2011 (7) TMI 1395 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment.
2. Disallowance of depreciation on stock exchange membership card.
3. Disallowance of software expenses.
4. Disallowance out of repairs.
5. Disallowance of bad debts.
6. Levy of interest u/s 234D.
7. Levy of interest u/s 234C.

Summary:

1. Reopening of Assessment:
The issue of reopening of assessment was not adjudicated as it was considered merely academic in nature by both parties.

2. Disallowance of Depreciation on Stock Exchange Membership Card:
The assessee claimed depreciation on the BSE Membership Card, which was disallowed by the AO and confirmed by the CIT(A). The ITAT allowed the depreciation claim, following its own decision in the assessee's case for AY 2005-06, where it was held that "depreciation on membership card of stock exchange is to be allowed."

3. Disallowance of Software Expenses:
The AO treated software expenses as capital expenditure, allowing only partial depreciation. The CIT(A) confirmed this. The ITAT remitted the issue back to the AO to decide afresh in light of the ITAT Special Bench decision in Amway India Enterprises Vs. DCIT, directing the AO to provide a reasonable opportunity to the assessee.

4. Disallowance out of Repairs:
The AO treated the expenditure on repairs as capital expenditure, which was confirmed by the CIT(A). The ITAT remitted the matter back to the AO to examine whether the expenses were revenue or capital in nature, following its decision in the assessee's case for AY 2001-02.

5. Disallowance of Bad Debts:
The AO disallowed bad debts claimed u/s 36(1)(vii) r.w.s. 36(2), which was confirmed by the CIT(A). The ITAT allowed the bad debts claim, following its decision in the assessee's case for AY 2001-02 and the Supreme Court decision in TRF Ltd. Vs. CIT.

6. Levy of Interest u/s 234D:
The AO charged interest u/s 234D, which was confirmed by the CIT(A). The ITAT deleted the interest, following the ITAT Special Bench decision in Ekta Promoters Ltd. and the Delhi High Court decision in DIT Vs. M/s Jacobs Civil Incorporated, holding that section 234D is applicable only from AY 2004-05 onwards.

7. Levy of Interest u/s 234C:
The AO levied interest u/s 234C, confirmed by the CIT(A). The ITAT remitted the matter back to the AO to examine and decide the issue in light of the Bombay High Court decision in Prime Securities Ltd., directing the AO to provide a reasonable opportunity of hearing to the assessee.

Conclusion:
- ITA No. 3272/M/06: Partly allowed for statistical purposes.
- ITA No. 1501/M/07: Allowed.
- ITA No. 1502/M/07: Allowed for statistical purposes.

Pronounced in the open court on this 27th day of July, 2011.