Assessing Officer's Decisions on Depreciation and Expenses Reviewed

The Assessing Officer partially disallowed depreciation claimed on machineries from Singapore, remitted for further determination. Foreign exchange fluctuation loss disallowance was not considered due to lack of appeal. Disallowances for personal expenses and partner's remuneration were left open for determination. The Revenue's appeal on disallowance under section 40(a)(ia) was dismissed. The total addition by the A.O. was partly allowed in the assessee's appeal. The disallowances not raised before the CIT(A) were dismissed, and the section 40(a)(ia) issue was remitted back to the A.O. for reconsideration.

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Issues:
- Partial disallowance of depreciation
- Disallowance of foreign exchange fluctuation loss
- Disallowance towards personal expenses
- Disallowance of partner's remuneration
- Disallowance under section 40(a)(ia)

Partial Disallowance of Depreciation:
The Assessing Officer (A.O.) disallowed 50% of the depreciation claimed by the assessee on machineries purchased from Singapore as they were used for less than 180 days. The assessee argued that once machineries are purchased, they form part of the 'block of asset', hence full depreciation should be allowed. The issue was remitted back to the A.O. to determine the eligible period for depreciation.

Disallowance of Foreign Exchange Fluctuation Loss:
The A.O. disallowed the claim of Rs.6,15,360/- as exchange fluctuation related to payments made for machineries from Singapore, stating it formed part of the cost of acquisition and could not be deducted. The assessee contended that the loss was incurred for business purposes. However, this issue was not considered further as it was not raised before the Commissioner of Income Tax (CIT) (Appeals).

Disallowance towards Personal Expenses:
The A.O. disallowed a portion of foreign travel and sale promotion expenses, citing an element of personal enjoyment. Additionally, remuneration paid to working partners was disallowed due to lack of quantification in the partnership deed. These matters were left open for determination at the end of the previous year.

Disallowance under Section 40(a)(ia):
The Revenue appealed against the CIT(A)'s decision to restrict disallowance under section 40(a)(ia) to the amount payable at the end of the previous year. The Special Bench decision held that disallowance could only apply to amounts 'payable', not already paid. The Revenue's appeal was dismissed based on this interpretation.

Conclusion:
The A.O.'s total addition of Rs.3,35,87,952/- was partly allowed in the assessee's appeal for statistical purposes. The disallowances of foreign exchange fluctuation loss, partial foreign travel and sales promotion expenses, and partners' remuneration were dismissed as they were not raised before the CIT(A). The issue of disallowance under section 40(a)(ia) was remitted back to the A.O. for further consideration. The order was pronounced on June 25, 2012, after the conclusion of the hearing.

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