2017 (5) TMI 353 - AT - Income Tax

Disallowance of depreciation on Business Development rights - Held that - Except for raising this ground, the assessee has failed to bring on record before us any material evidence to establish its claim for being allowed depreciation @25% on business development rights and controvert the findings of the authorities below. In this view of the matter we find no reason to interfere with or deviate from the judicious findings of the learned CIT(A) in rejecting the assessee s claim for being allowed depreciation @25% on business development rights. Consequently, ground No. 1 of Assessee s appeal is dismissed. Disallowance of claim for set off of brought forward losses under section 72A(6) r.w.s. 47(xiv) Proviso (c) - Held that - Except for raising this ground, the assessee has failed to controvert the findings of the authorities below and thereby establish with material evidence that its claim for being allowed set off of brought forward losses under section 72A(6) r.w.s. 47(xiv) of the Act is in order. In this view of the matter, we find no reason to interfere with the judicious decision rendered by the learned CIT(A) in rejecting the assessee s claim for being allowed set off of brought forward losses under section 72A(6) r.w.s. 47(XIV) of the Act. Consequently, ground No. 2 of the assessee s appeal is dismissed. Disallowance of Market Intelligence Collection Charges - Held that - Except for raising this ground, the assessee has failed to bring on record material evidence to controvert the findings of the learned CIT(A) and thereby establish with material evidence that its claim for being allowed expenditure incurred on market intelligence collection charges is in order and was to be allowed. In this view of the matter, we find no reason to interfere with the decision rendered by the learned CIT(A), in sustaining the disallowance in respect of the assessee s claim for market intelligence collection charges to the extent of ₹ 31,00,093/- @ 50/- per customer. - Decided against assessee.

Issues Involved:
1. Disallowance of depreciation on Business Development Rights.
2. Disallowance of claim for set off of brought forward losses under Section 72A(6) read with Section 47(xiv) Proviso (c) of the Income Tax Act.
3. Disallowance of Market Intelligence Collection Charges.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Business Development Rights:
The assessee claimed depreciation of ?36,76,397/- on business development rights, which was disallowed by the Assessing Officer (AO) due to the lack of documentary evidence substantiating the claim. The CIT(A) upheld this disallowance, noting that the assessee failed to provide details or proof of the expenses incurred for training staff and identifying locations. The assessee argued that these rights were preoperative expenses and that depreciation had been allowed in the previous assessment year (A.Y. 2003-04). However, the AO's remand report indicated that depreciation was disallowed in A.Y. 2003-04 due to insufficient evidence. The Tribunal found no reason to interfere with the CIT(A)'s decision, as the assessee failed to provide material evidence to support its claim. Consequently, this ground of appeal was dismissed.

2. Disallowance of Claim for Set Off of Brought Forward Losses under Section 72A(6) read with Section 47(xiv) Proviso (c):
The assessee contended that the CIT(A) erred in upholding the disallowance of its claim for brought forward losses under Section 72A(6) read with Section 47(xiv) Proviso (c). The AO disallowed the claim, noting that the assessee company paid ?2,13,23,484/- to Frontier Trading, a proprietary concern of Shri Vasant Raj Pandit, which constituted an indirect benefit. The CIT(A) agreed, stating that the payment violated the provision that the sole proprietor cannot receive any consideration or benefit other than by way of allotment of shares. The Tribunal upheld the CIT(A)'s decision, as the assessee failed to provide evidence to counter the findings. Thus, this ground of appeal was dismissed.

3. Disallowance of Market Intelligence Collection Charges:
The AO disallowed ?38,75,116/- out of the claimed ?46,50,139/- for market intelligence collection charges, allowing only ?7,75,023/- at ?25/- per customer instead of the claimed ?150/- per customer. The CIT(A) partially upheld the disallowance, allowing expenses at ?50/- per customer, resulting in a disallowance of ?31,00,093/-. The assessee argued that the expenses were justified and reasonable, but the CIT(A) found the expenses excessive and not substantiated. The Tribunal agreed with the CIT(A)'s findings, noting that the assessee failed to provide material evidence to support its claim. Consequently, this ground of appeal was dismissed.

General Ground:
Ground No. 4 was general in nature and did not require adjudication.

Conclusion:
The Tribunal dismissed the assessee's appeal for A.Y. 2004-05, upholding the decisions of the CIT(A) on all grounds. The order was pronounced in the open court on 5th May, 2017.

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