2017 (1) TMI 618 - AT - Income Tax

Rate of depreciation on CCTV cameras - Held that - CCTV cameras cannot function without computer as to see the footage captured by CCTV camera you need a device in the shape of computer and thus Computer is an integral part of CCTV camera and as such is eligible for depreciation at the rate of 60% as prescribed for Computers under the Income Tax Act and accordingly allow the depreciation @ 60% on the issue in dispute. See Commissioner of Income Tax Versus Citicorp Maruti Finance Ltd. 2010 (11) TMI 802 - Delhi High Court Disallowance of advertisement expenses - Held that - The said expenditure was genuine one as the same was paid to Lion Club for advertisement in District Directory for good and effective medium for company s products and services as is evident from the receipt filed at pages 165 of the paper book and delete the addition in dispute by relying on the judgment of Hon ble High Court of Delhi in the case of CIT vs. Salora International Limited reported in 2008 (8) TMI 138 - DELHI HIGH COURT wherein it has been held that expenses incurred for advertisement and sales promotion and brand building are allowable expenses. Disallowance expenditure(i.e. 10% of the telephone expense and vehicle running and maintenance expenses and 40% of the festival expenses) - Held that - The disallowance made by AO are without any basis and purely adhoc disallowances made for personal use or vouchers in the hands of the company which is not permissible in the eyes of law. Also note that the disallowance (40% of the festival expenses) has been incurred exclusively for the business purpose and all the payments had been through bank with proper supporting vouchers hence both the additions in dispute are deleted. See Sayaji Iron 20, 000/- was paid for brand promotion and effective marketing of company s products and services as is evident from the receipt filed at page 166 of the paper book. Hence the addition in dispute is deleted. Also find that even otherwise the assessee is eligible for deduction under section 80G of the I.T. Act 1961. See CIT vs. Salora International Limited 2008 (8) TMI 138 - DELHI HIGH COURT wherein it has been held that the expenses incurred for advertisement and sales promotion and brand building are allowable expenses.

Summary

Issues:
1. Violation of principles of natural justice by the Learned CIT (A).
2. Non-receipt of notice by the Assessee for the hearing date.
3. Errors in confirming additions made by the Assessing Officer.
4. Disallowance of various expenses by the Assessing Officer.
5. Disallowance of donation and deduction under Section 80G.
6. Initiation of penalty proceedings under section 271 (1)(c) of the Income Tax Act.
7. Levying of interest under section 234B.

Issue 1: Violation of principles of natural justice by the Learned CIT (A).
The Assessee contended that the Learned CIT (A) erred in passing the order without providing sufficient opportunity to be heard, thus violating the principles of natural justice. The Assessee raised concerns about not being heard adequately during the proceedings.

Issue 2: Non-receipt of notice by the Assessee for the hearing date.
The Assessee claimed that the notice fixing the date of hearing was not served upon them, leading to a lack of proper communication regarding the hearing schedule. This issue raised doubts about the procedural fairness in notifying the Assessee about the hearing dates.

Issue 3: Errors in confirming additions made by the Assessing Officer.
The Assessee challenged the additions made by the Assessing Officer, citing errors in confirming those additions by the Learned CIT (A). Various grounds were raised, including the lower rate of depreciation on CCTV cameras, disallowance of expenses, and other discrepancies in the assessment.

Issue 4: Disallowance of various expenses by the Assessing Officer.
The Assessee contested the disallowance of expenses such as advertisement costs, telephone expenses, vehicle running and maintenance expenses, festival expenses, and donations made for business purposes. The Assessee argued that these expenses were legitimate and necessary for business operations.

Issue 5: Disallowance of donation and deduction under Section 80G.
The Assessee questioned the disallowance of a donation made for advertisement purposes and the denial of deduction under Section 80G. The Assessee claimed that the donation was for brand promotion and marketing, and therefore, should be allowed as a business expense.

Issue 6: Initiation of penalty proceedings under section 271 (1)(c) of the Income Tax Act.
The Assessee contended that penalty proceedings initiated by the Assessing Officer for revising the return of income were unjustified, as the revision was made before any query was raised. The Assessee argued that no penalty should be imposed under these circumstances.

Issue 7: Levying of interest under section 234B.
The Assessee raised concerns about the levying of interest under section 234B, stating that it should not have been charged. The Assessee argued that the interest levy was not warranted in the given circumstances.

In summary, the judgment addressed multiple issues raised by the Assessee regarding procedural fairness, assessment discrepancies, disallowance of expenses, donations, deductions, penalty proceedings, and interest levies. The Tribunal partly allowed the Assessee's appeal by overturning certain additions and disallowances, emphasizing the need for proper assessment procedures and adherence to legal principles.