AlGayathri Trading Co. (P.) Ltd. v. Dy. CIT

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The Tax PublishersIT Appeal Nos. 232 and 235 (Coch.) of 2010 & 221 & 222 (Coch.) of 2012 2013 TaxPub(DT) 1841 (Coch-Trib) : (2013) 053 (II) ITCL 0571 : (2013) 142 ITD 0675 Income Tax Act, 1961 --Business deduction under section 36(1)(iii)--Interest on borrowed capital Interest-free advances given to related partnership firm--Assessee-company had made interest-free advances to a firm in which director of assessee-company had full interest and said firm was promoted for development of in-house software which would be used in business of assessee-company. Assessing officer disallowed part of interest on the ground that there was no commercial expediency in advancing interest-free Loans to said firm. *Held:* Matter was required to be remanded to examine whether funds advanced to firm were used by firm for business or it was used for personal needs of partners. Income Tax Act, 1961 Section 36(1)(iii) Income Tax Act, 1961 --DepreciationAllowability Part of building let out--During assessment proceedings it was noticed by assessing officer that assessee had claimed depreciation on building which was let out assessing officer held that depreciation was not allowable. Assessee, however, contended that out of total area of 3728 sq. ft., only 800 sq. ft. was let out to third party, therefore, part of depreciation was to be allowed. *Held:* Acceptable, as only 800 sq. ft. area was let out and the area which was not let out to that extent depreciation was allowable to assessee. Income Tax Act, 1961 Section 32(1) Income Tax Act, 1961 --Exemption under section 10A--Manufacture or production Blending and packing of tea--Where assessee was engaged in blending and packing of tea, it was entitled to deduction under section 10A as same amounts to manufacture or production. Income Tax Act, 1961 Section 10A In the ITAT, Cochin Bench N. R. S. Ganesan, J.M. & B. R. Baskaran, A.M. Al-Gayathri Trading Co. (P.) Ltd. v. Dy. CIT IT Appeal Nos. 232 and 235 (Coch.) of 2010 & 221 & 222 (Coch.) of 2012 A.Y. 2004-05 to 2006-07 11 January, 2013 Appellant by : Arun Raj S. Respondent by : M. Anil Kumar & S. Vijayaprabha ORDER *N. R. S. Ganesan, J.M.* The taxpayer and the department have filed appeal for assessment year 2004-05. The taxpayer has also filed two appeals for the assessment years 2005-06 and 2006-07. Therefore, we heard all the appeals together and dispose of the same by this common order. 2. For the assessment year 2004-05 the first grievance of the taxpayer is with regard to disallowance of interest. 3. Shri Arun Raj S, the learned counsel for the taxpayer submitted that for the year under consideration a sum of Rs. 13,44,278 was advanced to AG Info Solutions, a partnership concern in which the directors of the taxpayer company have full interest. According to die learned counsel, the object of the partnership firm AG Info Solutions was to develop in-house software for the taxpayer company. The taxpayer company advanced interest free amount only for the reason that the taxpayer company would be benefited in terms of its own software development. According to the teamed representative, the assessing officer disallowed proportionate interest to the extent of Rs. 1,61,313. The learned counsel for the taxpayer submitted that the partnership firm AG Info Solutions started its business for development of software. However, the firm could not pick up and finally it had to close down the business. According to the learned representative there was a commercial expediency in advancing funds to the sister concern. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersIT Appeal Nos. 232 and 235 (Coch.) of 2010 & 221 & 222 (Coch.) of 2012
2013 TaxPub(DT) 1841 (Coch-Trib) : (2013) 053 (II) ITCL 0571 : (2013) 142 ITD 0675

Income Tax Act, 1961

--Business deduction under section 36(1)(iii)--Interest on borrowed capital Interest-free advances given to related partnership firm--Assessee-company had made interest-free advances to a firm in which director of assessee-company had full interest and said firm was promoted for development of in-house software which would be used in business of assessee-company. Assessing officer disallowed part of interest on the ground that there was no commercial expediency in advancing interest-free Loans to said firm. Held: Matter was required to be remanded to examine whether funds advanced to firm were used by firm for business or it was used for personal needs of partners.

Income Tax Act, 1961 Section 36(1)(iii)

Income Tax Act, 1961

--DepreciationAllowability Part of building let out--During assessment proceedings it was noticed by assessing officer that assessee had claimed depreciation on building which was let out assessing officer held that depreciation was not allowable. Assessee, however, contended that out of total area of 3728 sq. ft., only 800 sq. ft. was let out to third party, therefore, part of depreciation was to be allowed. Held: Acceptable, as only 800 sq. ft. area was let out and the area which was not let out to that extent depreciation was allowable to assessee.

Income Tax Act, 1961 Section 32(1)

Income Tax Act, 1961

--Exemption under section 10A--Manufacture or production Blending and packing of tea--Where assessee was engaged in blending and packing of tea, it was entitled to deduction under section 10A as same amounts to manufacture or production.

Income Tax Act, 1961 Section 10A

In the ITAT, Cochin Bench

N. R. S. Ganesan, J.M. & B. R. Baskaran, A.M.

Al-Gayathri Trading Co. (P.) Ltd. v. Dy. CIT

IT Appeal Nos. 232 and 235 (Coch.) of 2010 & 221 & 222 (Coch.) of 2012

A.Y. 2004-05 to 2006-07

11 January, 2013

Appellant by : Arun Raj S.

Respondent by : M. Anil Kumar & S. Vijayaprabha

ORDER

N. R. S. Ganesan, J.M.

The taxpayer and the department have filed appeal for assessment year 2004-05. The taxpayer has also filed two appeals for the assessment years 2005-06 and 2006-07. Therefore, we heard all the appeals together and dispose of the same by this common order.

2. For the assessment year 2004-05 the first grievance of the taxpayer is with regard to disallowance of interest.

3. Shri Arun Raj S, the learned counsel for the taxpayer submitted that for the year under consideration a sum of Rs. 13,44,278 was advanced to AG Info Solutions, a partnership concern in which the directors of the taxpayer company have full interest. According to die learned counsel, the object of the partnership firm AG Info Solutions was to develop in-house software for the taxpayer company. The taxpayer company advanced interest free amount only for the reason that the taxpayer company would be benefited in terms of its own software development. According to the teamed representative, the assessing officer disallowed proportionate interest to the extent of Rs. 1,61,313. The learned counsel for the taxpayer submitted that the partnership firm AG Info Solutions started its business for development of software. However, the firm could not pick up and finally it had to close down the business. According to the learned representative there was a commercial expediency in advancing funds to the sister concern.