2015 (12) TMI 31 - AT - Income Tax

Disallowance of depreciation on computers on the ground that the same were not put to use - Held that - Total number of computers received were 88 in numbers and these computers were subject to positive report on testing. It is not coming out from the records that when the testing was carried out and whether the testing was carried out for the purpose of business requirements. In the absence of such material evidence, no inference can be drawn with regard to usage of the computers. Under these facts, we deem it proper to restore this issue back to the file of AO for verification and the AO is hereby directed to carry out further verification of the genuineness of certificate and claimed trial run of computers. Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Confirmation of 10% of expenses as personal expenses under sec.38(2) of the I.T. Act.
2. Disallowance of depreciation on computers despite being used for business purposes.

Analysis:

Issue 1 - Confirmation of 10% of expenses as personal expenses:
The appellant contested the confirmation of 10% of various expenses as personal expenses by the Ld.CIT(A)-V, Baroda, arguing that the expenses were incurred for business purposes. The appellant sought relief to allow these expenses, including postage, telephone, vehicle, petrol, and motor car depreciation. During the hearing, the appellant chose not to press this ground due to the smallness of the amount involved, which was accepted, leading to the dismissal of this ground.

Issue 2 - Disallowance of depreciation on computers:
The main contention revolved around the disallowance of depreciation on computers by the authorities, alleging that the computers were not put to use for business. The appellant claimed depreciation on computers amounting to &8377;5,39,110, supported by evidence of a trial run of the computers. The appellant referenced relevant case laws to support their claim. However, the Sr.DR opposed, stating that the evidence provided did not conclusively prove the usage of computers for business purposes during the relevant year.

The Tribunal examined the submissions, orders of the lower authorities, and case laws cited. The AO disallowed the depreciation on the basis that the computers were not effectively used for business purposes. The CIT(A) noted that the computers were intended for leasing starting from a specified date and were not actively used for business before that. The Tribunal observed that the evidence presented was insufficient to establish the actual usage of computers for business during the relevant period. Consequently, the Tribunal directed the AO to verify the genuineness of the certificate and the claimed trial run of computers, leading to the partial allowance of the appeal for statistical purposes.

This detailed analysis of the issues involved in the legal judgment highlights the arguments presented by the appellant, the opposing views, relevant legal provisions, case laws cited, and the final decision rendered by the Tribunal.