High Court Of Madras
CIT vs. Print Systems & Products
Sections 32, 40A(2)
Asst. Year 1988-89
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 85 of 2006
21st February, 2006
Counsel Appeared
J. Naresh Kumar, for the Appellant
JUDGMENT
P.P.S. Janarthana Raja, J. :
The above tax case appeal is directed against the order of the Tribunal in ITA No. 1279/Mad/1993, dt. 27th March, 2002 raising the following substantial questions of law :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition in respect of commission paid to sister-concern under s. 40A(2) of the IT Act, even though it is unreasonable and excessive ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in granting 100 per cent depreciation on addition of temporary erections, even though the property was acquired by the assessee and not taken on lease; the temporary erection to be treated as capital expenditure in computing the income of the assessee ?”
The facts in a nutshell are as under : The assessment year involved in this appeal is 1988-89 and the corresponding accounting year ended on 31st March, 1988. The assessee is a registered firm consisting of three partners. The assessee filed return of income on 24th Feb., 1989 admitting an income of Rs. 19,42,330. The assessment was completed under s. 143(3) and the total income was determined at Rs. 34,74,150. While completing the assessment, the AO disallowed the commission amount of Rs. 2,00,000 paid to M/s Nippon Enterprises (South), a sister-concern, and also disallowed the claim towards depreciation at 100 per cent of Rs. 4,50,815 in respect of addition of temporary erection. Aggrieved by the said order, the assessee filed appeal to the CIT (A). The CIT(A) allowed the appeal. Aggrieved by that order, the Revenue filed appeal before the Tribunal. The Tribunal, following its earlier orders, dismissed the Departmental appeal.
The learned senior standing counsel submitted that the Tribunal was wrong in deleting the addition made by the AO with reference to the provisions of s. 40A(2) of commission payment to the sister-concern. Further, it is stated that the assessee paid the commission to its sister-concern, which was unreasonable and excessive. The learned counsel also submitted that the temporary
The findings given by the Tribunal were based on the records and evidence. The Tribunal, after considering the relevant materials came to the conclusion that the commission payment was not found to be unreasonable and further found that the commission payment when compared with the commission offered by the other assessee in similar business at 5 per cent could not be said to be excessive. No further evidence or material was produced by the Revenue that the order of the Tribunal is unreasonable and unjust.
In respect of the second question, the Tribunal has given finding that the assessee had made temporary partitions, false ceiling and given the walls a coat of paint. The only objection of the Revenue was that since the property was acquired by the assessee and not taken on lease, the temporary erection would have to be treated as revenue expenditure. The Revenue is not in a position to point out any rule or section to substantiate its claim that the assessee is not entitled to 100 per cent depreciation on temporary erection. The ownership or taking the property on lease is of no consequence so far as construction of a temporary partition is concerned. So, the Tribunal, considering the relevant material and evidence, came to the conclusion that the assessee was entitled to 100 per cent depreciation in respect of the addition on temporary erection. This view has also been taken by the Tribunal in respect of the earlier assessment orders.
In view of the foregoing conclusion, we do not find any error or infirmity in the order of the Tribunal and hence, the same does not warrant any interference and no substantial questions of law arise for consideration of this Court. Hence, we dismiss the above tax case. No costs.
[Citation : 285 ITR 337]
