2022 (5) TMI 681 - AT - Income Tax

Disallowance of depreciation on intellectual property rights, being software used in the business of the assessee - HELD THAT - It is clear from the remand report as well as purchase order issued by M/s. Satyam Computers dated 18.10.2005 that iAllwayTM MIFS Server License has been acquired and the IPR has been used in the assessee company business for a period of 12 months, which falls under the assessment year of 2007-08. Once the depreciation on IPR is not in dispute, there is clear cut evidence of purchase order is on the record and moreover, the iAllwayTM Server License was used in the assessee company business, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to allow depreciation as claimed by the assessee for the assessment year 2007-08. So far as claim of depreciation on IPR for the assessment year 2008-09 is concerned, in the remand report, the Assessing Officer has stated that the assessee has not contested this issue by way of fresh evidence and therefore, no report on this issue was submitted before the ld. CIT(A). Since the assessee has not furnished renewal of iAllwayTM Server License in subsequent period either before the ld. CIT(A) or before the Tribunal, we are not inclined to interfere with the order of the ld. CIT(A) in confirming the disallowance made by the Assessing Officer. Accordingly, the ground raised by the assessee for the assessment year is dismissed. Disallowance towards unsecured loan given by the Director to the company - HELD THAT - It is not the case of the Department that the assessee has not availed any loan and more so, the assessee has produced all details available to the extent 89% of loan amount, which shows that the assessee has availed unsecured loans and moreover, loan receipt entry is very much available in the ledger accounts of Shri R. Srinivasan. Under the above facts and circumstances, the addition confirmed to the extent of ₹.2,48,000/- by the ld. CIT(A) is deleted. Thus, the ground raised by the assessee is allowed. Disallowance of loan - HELD THAT - We have perused the appellate order and find that in para 5.5 under addition on account of cash deposits to the tune of ₹.5,66,000/-, the submissions of the assessee about receipt of loan of ₹.5,00,000/- from M/s. Shreyas Investment through Shri R. Srinivasan and its repayment along with interest through Shri R. Srinivasan was not doubted by the ld. CIT(A) inasmuch as the assessee had shown the ledger account for interest payment and accordingly, directed to delete the addition of ₹.5,00,000/- . The same submissions of the assessee made towards addition has been rejected by the ld. CIT(A) and confirmed the addition is not correct. Under the above facts and circumstances, the addition confirmed by the ld. CIT(A) is deleted.

Summary

Issues:
1. Disallowance of depreciation on intellectual property rights for assessment years 2007-08 and 2008-09.
2. Disallowance of unsecured loan given by the Director to the company.
3. Disallowance of loan amount credited to the account by cheques for assessment year 2008-09.
4. Disallowance under section 43B.

Issue 1: Disallowance of Depreciation on Intellectual Property Rights:
- The appeals were delayed due to the COVID-19 pandemic, but the Tribunal admitted them for adjudication.
- The dispute was regarding the disallowance of depreciation on intellectual property rights used in the business.
- The Assessing Officer disallowed the claim as the evidence did not prove the purchase of intellectual property rights.
- The Tribunal found evidence supporting the acquisition and usage of the intellectual property rights for the assessment year 2007-08, hence directed the allowance of depreciation.
- However, for the assessment year 2008-09, as the renewal of the license was not furnished, the disallowance was upheld.

Issue 2: Disallowance of Unsecured Loan Given by Director:
- The disallowance of an unsecured loan given by the Director was contested.
- The Assessing Officer treated the unexplained loan as income from other sources.
- The CIT(A) restricted the addition to a specific amount due to lack of proof.
- The Tribunal noted that most details were provided, and the addition was deleted as the loan receipt entry was available in the ledger accounts.

Issue 3: Disallowance of Loan Amount Credited to the Account:
- The Assessing Officer added an amount to the total income as certain credits were not offered for assessment.
- The dispute was over a loan amount from M/s. Shreya Investments routed through the Director's account.
- The CIT(A) restricted the addition to a specific amount, which the Tribunal agreed to delete based on the evidence provided by the assessee.

Issue 4: Disallowance under Section 43B:
- The ground related to disallowance under section 43B was not pressed during the appeal hearing and was dismissed.
- The appeal for the assessment year 2007-08 was allowed, while the appeal for 2008-09 was partly allowed.

This judgment addresses various issues including the disallowance of depreciation on intellectual property rights, unsecured loans, and loan amounts credited to accounts. The Tribunal allowed the appeal for the assessment year 2007-08 but only partly allowed the appeal for 2008-09 due to lack of evidence for renewal of the license. The disallowances were based on the lack of proof of transactions and credits, with the Tribunal making decisions based on the evidence presented by the assessee and the findings of the lower authorities.