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2014 (11) TMI 682 - AT - Income TaxUnexplained expenses u/s 69C Capital expenses made on renovation/refurbishment to leasehold premises or not - Held that:- The order of the AO as well as of the CIT(A) is self contradictory - Under section 69C of the Act, the addition can be made in respect of expenditure incurred by the assessee if the assessee is not able to offer any explanation about the source of expenditure - the AO on the one hand is disbelieving the incurring of expenditure thus denying the claim of depreciation and on the other hand is making addition on account of unexplained expenditure and thereby admitting the incurring of expenditure by the assessee - The AO has tried to blow hot and cold in one stream - The assessee was never asked to prove the source of expenditure, rather the incurring of expenditure itself has been disbelieved by the lower authorities - no additions can be made u/s 69C of the Act - the addition made on this account under section 69C is ordered to be deleted Decided in favour of assessee. Claim of depreciation u/s 32(1)(i) @ 10% - Disallowance of bad debts written off Held that:- The assessee has invited attention to various documents in the shape of bills, vouchers and further details of the improvements done in the premises in question the matter is to be remitted back to the AO for fresh adjudication Decided in favour of assessee. Allowability of set off of unabsorbed depreciation against income from other sources Held that:- If the current year's depreciation cannot be set off owing to the profits or gains chargeable being less than the allowance, the allowance or the part of the allowance to which effect has not been given shall be added to the amount of allowance for depreciation for the following previous year and deemed to be part of the allowance which means that brought forward depreciation merges with the current year's depreciation because of the legal fiction created by provisions of Sec. 32(2) of the Act - However, this fiction has been subjected to the provisions of Sec. 72(2) and 73(3) of the Act - the unabsorbed depreciation is to be added to the account of allowance of depreciation of the next year and as such merges with next years depreciation allowance because of the legal fiction created by provisions of section 32(2) of the Act and further that as per the provisions of section 71 of the Act such depreciation allowance can be set off from income from other heads and further that section 72 does not create any bar to it Decided in favour of assessee. Depreciation on software disallowed u/s 32(1)(i) Held that:- It is immaterial as to whether the software was purchased along with the computer or thereafter - The interpretation of the CIT(A) that the assessee will be eligible for depreciation at the rate of 60% only when the software is purchased along with the computer is wrong - when the statute has provided a specific percentage to be allowed on a particular thing, no different view can be adopted - Since the statute has provided a depreciation allowance at the rate of 60% on computer as well as computer software, the assessee is entitled to depreciation at the rate of 60% on purchase of computer software Decided in favour of assessee.
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