2013 (8) TMI 191 - HC - Income Tax

Disallowance on depreciation on intangible asset - Tribunal deleted disallowance - Held that - installation of software could be checked by the technical person whether it was loaded in the system or not. Therefore, the finding in the survey cannot be relied upon. Even the AO has accepted the fact that some of the software were developed locally and installed in the system - valuation report of assets prepared by Dalal Mott Macdonald which was found in survey which indicated that software developed and installed by the assessee in the system. The assessee produced all the vouchers and receipt for the same which was also examined by learned CIT(A). Nothing is produced during the course of arguments to rebut the findings of learned CIT(A) - Decided against Revenue. Disallowance of interest u/s. 36(1)(iii) - Tribunal deleted addition - Held that - advances made to the different concerns were for the purpose of purchase of raw material or for the purchase of plant-machinery. On having found from the record that there was sufficient fund available with the assessee-respondent, it had held that there was no question of diversion of interest bearing funds by way of loan and advances - Following decision of S.A. Builders Ltd. Vs. Commissioner of Income-tax(Appeals) and another 2006 (12) TMI 82 - SUPREME COURT - Decided against Revenue. Disallowance of loss on sale of raw materials - Tribunal deleted addition - Held that - assessee had provided the requisite details elaborately before the CIT(A) and based on that the remand report was called for from the Assessing Officer. It was noted by the Tribunal that the assessee suffered a loss and this basic fact was not even challenged by the Assessing Officer in the remand report submitted to the CIT(A) - Decided against Revenue. Difference in balance - Tribunal deleted addition - Held that - In absence of any difference in details and reconciliation statement furnished by the assessee, the CIT(A) deleted the addition and the same came to be confirmed by the Tribunal. There being no material to take a contrary view & as both the authorities have concurrently held to delete the said addition - Decided against Revenue.

Issues involved:
1. Disallowance of claim of depreciation on intangible assets (software)
2. Addition made on account of bogus purchase
3. Disallowance of interest under section 36(1)(iii) of the Act
4. Disallowance of loss on sale of raw materials
5. Differences in balance of Rs.14,03,85,459
6. Disallowance of share and debenture issue expenses
7. Disallowance of machinery repair expenses

Detailed Analysis:
1. Disallowance of claim of depreciation on intangible assets (software):
The Tribunal remanded the matter to the Assessing Officer, upholding the decision of the CIT(A) regarding the nature of software as an intangible asset. The Tribunal found support for this decision in a valuation report and the evidence provided by the assessee. The Court declined to interfere with this decision, considering it a remand to the Assessing Officer. The issue was also addressed in another Tax Appeal and was not deemed fit for interference.

2. Addition made on account of bogus purchase:
This issue was not entertained as it was based on factual aspects and had similarities with another Tax Appeal. The Court found no grounds for consideration on this matter.

3. Disallowance of interest under section 36(1)(iii) of the Act:
The Tribunal deleted the addition on the grounds that advances were made for legitimate purposes, such as purchasing raw materials or plant-machinery, and there was no diversion of interest-bearing funds. The Court cited established law on this issue and found no need for further consideration.

4. Disallowance of loss on sale of raw materials:
The Tribunal deleted the addition, noting that the assessee had provided detailed evidence of the loss, which was not contested by the Assessing Officer. The Court found the decision to be based on factual grounds and declined to interfere.

5. Differences in balance of Rs.14,03,85,459:
The Tribunal deleted the addition after considering the explanation and reconciliation statement provided by the assessee. Both the CIT(A) and the Tribunal confirmed the deletion based on the evidence furnished. The Court saw no reason to interfere with this decision.

6. Disallowance of share and debenture issue expenses:
This issue was remanded by the Court to the Tribunal for adjudication on merit rather than a complete remand. Notice was to be issued to the revenue for further consideration based on the Court's stance in a previous Tax Appeal.

7. Disallowance of machinery repair expenses:
The Tribunal deleted the addition based on factual considerations, noting that similar additions were deleted in a previous assessment year. The Court found no need for further consideration on this issue.

In conclusion, the Court addressed each issue raised in the appeal, providing detailed analysis and reasons for upholding or deleting the additions based on the facts and legal principles involved.

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