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TMI Blog2018 (12) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation other than the amount of ₹ 3,19,95,890/-, we feel it appropriate to restore this issue to the file of the Ld. Assessing Officer for examining the allowability of the depreciation on the amount other than the ₹ 3,19,95,890/-in accordance with the provisions of the Act. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The ground of the appeal, is accordingly allowed for statistical purposes. Disallowance of staff welfare and other business expenses - Held that:- Addition mainly in view of nonproduction of the vouchers or logbook or other evidences in support of the claim of the expenses by the assessee. It is also settled law that no such disallowance can be made on ad hoc basis without pointing out specific defects in the claim of the assessee. In view of the above facts and circumstances of the case and the issue of the claim of depreciation already restored to the file of the Ld. Assessing Officer, we feel it appropriate to restore this issue also to the file of the Assessing Officer for deciding a fresh after providing adequate opportunity of being heard to the assessee. Disallowance of expenditure incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,45,587.00 25 36,397.00 Vehicle depreciation 5,58,940.00 25 1,39,735.00 Vehicle Insurance 38,811.00 25 9,703.00 Servant Salary 2,97,000.00 50 1,48,500.00 Total 16,52,309.00 50 4,78,022.00 3.That the learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by Assessing Officer of ₹ 55,150/- being 50% of the Membership fee on American Express Credit Card. 4.That the learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of ₹ 1,13,,65,036/- made by the Assessing Officer being the depreciation claimed on the Fixed Assets (Media Library) created by capitalization of stock and scrap in trade in the F.Y. 2006-07 (AY 2007-08) 2. Briefly stated facts of the case are that, the assessee a resident company is engaged in the business of production of TV programs i.e. films, Documentary films, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the assessment year 2007-08, the assessee revalued certain part of media library (films etc. produced by the assessee) at ₹ 3,19,95,873/- which was appearing at nil value in the stock in trade and converted the same as capital asset eligible for depreciation. The Tribunal in ITA No. 210/Del/2011 for assessment year 2007-08 however, rejected the claim of the assessee of conversion of the stock in trade into capital asset and held that for the purpose of Income- tax, the relevant part of the stock in trade shall be continued at nil value and denied the claim of the depreciation on such a revalued fixed assets. In the year under consideration, the Ld. CIT(A) , following the finding of the Tribunal rejected the claim of the depreciation of the assessee. The relevant finding of the Ld. CIT(A) is reproduced as under: 4.4 Ground No. 5 of appeal is directed against disallowing a sum of ₹ 1,13,65,036/- out of depreciation claimed by the assessee on media library. AO observed that during the AY 2007-08, the assesse has converted stock-in-trade of ₹ 3,19,95,873/- into fixed asset under the head media library. The intangible assets(media library) in question is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case of the assessee is that the value of these items had been taken as nil as there was no buyer for these items. However, with a view to show improved balance-sheet for taking higher loan from the banks these assets have been shown in the balance- sheet now. Nonetheless, no item could be sold in this year also. We have considered this submission also. We find that the assessee has not incurred any expenditure which has not been recorded in the books of account. The ld. CIT(Appeals) has given a clear finding that all expenses regarding production of films etc. have been duly accounted for in the books. Therefore, it cannot be said that these assets have come out of any unaccounted income. In this light, it becomes clear that the assessee was in possession of these assets, which were valued at nil for the purpose of arriving at the value of work-in-progress. In the light of this fact, it is reasonable to infer that un-saleable work-in-progress, which was valued at nil in earlier years, has now been valued at ₹ 3,19,95,890/-. This value admittedly is an artificial value because this work-in-progress is un-sellable even now though there is a possibility of getting some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed asset. Hon'ble ITAT held that re-classification , of the assets and the value placed thereon in the books will have no consequence as far as income tax assessments are concerned. It was held that the assets for the purpose of income-tax shall continue to be grouped as stock-in-trade at nil value. In view of the above, the claim of depreciation by the assessee on the above assets as fixed assets is not allowable. Therefore, the disallowance made by the AO is fully justified. The appeal is dismissed in this ground. 7. Before us, the Ld. Counsel submitted a chart of addition/deletion and depreciation claimed on media library during the assessment year 2007-08 to 2011-12, which is available on page 18 of the paper book. The said chart is reproduced as under : Particulars A.Y.2007-08 A.Y.2008-09 A.Y.2009-10 A.Y.2010-11 A.Y.2011-12 Opening Balance 79,700,000 79,913,783 60,808,523 45,460,140 Add:-Additions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of being heard. The ground of the appeal, is accordingly allowed for statistical purposes. 10. In ground No. 2 the assessee has raised the issue that following expenses have been disallowed by the Assessing Officer on ad hoc and incorrect basis: Particulars Amount (Rs.) %disallowed Amount disallowed (Rs.) Staff welfare expenses 43,406.00 20 8,681.00 Business promotion 1,84,158.00 25 46,040.00 Telephone Expenses 1,42,721.00 20 28,544.00 Travelling Expenses 2,41,686.00 25 60,422.00 Vehicle Running Expenses 1,45,587.00 25 36,397.00 Vehicle depreciation 5,58,940.00 25 1,39,735.00 Vehicle Insurance 38,811.00 25 9,703.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions and perused the relevant material on record. We note that the Assessing Officer has made disallowance mainly in view of nonproduction of the vouchers or logbook or other evidences in support of the claim of the expenses by the assessee. It is also settled law that no such disallowance can be made on ad hoc basis without pointing out specific defects in the claim of the assessee. In view of the above facts and circumstances of the case and the issue of the claim of depreciation already restored to the file of the Ld. Assessing Officer, we feel it appropriate to restore this issue also to the file of the Assessing Officer for deciding a fresh after providing adequate opportunity of being heard to the assessee. This ground for the appeal is allowed for statistical purposes. 14. In ground No. 3 also the assessee has challenged disallowance of ₹ 55,150/-out of the expenditure incurred through the credit card held by the directors of the company. In absence of the details of expenses incurred by the credit card for the purpose of the business of the company, the Assessing Officer made disallowance at the rate of 50% of the total expenses incurred through the credit car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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