2008 (3) TMI 359 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of depreciation on oxygen gas cylinders.
2. Disallowance of export proceeds not received within the stipulated period while computing deduction under section 80HHC.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Oxygen Gas Cylinders:

Facts and Arguments:
The assessee claimed depreciation of Rs. 1,75,00,000 at the rate of 100% on oxygen gas cylinders purchased from Shri Balaji Engineering and leased to M/s. Advance Gas and Consultancy Ltd. and M/s. Aashi Supplies. The Assessing Officer (AO) issued notices under section 133(6) to verify the genuineness of the transactions, which were returned undelivered. The AO asked the assessee to produce the parties involved. The assessee produced representatives who confirmed the transactions. However, the AO, based on an inquiry report from the ADI, Haldwani, found the purchase of cylinders to be non-genuine as the suppliers and transporters were non-existent. Consequently, the AO disallowed the depreciation claim.

CIT(A) Decision:
The CIT(A) accepted the assessee's explanation, noting that the assessee had provided substantial evidence, including purchase orders, bills, transport receipts, and lease agreements. The CIT(A) found that the assessee had made payments by cheques and received lease rent through cheques/drafts, which were duly accounted for in the books. The CIT(A) concluded that the assessee had proven the purchase and lease transactions and allowed the depreciation claim.

Tribunal's Analysis:
The Tribunal examined the records and arguments from both sides. It noted that the assessee had provided comprehensive documentation, including board resolutions, purchase orders, bills, and transport receipts. The Tribunal found that the AO's conclusion was based on local inquiries and hearsay, without substantial evidence. The Tribunal emphasized that the transactions were confirmed by the parties involved, and payments were made and received through banking channels. The Tribunal concluded that the AO's disallowance was unjustified and upheld the CIT(A)'s decision to allow the depreciation claim.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, concluding that the transactions were genuine and the depreciation claim was allowable.

2. Disallowance of Export Proceeds Not Received Within the Stipulated Period:

Facts and Arguments:
The AO did not consider export sales amounting to Rs. 58,12,910 as part of the total turnover for deduction under section 80HHC, as the proceeds were not realized in convertible foreign exchange within the statutory period of six months. The assessee had obtained an extension from CIT, Allahabad, and had applied for further extension. The AO questioned the jurisdiction of CIT, Allahabad, and referred the matter to CIT, New Delhi, who deemed the extension invalid.

CIT(A) Decision:
The CIT(A) accepted the assessee's explanation that it had applied for an extension to CIT, Allahabad, under a bona fide belief due to previous jurisdiction. The CIT(A) noted that the assessee had received the export proceeds (except Rs. 59,691) before the completion of the assessment. Following the decision in the previous assessment year, the CIT(A) allowed the claim.

Tribunal's Analysis:
The Tribunal considered the records and arguments. It noted that the assessee had acted under a bona fide belief and had received the export proceeds before the assessment completion. The Tribunal referred to section 155(13), which mandates rectifying the assessment order when foreign exchange is received. The Tribunal found that the AO should have allowed the claim as the proceeds were received before finalizing the assessment and the application for extension was pending.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to allow the claim, citing section 155(13) and the fact that the export proceeds were received before the assessment was finalized.

Final Judgment:
The appeal of the revenue was dismissed.