TMI Blog2013 (10) TMI 1569X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debt only on the ground that the TDS certificates have not been received. AO, therefore, disallowed the claim. 2.1.1 The assessee dispute the decision of AO and submitted before CIT(A) that the amount not received on account of TDS had been booked as revenue in the earlier years and offered to tax. In the absence of TDS certificates, the assessee could not claim deduction of Tax. Therefore, the amount had been written off and claimed as bad debt. CIT(A) however did not accept the contentions raised and agreed with AO that TDS was not a trading transaction and merely on the basis of write off the same could not be claimed as deduction. He, therefore, confirmed the addition made by AO, aggrieved by which the assessee is in appeal before Tribunal. 2.1.2 Before us the learned AR for the assessee submitted that the amount received short to the extent of TDS had been declared as income in the earlier year. The party had not given the TDS certificate and, therefore, it could not be known whether the tax was actually deducted and paid to the Central Government. The assessee had not made any claim of deduction on account of TDS either in earlier year or in subsequent year. The cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO in the absence of agreement did not accept the genuineness of lease transactions. He, therefore disallowed the entire claim. 2.1.2 The assessee disputed the decision of AO and submitted before CIT(A) that the lease agreements were called for by the AO at a late stage during the assessment proceedings and, therefore, could not be produced. The assessee filed copies of lease agreements in relation to TATA Finance Ltd and Birla Global Assets Finance Ltd as additional evidence and submitted that there was no tax evasion device as the assets were normal assets like laptop and car which were not entitled for 100% depreciation. Alternatively it was also submitted that if the transaction was treated as loan transaction, the company would be entitled for depreciation which would be more than the lease payment made by the assessee. CIT(A) forwarded the additional evidence to the AO for examination and report. The AO in the report submitted to CIT(A) mentioned that the assessee had submitted the lease agreement only in case of TATA Finance Ltd. CIT(A), therefore, observed that lease transaction in relation to TATA assets could not be considered as not genuine. He, therefore, delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the same assets allowed either in the earlier years or in the subsequent year, the claim will be allowed by him. The matter, therefore, is restored to the AO for fresh order after necessary verification and after hearing the assessee. 2.. The third dispute is regarding disallowance of claim of depreciation in relation to additional custom duty. The AO noted that custom duty payable of Rs. 2,09,22,914/- had been treated by the assessee as capital expenditure on which depreciation of Rs. 53,30,728/- had been claimed. AO asked the assessee to explain as to why the depreciation on account of custom duty be not disallowed as the custom duty was disputed. The assessee submitted that it had obtained EPCG license issued by DGFT at the concessional rate of custom duty of 15% and with export obligation worth USD 1,03,43,621/- i.e. four times the CIF value of the imported goods to be utilised withtin five years from the date of issue of license. The assessee however could not complete the export obligation and accordingly DRI vide letter dated 10.11.2000 asked the assessee to pay differential duty, which was paid by the company. The assessee disputed the additional liability by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will add to the cost of asset and will be entitled for depreciation. In our view the additional duty paid by the assessee will adde to cost of asset even if the payment had been made later and the assessee will be entitled for depreciation in respect of such additional duty. We do not agree with the findings of authorities below that there is some penal element involved. The custom duty paid by the assessee is normal duty payable for import of machinery which had not been paid earlier as the assessee had availed the incentive scheme but it had to pay later due to non fulfillment of conditions of incentive scheme. This in our view is not a penalty and has to be added to the cost of assets. The case of the assessee is supported by the decision of Tribunal in case of Maruti Udyog Ltd (Supra). The order of CIT(A) cannot be upheld . We, therefore, set aside the order of CIT(A) and direct the AO to allow the depreciation in relation to additional custom duty. 2.4 The fourth dispute is regarding addition of Rs.2,47,324,/- as notional interest on loan to M/s Rich Crest Animation Inc. USA. The AO during the assessment proceedings noted that the assessee had advanced Rs. 30,79,050/- to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before Tribunal. 2.4.2 Before us, the learned AR for the assessee submitted that the AO was not correct in stating that other AE s were also providing similar services. It was pointed out that other AE s had not providing any services and the assessee had not done any business with them. The learned AR referred to the relevant portion of the annual report of the year placed at page 65 of the paperbook as per which the assessee had received a sum of Rs. 4.55 crore on account of technical services provided to Rich Crest Animation Inc, and the amount received in the immediate preceding year was Rs. 2.61 crore. It was also pointed out by him that the assessee had earned total revenue of Rs. 12.06 crore out of which Rs. 4.55 crore had been received from the said AE and similar income had been received in the subsequent years also. The interest free advances had, therefore, been given to the subsidiary on commercial expediency. He placed reliance on the decision of Bangalore bench of Tribunal in case of Wipro Ltd. in ITA 972/Bang/2011 and also on the decision of Ahmedabad bench of Tribunal in ITA no. 1668 in case of Micro India Ltd. it was also pointed out that advances had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o by the assessee with AE. Since, the assessee had charged interest @8% from other AE s, the adjustment has been made at the rate of 8% The learned CIT (DR) also pointed out that it was not clear whether the entire revenue of Rs. 4.55 crore had been received by the assessee only from M/s Rich Crest Animation Inc. USA and not from other AE s. The position has however been clarified by the leaned AR, who pointed out that annexure 2 of form 3CED which had been filed before AO clearly showed that the entire income of Rs. 4.55 crore was received from M/s Rich Crest Animation Inc. USA. We have perused the said form No. 3CED and found the contention of the learned AR correct. The AO has also referred to the said form in the order which means that the form was before him and he has not made any adverse comments on the contents of Annexure -2. Further, both in earlier years and also in subsequent years, the assessee had received substantial revenue from the said AE. Therefore, it is clear that the assessee had no businesses with other AE s to whom interest had been charged. However, we agree with the submissions made on behalf of the revenue that commercial expediency is not relevant in mak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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