Tribunal directs AO to allow depreciation from previous years & fully allows various business expenses on appeal.

The Tribunal partially allowed the appeal regarding depreciation, directing the AO to allow depreciation on the opening written down value from previous years. The appeal was fully allowed on damage and wastage expenses, business promotion expenses, and foreign traveling expenses, with the AO instructed to make appropriate adjustments based on the Tribunal's decisions.

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Issues Involved:
1. Disallowance of depreciation.
2. Disallowance of damage and wastage expenses.
3. Disallowance of business promotion expenses.
4. Disallowance of foreign traveling expenses.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation:
- Facts: The assessee, a private limited company engaged in manufacturing and trading pharmaceuticals, claimed depreciation of Rs. 45,36,884 for the A.Y. 2008-09. The AO disallowed this claim, questioning the commencement of manufacturing activities and the use of plant and machinery.
- AO's Observations: The assessee failed to provide an approved plan for the building and proof of using the plant and machinery. The AO noted inconsistencies such as capital work in progress, low raw material consumption, and lack of separate trading accounts.
- CIT(A)'s Findings: The CIT(A) upheld the AO's decision, emphasizing the absence of crucial documents like the approved building plan and proof of the plant's operational status. However, the CIT(A) directed the AO to verify the actual depreciation claimed and restrict the addition to that figure.
- Tribunal's Decision: The Tribunal found that the assessee failed to produce primary documents to substantiate the claim of depreciation. However, it directed the AO to allow depreciation on the opening written down value from previous years. Thus, the appeal was partly allowed.

2. Disallowance of Damage and Wastage Expenses:
- Facts: The assessee claimed Rs. 26,66,760 for damage and wastage due to expired medicines. The AO disallowed Rs. 25,57,779 of this amount, citing lack of evidence and inconsistencies in the VAT audit report.
- CIT(A)'s Findings: The CIT(A) confirmed the AO's disallowance, noting the absence of detailed records for expired goods and highlighting a sample agreement that placed responsibility for damages on the agent, not the assessee.
- Tribunal's Decision: The Tribunal criticized the partial acceptance of the claim without cogent materials and noted that similar claims were accepted in the previous year. It directed the AO to delete the addition, allowing the appeal.

3. Disallowance of Business Promotion Expenses:
- Facts: The assessee claimed Rs. 16,72,746 for sponsoring a tour to Singapore for doctors. The AO disallowed the entire amount, questioning the business expediency and lack of supporting documents.
- CIT(A)'s Findings: The CIT(A) upheld the disallowance, deeming the expenses unethical and illegal as per the Medical Council of India's regulations.
- Tribunal's Decision: The Tribunal noted that the CBDT Circular No. 5/2012, which prohibits such expenses, was not applicable retrospectively to A.Y. 2008-09. It found the expenses were incurred wholly and exclusively for business purposes and allowed the appeal.

4. Disallowance of Foreign Traveling Expenses:
- Facts: The assessee claimed Rs. 1,53,757 for foreign travel expenses. The AO disallowed the entire amount, considering it personal in nature.
- CIT(A)'s Findings: The CIT(A) accepted 90% of the expenses but inadvertently restricted the disallowance to Rs. 1,38,381 instead of Rs. 15,376.
- Tribunal's Decision: The Tribunal noted that a body corporate cannot incur personal expenses and found that the expenses were for business purposes. It directed the AO to delete the addition, allowing the appeal.

Conclusion:
The Tribunal's judgment resulted in partial allowance of the appeal concerning depreciation, full allowance of the appeal on damage and wastage expenses, business promotion expenses, and foreign traveling expenses, directing the AO to make necessary adjustments and deletions as per the Tribunal's findings.

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