2013 (8) TMI 1027 - AT - Income Tax

Depreciation on pipelines - Held that - Admittedly, this issue is covered against the assessee by the decision of this Tribunal in assessee s own case for the assessment year 2004-05 Disallowance of depreciation on telecom system - Held that - It is pertinent to note that in the Assessment Year 2004-05 the depreciation was not allowed on the ground that in the Tax Audit Report it was stated that telecom system in question was put to use on 30.09.2004. There is no dispute that the system in question was put to use by the assessee which is evident from the certificate of IOCL dated 07.05.2003. We are, therefore, of the view that the assessee is entitled to full depreciation for the Assessment Years 2005-06 and subsequent years in accordance with the law. We are accordingly direct the Assessing Officer to allow the same. We also direct the assessee to furnish the working of depreciation to the Assessing Officer who will verify and allow the same in accordance with law. Disallowance of prior period expenses - Held that - CIT(A) confirmed the disallowance on the ground that the assessee has not furnished any evidence in support of the claim that those expenses were crystallized during the year. Before us also the ld Counsel of the assessee could not produce any evidence in support of the claim that those expenses were crystallized during the year. Therefore, we decline to interfere Lump sum disallowance of vehicle and office expenses - Held that - It is pertinent to note that the assessee has not produced voucher of these expenses before the Assessing Officer. Keeping in view of this conspicuous facts, the Assessing Officer made the disallowance of ₹ 50,000/-. The disallowance made by the Assessing Officer is neither excessive or unreasonable.

Summary

Issues:
1. Disallowance of depreciation on pipelines for multiple assessment years.
2. Disallowance of depreciation on telecom system for multiple assessment years.
3. Disallowance of prior period expenses.
4. Lump sum disallowance of expenses.

Issue 1: Disallowance of depreciation on pipelines for multiple assessment years
The appeals were against orders of CIT(A) for three assessment years. The Tribunal noted that the disallowance of depreciation on pipelines was covered against the assessee by a previous decision. The assessee argued that the minimum amount payable to institutions was a contractual liability, and depreciation was claimed accordingly. The Departmental Representative supported upholding the CIT(A)'s decision. The Tribunal found merit in the Departmental Representative's submissions and declined to interfere, rejecting Ground No.2 for all three appeals.

Issue 2: Disallowance of depreciation on telecom system for multiple assessment years
The appeals challenged the disallowance of depreciation on the telecom system for three assessment years. The assessee contended that the system was put to use, supported by a completion certificate. The CIT(A) had confirmed the disallowance based on past years' assessment orders. The Tribunal observed that the system was indeed put to use, as evidenced by the certificate. It directed the Assessing Officer to allow full depreciation for the relevant years and instructed the assessee to provide necessary documentation. Ground No.3 for all three appeals was allowed.

Issue 3: Disallowance of prior period expenses
In the Assessment Year 2005-06, disallowance of prior period expenses was contested. The CIT(A) upheld the disallowance due to lack of evidence of crystallization during the year. The Tribunal noted the absence of supporting evidence and declined to interfere, dismissing Ground No.4.

Issue 4: Lump sum disallowance of expenses
The lump sum disallowance of expenses in the Assessment Year 2005-06 was disputed. The assessee argued that without rejecting the books of account, such disallowance could not be made. However, as vouchers for the expenses were not produced, the Tribunal upheld the disallowance. Ground No.5 was dismissed.

In conclusion, the Tribunal partly allowed the appeals, addressing various issues related to depreciation disallowances and expenses. The decision was based on detailed analysis of the arguments presented by both parties and previous rulings.