ACIT CIR 4(2), MUMBAI vs. GUPTA SYNTHETICS LTD, MUMBAI

We heard the parties and perused the record. The assessee is engaged in the business of manufacture of polyester texturized yarn, polyester twister yarn.

The first issue relates to disallowance of depreciation claimed on electricity fittings at a higher rate. The assessee claimed depreciation at the rate of 15% for the Electrical fittings treating the same as plant and machinery and also claimed additional depreciation at the rate of 20%. The AO took the view that the electrical fittings is required to be treated as an item falling in the group of “Furniture & Fittings” and hence depreciation is allowable at 10%. Accordingly he restricted the depreciation to 10% and also disallowed the claim of additional depreciation. The ld. CIT (A), however, accepted the contentions of the assessee that the electrical fittings formed part of plant and machinery and hence it should be treated as plant and machinery only. Accordingly, he allowed the claim of the assessee.

At the time of hearing, the ld. AR reiterated the same contentions as made before the ld. CIT(A). On the contrary, the ld. DR submitted that the claim of the assessee that the electrical fittings formed part of the plant and machinery has not been properly demonstrated before the AO. Accordingly, he submitted that the factual aspect relating to the said claim needs to be examined at the end of the AO.

We find merit in the submissions of ld. DR. Accordingly, we set aside the order of the ld. CIT(A) on this issue and restore the same to the file of the AO with a direction to examine the claim of the assessee and take appropriate decision in accordance with law. The assessee is also directed to furnish the relevant details in support of its contention.

The next issue relates to the disallowance of claim of expenses incurred for obtaining feasibility report of Nylon Project. The assessee

The AO did not accept the contentions of the assessee and held that the expenditure incurred for obtaining feasibility report for new project is a capital expenditure. Accordingly, he disallowed the claim of the assessee. The ld.CIT(A), however, allowed the claim of the assessee by following the decisions relied upon by the assessee.

Before us, the ld.AR submitted that the view taken by the ld. CIT(A) is further supported by the following case law: i) Binani Cement Ltd V/s CIT (2015) 118 DTR 0061 (Cal);and ii) Commissioner of Income-tax V/s Nirmal Ltd ( 367 ITR 12 (Guj) = (2014) 52 taxmann.com 88(Guj) The ld. AR submitted that the Hon’ble Calcutta High Court in the case of Binani Cement Ltd (supra) has held that the expenditure incurred for preparation of feasibility report will be allowable as deduction even if the project is abandoned.

The ld. DR, on the contrary, placed reliance on the order of AO.

Having heard the rival contentions, we notice that the view taken by the ld. CIT(A) on this issue is supported by the various decision of Hon’ble High Courts referred above. Accordingly, we do not find any reason to interfere with his order on this issue.

The next issue relates to disallowance of professional fees paid for enhancing the term loan of the assessee. The assessee had paid professional fee for enhancing the term loan and the AO treated the same as capital expenditure. But the ld. CIT(A) allowed the claim of the assessee with the following observations :

In the result, the appeal filed by the revenue is treated as partly allowed for statistical purposes.

DR, ITAT, Mumbai concerned गार्ड पाईर / Guard file. 6. आदेशानुसाय/ BY ORDER,सहामक ऩंजीकाय (Asstt.