M/S. MADHU MACHINES & SYSTEMS PVT. LTD.,,BARODA vs. THE INCOME TAX OFFICER, WARD-4(1),, BARODA

The appellant company is engaged in the business of manufacturing, indenting, supplying and processing of all kinds of plastic processing, reprocessing recycling plants & other ancillary equipment. In respect of its business, the appellant company had maintained books of accounts systematically and regularly in accordance with the provisions of Income Tax Act and similar accounts are duly audited. For Assessment Year 2011-12, the appellant company e-filed its return of income on 23/09/2011 declaring total income of Rs. 18,25,800/-. A revised return of income was filed on 12/12/2011 declaring total income of Rs. 20,73,830/-. The said return was processed u/s. 143(1) accepting the income as returned and thereafter case was selected for scrutiny.

Apart from this, A.O. also disallowed depreciation of Rs. 2,37,135/- on Plant & Machinery given on lease.

During the course of assessment proceedings, Assessing Officer also confirmed the consultancy fee of Rs. 7,50,000/- paid to Devan M Shah (HUF).

Appellant also claimed depreciation of Rs. 73,483/- on inverters connected to computer which according to assessee is part of computer because in the absence of inverters connected to computers cannot be borrowed and disallowed depreciation of Rs. 73,483/-.

Against the said addition, assessee preferred first statutory appeal before the ld. CIT(A) who partly allowed the appeal of the appellant.

We have gone through the relevant record in the impugned order. So far disallowance of commission is concerned; ld. A.O. was recorded statement of three persons namely Smt. Chintal Shah, Smt. Gayatri Mode & Shri Gautan Mistry. They made a statement before the ld. A.O. that they have not performed any work for the appellant company but why their names have been

So far confirming disallowance of depreciation of Rs. 2,37,135/- on plant and machinery by the ld. CIT(A) is concerned, there is no dispute over the fact that the appellant company owned machinery which was purchased from PLM International Company, the appellant company has leased the said machinery to M/s. Zahoranksy Mould & Machines Pvt. Ltd., Coimbatore for a monthly rent of Rs. 1 lac. Thus, the undisputed facts remains that during the year under appeal , the appellant had owned the machinery and the same was used for its business by leasing the same on hire. Thus, the condition prescribed u/s. 32 of the Income Tax Act i.e. ownership of the machinery and user of the same for the purpose of the business are fully satisfied.

In view of the above discussion, we allow this ground of appeal.

So far confirming of disallowance of Rs. 7,50,000/- being consultancy charges paid to Shri Devang M. Shah (HUF) is concerned, this amount was paid for 2k Laser 341B project which includes Product Design, Raw Material selection, Mould Design, Machinery & mould Manufacturer, process setting, Training to personnel & other relates services and Mr. Devang M Shah is a qualified engineer. Therefore, in our considered opinion, expenses was incurred wholly and exclusively for the purpose of its business.

So far confirming of disallowance of depreciation of Rs. 73,483/- on inverters connected to computer is concerned, As per the definition of block of assets as prescribed in Income Tax Rule, 1962, New Appendix 1, Computers including computer software means any compute program recorded on any disc, tape, perforated media or other information storage device is eligible depreciation @ 60% but Invertors which are connected to computer. Therefore, we are not incline to give relief to the appellant. Therefore, this ground of appeal is dismissed.

In the result, appeal filed by the Assessee is partly allowed.