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2022 (8) TMI 455 - AT - Income TaxBogus purchase of computers - Disallowance of claim for depreciation on computers - HELD THAT:- CIT(A) has taken note of the fact that the entire purchases of computers during the year under consideration were not made by the assessee-company from RIPL and VCPL and in spite of the fact that some of the said purchases were made by the assessee-company from other parties, the AO disallowed the claim of the assessee for depreciation on all the computers purchased by the assessee during the years under consideration which clearly shows non-application of mind by the Assessing Officer as rightly observed by the learned CIT(A). There was substantial increase in the turnover of the assessee-company for the years under consideration including exports as noted by the learned CIT(A) in his impugned order which, in our opinion, was difficult to achieve without the computers claimed to be purchased by the assessee during the years under consideration as rightly held by the learned CIT(A). Having regard to all these facts of the case and keeping in view the consistent view taken by the appellate authorities in assessee’s own case on a similar issue in the preceding years as well as succeeding years including the decision of the Tribunal for AY 2000-01, we are of the view that the disallowance made by the Assessing Officer on account of depreciation on computers by alleging the purchase of computers as not genuine was not sustainable and the learned CIT(A) was fully justified in deleting the same. In that view of the matter, we uphold the impugned order of the learned CIT(A) on this issue and dismiss Ground No.1 of the Revenue’s appeal. Addition on account of interest - same is consequential in nature inasmuch as the claim of the assessee on purchase of computers having been held to be not genuine, the interest expenditure incurred by the assessee in respect of loan borrowed for the said purchase of computers was disallowed by the Assessing Officer by treating the same as not for the purpose of business - HELD THAT:- CIT(A), accepted the claim of the assessee for the purchase of computers as genuine and consequentially deleted the disallowance made by the Assessing Officer on account of interest. Since we have upheld the decision of the learned CIT(A) holding the purchase of computers by the assessee-company as genuine and allowing depreciation on the computers so purchased, it follows that the interest expenditure incurred by the assessee on loan borrowed from bank for the purposes of said purchase of computers is allowable as deduction being expenditure incurred wholly and exclusively for the purpose of assessee’s business. We accordingly uphold the impugned order of the learned CIT(A) giving relief to the assessee on this issue and dismiss Ground No.2 of the Revenue’s appeal. Disallowance under Section 40A(3) - HELD THAT:- As observed that the said payment was made by the assessee on account of advance and since the same was not claimed as expenditure deductible while computing income, we find ourselves in agreement with the learned CIT(A) that the disallowance made by the Assessing Officer under Section 40A(3) of the Act was liable to be deleted. Disallowance u/s 14A r.w.r. 8D - CIT-A deleted the addition - HELD THAT:- As per ratio laid down by the Hon’ble Supreme Court in the case of Essar Technoholdings Ltd [2018 (2) TMI 115 - SUPREME COURT] to hold that the disallowance made by the Assessing Officer under Section 14A of the Act for the year under consideration, i.e. AY 2001-02, was not sustainable. At the time of hearing before us, the learned DR has not been able to raise any contention to dispute this position. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue. Addition of preliminary expenses - CIT-A deleted the addition - HELD THAT:- As found by the learned CIT(A), there was nothing to show that the assessee during the year under consideration had floated any public issue or invited any share application from anybody. At the time of hearing before us, the learned DR has not been able to bring anything on record to rebut or controvert this finding recorded by the learned CIT(A). We, therefore, find no infirmity in the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer on account of preliminary expenses and dismiss Ground No.4 of the Revenue’s appeal for AY 2001-02.
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