2006-VIL-463-MAD-DT

Equivalent Citation: [2006] 285 ITR 337, 203 CTR 247

MADRAS HIGH COURT

Date: 21.02.2006

COMMISSIONER OF INCOME-TAX

Vs

PRINT SYSTEMS AND PRODUCTS.

BENCH

Judge(s)  : P. D. DINAKARAN., P. P. S. JANARTHANA RAJA.

JUDGMENT

The judgment of the court was delivered by

P.P.S. Janarthana Raja J.-The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal in I.T.A. No. 1279/Mds/93 dated March 27, 2002, raising the following substantial questions of law:

"1. Whether, on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was right in law in deleting the addition in respect of commission paid to sister concern under section 40A(2) of the Income-tax Act, even though it is unreasonable and excessive?

2. Whether, on the facts and in the circumstances of the case the Income-tax Appellate 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 March 31, 1988. The assessee is a registered firm consisting of three partners. The assessee filed a return of income on February 24, 1989, admitting an income of Rs. 19,42,330. The assessment was completed under section 143(3) and the total income was determined at Rs. 34,74,150. While completing the assessment, the Assessing Officer 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 an appeal to the Appellate Commissioner of Income-tax. The Commissioner of Income-tax (Appeals) allowed the appeal. Aggrieved by that order, the Revenue filed an appeal before the Appellate Tribunal. The Appellate Tribunal, following its earlier orders, dismissed the Departmental appeal.

Learned senior standing counsel submitted that the Tribunal was wrong 3 in deleting the addition made by the Assessing Officer with reference to the provisions of section 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. Learned counsel also submitted that the temporary erection would have to be treated as a revenue expenditure and the Tribunal was wrong in granting 100 per cent, depreciation.

We have heard learned senior standing counsel for the appellant.

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 a 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 the construction of a temporary partition is concerned. So, the Tribunal, considering the relevant materials 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.

 

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