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TMI Blog2015 (9) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... mputations at the time of assessments required to be examined. Since they are not placed before us, we cannot give any finding on this issue at the moment. As seen from the orders of CIT(A), he has considered that the amount was not allowed to assessee in the depreciation schedule and allowed in his order and made further disallowance of 0.5% of the claim as he considered the amount as part of production expenses, disallowed that amount on the basis of orders of ITAT in earlier years as well in the impugned year. To that extent, CIT(A)’s order is to be confirmed. However, in case the same amount was already added in the depreciation schedule as an addition during the year but claimed as revenue expenditure at 100% under the head ‘Repairs and Replacement’, the same cannot be allowed as it will be a double claim. In case the claim of repairs and replacement is in addition to the additions to assets shown in the schedule and those two figures are entirely different, then Revenue’s contentions that there is a double claim, cannot be accepted. However, these require deeper analysis with entire assessment record and unfortunately, neither party placed complete details before us eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. - Decided in favour of assessee for statistical purposes. - I.T.A. No. 278/HYD/2014 - - - Dated:- 2-9-2015 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For The Revenue : Smt. Amisha S. Gupt, DR For The Assessee : Shri P. Murali Mohan Rao, AR ORDER PER B. RAMAKOTAIAH, A.M. : This appeal is filed by Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Hyderabad dated 31-10-2013. The issue in this appeal is whether certain amounts disallowed by the Assessing Officer (AO) but claimed by assessee and allowed by CIT(A) were claimed twice or not? 2. Briefly the facts are that survey operations U/s. 133A of the Income Tax [Act] was conducted in the business premises of assessee on 22-08-2003. During survey operation, certain incriminating material was found and impounded. Subsequent to the survey operation, assessee filed its return of income for the assessment year 2003-04 on 01-12-2003 declaring a total income of ₹ 15,53,62,011/-. The return was processed U/s. 143(1) of the Act on 28-04-2004. Subsequently during the scrutiny assessment proceedings, the assessee filed a revised return declaring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignment charges payable as discussed above ₹ 10,00,000/- Rs.22,01,13,587/- Less: Redundant Animation Projects WIP ₹ 2,48,83,969/- Redundant software WIP Rs.2,49,09,786/- NET TAXABLE INCOME ₹ 4,97,93,755/- Rs.17,03,19,832/- (or) Rs.17,03,19,830/- 3. Aggrieved on the above order, assessee preferred the appeal before the CIT(A) on the above claims and submitted that (a) Disallowance in respect of Redundant Animation Projects WIP (Rs.1,57,28,968/-): The AO has disallowed an amount of ₹ 1,57,28,445/- out of total amount of ₹ 4,06,12,414/- claimed by the assessee in its return of income as detailed below: Redundant Animation Projects Rs.2,48,83,968/- Redundant Animation Projects claimed under Repairs Maintenance Rs.1,57,28,968/- Total Rs. ₹ 4,06,12,414/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike to submit that the a part of software Project cost was booked under the head Redundant Animation Projects and the other part including specific software s, hardware s etc expenditure on which was specifically incurred for software Projects were booked under Repairs Maintenance . Therefore, by following Hon ble ITAT order and considering the claim of assessee as made in revised return, the complete expenditure relating to Redundant software Projects i.e. ₹ 4,98,19,751/- shall be allowed in the AY. 2003-04 only. Further, this expenditure is in the nature of Production expenditure only. It is therefore requested to kindly allow the balance expenditure of ₹ 2,49,09,785/-. Without prejudice to the above submissions, we would like to submit that the Hon ble ITAT Hyderabad vide its order dated 04-07-2008 in ITA Nos. 410 to 413/Hyd/2006 in assessee s own case for the AY. 1999-2000 to 2002-03 have directed the AO to make a token disallowance of 0.5% of total production expenses claimed by the assessee. Respectfully following the same order of the Hon ble jurisdictional ITAT in assessee s own case, a token disallowance of 0.5 % of the above production expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 567/Hyd/2007 dt. 23-10-2009. 4. Ld. CIT(A) after considering the detailed submissions of assessee has allowed the above three grounds by stating as under: 7.1 The expenditure towards Redundant Animation Projects WIP is in the nature of Production Expenses . As can be seen from the original assessment order, the appellant had claimed 100% of the expenditure under the head Repairs Replacements . It is also an undisputed fact that the appellant company had claimed the same amount before the Hon ble ITAT under the head Redundant Animation Projects WIP and Redundant Software Projects WIP. Therefore, the assessing officer is not correct in observing that the appellant company has not agitated capitalization of amount under the head Repairs Replacements . On verification of the facts available on record, it is clear that the appellant company had claimed 100% of expenditure towards Redundant Animation Projects WIP and Redundant Software Projects WIP including the amount included under the head Repair Replacements . Therefore, the assessing officer ought to have treated the entire amount of ₹ 4,06,12,414/ - as revenue expenditure only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.4 Further, the Jurisdictional ITAT in the case of Kalyani Refineries Limited vs. Dy. CIT vide their order in ITA No. 567/Hyd/2007 dated 23.10.2009 has held that since the assessee recognized the debts as bad during the year under consideration, following the decision of the Special Bench in the case of Oman International Bank (Supra), we find that the lower authorities were not justified in disallowing the claim of the assessee in respect of bad debts. We accordingly set aside the order of the CIT (A) on this issue, and direct the assessing officer to allow the claim of the assessee in respect of bad debts. 9.5 Respectfully following the above cited decisions, I direct the Assessing Officer to delete the addition made in respect of Non collectable loans advances written off amounting to ₹ 3,23,52,355/- and Bad debts written off amounting to ₹ 1,33,49,823/-. Hence, the grounds of appeal in this regard are allowed . 6. Revenue is aggrieved and raised the following grounds: 1. The ld. CIT(A) has erred in allowing expenditure of Redundant Animation Projects WIP and Redundants Software Projects WIP as revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying the deduction, and stated that any fresh deduction of the same amount under another head will amount to double deduction. Relevant extract of the order given below: From the above, it is clear that the amount of ₹ 4,08,49,962/- claimed under the head Repairs and Replacement relate to plant and machinery and computer hardware and software. This amount has been capitalized and depreciation allowed. This has been accepted by the assessee since the same has not been agitated before the appellate authorities. Since the expenditure under the head Repairs and Replacements has already been considered in the assessment order, the assessee is not entitled to reallocate the same amount to other heads and claim deduction again Hence, a second time deduction of the same amount was not allowed by the AO. However, before Ld CIT(A), the assessee took a new plea, that this amount was nothing but Production Expenses, and as per the ITAT order on Production expenses for AY 1999-2000 to 2002-03, 99.5% of production expenses are to be allowed as deduction. Ld CIT(A), vide para 7.1 and 7.2 of his order, accepted assessee s contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The total additions to fixed Assets in the financial year 2002-2003 is amounting to ₹ 4,82,33,148/ _ has considered in companies act deprecation statement and Income tax deprecation statement. In original return of Income Assessee have claimed Income tax deprecation amounting to ₹ 9,57,55,777/- where as the Assessing officer allowed deprecation amounting to ₹ 9,06,17,754/- (Annexure A enclosed) in his original Assessment order. It clearly established that ₹ 4,08,49,962/- did not allowed by the Assessing officer in his original Assessment order and also revised Assessment order for the deprecation calculation. The Assessing officer in his original assessment order 143(3) dated 29-03-2006 mentioned as follows is Para (iv) of page number 2:- The assessee claimed an amount of ₹ 4,08,49,962/-towards repairs and replacements u/s 31 of IT Act (100%) which was claimed as additions to fixed assets in the Balance Sheet. The details for the additions were called for. The assessee admitted ₹ 1 Lakh under the head Plant and Machinery , ₹ 4,07,49,962/- under the head Computer Hardware and Software . The assessee s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions to fixed assets in the balance sheet. The details for the additions were called for. The Assessee admitted ₹ 1 Lakhs under the head plant Machinery , ₹ 4,07,49,962/- under the head /I computer hardware and software . The Assessee claim for written off of the entire expenditure of ₹ 4.08 crores is not considered treating the same as capital expenditure and deprecation allowed as per I.T Rules is allowed In the Revised Assessment order passed by Assessing officer U / s. 143(3) r.w.s 254 of the Act dated 31-12-2009 the Assessing officer mentioned as follows in para a of page number 4: The Assessee claimed deprecation of ₹ 11,02,16,915/- in the computation of income enclosed to the revised return. But, as per the deprecation schedule enclosed to the revised return, claimed is ₹ 9,57,55,777/-. The Assessee could not produce any evidence in support of the claim of deprecation of ₹ 11,02,16,915/-. In the absence of any details, the additional deprecation of ₹ 1,44,61,138/- ( ₹ 11,02,16,915 - ₹ 9,57,55,777) claimed is not entertained. The correct deprecation admissible consequent to the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as filed by the Revenue in Annexure-2 to the written submissions are: Rs. a. Plant and Machinery 1,00,000 b. Computer software 4,07,749,962 c. Furniture 5,64,717 d. Office equipment 3,23,469 e. Library 64,95,000 TOTAL 4,82,33,148 These amounts are exactly tallying with reference to depreciation originally allowed by the AO in Annexure-A enclosed to assessee s written submissions wherein, additions upto 30th September were bifurcated to ₹ 1,45,57,132/- and additions after 30th September were taken at ₹ 3,36,76,016/-. As seen from the P L A/c originally filed in the return of income along with annual accounts of assessee placed in the Paper Book, the additions to the assets as per the P L A/c was to the tune of ₹ 4,82,33,000/-. These amounts in the P L A/c tally with the fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in various stages, the redundant animation projects amount involves part of repair expenditure of ₹ 1,57,28,445/- and a revised claim from later year of ₹ 2,48,83,969/- thus, totaling to ₹ 4,06,12,414/-. Out of this, AO has already allowed amount of ₹ 2,48,83,969/- in the assessment order consequent to the directions of the ITAT. Assessee contested before the CIT(A) in the impugned order that the balance of ₹ 1,57,28,445/- was also eligible for deduction which the Ld. CIT(A) allowed. 14. Like-wise, the claim of Redundant Software Projects to the extent of ₹ 4,98,19,571/- agitated before the ITAT consist of an amount of ₹ 2,49,09,786/- being a fresh claim and ₹ 2,49,09,785/- out of the repairs claim originally made. Here also, AO allowed ₹ 2,49,09,786/-whereas, CIT(A) allowed the balance amount of ₹ 2,49,09,785/- in the impugned order. 15. Revenue s grounds with reference to the amounts allowed by the CIT(A) contains that these amounts were already considered as part of depreciation schedule on which depreciation was allowed. 16. As seen from the contentions raised before us, the issue boils to whether 100% r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original accounts from which the amounts were claimed in the computation of income at the time of filing original return. 2. Whether the amounts claimed under the head Repairs and Replacement is same as that of additions shown in the balance sheet as new assets which the AO has considered and allowed depreciation. 19. AO is directed to examine all the depreciation schedules and also account schedules and determine whether the amount is different from the amounts considered in depreciation schedule or not? In case the same amount was taken in the depreciation schedule, AO is directed to exclude the same and allow the amount as revenue expenditure as per the directions of Ld. CIT(A). In fact the entire claim of Redundant Animation Project , Redundant Software Project was directed to be examined and allowed by ITAT but AO allowed partly as revenue expenditure. Therefore, we do not see any reason that balance of the amount should be capitalized. Accordingly, AO is directed to exclude the same, if it is claimed and allowed in the depreciation schedule also. With these directions, while upholding the orders of the CIT(A) to that extent, AO is directed to re-examine the above i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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