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Asst. Commissioner of Income Tax, Circle-13 (1) , Hyderabad Versus M/s. Padmalaya Tele Films Ltd

2015 (9) TMI 1239 - ITAT HYDERABAD

Repairs and replacements - whether amount of repairs and replacements claimed in the original return was allowed to assessee under the depreciation head or in the absence of the same allowable as revenue expenditure as was done by the Ld. CIT(A)? - Held that:- Even though the Revenue relied on certain depreciation schedules and assessee also furnished certain schedules, same could not be verified by us in the absence of the original claim of depreciation schedules, the AO’s working of depreciati .....

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th the Company Law Authorities and also the Income Tax computations at the time of assessments required to be examined. Since they are not placed before us, we cannot give any finding on this issue at the moment.

As seen from the orders of CIT(A), he has considered that the amount was not allowed to assessee in the depreciation schedule and allowed in his order and made further disallowance of 0.5% of the claim as he considered the amount as part of production expenses, disallowed tha .....

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e schedule and those two figures are entirely different, then Revenue’s contentions that there is a double claim, cannot be accepted. However, these require deeper analysis with entire assessment record and unfortunately, neither party placed complete details before us even though written submissions are given, relying on their own stated positions. Therefore, we are of the opinion that this issue requires examination by the AO afresh. Accordingly, he is directed to

1. Examine the cla .....

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fferent from the amounts considered in depreciation schedule or not? In case the same amount was taken in the depreciation schedule, AO is directed to exclude the same and allow the amount as revenue expenditure as per the directions of Ld. CIT(A). In fact the entire claim of ‘Redundant Animation Project’, ‘Redundant Software Project’ was directed to be examined and allowed by ITAT but AO allowed partly as revenue expenditure. Therefore, we do not see any reason that balance of the amount should .....

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the balance amount. The amount is eligible for deduction as revenue expenditure subject to disallowance as directed by CIT(A). - Decided partly in favour of revenue for statistical purposes.

Bad debts claim - Held that:- Whether the revised financial statements were only filed for the purpose of Income Tax or the company revised the accounts, not only in this year but also in later year, was not placed on record. In case assessee has written off the amounts in the revised financial ac .....

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KOTAIAH, A.M. : This appeal is filed by Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Hyderabad dated 31-10-2013. The issue in this appeal is whether certain amounts disallowed by the Assessing Officer (AO) but claimed by assessee and allowed by CIT(A) were claimed twice or not? 2. Briefly the facts are that survey operations U/s. 133A of the Income Tax [Act] was conducted in the business premises of assessee on 22-08-2003. During survey operation, certain incriminatin .....

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al income at ₹ 20,49,50, 000/ -. Thereafter, the assessee filed a petition u/s. 154 of the Act before the Assessing Officer contending that the claims made in the revised return were not considered by the Assessing Officer while completing the assessment U/s. 143(3) of the Act. The Assessing Officer, however, rejected the application made U/s. 154 of the Act by observing that all the claims made by the assessee had been duly considered. The assessee challenged the assessment order before t .....

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rder accepting the contentions of the assessee that the claims made in the revised return towards the aforesaid deductions have not been considered by the Assessing Officer while completing the assessment u/s. 143(3) of the Act. The ITAT remitted the matter to the file of the AO. Accordingly, the case was taken up again and the assessment was completed on 31-12-2009 U/s. 143(3) r.w.s 254 by making certain additions as shown in the following computation of total income: Total Income as per assess .....

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le as discussed above ₹ 10,00,000/- Rs.22,01,13,587/- Less: Redundant Animation Projects WIP ₹ 2,48,83,969/- Redundant software WIP Rs.2,49,09,786/- NET TAXABLE INCOME ₹ 4,97,93,755/- Rs.17,03,19,832/- (or) Rs.17,03,19,830/- 3. Aggrieved on the above order, assessee preferred the appeal before the CIT(A) on the above claims and submitted that (a) Disallowance in respect of Redundant Animation Projects WIP (Rs.1,57,28,968/-): The AO has disallowed an amount of ₹ 1,57,28,44 .....

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. We would like to submit that a part of Animation Project cost was booked under the head Redundant Animation Projects and the other part including specific software s, hardware s etc expenditure which was specifically incurred for Animation Projects were booked under the head Repairs & Maintenance . Therefore, by following Hon ble ITAT s order and considering the claim of assessee as made in revised return, the complete expenditure relating to Redundant Animation Projects i.e ₹ 4,06, .....

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0.5% of total production expenses claimed by assessee. Respectfully following the same order of the Hon ble jurisdictional ITAT in assessee s own case, a token disallowance of 0.5 % of the above production expenditure claimed in respect of Redundant Animation Projects WIP can be made for the assessment year under consideration. (b) Disallowance in respect of Redundant software Projects WIP (Rs.2,49,09,785/-) The AO has disallowed an amount of ₹ 2,49,09,785/- out of total amount of ₹ .....

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t the a part of software Project cost was booked under the head Redundant Animation Projects and the other part including specific software s, hardware s etc expenditure on which was specifically incurred for software Projects were booked under Repairs & Maintenance . Therefore, by following Hon ble ITAT order and considering the claim of assessee as made in revised return, the complete expenditure relating to Redundant software Projects i.e. ₹ 4,98,19,751/- shall be allowed in the AY. .....

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the assessee. Respectfully following the same order of the Hon ble jurisdictional ITAT in assessee s own case, a token disallowance of 0.5 % of the above production expenditure claimed in respect of Redundant Software Projects WIP can be made for the assessment year under consideration. (C) Disallowance of Non-collectable Loans & Advances and bad debts (Rs. 4,59,13,909/- ) The assessee company had claimed written off non collectable loans & advances and Bad Debts written off as detailed .....

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e above advances and debtors have been written off in the financial year 2002-03 relevant to the assessment year under consideration i.e. AY. 2003-04 only. We would like to submit that the entire Animation Work requires expertise skills in animation to complete the projects and hence, the assessee, engaged experts from various places to carry out the project in much efficient and excellent way at mutually agreed consideration with all comforts to revise. Since the work is of specialized skills, .....

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ire Animation work and there by the amount of ₹ 3,25,64,086/- paid to the Animators was written off during the year under consideration as bad debts & non collectable Loans & Advances and therefore, it is an allowable expenditure. In this regard, we place our reliance on the order of ITAT in the case of Kalyani Refineries Limited Vs. Dy. CIT vide ITA No. 567/Hyd/2007 dt. 23-10-2009. 4. Ld. CIT(A) after considering the detailed submissions of assessee has allowed the above three gro .....

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is not correct in observing that the appellant company has not agitated capitalization of amount under the head Repairs & Replacements . On verification of the facts available on record, it is clear that the appellant company had claimed 100% of expenditure towards Redundant Animation Projects WIP and Redundant Software Projects WIP including the amount included under the head Repair & Replacements . Therefore, the assessing officer ought to have treated the entire amount of ₹ 4,0 .....

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enditure. Hence, the ground of the assessee in this regard is partly allowed. 8.1 The issue under consideration is similar to the matter covered in the ground no. 2. adjudicated in the forgoing paras. Following the same, I direct the assessing officer to disallow 0.5% of ₹ 2,49,09,785/ - and allow the balance amount as revenue expenditure. In the end, this ground of appeal stands partly allowed . 5. With reference to bad debts, the Ld. CIT(A) considered the issue and allowed the same as un .....

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written off in the books of account. In this regard, the Board of Directors of the appellant company had passed a resolution on 30.01.2003 for writing off the bad debts after considering the steps taken to recover these dues. 9.3 The matter in respect of writing off of bad debts under the provisions of provisions of section 36(1)(vii) after its amendment with effect from 1-4-1989 had come up before a Special Bench of Hon ble Income Tax Appellate Tribunal, Mumbai in the case of Deputy Commission .....

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7 dated 23.10.2009 has held that since the assessee recognized the debts as bad during the year under consideration, following the decision of the Special Bench in the case of Oman International Bank (Supra), we find that the lower authorities were not justified in disallowing the claim of the assessee in respect of bad debts. We accordingly set aside the order of the CIT (A) on this issue, and direct the assessing officer to allow the claim of the assessee in respect of bad debts. 9.5 Respectfu .....

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as revenue expenditure without considering the fact that the revenue has filed appeal before High Court against the order of the ITAT. 2. The ld. CIT(A) erred in allowing the claim of the assessee under the head repairs and replacements towards Redundant Animation Projects WIP and Redundant Software Project WIP without appreciating the fact that the A.O. had disallowed the same on the ground that the assessee had capitalized the expenditures and claimed depreciation. 3. The ld. CIT(A) erred in .....

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cannot be allowed. The detailed submissions of the Revenue in writing is as under: a) Deduction of ₹ 4,08,49,962/-: The first issue pertains to the deduction of ₹ 4,08,49,962/-claimed by the assessee under the head Repairs and replacements in his revised computation filed on 29.03.2006 (Copy of Revised computation enclosed vide Annx 1). In course of Set aside proceedings, the assessee also filed details of this expenditure which included ₹ 4,07,49,962/- under Computer hardware .....

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on that this was capital expenditure, and hence allowed depreciation on it. (Copy enclosed vide Annx 4). This stand of the AO was accepted by the assessee and hence not agitated before CIT (A) too. Hence, in the set aside assessment order, the AO clearly brought out the above facts vide pg 6, first para of the assessment order denying the deduction, and stated that any fresh deduction of the same amount under another head will amount to double deduction. Relevant extract of the order given below .....

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reallocate the same amount to other heads and claim deduction again Hence, a second time deduction of the same amount was not allowed by the AO. However, before Ld CIT(A), the assessee took a new plea, that this amount was nothing but Production Expenses, and as per the ITAT order on Production expenses for AY 1999-2000 to 2002-03, 99.5% of production expenses are to be allowed as deduction. Ld CIT(A), vide para 7.1 and 7.2 of his order, accepted assessee s contention of this amount being produc .....

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as already been allowed to the assessee in the original assessment proceedings, that still stand. Any further deduction on this head will amount to Double Deduction. 3. A look at the details of this amount (Annx 2) clearly shows that this is nothing but amount spend on Printers, TV, Computers, Editing systems, media equipment etc. All these purchases are capital in nature, hence correctly capitalized by the AD in orginal assessment order. By no stretch of imagination can the assessee now claim t .....

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ly. Therefore, it is requested that the contention of the assessee be rejected and no further deduction under this head be allowed to the assessee . 8. In reply, it was the contention of the Ld. Counsel that AO has not allowed depreciation on the amount of ₹ 4,08,49,962/- and so question of double allowance does not arise. He supported the orders of the CIT(A) and filed written submissions in explaining the amounts as under: Explanation for Additions to Fixed Assets: • The Assessee Co .....

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ncome Assessee have claimed Income tax deprecation amounting to ₹ 9,57,55,777/- where as the Assessing officer allowed deprecation amounting to ₹ 9,06,17,754/- (Annexure A enclosed) in his original Assessment order. It clearly established that ₹ 4,08,49,962/- did not allowed by the Assessing officer in his original Assessment order and also revised Assessment order for the deprecation calculation. • The Assessing officer in his original assessment order 143(3) dated 29-03- .....

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4.08 Crores is not considered treating the same as capital expenditure and depreciation allowable as per IT Rules is allowed. However The AO mentioned in the original Assessment order that repairs & replacement expenditure which was claimed 100% in the original return of Income and additions made to Computers & pant machinery is one and same. It is to submit that the additions to fixed assets and repairs & replacement expenditure are not one and same. Both are different. Also the Ass .....

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with the direction to consider the revised return of income filed by the Assessee. • In the revised return of Income we have claimed amounting to ₹ 4,08,49,962/towards repairs for animation projects & software projects which was there in inventories head in the original return of Income. The breakup of amount is given below: Redundant animation projects ₹ 1,57,28,445/- Redundant software projects Rs.2,49,09,785/- Others repairs ₹ 2,11,732/- Total amount Rs.4,08,49,962 .....

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ow: The Assessee claimed an amount of ₹ 4,08,49,962/-towards repair and maintenance and replacement U/s. 31 of the I. T Act (100%) which was claimed as additions to fixed assets in the balance sheet. The details for the additions were called for. The Assessee admitted ₹ 1 Lakhs under the head plant & Machinery , ₹ 4,07,49,962/- under the head /I computer hardware and software . The Assessee claim for written off of the entire expenditure of ₹ 4.08 crores is not consid .....

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/-. The Assessee could not produce any evidence in support of the claim of deprecation of ₹ 11,02,16,915/-. In the absence of any details, the additional deprecation of ₹ 1,44,61,138/- ( ₹ 11,02,16,915 - ₹ 9,57,55,777) claimed is not entertained. The correct deprecation admissible consequent to the assessment orders of earlier years is worked out as per the deprecation schedule enclosed and the same is allowed Ultimately the AO allowed deprecation ₹ 7,39,70,913/-(An .....

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sed Assessment order passed U / s. 143(3) r.w.s 254 of the act, dated 31-12-2009. It is clearly explains that even though the Assessing officer mentioned in original Assessment order and revised assessment order that he allowed the deprecation on capitalised expenditure but the deprecation is not considered in the Assessment . 9. With reference to the Sundry Debts, it was submitted that assessee has written off in the revised financial accounts submitted to the AO, therefore objection of Revenue .....

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revenue expenditure as was done by the Ld. CIT(A). Before adverting to the issue, it is to be mentioned that assessee originally claimed an amount of ₹ 4,08,49,962/- as 100% deduction in the computation of income but under the head Repairs and Replacements u/s 31. As seen from the enclosure to the return of income, assessee added back the book depreciation and claimed depreciation at ₹ 9,57,55,777/-. The details of the same are not placed on record by either party. Along with the abo .....

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llowed by the AO in Annexure-A enclosed to assessee s written submissions wherein, additions upto 30th September were bifurcated to ₹ 1,45,57,132/- and additions after 30th September were taken at ₹ 3,36,76,016/-. As seen from the P&L A/c originally filed in the return of income along with annual accounts of assessee placed in the Paper Book, the additions to the assets as per the P&L A/c was to the tune of ₹ 4,82,33,000/-. These amounts in the P&L A/c tally with th .....

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f the depreciation schedule as claimed by assessee of ₹ 9,57,55,777/- originally was examined. Now, the difficulty arises in the sense that the depreciation claim is varying from order to order depending on the opening WDV, consequent to the effect of various orders in earlier years. Unless one notices the opening WDV which is considered by the AO and additions to the assets in the block, the issue whether the same amount was claimed and allowed in the depreciation schedule cannot be exami .....

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this ground. In spite of CIT(A) s finding/observation in the order, as seen from the grounds before the Tribunal this issue was contested and there is separate finding on that. Therefore, the Revenue s contention that this amount was allowed as depreciation and accepted by assessee cannot be accepted, as assessee did question the same. 12. As clarified by assessee, out of the amount of repairs of ₹ 4,08,49,962/- it has bifurcated the amounts as under: a. Redundant animation Projects - S .....

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onsequent to the directions of the ITAT. Assessee contested before the CIT(A) in the impugned order that the balance of ₹ 1,57,28,445/- was also eligible for deduction which the Ld. CIT(A) allowed. 14. Like-wise, the claim of Redundant Software Projects to the extent of ₹ 4,98,19,571/- agitated before the ITAT consist of an amount of ₹ 2,49,09,786/- being a fresh claim and ₹ 2,49,09,785/- out of the repairs claim originally made. Here also, AO allowed ₹ 2,49,09,786/ .....

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year. Even though the Revenue relied on certain depreciation schedules and assessee also furnished certain schedules, same could not be verified by us in the absence of the original claim of depreciation schedules, the AO s working of depreciation, submissions of assessee in the course of assessments. As already stated above, there is no separate repairs and replacement expenditure in the schedules to the P&L A/c as verified by us. Whether it was part of any other head of account and claime .....

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T(A), he has considered that the amount was not allowed to assessee in the depreciation schedule and allowed in his order and made further disallowance of 0.5% of the claim as he considered the amount as part of production expenses, disallowed that amount on the basis of orders of ITAT in earlier years as well in the impugned year. To that extent, CIT(A) s order is to be confirmed. 18. However, in case the same amount was already added in the depreciation schedule as an addition during the year .....

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efore us even though written submissions are given, relying on their own stated positions. Therefore, we are of the opinion that this issue requires examination by the AO afresh. Accordingly, he is directed to 1. Examine the claim of repairs and replacement and the original accounts from which the amounts were claimed in the computation of income at the time of filing original return. 2. Whether the amounts claimed under the head Repairs and Replacement is same as that of additions shown in the .....

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