2001 (10) TMI 267 - AT - Income Tax

Summary

Issues Involved:

1. Depreciation on temporary structures.
2. Depreciation on service line charges.
3. Depreciation on computer software.
4. Adjustment of claims under section 143(1)(a).
5. Rectification under section 154.
6. Deductions under sections 80HH, 80-I, and 80-IA.

Issue-wise Detailed Analysis:

1. Depreciation on Temporary Structures:

The assessee claimed depreciation on temporary structures at 100%, even though other furniture and fixtures were depreciated at only 10%. The Assessing Officer (AO) allowed 100% depreciation but restricted it to 50% for structures held for less than 180 days, in accordance with the proviso to section 32(1). The allowable depreciation was computed at Rs.5,417 instead of the claimed Rs.10,834. The Tribunal upheld the AO's decision, noting that the adjustments made were not debatable and fell within the scope of section 143(1)(a).

2. Depreciation on Service Line Charges:

The assessee claimed 100% depreciation on service line charges of Rs.1,75,000, but the AO restricted it to 25% as applicable to plant and machinery, and further limited it to 50% since the asset was held for less than 180 days. This resulted in an addition of Rs.1,53,125. The Tribunal supported the AO's adjustments as they were based on the depreciation table and were prima facie in nature.

3. Depreciation on Computer Software:

The assessee claimed 100% depreciation on computer software costing Rs.1,55,000. The AO allowed 25% depreciation, further restricted to 50% for being held for less than 180 days, resulting in an addition of Rs.1,35,625. The Tribunal upheld the AO's decision, stating that the adjustments were not debatable and were correctly made under section 143(1)(a).

4. Adjustment of Claims under Section 143(1)(a):

The assessee argued that the AO should have allowed the claims under section 37 as revenue expenditure if they were not admissible under section 32. The Tribunal rejected this argument, stating that the AO was only required to process the return based on the information provided and was not obligated to consider alternative claims under section 37.

5. Rectification under Section 154:

The AO rejected the assessee's plea for rectification under section 154, stating that any inquiry into the allowability of the expenditure under section 37 could only be done under section 143(3). The Tribunal agreed, noting that section 154 is meant to rectify apparent errors and not errors committed by the assessee while filing the return. The Tribunal emphasized that the AO acted correctly based on the information provided in the return and accompanying statements.

6. Deductions under Sections 80HH, 80-I, and 80-IA:

The CIT(A) directed the AO to reconsider the deductions under sections 80HH, 80-I, and 80-IA, as the adjustments made increased the profits of the relevant units. The Revenue argued that the assessee did not provide separate P&L accounts for the old and new divisions. The Tribunal upheld the CIT(A)'s direction, stating that the AO should have called for the necessary particulars instead of ignoring the request. The Tribunal found no merit in the Revenue's grounds and dismissed the appeal.

Conclusion:

The Tribunal dismissed both the assessee's and the Revenue's appeals, upholding the AO's adjustments and the CIT(A)'s directions. The Tribunal emphasized that the AO's adjustments were prima facie in nature and within the scope of section 143(1)(a), and that any rectification under section 154 could not address errors made by the assessee in the original return.