TMI Blog2008 (1) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of information technology and providing digital security solutions for net-working, internet multimedia, and also claims to have carried on research and development in the area of robotics, ASIC, micro controller etc. During the course of scrutiny assessment, after verification of books of account, the Assessing Officer found that the assessee had shown consultancy income of Rs. 1.59 crores and sale of goods at a value of Rs. 12.48 lakhs. The Assessing Officer observed that the names and addresses of all its clients to whom the assessee-company actually rendered consultancy services as well as provided other services during the year, and the extent of expenditure incurred during the year on each of such assignments have not been explained and corroborated with proper verifiable records. The income declared for the year was on account of fee received for licensing of its fixed assets, namely, "set top box technology to M/s. Cybermatics Network (P.) Ltd. The Assessing Officer found that against this income, a sum of Rs. 9,50,000 in the form of commission was booked by the assessee under the head "General expenses". It was explained that this commission was paid to M/s. Narendra Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was not furnished by the assessee. The Assessing Officer has also issued notice under section 133(6) of the Act directly to M/s. Narendra Presstech (P.) Ltd. and which has been replied by it vide its letter dated 25-2-2003. After receipt of this letter, the Assessing Officer observed that no services were rendered by M/s. Narendra Presstech. By quoting the contents of the letter with regard to nature of services rendered, the Assessing Officer inferred that it was simply an arrangement made by the assessee and in fact no services were rendered. The CIT (Appeals) has also confirmed the disallowance just by stating in general terms that deduction for commis-sion expenses cannot be allowed under section 37(1) of the Act when it is not proved that expenditure was incurred wholly and exclusively for the purposes of business. The CIT (Appeals) concluded that the facts of the case indicate that the assessee has failed to furnish any cogent, relevant and reliable evidence to prove that the above party had actually rendered any services for the purpose of business. The allegation of the Assessing Officer that recipient of commission income was not in the field in which the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om whom the orders were alleged to be procured. Needless to say that the assessee should be given due opportunity to explain and the Assessing Officer may also call upon the recipient of the commission by issuing summons under section 131 to find out the factual position regarding field in which he was operating and the nature of services precisely rendered to the assessee for getting the commission income along with the correspondence entered into by it. We direct accordingly. This ground is allowed for statistical purposes. 4. Following grounds have been taken by the assessee with regard to denial of claim of depreciation : "1. The learned CIT (Appeals) erred in law and on facts in confirming the disallowance of depreciation of Rs. 32,81,530 on various assets purchased and put to use by the assessee in its business during the year under consideration ignoring the facts and evidences placed on record. Thus the disallowance so made should be deleted. 2. That the order of the learned CIT (Appeals) is wrong on the facts and erroneous in point of law which should be quashed and total addition of Rs. 42,31,530 should be deleted. 3. The learned Assessing Officer hurriedly fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was also held to be not eligible for claim of depreciation on the plea that purchase was not supported by any bills etc. Depreciation on Maruti Van was also declined on the plea that copy of registration certificate of vehicle was not furnished. The assessee has also claimed depreciation on EDA Software valued at Rs. 33.97 lakhs claimed to have been imported from CG Core EL Programmable LLC, Fremont, CA 94539. The Assessing Officer declined the claim of depreciation by observing that the only evidence placed on record is a copy of the Invoice No. 10700/BLS/123, dated 27-7-2000, neither the transportation coat nor the exact date of arrival of the same nor the mode of transportation and the place from where customer clearance was obtained has been revealed. As per Assessing Officer, the assessee has also failed to capitalize the total expenditure on its transportation, customs duty and the freight inward etc., pertaining to this asset. Thus, the claim of depreciation of Rs. 20,30,280 on this asset was declined. 6. By the impugned order, the CIT(A) confirmed the action of the Assessing Officer by observing that allowability of claim of depreciation is governed by the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity expenses to the tune of Rs. 85,968 itself prove consumption of electricity for the use of the machinery. With regard to depreciation of EDA software, the learned AR contended that same was imported and the consignment along with documents were received through bank. Our attention was drawn to the copy of invoice along with bill of entry issued by the Indian Customs, EDI System Import, New Customs House, IGI Airport, New Delhi, which was placed on the record and were alleged to be filed before the lower authorities. As per learned AR, goods cannot be imported without all these documents. He further submitted that this software was used for development of designing and IP Core Development, the company executed this job and received the payment in foreign exchange for which deduction was also claimed under section 80HHE of the Act. He vehemently argued that both the lower authorities have brushed aside all the documents and declined the assessee for claim of depreciation arbitrarily. 8. On the other hand, learned DR submitted that concurrent finding has been recorded both by the Assessing Officer and CIT (Appeals) to the effect that assessee failed to substantiate the cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which assets were transferred and which assets were otherwise sold by the transferor between 1999-2000 is not known. It was also contended by the learned AR that value was not only paid for acquiring these assets, but the assessee has purchased the entire business of the vendor company which included goodwill of the company and the name of the company etc. He submitted that WDV is never taken as the sole criteria for making the payment of the assets and at the time of negotiation one has to accept certain valuation of vendor and get accepted valuation of some items. As per our considered view by the Finance (No. 2) Act, 1998, with effect from 1-4-1999, the definition of assets was broaden so as to include intangible assets, however, goodwill has not been included in the intangible assets, so as to provide a right of claim of depreciation on the goodwill so transferred. We, therefore, do not find any merit in the contention of the learned AR for considering the value of goodwill also while adjudicating the ground of depreciation on various assets acquired which also included value of goodwill. With respect to 100 per cent claim of depreciation on UPS, we found substantial force in ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
