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II. Direct Taxes Case Laws:
1. M/s. Ripe Component Technologies Pvt. Ltd. Vs. ACIT, I.T.A. No. 163/Del/2012, Date of Order: 21.10.2016, ITAT - Delhi
Issue:
Whether Temporary structure constructed on a factory premises on lease is eligible for 100% depreciation.
Held: No
Brief Facts:
The assessee company filled its return of income and claimed 100%
depreciation on temporary structure made on a leased property. The Ld.
AO disallowed the assessee’s claim of depreciation on temporary
structure at the rate of 100% and allowed depreciation at the rate of
10%.
The Ld.
AR submitted that, the assessee took a factory premises on lease and
constructed temporary structure. He further submitted that the structure
erected was on purely temporary basis and once broken, would have no
commercial value. On the other hand, the Ld. DR submitted that the
construction carried out was in the nature of improvement of leasehold
premises after taking it on lease and was for enduring benefits and not
in the nature of repairs or renovation of the leased premises.
Held:
The Hon’ble Delhi ITAT held that the renovation made by the assessee
company is in the nature of permanent structure by way of Brick Wall
partitions, panelling of Aluminium , Flooring etc. which cannot be
covered under current repairs as provided in section 30 of the Income
Tax Act. Thus the expenditure so incurred is certainly capital in nature
on which depreciation can only be allowed. Further Hon’ble ITAT placed
reliance on the judgment of ITAT Delhi in the case of Marubeni-Itochu
Steel India Pvt. Ltd. Vs. DCIT in ITA No. 1716/Del/2014, wherein it was
held that “the expenditure incurred by the assessee on the premises in
the capacity of non-owner should firstly be in the nature of capital
expenditure and amount so incurred would be capitalized entitling the
assessee to depreciation as per the eligible rate”.
Therefore it is held that such amount was not in the nature of current repair but a capital expenditure not deductible in full.
(Please click here for judgment)
2. ITO Vs. M/S. Empire Developers, I.T.A. No. 2321/Mum/2015, Date of Order: 01.09.2016, ITAT - Mumbai
Issue:
No disallowance of interest expense can be made u/s 36(1)(iii) of
the Income Tax Act, 1961 , where revenue failed to produce any evidence,
indicating that the interest bearing funds were used in making
investment without commercial exigencies.
Brief Facts:
Assessee filed Tax Audit Report and show Nil income . The
assessee, however given loans and advances and no interest has been
charged on these loans. The assessee was issued a show-cause notice as
to why the interest should not be disallowed u/s 36(1)(iii) as interest
bearing funds were diverted as interest free loans and advances. In
reply to show cause notice assessee submitted that no new loan or
advances has been made during the year and there is no source for the
same in current year and hence the details called in show cause notice
is not applicable. Since assessee had not furnished any documentary
evidences, AO disallowed the the claim of assessee.
Held:
The Hon’ble Mumbai ITAT held that no evidence has been produced by
the Revenue evidencing that the funds were diverted without commercial
exigencies. So far as, making investment is concerned, it is the
businessman who is to make the investment protecting his business
interest. The AO cannot be expected to sit in the chair of the assessee
and decide in which manner the investment has to be made. Action can
only be taken or disallowance can be made only in a situation when it is
found that the investment or granting loans is contrary to the
provisions of the Act.
Appeal of the Revenue is dismissed
(Please click here for judgment)
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