2019 (4) TMI 1577 - AT - Income Tax

Disallowance of deduction u/s. 35ABB and membership fee to various clubs - HELD THAT - Issue decided in the cases of assessee itself for A.Yrs.2002-03 to 2008-09 in favour of assessee. Disallowance of business loss - HELD THAT - As examined the schedule BP of ITR-6 regarding computation of income from business or profession and we find that at Sr. No. 12(ii), the assessee has mentioned the figure of ₹ 49,83,62,873/- under the head depreciation allowable u/s. 32(1)(i). This figure is filled manually by the assessee while filing ITR-6. However, Schedule DPM Schedule DOA pertaining to depreciation of plant machinery and depreciation on other assets, are lying blank. It is not understandable as to why these schedules were kept blank by the assessee when he has claimed depreciation. This may also affect the business losses claimed by the assessee. AO also required to examine and verify the figure of depreciation mentioned at Sl. No. 11 and at sl. No. 12(ii) of ₹ 49,83,62,873/- of Schedule BP whereas in Profit and loss account, the amount of depreciation is shown at ₹ 95,01,65,233/- at Sl. No. 42. All these distorted figures shown in the return of the assessee need to be examined and verified thoroughly by the AO before arriving at correct business losses admissible to the assessee. No justification in the direction of the ld. CIT(A) to take the business loss of ₹ 94,10,62,358/-. Accordingly, this issue is restored back to the file of Assessing Officer for making proper verification of the figures returned by the assessee in ITR-6 as noted above and thereafter he shall work out correct business profit/losses of the assessee. The assessee is directed to reconcile all the figures shown in ITR-6.

Summary

Issues:
1. Disallowance of deduction under section 35ABB for liquidated damages and interest paid to Department of Telecommunications.
2. Disallowance of membership fee paid to various clubs.
3. Disallowance of claimed business loss for the assessment year.

Issue 1: Disallowance under section 35ABB
The appellant claimed a deduction under section 35ABB for payments made to the Department of Telecommunications (DoT) for liquidated damages and interest. The Assessing Officer disallowed the deduction, stating the payments were not legitimate expenses. The appellant argued that the payments were made as per the license agreement with DoT for failing to deliver services on time. The Tribunal referred to a previous decision and upheld the deduction, stating the payments were for breach of contract, not a breach of law, and hence admissible as business expenses.

Issue 2: Disallowance of Club Membership Fee
The appellant claimed a deduction for membership fees paid to various clubs, asserting it was for business purposes. The Assessing Officer disallowed the deduction, alleging personal expenses were included. The Tribunal, citing relevant case laws, upheld the deduction, stating the expenses were incurred for business promotion and deemed wholly and exclusively for business purposes.

Issue 3: Disallowance of Claimed Business Loss
The appellant claimed a business loss higher than the figure reflected in the acknowledgment of return. The Tribunal noted discrepancies in the figures provided by the appellant and directed the Assessing Officer to verify and reconcile the figures accurately. The issue was remanded back to the Assessing Officer for proper verification, and the appellant was given the opportunity to explain the discrepancies.

In conclusion, the Tribunal partly allowed the appeal of the Revenue for statistical purposes, directing a review of the business loss claimed by the appellant.