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2020 (10) TMI 506 - ITAT HYDERABADDisallowance of expenditure towards purchase of tools - Revenue or capital expenditure - HELD THAT:- Assessee has drawn its statement of affairs adhering to the principle of materiality concept. In this situation, we are of the considered view that the disallowance made by AR is not warranted as the expenditure claimed by the assessee is too negligible compared to the volume of the business of the assessee and further it is meaningless to maintain the negligible assets in the books of accounts of the assessee. Claiming these expenditures as deduction is only revenue neutral because even otherwise depreciation has to be allowed on these petty assets. Hence, we hereby set-aside the order of the CIT (A) on this issue and further direct the AO to delete the addition and accordingly withdraw the benefit of depreciation granted to the assessee. Disallowance of depreciation - demolition of the building - HELD THAT:- As per the provisions of section 32(1)(iii) it is apparent that the amount of ₹ 17,38,711/- has to be removed from the block of assets and conversely treated as depreciation. It appears from the orders of the Ld. Revenue Authorities that they have only partially followed the provisions of the Act by excluding the amount of ₹ 17,38,711/- from the block of assets without granting depreciation for the entire amount of ₹ 17,38,711/- which is erroneous. Therefore, we hereby set aside the order of the Ld. CIT (A) on this issue and further direct the Ld. AO to grant depreciation of ₹ 17,38,711/- towards the demolition of the building and delete the same from the block of asset. While doing so, the Ld. AO shall also ensure that the same amount is not claimed as loss in the P & L Account once again which will amount to double deduction. Disallowance of depreciation - discarding the furniture and remove the same from the block of asset - HELD THAT:- As per the provisions of section 32(1)(iii) it is apparent that the amount of ₹ 4,758/- has to be removed from the block of assets and conversely treated as depreciation. It appears from the orders of the Ld. Revenue Authorities that they have only partially followed the provisions of the Act by excluding the amount of ₹ 4,758/- from the block of assets without granting depreciation of ₹ 4,758/- which is erroneous. Set aside the order of the Ld. CIT (A) on this issue and further direct the Ld. AO to grant depreciation of ₹ 4,758/- towards discarding the furniture and remove the same from the block of asset. While doing so, the Ld. AO shall also ensure that the same amount is not claimed as loss in the P & L Account once again which will amount to double deduction. Addition towards Excise Duty levied on finished goods - HELD THAT:- Opportunity should be provided to the assessee to establish before the Ld. Revenue Authorities that the assessee had not paid the Excise Duty for the unsold finished stock. Therefore, in the interest of justice, we hereby remit back the matter to the file of the Ld. AO to examine whether the assessee had not paid the Excise Duty for its finished closing stock and if found so delete the addition because in that case unpaid Excise Duty need not be added to the value of the finished closing stock of the assessee. If found otherwise, reinstate the order of the Ld. AO passed on the earlier occasion on the issue.
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