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2020 (3) TMI 620 - AT - Income TaxDepreciation on Data Processing Equipment as part of computers - depreciation @ 60% - HELD THAT - We in the interest of justice and fair play, expressed to set aside the finding of the learned CIT (A) to the AO to verify whether the items of addition are part and parcel of the computers. But at the time of dictation, we find that the learned CIT (A) has given very clear finding about the addition of the items under the head data processing equipments are computers/connected devices which was not controverted by the learned DR appearing for the Revenue. Therefore, we find that there is no justification to set aside the issue to the file of the AO for fresh adjudication of the items of addition under data processing equipments. We also note that the appeal was filed by the Revenue and the onus was on it to high lights the infirmities in the order of the ld. CIT-A but the ld. DR appearing on behalf of the Revenue failed to do so - we are of the view that the assessee is entitled for depreciation on data processing equipments at the rate of 60%. Disallowance u/s 40(a)(ia) - Housekeeping Expenses u/s 194C - HELD THAT - We find that the assessee itself before the learned CIT (A) has admitted the fact that the parties for creating the house keeping provisions were not identifiable. Accordingly we hold that these are contingent liabilities which are not based/computed/calculated in scientific manner. Thus, we do not find any infirmity in the order of the learned CIT (A). Retrospectivity of the second proviso to Section 40(a) (ia) - Interest Expenses u/s 194A - HELD THAT - CIT (A) has no power to set aside the order to the AO for the verification. As such the learned CIT (A) has to adjudicate the issue raised by the assessee after calling the remand report from the AO. However, the facts of the present case are the different. As such, the learned CIT(A) has adjudicated the issue raised by the assessee but set aside to the file of the AO only for the limited purpose of the verification. Therefore, we do not find any infirmity in the order of the learned CIT (A) so far as the direction provided to the AO. Similarly, we also note that, the amendment made under the provisions of section 40(a)(ia) vide Finance Act, 2012 has been applicable retrospectively. See ANSAL LAND MARK TOWNSHIP (P) LTD. 2015 (9) TMI 79 - DELHI HIGH COURT - we hold that such amendment under the provisions of section 40(a)(ia) of the Act though brought from the assessment year 2013-14 but it has been held applicable from retrospectively. Accordingly, we do not find any reason to interfere in the order of learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Interest Expenses to Kotak Mahindra Prime Limited under section 194A - HELD THAT - We note that the learned AR for the assessee has not produced any documentary evidence suggesting that the impugned amount paid to ALBL represents the reimbursement of the expenses. Indeed, there was the submission filed by the assessee before the authorities below claiming that the impugned amount of interest represents the reimbursement of the expenses. However, the learned CIT (A) has not given any finding on this contention of the assessee.Accordingly, in the absence of documentary evidence, we reject the contention of the assessee. We find force in the alternate contention of the assessee that the payee of such interest has offered the same to tax. Accordingly, we direct the assessee to file the requisite details showing the reconciliation for the payment made by the assessee to ALBL and the ALBL subsequently made the payment to Kotak Mahindra Prime Limited which has offered the amount of interest income in the income tax return. Hence the ground of appeal of the Revenue is dismissed whereas the grounds raised by the assessee in its CO are partly allowed for the statistical purposes. Disallowances on account of bad debts - AO disallowed the same by holding that the impugned amount was not offered to tax in the earlier years, therefore the same should not be allowed in current year - HELD THAT - Assessee cannot be allowed deduction for writing off such security deposit as bad debts for the reason that the conditions as specified under the provision section 36(2) have not been satisfied. Fact has not been doubted by any of the authorities below that such expenses were not incurred by the assessee in the course of the business. As such, the assessee has taken two showrooms in 2 different cities for the purpose of its business. Accordingly, the security deposits were made in the course of its business activities. Therefore, any loss incurred for any activity carried out in the course of the business is eligible for deduction either under section 37 or section 28 of the Act. In this regard we find support and guidance from the judgment of Hon ble Gujarat High Court in case of PCIT vs. Dishman Pharmaceuticals Chemicals Ltd 2019 (10) TMI 1195 - GUJARAT HIGH COURT Assessee kept showing such security deposit in its balance sheet for 2 years and also chased lessor for the recovery of the security deposits. But all the force of the assessee remains unfruitful. Finally, the assessee in the financial year 14-15 lost the hope of the recovery of the impugned amount and decided to write it off in the financial statements. In our considered view, the action of the assessee writing it off in the financial statements suggests the year of crystallization, though the assessee was entitled to receive the amount of security deposit in the financial year 11-12. As such, in our considered view, the year in which the assessee has written off the amount of security deposit is the relevant year in which the liability has crystallized. Accordingly, we reverse the order of the learned CIT (A) and direct the AO to allow the claim of the assessee. The ground of appeal raised by the assessee in its CO is allowed. Disallowances of car depreciation - assessee before learned CIT(A) submitted that the AO has made an assumption without any basis that the impugned car is owned by its Director - HELD THAT - We note that the amount of depreciation was disallowed in the absence of documentary evidences furnished by the assessee. However the learned AR before us has undertaken the responsibility to file the necessary documents evidencing that the payment for the purchase of the car was paid by it. In this regard, we note that if the payment has been made by the assessee then the assessee shall be the owner of the vehicle despite the fact it was registered in the name of 3rd person who is closely connected with the assessee - we are inclined to set aside the issue to the file of the AO for fresh adjudication
Issues Involved:
1. Depreciation rate on data processing equipment. 2. Disallowance under Section 40(a)(ia) for non-deduction of TDS on interest expenses. 3. Disallowance of housekeeping expenses provision. 4. Disallowance of bad debts. 5. Disallowance of depreciation on motor cars. 6. Levy of interest under Section 234B and 234C. 7. Initiation of penalty proceedings under Section 271(1)(c). Detailed Analysis: 1. Depreciation Rate on Data Processing Equipment: The Revenue challenged the CIT(A)'s decision to allow 60% depreciation on data processing equipment by classifying them as computers. The assessee argued that items like software, laptops, desktops, printers, scanners, modems, and routers should be treated as part of the computers. The CIT(A) found that these items were indeed computers or related devices and had allowed 60% depreciation in the previous year. The Tribunal upheld the CIT(A)'s decision, noting no defects in the findings and confirming the depreciation rate of 60%. 2. Disallowance Under Section 40(a)(ia) for Non-Deduction of TDS on Interest Expenses: The AO disallowed expenses for housekeeping and interest payments due to non-deduction of TDS. The CIT(A) directed the AO to verify if the payee had offered the interest income in their return, which would negate the disallowance. The Tribunal agreed with the CIT(A), citing the Delhi High Court's decision in Ansal Land Mark Township (P) Ltd., which held that the amendment to Section 40(a)(ia) is retrospective. Thus, if the payee has declared the income, the disallowance should not apply. 3. Disallowance of Housekeeping Expenses Provision: The AO disallowed housekeeping expenses provision due to non-deduction of TDS. The CIT(A) upheld this disallowance but allowed the deduction in the subsequent year when the provision was reversed. The Tribunal found no infirmity in this decision, confirming the disallowance for the year under consideration. 4. Disallowance of Bad Debts: The AO disallowed a claim of bad debts for security deposits not recovered from landlords, as these were not offered to tax in earlier years. The CIT(A) upheld this disallowance. The Tribunal reversed this decision, holding that the loss was incurred in the course of business and should be allowed as a deduction under Section 37 or Section 28, provided it pertains to the year under consideration. 5. Disallowance of Depreciation on Motor Cars: The AO disallowed depreciation on a car registered in the director's name, claiming it was not owned by the assessee. The CIT(A) confirmed this disallowance. The Tribunal set aside the issue to the AO for fresh adjudication, allowing the assessee to provide evidence of payment for the car and its use in business. 6. Levy of Interest Under Section 234B and 234C: The CIT(A) treated the levy of interest under Sections 234B and 234C as consequential. The Tribunal set aside the issue to the AO for fresh adjudication as per the provisions of law. 7. Initiation of Penalty Proceedings Under Section 271(1)(c): The CIT(A) dismissed the ground challenging the initiation of penalty proceedings, stating no penalty had been levied yet. The Tribunal found this issue premature and dismissed it. Conclusion: - The Revenue's appeal was dismissed. - The assessee's cross-objection was partly allowed for statistical purposes, with directions for fresh adjudication on certain issues.
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