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Depreciation & Expense Disallowance Remanded for Review The Tribunal remanded the disallowance of depreciation on a showroom and expenses under section 40a(ia) of the Income Tax Act to the Assessing Officer. ...
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Depreciation & Expense Disallowance Remanded for Review
The Tribunal remanded the disallowance of depreciation on a showroom and expenses under section 40a(ia) of the Income Tax Act to the Assessing Officer. The Tribunal emphasized the need for evidence of bifurcation for depreciation purposes and reconsideration of the disallowances in light of legal provisions and precedents cited during the proceedings. The appeal was allowed for statistical purposes, setting aside the disallowances for further examination by the AO.
Issues: 1. Disallowance of depreciation on a showroom. 2. Disallowance of expenses under section 40a(ia) of the Income Tax Act.
Issue 1: Disallowance of Depreciation on a Showroom: The appeal concerned the disallowance of depreciation amounting to Rs. 8,20,000 by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) (CIT(A)) regarding the purchase of a showroom comprising land and building. The AO sought bifurcation of the total consideration for depreciation purposes, attributing 50% towards land and disallowing depreciation thereon. The assessee claimed no bifurcation was possible as the entire showroom was purchased outright. The Tribunal referred to a Co-ordinate Bench decision involving similar facts and remanded the issue to the AO to provide evidence of bifurcation, emphasizing that depreciation on the land portion was not allowable.
Issue 2: Disallowance of Expenses under Section 40a(ia): The second issue involved disallowance of Rs. 76,732 and Rs. 40,000 under section 40a(ia) of the Act for non-deduction of tax at source on payments to Crossword Book Stores Ltd. and Times Internet, respectively. The CIT(A) confirmed the disallowance due to lack of supporting evidence from the assessee. The Tribunal, upon hearing the arguments, remanded the issue to the AO for reconsideration in light of the second proviso to section 40a(ia) and a retrospective amendment cited from a Delhi High Court decision. The Tribunal allowed the appeal for statistical purposes, setting aside the disallowances for further examination by the AO.
In conclusion, the Tribunal's judgment addressed the disallowance of depreciation on a showroom and the disallowance of expenses under section 40a(ia) of the Income Tax Act, remanding both issues to the Assessing Officer for further verification and consideration based on legal provisions and precedents cited during the proceedings.
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