Tax Tribunal Upholds Depreciation & Compensation Claims, Dismisses Revenue Appeal

The ITAT upheld the CIT (A)'s decision, allowing the excess depreciation claim and directing consideration of the employee compensation expenses claim. However, the ITAT modified the CIT (A)'s direction regarding the consideration of claims for earlier years, stating that such direction was beyond the CIT (A)'s authority. The appeal of the revenue was dismissed with this direction.

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Issues:
1. Excess depreciation claim disallowed by AO
2. Additional claim of deduction on employee compensation expenses rejected by AO

Issue 1: Excess Depreciation Claim
The assessee, engaged in stock and shares brokerage, filed a return of income for AY 2012-13, with the AO disallowing excess depreciation claim on software. The AO held that the claim was not crystallized during the year and disallowed it. The assessee contended that depreciation on software should be allowed at 60%, not 25% as determined by the AO. The CIT (A) upheld the assessee's claim, directing the AO to verify the actual cost of the asset for depreciation calculation. The ITAT found no infirmity in the CIT (A)'s decision, dismissing the revenue's appeal.

Issue 2: Additional Claim of Deduction on Employee Compensation Expenses
During assessment proceedings, the assessee submitted a letter claiming additional deduction for employee compensation expenses of Rs. 1.79 crores, not initially claimed in the return. The AO disallowed the claim, stating it was not a revenue expense and lacked actual expense proof. The CIT (A) allowed the claim, citing precedents like Biocon Ltd, and directed the AO to consider the claim on merit. However, the CIT (A) noted the claim was made on a cumulative basis, not in line with the Biocon case, which allowed claims on a straight-line basis. The ITAT agreed with the CIT (A) on allowing the claim but modified the direction regarding considering claims for earlier years, stating the CIT (A) lacked authority to direct such consideration. The appeal of the revenue was dismissed with this direction.

In conclusion, the ITAT upheld the CIT (A)'s decision on both issues, allowing the excess depreciation claim and directing consideration of the employee compensation expenses claim. However, the ITAT modified the CIT (A)'s direction regarding the consideration of claims for earlier years, stating that such direction was beyond the CIT (A)'s authority.

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