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TMI Blog2016 (5) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowed for the purposes of business and, therefore, any interest paid thereon has to be allowed as business expenditure - Decided against assessee. Disallowance of deffered revenue expenditure - Held that:- We find that the assessee has strongly contended that it has not floated any public issue nor invited any share application from anybody, neither during the year under consideration nor in the subsequent years. Therefore, there is no question of incurring expenditure on increase of the share capital. We do not find any adverse inference/findings by the lower authorities in so far as this claim of the assessee is concerned. Since the assessee is a body corporate it has to incur various expenditures before the Registrar of companies. There is no adverse finding by the lower authorities that the expenditure was not incurred for the purposes of business. We, therefore, do not find any reason/basis for disallowing the same. We accordingly direct the A.O to delete the addition - Decided in favour of assessee Disallowance of foreign travelling expenses - Held that:- There is no dispute that the assessee did not furnish complete details of the claim of foreign travel expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. All these appeals were heard together and are disposed of by this common order as they involve common issues. The grievance of the revenue read as under:- 1. The CIT(A) has erred in law and on facts by deleting the disallowance of ₹ 20.10 lacs towards consulting charges paid to Satellite Mgt. Services Ltd, even when the assessee had not discharged the onus of establishing the business purpose of such expenditure. 2. The CIT(A) has erred in law and on facts by deleting the disallowance of ₹ 14.59 lacs towards management consultancy fees paid to CAs despite the fact that the assessee had not discharged the onus of establishing the business purpose of such expenditure. 3. The CIT(A) has erred in law and on facts by deleting the disallowance of ₹ 11.51 lacs towards commission payment to Jayesh Parikh even when the assessee had not discharged the onus of establishing the business purpose of such expenditure. 4. The CIT(A) has erred in law and on facts by deleting the disallowance of deduction of ₹ 2.73 Crores u/s 80HHE despite the fact that the conditions laid down u/s 8OHHE for claiming such deduction were not fulfilled. 3. The gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has shown purchases from RIPL and VCPL, therefore, to support these purchases onus is on the assessee to produce these parties before the A.O who has already recorded the statement of these two persons and who have denied to have made any sale to the assessee company. Thus primarily it is for the assessee to produce these persons before the A.O so as to enable him to confront these two parties. It will be a stage of reexamination. The revenue authorities should also exercise their powers to enforce the presence of these two persons and assessee is required to give full support by way of providing the addresses, mobile numbers and their other whereabouts so as to enable the A.O to serve the summons on them. It is in the interest of the assessee company to extent full support to the A.O to enable him to enforce the attendance of these two persons. Merely putting the burden on the A.O and to sit quietly will not be in its interest. If necessary the A.O can issue commission to the other officer of the department where the assessee can also go and confront the two persons. Accordingly, both the appeals are restored to the file of the A.O for deciding afresh. 6. Pursuant to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contention of the assessee is considered but not acceptable because A.O. has given proper opportunity to the assessee for cross examination with Mr. Rahul Parikh and Smt. Vandana Parikh. The assessee did not produce the two persons before the A.O. after giving the proper opportunity to the assessee company. Therefore, claim of the assessee regarding depreciation and interest payment is not tenable and rejected. The addition was confirmed by the Ld.CIT (A). (Disallowance of ₹ 16,11,32,180/-) 2. Disallowance of expenses regarding foreign travelling : Contention of the assessee is considered. But the ld. CIT (A) has confirmed the addition made by the A.O. Therefore, follow the decision of the ld. CIT(A) contention of the assessee is not acceptable and rejected. (Disallowance of ₹ 16,57,920/-) 3. Disallowance of deferred expenditure u/35D ; Contention of the assessee is considered. But the ld. CIT (A) has confirmed the addition made by the A.O. Therefore, follow the decision of the Id. CIT (A) contention of the assessee is not acceptable and rejected. (Disallowance of ₹ 1,59,028/-) 4. Disallowance regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial part of computers and servers were installed at the office premises of the assessee company located at Nivruti Niwas, Ellisbridge at Ahmedabad and also at Delhi and Mumbai. Since these premises were not surveyed by the Department the computer Hardware installed at these premises was completely ignored. In support of its claim of purchases of computer and the depreciation thereon, the assessee filed necessary invoices of purchases along with copies of ledger account and bank statements. 9. After considering the facts and the submissions, the ld. CIT(A) observed that the claim of the assessee is based on the same reasoning as were given at the time of first round of appeal and since the reasonings given by the assessee were not accepted by the ld. CIT(A) then, therefore, the same are also not accepted now. The impugned disallowance of depreciation was upheld. 10. In so far as the claim of interest expenses of ₹ 1,06,89,996/- is concerned, it was explained by the assessee that the loan was not used for the purchase of computer. It was further brought to the notice of the ld. CIT(A) that out of total claim of interest of ₹ 1,06,89,996/-, only ₹ 65,39, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the findings of his predecessor given in the first round of appeal and deleted these disallowances. While deleting the additions on account of commission of ₹ 11,51,263/-, the ld. CIT(A) observed that when this addition was deleted in the first round of appeal, no ground was taken by the revenue before the Tribunal. Therefore, A.O s action in disallowing the commission is beyond the mandate of the Tribunal s order. 14. A similar observation has been made in so far as the claim of deduction u/s. 80HHE is concerned, the ld. CIT(A) observed that since in the first round of litigation, the claim of deduction u/s. 80HHE was allowed by the ld. CIT(A) and since the revenue had not preferred any appeal against the said findings of the ld. CIT(A). The A.O should not have disallowed the claim in the second round of litigation. 15. The only other addition confirmed by the ld. CIT(A) relates to the octroi duty payment of ₹ 1,71,000/-. 16. The revenue is in appeal in respect of the additions deleted by the ld. CIT(A), the assessee is in appeal against the additions confirmed by the ld. CIT(A) and the assessee has also preferred Cross Objection against the appeal of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O with similar directions to verify the claim made by the assessee and the A.O while giving appeal effect to the order of the ld. CIT(A) vide order dated 06.05.2014 allowed the claim of deduction u/s. 80HHE of the Act at ₹ 27322363/-. We, therefore, do not find any merit in the claim of the revenue. For the sake of completeness, this issue was not raised by the revenue in its appeal in the first round of litigation; therefore, any denial of deduction by the A.O in the second round is not tenable. Ground no. 4 is accordingly dismissed. 21. In the result, the appeal filed by the revenue is dismissed. Coming to the Assessee s appeal in ITA No. 1452/Ahd/2014. 22. The first grievance relates to the claim of depreciation on the purchases of computers. 23. The facts relating to this grievance are that during the course of the assessment proceedings in the first round, the A.O found that the claim of purchase of computers by the assessee was bogus. Necessary enquires were made from Co-Op. Bank of Ahmedabad from where the assessee has taken loan of approximately 6 crores. The information received from the bank revealed that almost the entire purchase of computer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at various places have not been surveyed. Therefore, possibility of computer hardware installed at these premises cannot be ruled out. One more important factor which has to be considered and which goes in favour of the assessee is the claim of short payment of octroi by the octroi department. The assessee has been found to have made short payment of octroi by ₹ 1,71,000/- There is no adverse remark by the revenue authorities in so far as the insurance policies taken to insure the computers. 26. Considering the aforementioned facts, in our considered opinion, the circumstantial evidences are in favour of the assessee. The revenue s rejection of the claim of depreciation is only based on the statements of Parikh couple who were not allowed to be cross examined by the assessee; therefore, their statements are in complete violation of principles of natural justice. On the basis of circumstantial evidences mentioned elsewhere, we are of the opinion that the assessee had purchased computers and is eligible for the claim of depreciation. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O to allow the claim of depreciation. This ground is accordingly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) confirmed the disallowance based upon the findings of his predecessor given in the first round of litigation. 31. We have given a thoughtful consideration to the findings of the authorities below. There is no dispute that the assessee did not furnish complete details of the claim of foreign travel expenditure which it claimed through its computation of income. Even before us no demonstrative evidences have been brought on record to justify the claim in the computation of income. In the absence of any demonstrative evidence, the claim of the assessee is rightly denied by the revenue authorities. This grievance of the assessee is accordingly dismissed. 32. The next grievance of the assessee relates to the disallowance of ₹ 1,59,028/- as deffered revenue expenditure. 33. The disallowance has been made on the finding that the entire expenditure has been incurred for increase in share of capital. It was explained before the revenue authorities that the total expenditure incurred at ₹ 6,36,112/- comprises of payment of fees to Registrar of companies for various matters and does not entirely pertain to increase in share capital. This claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional octroi was raised and paid by the assessee. Although necessary details were not furnished before the A.O. However, the payment was duly supported by other documentary and substantial evidences and on the basis of which in the first round of litigation, the ld. CIT(A) directed the A.O to allow depreciation. 38. We fail to understand why the amount has been disallowed in the present litigation. Once, it has been accepted that it is a capital expenditure forming part of the cost of the Hardware; the A.O should have allowed depreciation on it. We, accordingly direct the A.O to allow depreciation on the additional octroi duty of ₹ 1,71,000/- being treated as capital expenditure. This ground is allowed in part for statistical purpose. 39. In the result, assessee s appeal is partly allowed. ITA No. 804/Ahd/2011 Assessee s appeal for A.Y. 2004-05. 40. The grievance of the assessee read as under:- 1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in dismissing the ground raised in appeal that disallowance of depreciation was based not on facts but only on conjectures and surmises and was not valid. 2. On the facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,09,69,161/-. 43. A similar issue was considered and decided by us in ITA No. 1452/Ahd/2014 qua ground no. 1 of that appeal. For our detailed discussion therein, we direct the A.O to allow the claim of depreciation. 44. Ground no. 4 relates to the disallowance of interest expenses. 45. An identical issue has been considered by us in ITA No. 1452/Ahd/2014 qua ground no. 2 of that appeal. For our detailed discussion therein, we direct the A.O to delete the addition of ₹ 21,12,514/-. 46. Ground no. 5 relates to the disallowance of ₹ 1,59,028/- being treated as deferred revenue expenditure. 47. An identical issue has been considered and decided by us in ITA No. 1452/Ahd/2014 qua ground no. 4 of that appeal. For our detailed discussion therein, we direct the A.O to delete the addition of ₹ 1,59,028/-. 48. Ground no. 6 relates to the disallowance of bad debts of ₹ 3,08,76,140/- in its Profit and Loss account. The A.O asked the assessee to furnish the following details:- (1) Name and address of the parties in respect of whom bad debts are written off. (2) Nature of transaction and data of transaction. (3) Copy of ledger of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose. 54. In the result, the appeal filed by the assessee is partly allowed. ITA No. 1453/Ahd/2014 Assessee s appeal for A.Y. 2003-04. 55. The grievance of the assessee reads as under:- 1. On the peculiar facts and circumstances of the case and in law the ld. CIT(A) has erred in not independently adjudicating the appellant s ground no. 3 raised before him for disallowance of depreciation of ₹ 4,83,92,457/- for the purchases made from (1) Rahul Infotech Pvt. Ltd. (2) Vandana Computers Pvt. Ltd. on the merit of the case. 2. In the eventuality if ground no. 1 above is decided in favour of the appellant then the issue of claim of depreciation may kindly be decided on its own merits considering the deposition of officiating executive directors of the company against the denial made by nonofficiating retired directors of (i) RIPL and (ii) VCPL respectively and also by considering all other clinching (i.e. direct circumstantial) evidences. 56. The only grievance relates to the disallowance of depreciation of ₹ 4,83,92,457/- on purchases of computers. 57. An identical issue has been decided by us in ITA No. 1452/Ahd/2014 qua ground no. 1 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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