Assessee's Appeal Partially Allowed: Depreciation Claimed, Income Discrepancy Upheld

The Tribunal partially allowed the assessee's appeal. The disallowance of depreciation on plant and machinery was overturned, allowing the assessee to claim depreciation. However, the addition due to discrepancies in income as reflected in Form 26AS was upheld. The final order, pronounced on 01st March 2022, resulted in the appeal being partly allowed.

---

---

Issues Involved:
1. Disallowance of depreciation on plant and machinery.
2. Addition due to the difference between income credited to the Profit and Loss account and the income reflected in Form 26AS.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Plant and Machinery:

The assessee appealed against the disallowance of Rs. 6,53,933/- on account of depreciation on plant and machinery installed at customer premises. The primary business of the assessee involves trading in diagnostic kits and instrumentation used for medical purposes, and marketing related medical instrumentation on a commission basis. The assessing officer disallowed the depreciation on machines given on rent, following the precedent set in earlier years.

The Tribunal noted that the modus operandi of the assessee includes:
- Outright sale of diagnostic machines to customers.
- Installation of diagnostic machines owned by the assessee at customer premises with a conditional agreement that the reagents used must be purchased exclusively from the assessee.

The Tribunal referenced its earlier decision for assessment years 2007-08 to 2010-11, where it was held that the conditional deployment of diagnostic machines to boost reagent sales is a strategic business approach. The Tribunal found that the installation of diagnostic machines at customer sites under such agreements constitutes a business activity, and thus, the assessee is entitled to claim depreciation.

The Tribunal dismissed the observations of the CIT(A) that the assessee had not furnished details or evidence regarding the plant and machinery given to customers. The Tribunal found that the diagnostic machines formed part of the assessee's "Block of assets" and were installed at customer sites as part of a strategic business practice. Therefore, the disallowance of depreciation was not justified.

2. Addition Due to Difference in Income:

The assessee also contested the addition of Rs. 1,88,922/- due to discrepancies between the income credited to the Profit and Loss account and the income reflected in Form 26AS. The assessing officer noted mismatches in amounts reported by various parties, resulting in the aggregate difference being added as unaccounted receipts.

The Tribunal found no new facts or evidence to challenge the findings of the lower authorities. Consequently, the Tribunal upheld the addition, dismissing the assessee's ground on this issue.

Conclusion:

The Tribunal allowed the appeal of the assessee in part. The disallowance of depreciation on plant and machinery was overturned, allowing the assessee's claim for depreciation. However, the addition due to the difference in income as reflected in Form 26AS was upheld. The final order pronounced in the open court on 01st March 2022 resulted in the appeal being partly allowed.

---