1. As there is difference of opinion between the Members of the Bench who heard this appeal, the following points of difference are referred to the Hon'ble President, Income-tax Appellate Tribunal, for the opinion of the Third Member : "1. Whether the view of the learned Judicial Member that the disallowance out of Foreign Travelling Expenses of Directors and other Staff claimed at Rs. 10,04,318 be disallowed to the extent of Rs. 6,02,290 as done by the Assessing Officer, is correct or the view of the Accountant Member that the disallowance should be restricted only to Rs. 10,746 is justified.
2. Whether, the view of the learned Judicial Member that the assessee is not entitled to depreciation in relation to four flats and two garages purchased by it in Antriksha Bhawan, Kasturba Gandhi Marg, New Delhi as held by the Assessing Officer is correct or the view of the Accountant Member that the CIT(A) was justified in directing the Assessing Officer to allow the claim of depreciation on flats and garages as the assessee has paid the entire consideration for the purchase and has taken possession of flats and garages, is justified." 1. As there is difference of opinion between the members of the Bench who heard this appeal, the following points of difference are referred to the Hon'ble President, Income-tax Appellate Tribunal, for the opinion of the Third Member : "1. Whether, the view of Judicial Member that the disallowance out of Foreign Travelling Expenses claimed at Rs. 10,04,318 be disallowed to the extent of Rs. 6,02,290 as done by Assessing Officer, in view of facts and circumstances and case law cited in his proposed order and corrigendum issued on 15-1-1998 is correct or Ld. Accountant Member's view is correct to hold that the disallowance should be restricted to Rs. 10,746.
2. Whether, in view of facts and circumstances of the case, Judicial Member is justified in disallowing depreciation by restoring the order of Assessing Officer, on flats and garages as assessee failed to establish that these were used for business purposes, supported by assessee's record and also one of the possession letter shows possession to be not within accounting period or Ld. Accountant Member is justified in confirming the order of CIT(A) on this point." 1. As a result of difference between the learned Members constituting the Division Bench, Hon'ble President of the Tribunal in exercise of powers conferred on him under section 255(4) of Income-tax Act, 1961, has referred the issues as mentioned in the following questions, to me to express my opinion as a Third Member :-- "1. Whether the view of the learned Judicial Member that the disallowance out of Foreign Travelling Expenses of Directors and other Staff claimed at Rs. 10,04,318 be disallowed to the extent of Rs. 6,02,290 as done by the Assessing Officer, is correct or the view of the Accountant Member that the disallowance should be restricted only to Rs. 10,746, is justified 2. Whether, the view of the learned Judicial Member that the assessee is not entitled to depreciation in relation to four flats and two garages purchased by it in Antriksha Bhawan, Kasturba Gandhi Marg, New Delhi as held by the Assessing Officer is correct or the view of the Accountant Member that the CIT(A) was justified in directing the Assessing Officer to allow the claim of depreciation on flats and garages as the assessee has paid the entire consideration for the purchase and has taken possession of flats and garages, is correct ?" "1. Whether, the view of Judicial Member that the disallowance out of Foreign Travelling Expenses claimed at Rs. 10,04,318 be disallowed to the extent of Rs. 6,02,290 as done by Assessing Officer, in view of facts and circumstances and case law cited in his proposed order and corrigendum issued on 15-1-1998 is correct or Ld. Accountant Member's view is correct to hold that the disallowance should be restricted to Rs. 10,746? 2. Whether, in view of facts and circumstances of the case, Judicial Member is justified in disallowing depreciation by restoring the order of Assessing Officer, on flats and garages as assessee failed to establish that these were used for business purposes, supported by assessee's record and also one of the possession letter shows possession to be not within accounting period, or Ld. Accountant Member is justified in confirming the order of CIT(A) on this point?" 2. It is observed that in question No. 1 proposed by learned Judicial Member, reference has been made to a corrigendum dated 15-1-1988. The said corrigendum has not been signed by learned Accountant Member and the same was never issued so as to carry out the amendment at page 5 of order written by learned Judicial Member.
3. The issue involved in question No. 1 relates to disallowance to the extent of Rs. 6,02,290 made by Assessing Officer out of travelling expenses claimed at Rs. 10,04,318. The brief facts are that Assessing Officer observed from tax audit report that foreign travelling expenses, incurred by the Directors and staff amounted to Rs. 10,04,318. On a query, the assessee submitted details of the expenses.
Assessing Officer observed that the assessee was thinking of starting a new hundred per cent Export Oriented Unit (EOU) and Directors and others went abroad in connection with implementation of the said project. He held that the main expenditure on foreign travelling was on the said account. He further held that the expenditure on foreign travelling could not be fully allowed as revenue expenditure. He observed that it was unbelievable that no personal expenditure was incurred by the persons who went abroad. He, therefore, disallowed 10 per cent of total expenditure being personal and 50 per cent was disallowed as not being of revenue nature. Thus, he disallowed expenditure of Rs. 6,02,290, 3.1 On first appeal, ld. counsel submitted that the expenditure incurred on foreign travelling was in connection with setting up of hundred per cent EOU for export of needles, which was within the same business fold of an existing business and the same was revenue expenditure. He relied on the decisions reported in CITv. Alembic Glass Industries Ltd. [1976] 103 ITR 715 (Guj.), CITv, Hindustan Machine Tools Ltd. (No. I) [1989] 175 ITR 212 (Kar.) and CITv. Woodcraft Products Ltd. [1993] 69 Taxman 415 (Cal.). Ld. CIT(A) considered the submissions and held that 50 per cent disallowance of travelling expenses for being capital in nature has been wrongly made. He, therefore, deleted disallowance of 50 per cent of total expenditure.
With reference to disallowance of 10 per cent of total expenditure, he held that the same had been made by Assessing Officer purely on suspicion and surmises. He observed that the expenditure was duly sanctioned by RBI and there was no basis to hold any part thereof as personal in nature. He, therefore, directed Assessing Officer to delete the disallowance.
3.2 On further appeal, ld. Judicial Member held that the Directors and staff went abroad for implementation of setting up of hundred per cent EOU by the assessee, in addition to existing unit and the same was a new venture. Relying upon the decisions reported in 132 ITR 40 (sic) and 169 ITR 14 (statutes), he held that addition was warranted and that CIT(A) fell in error in deleting the same. He, therefore, reversed order of CIT(A) and restored that of Assessing Officer. Regarding 10% of the expenditure being personal in nature, ld. Judicial Member observed that the facts were similar for assessment year 1990-91. He observed that details furnished showed that the expenditure was incurred on Directors, their spouses and guests and, therefore, 10 per cent was held to be disallowable and it was rightly held so in earlier years. Taking a consistent view, he restored disallowance to the extent of 10 percent.
3.3 Learned Accountant Member observed that reference to 132 ITR 35 was misplaced as decision reported was that of Bhimraj Saremal v. CED under Estate Duty Act and reference to 169 ITR 14 (statutes) had nothing to do with claim of foreign travelling expenses. He opined that the expenditure on travelling for setting up a new unit by an existing business has to be held as an expenditure of a revenue nature especially so in a case where only the possibilities of expanding the existing business by setting up a new unit were explored but no new unit was in fact established in the accounting year under consideration. He referred to decision in Bralco Metal Industries (P.) Ltd. v. CIT [1994] 206 ITR 477 (Bom.). He, therefore, held that Assessing Officer was not justified in disavowing 50 per cent of travelling expenses treating the same to be of capital nature and CIT(A) was justified in holding that the entire expenditure debited under the head 'foreign travelling expenses' was of a revenue nature.
W.r.t. disallowance of 10 per cent of total expenditure being personal in nature, ld. Accountant Member observed that the assessee was a limited company which was an artificial juridical person and cannot have any personal expenditure as such. Assessing Officer and ld.Judicial Member have upheld disallowance supposedly on account of personal expenditure of the Directors and their family members, although there was no finding by Assessing Officer of any particular personal expenditure. In assessment year 1990-91, the assessee-company incurred an expenditure of Rs. 11,56,114 on foreign travels, which included foreign travelling of Directors at Rs. 7,73,739 and of staff at Rs. 3,82,975. Assessing Officer disallowed 10 per cent of foreign travelling expenses of Directors, their spouses and other guests which was claimed at Rs. 8,40,730. CIT(A) scrutinised details and came to the conclusion that foreign exchange sanctioned was Rs. 1,37,622 and only 10 per cent of the said amount, i.e. Rs. 13,702, were disallowable. The assessee accepted the order of CJT(A), whereas the Revenue filed appeal against the relief allowed and the Tribunal vide order dated 12-7-1996 in ITA No. 152/92, to which Id. Judicial Member was also a party dismissed the appeal. Ld Accountant Member further observed that out of total foreign travelling expenses, expenditure on air ticket was Rs. 6,78,533 and foreign exchange released was only Rs. 1,07,466. Although disallowance had been made by Assessing Officer merely on suspicion and surmises because expenditure on account of foreign exchange was sanctioned by RBI, yet to be consistent with the finding of Tribunal in earlier year, 10 per cent of Rs. 1,07,466 could be disallowed as no part of expenditure on air tickets could possibly be disallowed. He, therefore, restricted disallowance out of foreign travelling expenses at Rs. 10,746.
3.4 Learned Departmental Representative Shri Y.R. Saini relied heavily on order of ld. Judicial Member. He referred to provisions of section 37 and submitted that the revenue expenditure is required to be laid out or expended wholly and exclusively for the purpose of business or profession, before it can be allowed in computing the income chargeable under the head 'profits and gains of business or profession'. He stressed that the assessee wanted to set up a new unit, which ultimately did not come up and, therefore, the expenditure incurred on foreign travel of the Directors and others was in the nature of capital expendilure. In support, ld. DR relied on the following decisions :-- (a) CITv. S.L.M. Maneklal Industries Ltd. [1977] 107 ITR 133 (Guj.), in which the ITO held that the expenditure incurred for acquisition of a capital asset in the shape of designs and drawings was capital expenditure and the claim of the assessee for deduction thereof as revenue expenditure was not tenable. On first appeal, the AAC agreed with the ITO. On further appeal, the Tribunal held that the payments made for user of drawings, designs, etc. could not be said to have brought into existence an asset of an enduring nature, but the payments had been made to get the benefits of licence for the purpose of running the business during the period for which the agreements were entered into with a view to earn profits and, therefore, the payments could not be held to be payments on capital account. The Tribunal held that as in the previous years one-fifth of the expenditure should be allowed as a revenue expenditure. On a reference, High Court held that the know-how and the physical embodiments in the shape of plans, designs, workshop drawings, etc.
were clearly included within the meaning of the word 'plant' in section 32 and, therefore, was a capital asset. It further observed that every expenditure incurred in connection with a capital asset was not an expendilure of a capital nature. In the ultimate analysis, High Court held that the Tribunal was right in holding that one-fifth of the expenditure incurred by the assessee for purchase of drawings, designs and patterns from the foreign concern was allowable as revenue expenditure; (b) Modi Industries Ltd v. CIT [1977] 110 ITR 855 (All.), in which the Chairman made a tour of several foreign countries mainly in connection with setting up of two new factories, one for manufacture of electrodes and the other of steel factory. It was observed that the purpose of the tour was either initiation of new business or extension of the already existing business and this being so the expenditure incurred would definitely be of a capital nature; (c) CITv. T.S. Hajee. Moosa & Co. [1985] 153 ITR 422 (Mad.), wherein it was held that the expenses on foreign travel of the wife of the senior partner of the firm was not for business purpose of the firm and were not allowable; (d) CIT v. Shri Digvijay Cement Co. Ltd [1986] 159 ITR 253 (Guj.), wherein it was held that the expenditure incurred in obtaining feasibility report for setting up shipyard was capital expenditure and not deductible. The report was not favourable to the assessee and shipyard not set up; (e) Saurashtra Cement & Chemical Industries Ltd. v. CIT [1992] 196 ITR 237 (Guj.), wherein it was held that the expenditure incurred in obtaining techno-economic feasibility report and consultation fees for the purpose of expansion of unit was capital expenditure; (f) CITv. J.K. Chemicals Ltd [1994] 207 ITR 985 (Bom.), wherein it was held that the expenditure of Rs. 2.50 lakhs incurred for preparation of project report constituted capital expenditure; (g) CITv. Barium Chemicals Ltd [1987] 168 ITR 164 (AP), wherein it was held that the expenditure incurred in investigating into defects and for advice to rectify defects was capital expenditure; (h) Triveni Engg. Works Ltd. v. CIT [1998] 232 ITR 639 (Delhi), wherein it was held that the expenditure incurred on project report was incurred to bring an asset or advantage into existence having enduring benefit and thus the expenditure was capital in nature; (i) V.B.C. Industries Ltd v. CIT [1999] 236 ITR 335 (AP), wherein it was observed that the expenditure incurred in connection with project reports was claimed as revenue expenditure and the Tribunal gave a finding that the expenditure incurred was capital expenditure. On an application filed under section 256(2), High Court held that a question of law arose for reference; and (j) CIT v. Ambica Mills Ltd [1999] 236 ITR 921 (Guj.), wherein it was observed at page 923 that the expenditure incurred for getting the feasibility report was capital expenditure.
3.5 Learned counsel Shri C.S. Aggarwal along with Shri B.M. Khanna filed a written synopsis, wherein it has been mentioned that reference to 132 ITR 40 was incorrect and correct citation is CIT v. McGaw Ravindra Laboratories (India) Ltd [1981] 132 ITR 401 (Guj.). The said decision was approved by the Apex Court in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149. In the said case, the assessee-company was manufacturing blood transfusion equipment under a collaboration agreement with a foreign company. Its products could be sold in India, Ceylon and Pakistan. It deputed R to negotiate changes in the agreement to cover ancillary products such as plasma and for export of its products to other countries. It also deputed H, its laboratory controller, for training in the manufacture of blood bank products. The AAC held that the tour undertaken by R was for two purposes : (a) to negotiate changes in the arrangement with the foreign company to enable the assessee-company to market its products in new territories; and (&) to negotiate for the setting up of an altogether new business involving the manufacture of new products; and that to the extent the tour of R was undertaken for starting manufacture of new products, the expenditure was capital in nature, but the expenditure to the extent it was incurred for extending the business to new territories, was not capital in nature. Ld. counsel urged that it was evident from the said case that it supports the assessee's case, as line of activity of the assessee-company is that of manufacture of needles and it was in connection therewith that the expenditure on foreign travel had been incurred in the course of expansion of its existing business and not in respect of altogether a new business which was the cage before the Gujarat High Court. It is also mentioned that the observations of learned Judicial Member recorded in paragraph 3 w.r.t. 10 per cent of the expenditure being personal in nature, are based on misconception and misreading. It has been pointed out that in assessment year 1990-91, the Tribunal had upheld disallowance of 10 per cent w.r.t. foreign exchange sanctioned. It has been pointed out that learned Accountant Member in order to maintain consistency has held that Rs. 10,746 would be required to be disallowed in view of order in the preceding year. It has been pointed out that there is clear error in order of learned Judicial Member. Ld. counsel also pointed out that the case law relied upon by ld. DR is in respect of setting up of a new business and relates to obtaining of feasibility and project reports and drawings, designs, etc. in the shape of know-how.
3.6 I have carefully considered the submissions made by both the parties and have perused orders of tax authorities and of my learned brothers. I have also seen the case law relied upon by both the parties. It is observed that CIT(A) while deleting 50 per cent disallowance out of foreign travel relied upon the decisions reported in Alembic Glass Industries Ltd's case (supra) Hindustan Machine Tools Ltd. (No.1)'s case (supra) and Woodcraft Products Ltd.'s case (supra).
In Alembic Glass Industries Ltd.'s case (supra), Hon'ble Gujarat High Court observed that there was inter-connection and inter-dependence between the two units and that the Tribunal was, therefore, justified in law in holding that the new factory at Bangalore did not constitute a new business but was only an establishment of a new unit of the existing business at Baroda. It held that the travelling expenses incurred by the assessee referable to the Bangalore unit were for the purposes of the assessee's business and as such were allowable as revenue expenditure. In Hindustan Machine Tools Ltd. (No. 1)'s case (supra), Hon'ble Karnataka High Court held that there was complete unity and interlacing among all divisions of each unit and all units of the business and the expenditure incurred on new units was allowable as revenue expenditure. In Woodcraft Products Ltd. 's case (supra), Hon'ble Calcutta High Court held that travel expenses incurred in connection with expansion of business which ended in failure was revenue expenditure. It is further observed that in Bralco Metal Industries (P.) Ltd.'s case (supra), Hon'ble Bombay High Court have held that the expenditure incurred on foreign tours of Managing Director for purchase of plant and machinery was for the purpose of business and in connection with running business and expenditure was allowable as a deduction under section 37. The cases relied upon by ld.DR are clearly distinguishable on facts and most of them relate to obtaining feasibility and project reports and know-how in the form of drawings and designs and setting up of new units for new products. The ratio of said cases is, therefore, not applicable to the facts of the present case as it is not disputed that the assessee was already in business of manufacturing needles and even proposed hundred per cent EOU was for manufacturing the same product. Simply because EOU has to be set up in a separate zone, it will not amount to setting up of a new business as the assessee would have continued with manufacture of same product which it was already manufacturing and the only purpose for setting up of a new unit was to ensure hundred per cent exports from that unit. I, therefore, feel that the cases relied upon by CIT(A) and learned Accountant Member directly cover the issue in favour of the assessee. I, therefore, tend to agree with learned Accountant Member that in the present case 50 per cent disallowance out of foreign travelling expenditure was not warranted. W.r.t. 10 per cent of the expenditure allowable out of foreign exchange sanctioned by RBI, ld.Accountant Member has relied on order for preceding year. I, therefore, uphold order of learned Accountant Member for restricting disallowance on account of personal expenditure at Rs. 10,746. I may mention that learned Judicial Member in his proposed corrigendum has also referred to the decision in Saraswati Industrial Syndicate Ltd. v. CIT[1912] 84 ITR 544 (Punj. & Har.), I feel that even the facts of that case are entirely different as in the said case ITO had arrived at the conclusion that all the three tours were mostly concerned with the acquisition of capital assets in the form of collaboration for expansion of the business of the company or the consultation with their former collaborators for expansion of the manufacturing capacity of the company which were advantages of enduring nature and would have become the source of income for the assessee-company. With regard to two foreign tours, the ITO allowed one-half of the expenses as revenue expenses and disallowed the remaining half. It was held that the proportion could not be said to be unjustified as the managing director had not furnished any reports about his company to prove the amount of expenditure that could be allowed. In the present case, I have pursued the queries raised by Assessing Officer and replies of the assessee on this issue as placed in the paperbook. It is observed that Assessing Officer never called for any such report from the assessee and proceeded to disallow 50 per cent of the expenditure claimed by the assessee for foreign travelling of Directors and staff. I, therefore, feel that even the said case is of no help to the Revenue.
4. The second issue involved in question No. 2 relates to eligibility to claim depreciation in respect of four flats and two garages purchased by the assessee in Antriksha Bhawan, New Delhi. Assessing Officer observed that the assessee had paid Rs. 17,98,194 for purchasing four flats in Antriksha Bhawan. The assessee had also paid Rs. 60,000 for two garages. Assessing Officer noted that in the preceding year, the assessee had paid Rs. 17,81,806 on account of the said flats and charged depreciation. He asked the assessee to file evidence in respect of admis- sibility of depreciation. The assessee stated in reply that the flats purchased were mainly used for stocking the material which was imported or needles which were exported. The assessee pointed out that the Purchase Department was using these flats for the said purpose. The assessee also submitted subsequently that flats had been put to use by the company by stocking imported material and to facilitate the Purchase Department. It stated that the flats would be used for Branch Office also. Assessing Officer observed that in second reply the assessee had omitted utilisation of flats for the purpose of export of needles. The said omission was significant as the assessee was asked to file export invoices from which it could be gathered that these flats could not have been utilised for the purpose of export of needles. Assessing Officer concluded that the assessee had not utilised flats during the previous year relevant to assessment year 1991-92 but to get undue benefit of depreciation it has tried to show that these flats were used for the purpose of business. The assessee had not filed any evidence to show that it has ownership rights over the flats. No evidence has been filed to show mutation of the property in the name of the assessee. He, therefore, held that the assessee was neither owner of these flats nor it has utilised flats for the purpose of business during the relevant previous year. He, therefore, disallowed depreciation.
4.1 On first appeal, ld. counsel submitted that the assessee should be considered to be owner even though the flats were not mutated in its name, since the assessee was in a position to exercise all rights which a legal owner is entitled to. He referred to provisions of section 27(iiib). Ld. counsel relied on decision in Addl. CIT v. U.P. State Agro Industrial Corpn. Ltd. [1981] 127 ITR 97 (All.). Ld. CIT(A), relying upon the decision in the case of U.P. State Agro Industrial Corpn. Ltd. (supra) held that the assessee will be considered to be owner of the building under section 32, if he is in a position to exercise right of ownership not on behalf of person in whom the title vests but in his own right. He, therefore, held that no case for denial of depreciation of non-use of flats for business purposes has been made out and that depreciation cannot be denied. He, therefore, directed Assessing Officer to allow depreciation on flats/garages.
4.2 On further appeal, learned Judicial Member observed that even if the assessee is taken to be owner of these flats, though there was no registered document or mutation yet nothing was placed on record to establish that these flats were used for business purposes. The assessee's own record established that these flats had been shown to be vacant and one of the letters had mentioned the date of possession as 23-11-1991, in respect of flat No. 615. He, therefore, held that the assessee is not entitled to depreciation.
4.3 Learned Accountant Member referred to para 5.1 of order of CIT(A), wherein it has been noted that the assessee had paid an amount of Rs. 17,98,194 for purchase of flats and it also paid Rs. 60,000 for two garages. The assessee had claimed that these flats were used for stocking imported material needed for manufacture of needles to facilitate Purchase Department. Learned Accountant Member referred to decision in CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 (SC), wherein it has been held that in the context of section 22, 'owner' is a person who is entitled to receive income in his own right and the said section did not require registration of the sale deed. It was held that amendment of section 27 by the Finance Act, 1987 was only clarificatory in nature. In view of ratio of the said decision, learned Accountant Member held that once consideration for purchase of flats was paid, the assessee became owner of these assets, ie. four flats and two garages, although the same were not registered in its name, The user of the assets should be understood in a wide sense so as to embrace passive as well as active use. By way of illustration, he mentioned that a fire extinguisher installed in a building or a factory is a plant which is ready to be used and depreciation is allowed, although it can be used only in case of fire. He referred to decision in Khimji Visram & Sons (Gujarat) (P.) Ltd. v. CIT [1994] 209 ITR 993 (Guj.), in which a question arose for claim of depreciation in assessment year 1976-77, ie. year in which asset was purchased. The said premises were handed over for repairs and actual business was commenced in 1977 only. High Court held that since the assessee had purchased the premises for the purpose of business or setting up of business and that it look over possession in July, 1975 and handed over the same to its agent for furnishing and repairs, it could be said that after taking over possession the premises were used for the purpose of business. It held that the assessee was entitled to depreciation in respect of the said premises in assessment year 1976-77. Assessing Officer himself had allowed depreciation for assessment year 1994-95 by noting that registered office of the company was shifted to these flats on 20-12-1993. He, therefore, held that CIT(A) was justified in allowing claim of depreciation in respect of flats/garages purchased by the assessee.
4.4 Ld. D.R. referred to the provisions of section 32 and submitted that two conditions were necessary to be complied with before the assessee was allowed depreciation. He referred to ownership of the assets in question and use thereof. He submitted that these conditions have not been met. He submitted that it has to be seen whether the assessee had possession of flats and garages as on 31-3-1991. The transfer deed was made next year. In case of part performance, if possession of asset is not with the assessee, it has to be examined whether depreciation is allowable. The assessee has not filed any documentary evidence reg use of flats, garages, e.g. employment of chowkidar, purchase of goods, storage of goods and their further dispatch from the said flats/garages. He, therefore, urged that order of learned Judicial Member may be upheld; 4.5 Ld. counsel relied on order of learned Accountant Member. He referred to the decisions of Hon'ble Supreme Court in the cases of Podar Cement (P.) Ltd. (supra) and Mysore /Minerals Ltd. v. CIT [1999] 239 ITR 775. He submitted that the Apex Court have given a very wide meaning to the expression 'owner' used in section 32 and the assessee in possession of a building on part payment of price, where bldg. has not been registered in the name of the assessee, has been held to be owner of building for the purpose of section 32. The Apex Court have held that such assessee is entitled to depreciation. He submitted that the findings that the assets have not been used for the purpose of business is based on no material. In subsequent year, depreciation has been allowed not on original cost but on w.d.v., implying thereby that depreciation was allowable in preceding year. Depreciation should not be merely computed but has to be actually allowed for recording a finding that the same has actually been allowed. He also referred to the decision in CIT v. Dharampur Leather Co. Ltd. [1966] 60 ITR 165 (SC). He then referred to pages 99-102 of paperbook, where copies of possession letters in respect of flat Nos. 619, 617, 615 and 612-A are pledged and date of possession has been shown as 23-11-1990. He, therefore, submitted that the assessee had been handed over possession of flats in relevant previous year. The assessee was using the said flats for the purpose of storage of goods and that even where passive user of asset is there, the assessee would be entitled to depreciation.
He referred to the decision in the case of Capital Bus Service (P.) Ltd v. CIT [1980] 123 ITR 404 (Delhi), in which the assessee-company, a transport operator maintaining a fleet of buses, kept ready for use four buses for being run on contract basis on temporary permits. On account of lack of demand, those buses were not actually employed by the assessee for more than 30 days in the previous year ending 31-3-1961 relevant to assessment year 1961-62. The question was whether the assessee was entitled to normal depreciation in respect of those four buses. High Court held that the expression 'used for the purpose of business' comprehended cases where the machinery was kept ready by the owner for use in his business and the failure to use it actively in the business was not on account of its incapacity for being used for that purpose or its non-availability. In the ultimate analysis it was held that the assessee was entitled to grant of normal depreciation in respect of four buses. He submitted that needles manufactured by the assessee were exported from Delhi and the same were being stored in the said flats.
4.6 I have carefully considered the submissions made by both the parties, in the light of decisions in Podar Cement (P.) Ltd.'s case (supra) and Mysore Minerals Ltd.'s case (supra). It is observed from pages 99-102 of paperbook that possession of flat Nos. 619, 617, 615 and 612-A was handed over to the assessee on 23-11-1990. I may mention that learned Judicial Member has noted in his order that flat No. 615 was handed over on 23-11-1991. In the last portion of copy of letter placed at page 101, it has been mentioned that actual possession of flat No. 615 in Antriksh Bhawan has been handed over to M/s Groz-Beckert on 23-11-1990. It appears that in middle portion of page, the figures '90' are not very clear and the same have perhaps been read as 91. It is also observed that date of possession of all fiats is November 23rd and, therefore, date in respect of flat No. 615 appears to have been noted wrongly in order of learned Judicial Member. In view of clear fact that possession of four flats had been handed over in relevant previous year, the ratio of the aforesaid two decisions of the Apex Court clearly entitles the assessee to depreciation. In so far as usage of the said flats/garages is concerned, the decision in Capital Bus Service (P.) Ltd.'s case (supra) is clearly in favour of the assessee. In view of the foregoing, I tend to agree with the conclusion of learned Accountant Member that the assessee is entitled to depreciation in respect of said flats/ garages.
5. The matter will now go before the regular Bench for decision according to the majority opinion.
1. The aforesaid was the revenue's appeal before the Tribunal in which as many as seven grounds were raised out of which the Hon'ble Members constituting the Division Bench disagreed on two of them and these being :-- (i) Whether disallowance out of foreign travelling expenses claimed at Rs. 10,04,318 was to be made at a figure of Rs. 6,02,290 as done by the Assessing Officer or the disallowance was to be restricted to Rs. 10,746, The Ld. Judicial Member took the former view whereas the Ld. Accountant Member expressed an opinion to the latter effect.
(ii) The question of depreciation in relation to four flats and two garages purchased by the assessee, the Ld. Judicial Member taking the view that the assessee was not entitled to depreciation whereas the Ld. Accountant Member confirmed the view taken by the CIT(A) to hold that the depreciation on flats and garages was allowable.
2. As there was difference of opinion on the aforesaid two points, the matter was referred to a Third Member by the Hon'ble President of the Tribunal under section 255(4) of the Income-tax Act, 1961. The Third Member by means of an order dated 16-6-2000 has agreed with the view of the Accountant Member on both the issues i.e. in favour of the assessee and against the revenue.
3. By means of the present order effect is being given to the majority opinion and this would mean that the relevant grounds in the revenue's appeal would stand rejected.
4. As regards the other grounds in the revenue's appeal, there is no difference of opinion between the Members who had constituted the Division Bench initially. In other words, the earlier orders passed by the Members are to be read alongwith the present order of the Tribunal and which would mean disposal of the revenue's appeal.