2021 (9) TMI 1032 - AT - Income Tax

Disallowance of depreciation - acquisition of the intellectual property asset and claimed depreciation @ 25% treating it as intangible capital asset - HELD THAT - As informed that the revenue did not file any appeal against the order of Ld. CIT (A) in the first year i.e., in AY 2012-13. However, looking to the fact that since in this year the assessee is allowed for depreciation on WDV brought over, then an earlier position has been accepted and attained finality, then depreciation cannot be disallowed in the subsequent year. Once the depreciation has been allowed in the first year of capitalisation of expenditure, thereafter there is no basis for disallowing the consequential benefit on WDV. Accordingly, this ground raised by the revenue is dismissed. Disallowance of 14A - Assessee argued AO without recording any satisfaction as to what was the exempt income and the computation of disallowance made by the assessee is not correct - CIT(A) had restricted the disallowance to the amount of exempt income following the decision of earlier years and the judgment of Hon ble Delhi High Court - HELD THAT - Since the aforesaid decision is based on the principle laid down by the Hon ble Jurisdictional High Court, therefore, we do not find any infirmity in the finding of the Ld. CIT(A) and the same is confirmed. Disallowance on account of club expenditure - HELD THAT - AO has disallowed the club services and these expenses holding that it is not related to the business activities of the assessee. Ld. CIT (A) relied upon the judgment of Hon ble Supreme Court in the case of CIT vs. United Glass Mfg. Co. Ltd. 2012 (9) TMI 914 - SUPREME COURT . and the earlier year Ld. CIT(A) order has deleted the said disallowance. We find that this issue is decided in favour of the assessee company by the order of the Tribunal in the appeal for the assessment year 2011- 12. Accordingly this ground raised by the revenue is dismissed. Disallowance on account of late payment of ESI and PF - CIT-A deleted the addition - HELD THAT - Once the payments have been made on or due date of return of income then we do not find any infirmity in the aforesaid finding of the Ld. CIT(A). Accordingly this ground of the revenue is dismissed.

Summary

Issues:
1. Disallowance of depreciation
2. Addition under section 14A
3. Disallowance of club expenditure
4. Disallowance on account of late payment of ESI and PF

1. Disallowance of Depreciation:
The Revenue filed an appeal against the order by Ld. CIT(Appeals)-9 for the assessment year 2014-15. The AO disallowed depreciation of ?4,34,13,420, citing that a payment made to Mansarover Trust (MT) was not wholly and exclusively for business purposes. The Ld. CIT(A) followed the precedent set in the assessment year 2012-13 and directed the AO to delete the disallowance. The Tribunal upheld the decision, stating that once depreciation was allowed in the first year of capitalization, it cannot be disallowed in subsequent years.

2. Addition under Section 14A:
The AO disallowed ?62,65,891 under section 14A without specifying the exempt income. The Ld. CIT(A) restricted the disallowance to the amount of exempt income, which was ?7,12,047, based on earlier decisions and High Court judgments. The Tribunal upheld the Ld. CIT(A)'s decision, as it was in line with the principles set by the High Court.

3. Disallowance of Club Expenditure:
The AO disallowed club services expenses as not related to business activities. The Ld. CIT(A) referred to a Supreme Court judgment and previous Tribunal orders to delete the disallowance. The Tribunal dismissed the Revenue's ground, stating the issue was decided in favor of the assessee in earlier years.

4. Disallowance on Account of Late Payment of ESI and PF:
The AO disallowed ?16,717 for late payment of ESI and PF, which the Ld. CIT(A) directed to be deleted as the payments were made on or before the due date. The Tribunal upheld the Ld. CIT(A)'s decision, citing various High Court decisions. Consequently, the Revenue's appeal was dismissed on all grounds.

The judgment by the Appellate Tribunal ITAT DELHI in 2021 addressed various issues raised by the Revenue against the Ld. CIT(A) order for the assessment year 2014-15. The detailed analysis and reasoning provided by the Tribunal for each issue ensure a comprehensive understanding of the decision, which favored the assessee in all aspects.