee. Sec. 37(1) deals with the allowance of the expenditure which are not otherwise allowable under ss. 30 to 36. The non obstante clause under s. 37(3), i.e., 'notwithstanding anything contained in sub-s. (1)' does not exclude from its purview the expenditure of the nature allowable under ss. 30 to 36. Sec. 37(1) deals with the allowance of the expenditure except the expenditure which is otherwise allowable under ss. 30 to 36. The non obstante clause does not give the interpretation by which the applicability of limiting the allowance of the expenditure is restricted only to the expenditure which is allowable under s. 37(1). We, therefore, confirm the disallowance made by the AO. In the result this ground of appeal is dismissed.
9. The next ground of appeal relates to the non-allowance of additional depreciation on computer and paper-copier amounting to Rs. 99,689. According to the assessee the AO without discussing or recording a finding as to whether computer and paper-copier are office appliances, had simply disallowed the additional depreciation claimed by the assessee merely mentioning: "Less: On computer and plain paper-copiers not admissible (FL 134, 146, 147, 155, 167 & 168)" The CIT(A) confirmed the disallowance by observing: "It would appear that the AO has disallowed the claim of extra shift allowance on these two assets treating them as office appliances". The CIT(A) held that the data processing equipment not to be office appliance but treated the photo-copier to be office appliance. He relied on the decision of the Bombay High Court in the case of CIT vs. International Computers Ltd. (1981) 131 ITR 1 (Bom) and the Gujarat High Court decision in the case of CIT vs. Tarun Commercial Mills Ltd. (1985) 151 ITR 75 (Guj) and also on the decision of the Tribunal (Special Bench) in the case of Daks Office Services (P) Ltd. vs. ITO (1989) 34 TTJ (Bom) (SB) 604 : (1989) 30 ITD 223 (Bom) (SB). He vehemently stated that the assessee-company has simply leased out the machinery and this machinery was not at all used in the office of the assessee. This was not used for the purpose of the business of the assessee and cannot be regarded to be office appliances. The Departmental Representative relied on the orders of the authorities below.
10. We have considered the rival submissions and perused the material on record. We find that the CIT(A) in para 5 of his order has held in the case of the assessee that computer was not office appliance. We also find that there is no finding by the AO in the assessment order as to whether the computer is an office appliance or not. The disallowance is merely based on presumption that these assets are office appliances. Following the decision of the Special Bench of the Tribunal in the case of Daks Office Services (P) Ltd. (supra) we hereby allow this ground of the assessee. The AO is directed to allow the assessee additional depreciation as claimed by the assessee.
11. The next ground of appeal relates to the interest chargeable under s. 216 of the Act. After hearing both the parties we are of the considered opinion that the AO should have passed a speaking order after giving a reasonable and fair opportunity to the assessee before imposing such interest suo motu. We accordingly set aside the order of the AO to the extent it relates to charging of interest under s. 216 and send bank the matter to the AO to decide the levy of interest in accordance with law after giving reasonable and fair opportunity to the assessee by way of a speaking order.
12. The next ground of appeal relates to the disallowance of 100 per cent cost of the carpets claimed by the assessee by way of depreciation. The AO disallowed 100 per cent depreciation on the carpets leased out by the assessee on the ground that there is no provision for full write off of the cost of the plant exceeding Rs. 5,000 just because the life span of such asset may be short. The cost of each carpet is well over Rs. 5,000, even though the quotation for the purchase or lease could be on square feet basis.
13. The arguments of both the parties were heard. We have perused the submissions and the decisions relied on by the authorised representative. The decisions are not applicable to the facts of the assessee's case. We feel that no interference is called for with the decision of the CIT(A), who was sent back the matter to the AO to decide the issue de novo after examining the facts of the case as under :
"Regarding carpets, it is not known whether individual carpets were purchased or whether it was a composite contract to furnish a large floor area with carpets. In the latter case the payment may have been made at sq. mtr. rate or st. ft. rate, but it will be difficult to hold that each piece of carpet had a separate identity with reference to the payment. This is a matter which has to be ascertained on verification by the assessing authority. If the details are furnished to the assessing authority, he will examine and allow deduction at 100 per cent of the actual cost of carpets whose cost is clearly identifiable from the bills of purchase and the said cost in each case does not exceed Rs. 5,000".
In the result the appeal is partly allowed.