9911796707
TMI Blog2024 (8) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee stated that there was a business transfer agreement for purchase of running business of CA India Technologies Pvt. Ltd. which was to take place from 26.02.2015 but due to some technical reason the record date of acquisition was extended to 31.05.2015. No employee cost is there, assessee s submission in this regard is that operations commenced with directors and assistance from Arcserve USA and CA Technologies employees, negating additional manpower costs. Furthermore, the most important feature is that assessee had arrangement with its AE for billing cost plus 15%. This has been duly billed during the year and entire depreciation cost plus 15% has been billed to the AE. When the Revenue is accepting the revenue earned which is totally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the year under consideration. On perusal of the bills, AO noted that certain bills were in the name of Associated Enterprise of USA and certain bills were dated after 31.03.2015. AO observed that assessee was in the phase of setting up of its business and had not claimed any expense for employee cost and hence the assets could not have been put to use. He also observed that some of the fixed assets bills were not in the name of assessee and some of the bills pertained to next assessment year. In view of the above, AO disallowed the claim of depreciation in respect of Plant and Machinery i.e. computers Rs. 8,397,818/-, furniture fittings Rs. 2,59,133/- and building Rs. 2,01,711/- aggregating to Rs. 88,58,662/-. AO also held that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and appellant claims that depreciation is allowable to it as it has been put to use in Indian office prior to closer of financial year. However, it is clear that user and ownership is not established in the case of appellant. There is no evidence that these computers were used by appellant in its business as its business was in the process of being set up and the employees were acquired on 31.05.2015 i.e. after the end of the financial year. AO has observed that revenue has been booked on the basis of markup of 15% over and above the expenditure/cost incurred by assessee which shows that in actuality no revenue was earned by appellant during the year. It is also to be noted that the expenses prior to set up of business will be pre-operativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in execution. Corrected Invoice and Use: Invoices from Dell International were initially incorrect but later rectified after the fiscal year-end. Despite this, assets were in use, and payments were made within the fiscal year. Interior Work and Depreciation: Partial completion of interior work was capitalized and depreciated based on completion within the fiscal year. Employee Costs: Operations commenced with directors and assistance from Arcserve USA and CA Technologies employees, negating additional manpower costs. Challenge to AO's Interpretation of Expenses and Revenue: The appellant argues against the AO's inference that no expenses were incurred, as operational assets and workspaces were in use. Revenue billed to the AE inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortant feature is that assessee had arrangement with its AE for billing cost plus 15%. This has been duly billed during the year and entire depreciation cost plus 15% has been billed to the AE. When the Revenue is accepting the revenue earned which is totally based upon depreciation plus 15% markup, there is no reason to deny the cost. Hence, we are of the considered view that the authorities below have erred in disallowing the depreciation. In the facts and circumstances of the case, we are in agreement with the submission of the ld. Counsel of the assessee that depreciation claimed is to be allowed. Accordingly, in view of the above, assessee is entitled to claim the depreciation. 9. In the result, the appeal of the assessee is allowed. O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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