Tribunal adjusts sales charges, limits depreciation, and upholds interest disallowance decisions.

The Tribunal remanded the issue of disallowed sales consultancy charges back to the AO for re-examination due to lack of detailed evidence on services rendered. The disallowance of depreciation on fixed assets was restricted by the CIT(A) to Rs. 84,000, with the Tribunal upholding this decision based on sufficient evidence of asset usage for business purposes. The disallowance of interest on borrowed capital was allowed, except for a specific amount related to pre-capitalization period, with the Tribunal affirming this decision in line with relevant case law. The revenue's appeal was dismissed, maintaining the CIT(A)'s decisions on depreciation and interest.

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Issues Involved:
1. Disallowance of sales consultancy charges.
2. Disallowance of depreciation on fixed assets.
3. Disallowance of interest on borrowed capital.

Issue-wise Detailed Analysis:

1. Disallowance of Sales Consultancy Charges:
The assessee claimed consultancy charges of Rs. 7,50,000/- paid to three HUFs, which the AO disallowed due to lack of evidence on the services rendered. The CIT(A) upheld this disallowance, stating that the appellant failed to provide documentary proof of the services. The Tribunal noted that the payments to the HUFs were not disputed but the nature of services was not detailed. The Tribunal restored the issue to the AO to re-examine the details provided by the assessee and decide accordingly.

2. Disallowance of Depreciation on Fixed Assets:
The AO disallowed depreciation on two counts: lack of evidence of asset usage and the nature of the property being land with AC sheet roofing. The CIT(A) restricted the disallowance to Rs. 84,000/-, noting that the assessee provided sufficient evidence of usage, including electricity and water bills, and proof of stock movement. The Tribunal upheld the CIT(A)'s decision, agreeing that the asset was used for business purposes and qualified for depreciation.

3. Disallowance of Interest on Borrowed Capital:
The AO disallowed interest paid on borrowed capital, arguing it was excessive and used for purchasing assets not put to use. The CIT(A) allowed the interest, except for Rs. 73,015/- related to pre-capitalization period, as the assets were used in the business. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in DCIT Vs. Core Health Care Ltd., which allows interest on borrowed capital used for business purposes, regardless of the asset's nature.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes by remanding the issue of consultancy charges back to the AO. The revenue's appeal was dismissed, upholding the CIT(A)'s decisions on depreciation and interest on borrowed capital.

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