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TMI Blog2014 (1) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has been restricted to 10 per cent. for the reason that the assessee has paid fringe benefit tax - the assessee has neither produced any supporting material either before the lower authorities or before the tribunal – there was no reason to interfere with the order of the Commissioner of Income-tax (Appeals) – Decided against Assessee. Disallowance on account of bad debts u/s 36 (1)(vii) of the Act – Held that:- Assessee has written off the amounts in the books of account pertaining to its travel business and the income was taken into consideration while computing the income in the earlier years - the debts were written off in the books of account and therefore it has complied with the requirement of the Act - the assessee has written off the amount in its books of accounts – Following T.R.F. Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] - the addition made by the Assessing Officer to be deleted – Decided in favour of assessee. Disallowance of depreciation on goodwill u/s 32(1)(2) of the Act – Restricting the disallowance to 10 per cent. as against 20 per cent - Held that:- The assessee had taken an additional ground with respect to claim of depreciation on goodwill befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax (Appeals)-VIII, Ahmedabad, are as under. We first take up the appeal filed by the assessee I. T. A. No. 150/A/2010. 3. The assessee is a private limited company engaged in the business of travels, money-changing, cargo, facility management, tea estate, etc. The assessee filed its e-return on December 30, 2006 declaring total income of Rs. 66,92,341. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated December 31, 2008 and the total income was determined at Rs. 2,23,17,417. Thereafter, vide order passed under section 154 dated February 9, 2009 total income after set off of unabsorbed business loss was determined at Rs. 66,91,343. 4. Aggrieved by the order of the Assessing Officer, the assessee carried the matter before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) vide his order dated November 10, 2009 gave partial relief to the assessee. It is against the aforesaid order of the Commissioner of Income-tax (Appeals), the Revenue and the assessee both are in appeal before us. 5. The grounds raised by the assessee reads as under : "1. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation business is such where the penalty by the Regional Transport Officer and Police Department for violation of rules is common. Further since most of the expenses claimed are not supported by vouchers he disallowed 20 per cent. of the aforesaid expenses on estimate basis and worked out the total disallowance of Rs. 52,93,577. 8. Aggrieved by the order of the Assessing Officer the assessee carried the matter before the Commissioner of Income-tax (Appeals). 9. Before the Commissioner of Income-tax (Appeals), the assessee, inter alia, submitted that the handling charges represent expenses related to customers of International Air Travel as well as domestic air tickets for their purchase of international passage tickets. As per the prevailing practice rebate was given to the customers and the expenses were genuine in nature. It was further submitted that there was no scope of nature of penalties to the Regional Transport Officer and police department for violation of rules in these expenses. With respect to the petrol and diesel expenses it was submitted that the expenses were on account of fuel for various vehicles and the expenditure was justified in comparison to the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one months vouchers but the assessee had failed to produce the same before the Assessing Officer. He further submitted that the assessee did not produce the aforesaid vouchers even before the Commissioner of Income-tax (Appeals). In view of these facts the learned Departmental representative submitted that the Assessing Officer was fully justified in making a reasonable estimate of disallowance at 20 per cent. 13. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the Assessing Officer had asked the assessee to produce one months vouchers in the case of travel business but the assessee failed to produce the same before the Assessing Officer. The assessee did not produce the copies of the vouchers for his perusal. It is also a fact that the Commissioner of Income-tax (Appeals) did not call for a remand report from the Assessing Officer before granting partial relief. In view of these facts we are of the view that one more opportunity be granted to the assessee to substantiate its claim by producing the vouchers and other details before the Assessing Officer. We thus remit the issue to the file of the Assessing Officer and direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses is hereby confirmed. The appellant will get relief of Rs. 5,26,716 accordingly." 16. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee is now in appeal before us. 17. The learned authorised representative submitted that the expenses were incurred for the purpose of business and further the assessee has also paid fringe benefit tax on the expenses incurred. The Assessing Officer has not pinpointed any single instance of expense which is disallowable in nature. He therefore, submitted that since the disallowance has been made on estimated basis the entire addition be deleted. 18. The learned Departmental representative on the other hand relied on the order of the Assessing Officer. 19. We have heard the rival submissions and perused the material on record. It is a fact that the disallowance has been made by the Assessing Officer on estimated basis at 25 per cent. of the expenses and which has been restricted to 10 per cent. for the reason that the assessee has paid fringe benefit tax. It is also a fact that the assessee has neither produced any supporting material either before the lower authorities or before us. In view of the totalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by the appellant as referred to above does not fulfil the conditions as laid down by the hon'ble Gujarat High Court in the case of Dhall Enterprised and Engineers P. Ltd. v. CIT [2007] 295 ITR 481 (Guj). In view of this the appellant's claim of bad debt amounting to Rs. 8,17,446 is hereby rejected. The ground taken by the appellant is hereby dismissed." 23. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee is now in appeal before us. 24. The learned authorised representative submitted that the assessee has written off the amounts in the books of account pertaining to its travel business and the income was taken into consideration while computing the income in the earlier years. It was further submitted that the debts were written off in the books of account and therefore it has complied with the requirement of the Act. He further submitted that the issue of bad debts is now covered in the assessee's favour in view of the apex court decision in the case of T.R.F. Ltd. v. CIT [2010] 323 ITR 397 (SC). He thus submitted that the addition made by the Assessing Officer be deleted. 25. The learned Departmental representative on the other hand su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that in view of the decision of the hon'ble Income-tax Appellate Tribunal Mumbai Bench in Kotak Brokerage v. ACIT, it is entitled for depreciation under section 32 on the value of goodwill. 12.1 I have considered the facts and submission of the learned authorised representative carefully. Keeping in view the legal position as cited above the additional ground of the appellant is being adjudicated. So far as depreciation of goodwill is concerned it does not form part of the intangible assets specified in section 32(1)(ii) of the Act. Therefore, depreciation on the same cannot be allowed. In this regard reliance is placed on the decision of the hon'ble Income-tax Appellate Tribunal, Delhi in the case of Bisquare Technologies P. Ltd. v. ITO [2008] 21 SOT 503 (Delhi). 12.2 In view of the above, the additional ground taken by the appellant is hereby rejected." 29. Before us the learned authorised representative submitted that the issue of depreciation on goodwill has now been settled in view of the decision of the apex court in the case of CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC). He placed on record the copy of the aforesaid decision. He therefore submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses were for keeping building, furniture, labour lines, stores, etc. It was further submitted that in case of expenditure on building is treated as capital in nature the assessee is entitled to depreciation at 10 per cent. The Assessing Officer therefore, concluded that since the assessee had itself requested to consider the expenditure as capital in nature and requested for claim of depreciation, he allowed Rs. 2,71,344 as depreciation and disallowed the amount of Rs. 24,42,092. For similar reasons the Assessing Officer allowed the depreciation at 15 per cent. on the expenditure incurred on repairs on the plant and machinery and disallowed Rs.21,03,763. Aggrieved by the action of the Assessing Officer the assessee carried the matter before the Commissioner of Income-tax (Appeals). 33. The Commissioner of Income-tax (Appeals) deleted the addition by holding as under : "6.7. I have considered the facts and submission of the learned authorised representative carefully. I have also gone through the details of such expenses including their ledger accounts. The nature of these expenses is that they appear to have been incurred towards maintenance of building and ma ..... 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