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2016 (5) TMI 1008 - AT - Income TaxClaim of depreciation on the purchases of computers - Held that - In our considered opinion, the circumstantial evidences are in favour of the assessee. The revenue s rejection of the claim of depreciation is only based on the statements of Parikh couple who were not allowed to be cross examined by the assessee; therefore, their statements are in complete violation of principles of natural justice. On the basis of circumstantial evidences mentioned elsewhere, we are of the opinion that the assessee had purchased computers and is eligible for the claim of depreciation. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O to allow the claim of depreciation - Decided in favour of assessee. Disallowance of interest expenses - Held that - There is no dispute that the disallowance is based upon the findings given in the first round of litigation. Since we have held the purchase of computers to be genuine as per our detailed decision/discussion qua first grievance of this appeal. We have no hesitation to hold that the money has been borrowed for the purposes of business and, therefore, any interest paid thereon has to be allowed as business expenditure - Decided against assessee. Disallowance of deffered revenue expenditure - Held that - We find that the assessee has strongly contended that it has not floated any public issue nor invited any share application from anybody, neither during the year under consideration nor in the subsequent years. Therefore, there is no question of incurring expenditure on increase of the share capital. We do not find any adverse inference/findings by the lower authorities in so far as this claim of the assessee is concerned. Since the assessee is a body corporate it has to incur various expenditures before the Registrar of companies. There is no adverse finding by the lower authorities that the expenditure was not incurred for the purposes of business. We, therefore, do not find any reason/basis for disallowing the same. We accordingly direct the A.O to delete the addition - Decided in favour of assessee Disallowance of foreign travelling expenses - Held that - There is no dispute that the assessee did not furnish complete details of the claim of foreign travel expenditure which it claimed through its computation of income. Even before us no demonstrative evidences have been brought on record to justify the claim in the computation of income. In the absence of any demonstrative evidence, the claim of the assessee is rightly denied by the revenue authorities - Decided in favour of assessee. Disallowance of octroi payment - Held that - We fail to understand why the amount has been disallowed in the present litigation. Once, it has been accepted that it is a capital expenditure forming part of the cost of the Hardware; the A.O should have allowed depreciation on it. We, accordingly direct the A.O to allow depreciation on the additional octroi duty of ₹ 1,71,000/- being treated as capital expenditure Disallowance of bad debts - Held that - No doubt that as per the ratio laid downin the case of TRF Ltd 2010 (2) TMI 211 - SUPREME COURT the assessee need not give the reasons for the write off but at the same time the assessee has to demonstrate that the debt has been taken on the income side in the earlier years as per the provisions of Section 36(2) of the Act, no such demonstrative evidence has been furnished, neither before the lower authorities nor before us. We, therefore, decline to interfere with the findings of the ld. CIT(A)- Decided against assessee. Disallowance of payment of PF/ESI - Held that - We direct the A.O to delete the additions after verifying that employees contribution were paid before the due date for filing the return of income as decided by the Tribunal in assessee s own case for A.Y. 2002-03 - Decided in favour of assessee by way of remand.
Issues Involved:
1. Disallowance of consulting charges. 2. Disallowance of management consultancy fees. 3. Disallowance of commission payment. 4. Disallowance of deduction under Section 80HHE. 5. Disallowance of depreciation and interest on fixed assets. 6. Disallowance of foreign travel expenses. 7. Disallowance of deferred revenue expenditure under Section 35D. 8. Disallowance of octroi payment. 9. Disallowance of bad debts. 10. Disallowance of payment of PF/ESI. Detailed Analysis: 1. Disallowance of Consulting Charges: The CIT(A) deleted the disallowance of ?20.10 lacs towards consulting charges paid to Satellite Mgt. Services Ltd. The Tribunal found that the Assessing Officer (A.O.) did not bring any new material evidence to justify the disallowance and simply followed the findings of his predecessor. The CIT(A) was convinced that the charges were well supported by documentary evidence, and the deletion of the disallowance was upheld. 2. Disallowance of Management Consultancy Fees: The CIT(A) deleted the disallowance of ?14.59 lacs towards management consultancy fees paid to CAs. Similar to the consulting charges, the A.O. did not provide new evidence, and the CIT(A) found that the fees were well supported by documentation. The Tribunal upheld the deletion of the disallowance. 3. Disallowance of Commission Payment: The CIT(A) deleted the disallowance of ?11.51 lacs towards commission payment to Jayesh Parikh. The Tribunal noted that the A.O.'s action was beyond the mandate of the Tribunal’s order in the first round of litigation, as no ground was taken by the revenue before the Tribunal initially. The deletion of the disallowance was upheld. 4. Disallowance of Deduction under Section 80HHE: The CIT(A) deleted the disallowance of ?2.73 crores under Section 80HHE. The Tribunal noted that the CIT(A) had allowed the deduction in the first round of litigation, and the revenue had not appealed against it. Therefore, the A.O.'s disallowance in the second round was not tenable. The deletion was upheld. 5. Disallowance of Depreciation and Interest on Fixed Assets: The CIT(A) upheld the disallowance of depreciation and interest on fixed assets. The Tribunal found that the A.O. did not enforce the attendance of key witnesses for cross-examination and did not dismiss the veracity of affidavits provided by the assessee. The Tribunal concluded that the circumstantial evidence favored the assessee and directed the A.O. to allow the claim of depreciation and interest expenses. 6. Disallowance of Foreign Travel Expenses: The CIT(A) upheld the disallowance of ?16.56 lacs towards foreign travel expenses. The Tribunal found that the assessee did not furnish complete details or demonstrative evidence to support the claim. The disallowance was upheld. 7. Disallowance of Deferred Revenue Expenditure under Section 35D: The CIT(A) upheld the disallowance of ?1.59 lacs being treated as deferred revenue expenditure. The Tribunal found that the assessee had not floated any public issue or invited share applications, and the expenditure was for various company law-related matters. The Tribunal directed the A.O. to delete the addition. 8. Disallowance of Octroi Payment: The CIT(A) upheld the disallowance of ?1.71 lacs towards octroi payment. The Tribunal noted that the octroi department had raised a demand based on physical verification, and the payment was supported by substantial evidence. The Tribunal directed the A.O. to allow depreciation on the octroi payment. 9. Disallowance of Bad Debts: The CIT(A) upheld the disallowance of ?3.08 crores towards bad debts. The Tribunal found that the assessee did not provide demonstrative evidence to show that the debt had been taken on the income side in earlier years as required by Section 36(2). The disallowance was upheld. 10. Disallowance of Payment of PF/ESI: The CIT(A) upheld the disallowance of ?37,440 towards PF/ESI payments. The Tribunal directed the A.O. to delete the additions after verifying that the employees' contributions were paid before the due date for filing the return of income, following the Tribunal's decision in the assessee’s own case for a previous year. Conclusion: The appeals were disposed of with the Tribunal upholding some disallowances and directing the A.O. to allow others based on the evidence and compliance with legal provisions. The revenue's appeal was dismissed, and the assessee's appeals were partly allowed.
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