9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 455 - AT - Income TaxBogus purchase of computers - Disallowance of claim for depreciation on computers - HELD THAT - CIT(A) has taken note of the fact that the entire purchases of computers during the year under consideration were not made by the assessee-company from RIPL and VCPL and in spite of the fact that some of the said purchases were made by the assessee-company from other parties, the AO disallowed the claim of the assessee for depreciation on all the computers purchased by the assessee during the years under consideration which clearly shows non-application of mind by the Assessing Officer as rightly observed by the learned CIT(A). There was substantial increase in the turnover of the assessee-company for the years under consideration including exports as noted by the learned CIT(A) in his impugned order which, in our opinion, was difficult to achieve without the computers claimed to be purchased by the assessee during the years under consideration as rightly held by the learned CIT(A). Having regard to all these facts of the case and keeping in view the consistent view taken by the appellate authorities in assessee s own case on a similar issue in the preceding years as well as succeeding years including the decision of the Tribunal for AY 2000-01, we are of the view that the disallowance made by the Assessing Officer on account of depreciation on computers by alleging the purchase of computers as not genuine was not sustainable and the learned CIT(A) was fully justified in deleting the same. In that view of the matter, we uphold the impugned order of the learned CIT(A) on this issue and dismiss Ground No.1 of the Revenue s appeal. Addition on account of interest - same is consequential in nature inasmuch as the claim of the assessee on purchase of computers having been held to be not genuine, the interest expenditure incurred by the assessee in respect of loan borrowed for the said purchase of computers was disallowed by the Assessing Officer by treating the same as not for the purpose of business - HELD THAT - CIT(A), accepted the claim of the assessee for the purchase of computers as genuine and consequentially deleted the disallowance made by the Assessing Officer on account of interest. Since we have upheld the decision of the learned CIT(A) holding the purchase of computers by the assessee-company as genuine and allowing depreciation on the computers so purchased, it follows that the interest expenditure incurred by the assessee on loan borrowed from bank for the purposes of said purchase of computers is allowable as deduction being expenditure incurred wholly and exclusively for the purpose of assessee s business. We accordingly uphold the impugned order of the learned CIT(A) giving relief to the assessee on this issue and dismiss Ground No.2 of the Revenue s appeal. Disallowance under Section 40A(3) - HELD THAT - As observed that the said payment was made by the assessee on account of advance and since the same was not claimed as expenditure deductible while computing income, we find ourselves in agreement with the learned CIT(A) that the disallowance made by the Assessing Officer under Section 40A(3) of the Act was liable to be deleted. Disallowance u/s 14A r.w.r. 8D - CIT-A deleted the addition - HELD THAT - As per ratio laid down by the Hon ble Supreme Court in the case of Essar Technoholdings Ltd 2018 (2) TMI 115 - SUPREME COURT to hold that the disallowance made by the Assessing Officer under Section 14A of the Act for the year under consideration, i.e. AY 2001-02, was not sustainable. At the time of hearing before us, the learned DR has not been able to raise any contention to dispute this position. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue. Addition of preliminary expenses - CIT-A deleted the addition - HELD THAT - As found by the learned CIT(A), there was nothing to show that the assessee during the year under consideration had floated any public issue or invited any share application from anybody. At the time of hearing before us, the learned DR has not been able to bring anything on record to rebut or controvert this finding recorded by the learned CIT(A). We, therefore, find no infirmity in the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer on account of preliminary expenses and dismiss Ground No.4 of the Revenue s appeal for AY 2001-02.
Issues Involved:
1. Deletion of disallowance of depreciation on computers. 2. Deletion of disallowance of interest expenditure. 3. Deletion of disallowance under Section 40A(3). 4. Deletion of disallowance under Section 14A. 5. Deletion of disallowance of preliminary expenses. Issue-wise Detailed Analysis: 1. Deletion of Disallowance of Depreciation on Computers: The main issue involved in the appeal for AY 1999-2000 was the deletion by the CIT(A) of the addition made by the Assessing Officer (AO) on account of disallowance of the assessee's claim for depreciation on computers. The AO disallowed the depreciation based on findings from a survey conducted under Section 133A, which suggested that the purchases of computers were not genuine. The CIT(A) allowed the claim for depreciation, finding that the purchases were genuine and noting that similar issues in other years had been decided in favor of the assessee by the Tribunal. The Tribunal upheld the CIT(A)'s decision, noting that the adverse findings by the AO were not tenable and that the purchases were supported by substantial evidence, including invoices, ledger accounts, bank statements, and affidavits from current directors of the supplier companies. 2. Deletion of Disallowance of Interest Expenditure: The issue of disallowance of interest expenditure was consequential to the disallowance of depreciation on computers. Since the CIT(A) accepted the claim for the purchase of computers as genuine, the interest expenditure incurred on loans borrowed for the said purchase was also allowed. The Tribunal upheld this decision, agreeing that the interest was incurred wholly and exclusively for the purpose of the assessee's business. 3. Deletion of Disallowance under Section 40A(3): The AO disallowed Rs. 5000 under Section 40A(3) for cash payments exceeding the prescribed limit. The CIT(A) deleted this disallowance, noting that the payment was an advance and not claimed as a deductible expense. The Tribunal upheld the CIT(A)'s decision, agreeing that the disallowance was unwarranted. 4. Deletion of Disallowance under Section 14A: For AY 2001-02, the AO made a disallowance under Section 14A, which was deleted by the CIT(A) on the grounds that the provisions of Rule 8D were not applicable retrospectively and would apply from AY 2008-09 onwards. The CIT(A) relied on the Supreme Court's decision in CIT vs. Essar Technoholdings Ltd. The Tribunal upheld this decision, noting that the DR did not dispute the CIT(A)'s reasoning. 5. Deletion of Disallowance of Preliminary Expenses: The AO disallowed preliminary expenses, which the CIT(A) deleted, noting that the assessee did not float any public issue during the year and that similar disallowances in earlier years had been deleted by the Tribunal. The Tribunal upheld the CIT(A)'s decision, agreeing that the disallowance was unjustified. Conclusion: The Tribunal dismissed the Revenue's appeals for both AY 1999-2000 and AY 2001-02, upholding the CIT(A)'s decisions on all issues. The Tribunal also dismissed the Cross-Objections filed by the assessee as withdrawn. The judgment emphasized the importance of consistency and the necessity for the AO to provide substantial evidence when making disallowances.
|
