Tribunal remits depreciation claim issues for reassessment, emphasizes substantiation of expenses & asset use

The Tribunal remitted the issues related to depreciation claims back to the Assessing Officer for re-examination, emphasizing the need for the assessee to substantiate expenses and provide evidence regarding asset use. The appeal was allowed for statistical purposes, with a direction for reconsideration based on the arguments presented. The Tribunal also condoned the delay in filing the appeal, stressing the importance of advancing substantial justice.

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Issues Involved:
1. Disallowance of depreciation relating to assets capitalized during the subject AY.
2. Disallowance of depreciation on assets purchased in AY 2013-14 but put to use in AY 2014-15.
3. Excess disallowance of depreciation.
4. Initiation of penalty proceedings under section 271(1)(c) of the Act.
5. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation Relating to Assets Capitalized During the Subject AY:
The assessee claimed depreciation on assets capitalized during the assessment year 2014-15, which included payments made to directors as incentives for consultation/professional services related to the purchase and installation of fixed assets. The CIT(A) disallowed this claim, noting that the directors' qualifications and the actual services rendered were not substantiated. Additionally, the CIT(A) pointed out inconsistencies in the treatment of these expenses, which were initially claimed as revenue expenditure in the previous year but later capitalized. The Tribunal acknowledged the principle that professional fees related to asset acquisition should be added to the asset's cost but emphasized the need for the assessee to prove the genuineness of such expenses. The Tribunal remitted the issue back to the AO for re-examination.

2. Disallowance of Depreciation on Assets Purchased in AY 2013-14 but Put to Use in AY 2014-15:
The assessee argued that although the assets were acquired in the financial year 2012-13, they were put to use only in the financial year 2013-14, and thus depreciation should be allowed for the year 2014-15. The CIT(A) disallowed the claim, citing a lack of evidence regarding the nature of the assets and the time taken for installation. The Tribunal remitted the issue back to the AO for verification of the actual date of use of the assets, directing the AO to allow depreciation if the assets were indeed put to use in the assessment year 2014-15.

3. Excess Disallowance of Depreciation:
The assessee contended that if the assets were put to use for less than 180 days, only 50% of the depreciation should be disallowed. The CIT(A) dismissed this claim due to insufficient evidence. The Tribunal noted that since the primary issue of depreciation was remitted back to the AO, the alternative claim regarding the 50% depreciation also needed reconsideration. The AO was directed to examine this aspect and allow depreciation as per Section 32 of the Act if the assets were used for less than 180 days.

4. Initiation of Penalty Proceedings Under Section 271(1)(c) of the Act:
The assessee argued that the initiation of penalty proceedings was unwarranted as there was no failure to comply with notices or any attempt to conceal income or furnish inaccurate particulars. This issue was not specifically addressed in the Tribunal's order, indicating that it was not a primary focus of the appeal.

5. Condonation of Delay in Filing the Appeal:
The Tribunal noted a delay of 24 days in filing the appeal, which the assessee attributed to an inadvertent mistake by the counsel handling tax matters. Despite the DR's opposition, the Tribunal condoned the delay, emphasizing the need to advance substantial justice.

Conclusion:
The Tribunal set aside the appeal to the file of the AO, directing a reconsideration of the issues related to depreciation claims in light of the assessee's arguments and supporting judicial precedents. The appeal was allowed for statistical purposes, and the order was pronounced on 2nd December 2020 in Chennai.

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