2016 (12) TMI 238 - AT - Income Tax

Disallowance of claim of depreciation - depreciation on the capitalise WDV on account of unpaid customs duty - Held that - We find that the FAA had followed the order of his predecessor for the earlier year and upheld the addition.Nothing has been brought on record to challenge the findings given by the AO and the FAA about the disallowance.Therefore, confirming the order of the FAA, we decide the first ground against the assessee Addition on account of notional interest at the rate of 8% on the sums advanced to subsidiary - Held that - We find that the assessee had not established the basic fact of not charging the interest from RCA and charging interest from the other subsidiaries. It has to explain as to why different treatment was given with regarding charging of interest.In our opinion, the FAA was justify in holding that making a bald statement of commercial expediency for an expenditure is not enough, that the assessee has to establish the fact. In the case under consideration, the assessee had not proved the said basic fact.Therefore, we hold that there is no need to interfere with the order of the FAA. Confirming his order, we decide the second ground against the assessee. Disallowance of professional fees paid - Held that - We find that the assessee had paid and amount of the 50 lakhs to JA, that it had detected tax at source as per the provisions of the act, it had claimed that project was abandoned, that JA did not return the money, that arbitration proceedings were going on at the time of assessment proceedings, that it had shown the amount in question in the balance sheet under the head loans and advances. In our opinion, the FAA was justified in holding that claim made by the assessee was premature and did not pertain to the AY.under appeal. As the order of the FAA does not suffer from any legal infirmity,so,confirming the same we decide the third ground against the assessee. Addition on account of reversal of provision doubtful debts and bad debts - Held that - FAA has clearly given a finding of facts that the assessee has filed the details of amounts written off by it and same constituted the part of the audited accounts.In our opinion, once the amounts have been written and not have been shown as provisions, same have to be allowed.Considering the facts and circumstances of the case, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity.So confirming her order we decide the effective Ground of appeal against the Revenue.

Issues Involved:
1. Disallowance of depreciation on unpaid customs duty
2. Addition of notional interest on advances to subsidiary
3. Disallowance of professional fees paid to a third party
4. Reversal of provision for doubtful debts and bad debts

Issue 1: Disallowance of Depreciation on Unpaid Customs Duty
The Appellate Tribunal ITAT Mumbai addressed the challenge to orders dated 27.10.2012 regarding the disallowance of depreciation on unpaid customs duty. The Assessing Officer disallowed the claim of depreciation amounting to &8377; 45.76 lakhs on the capitalised WDV of &8377; 1.83 Crores. The Tribunal upheld the disallowance, emphasizing that no evidence was presented to challenge the findings of the AO and the First Appellate Authority (FAA). The Tribunal confirmed the FAA's decision, ruling against the assessee on the first ground of appeal.

Issue 2: Addition of Notional Interest on Advances to Subsidiary
The second ground of appeal involved the addition of &8377; 2.29 lakhs as notional interest on advances to a subsidiary. The AO added this amount based on the failure to charge interest on the advances made to the subsidiary. The FAA upheld the AO's decision, stating that the reasons provided by the assessee were unsatisfactory and lacked evidence. The Tribunal agreed with the FAA, concluding that the assessee failed to justify the differential treatment in charging interest. The Tribunal confirmed the FAA's order, deciding against the assessee on the second ground of appeal.

Issue 3: Disallowance of Professional Fees
Regarding the disallowance of &8377; 50 lakhs paid as professional fees to a third party, the AO added this amount to the income of the assessee. The FAA upheld the AO's decision, stating that the claim was premature and did not pertain to the assessment year under consideration. The Tribunal concurred with the FAA, noting that the claim made by the assessee was premature and lacked substantiation. Consequently, the Tribunal confirmed the FAA's decision, ruling against the assessee on the third ground of appeal.

Issue 4: Reversal of Provision for Doubtful Debts and Bad Debts
The first ground of appeal in a separate case concerned the deletion of the addition of &8377; 1.50 Crores due to the reversal of provision for doubtful debts and bad debts. The FAA concluded that the provision for doubtful debts had been added back in earlier years and subsequently written off as bad debts. The Tribunal agreed with the FAA's factual findings and deleted the addition made by the AO. Confirming the FAA's decision, the Tribunal ruled in favor of the assessee on this ground of appeal.

In conclusion, the Appellate Tribunal ITAT Mumbai dismissed the appeals filed by both the assessee and the Assessing Officer, rendering the orders on various grounds as detailed above.

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