2021 (7) TMI 1410 - AT - Income Tax

Rectification of mistake - Addition on account of depreciation on fixed assets u/s. 40a(ia) read with section 37 in respect of capitalization of professional fees capitalized of certain expenses FCCB Premium and FCCB Issue Expenses - HELD THAT - The year before us is A.Y. 2007-08 wherein the depreciation on fixed assets is required to be allowed only as consequential effect of depreciation already allowed by the ld. AO in the A.Y. 2005-06. We find that no expenditure was per se incurred during the year relating to this issue and hence the provisions of Section 40(a)(ia) of the Act could not be made applicable for A.Y. 2007-08. We find that directions of this Tribunal to examine the allowability of expenses u/s. 40(a)(ia) of the Act for A.Y. 2007-08 would only result in impossibility of performance on the part of assessee in as much as no expenditure was incurred by the assessee in A.Y. 2007-08 thereof. The expenditure falling within the ambit of Section 40(a)(ia) had been incurred by the assessee in A.Y. 2005-06 on which depreciation is already allowed by the ld. AO in A.Y. 2005-06. Hence the A.Y. 2007-08 is only consequential year of allowing depreciation on fixed assets and expenses falling under 40(a)(ia) of the Act. Miscellaneous Application of the assessee is allowed.

Summary

Issues:
1. Modification of Tribunal order for A.Y. 2007-08
2. Disallowance of depreciation on fixed assets
3. Disallowance of FCCB premium and related expenses
4. Incorrect assessment year mentioned in the Tribunal order

Analysis:

Issue 1: Modification of Tribunal Order
The assessee filed a Miscellaneous Application seeking to modify certain portions of the Tribunal order for A.Y. 2007-08. The application pointed out mistakes apparent from the record, including the disposal of grounds of appeal related to depreciation and disallowances. The Tribunal had set aside certain issues to the Assessing Officer for verification, leading to a dispute regarding the necessity of sending the matter back for fresh adjudication. The Tribunal ultimately allowed the modification of its findings based on the arguments presented by the parties.

Issue 2: Disallowance of Depreciation on Fixed Assets
The Tribunal erroneously directed re-verification of depreciation on expenditure covered under Section 40(a)(ia) of the Income Tax Act for A.Y. 2007-08. It was clarified that no expenditure was incurred during that year, and the provisions of Section 40(a)(ia) could not be applied. The Tribunal acknowledged that the depreciation had already been allowed in the preceding assessment year, making it a consequential effect for the current year. Consequently, the Tribunal modified its findings to reflect the correct treatment of depreciation on fixed assets and related expenses.

Issue 3: Disallowance of FCCB Premium and Expenses
The Tribunal addressed the disallowance of FCCB premium and related expenses separately raised by the Revenue. The Tribunal clarified the distinction between the issues raised and the need for separate adjudication. It was emphasized that the depreciation on the same fixed asset had been allowed in the previous assessment year, reinforcing the argument for allowing depreciation in the current year. The Tribunal corrected the misrepresentation of the grounds raised by the Revenue in its order to ensure accuracy in the judgment.

Issue 4: Incorrect Assessment Year Mentioned
The Tribunal order contained errors in mentioning the assessment year as "2014-15" instead of "2008-09." The correction was made to reflect the accurate assessment year as claimed by the assessee. The Tribunal acknowledged the mistake and rectified the reference to the correct assessment year while maintaining the integrity of the rest of the order.

In conclusion, the Tribunal addressed the discrepancies in the original order, rectifying errors related to the disallowance of depreciation on fixed assets, FCCB premium, and expenses, as well as inaccuracies in the assessment year mentioned. The modifications made by the Tribunal aimed to ensure the correct application of tax laws and principles in the assessment for A.Y. 2007-08.